(July 12, 2010) Washington – The Government Accountability Office (GAO) today issued a report urging the Department of Energy (DOE) to make changes to its current loan guarantee program to make it more effective. The Renewable Fuels Association (RFA) has been highly critical of the program, repeatedly urging DOE to review and adjust its program so as to more fairly evaluate applications from cellulosic and other next generation ethanol companies.

Specifically, the RFA supports three recommendations made by GAO that follow closely with previous criticisms:

(1) DOE develops performance goals reflecting the LGP's policy goals and activities;

(2) revise the loan guarantee process to treat applicants consistently unless there are clear, compelling grounds not to do so; and,

(3) develop mechanisms for administrative appeals and for systematically obtaining and addressing applicant feedback.

“Access to capital is a chief hindrance to the commercial deployment of cellulosic ethanol technology,” said RFA President and CEO Bob Dinneen. “DOE has created a loan guarantee program that in theory is helpful, but in practice has proven difficult if not impossible for cellulosic ethanol companies to access. If the goals of the RFS are to be met, the Obama Administration must make sure loan guarantee programs are workable and accessible for qualified companies, regardless of their technology. Currently, such a scenario does not exist. Incorporating our comments with GAO recommendations would be a good place to start.“

In October 2009, the RFA wrote to DOE expressing concerns raised by its cellulosic ethanol producer members. In the letter, the RFA raised a number of issues that created unfair and unnecessary challenges for cellulosic ethanol companies.

Of note, the RFA highlighted the following concerns:

(1) Eliminate the requirement that applicants have year-long off-take agreements in place. Existing biofuel facilities do not have such agreements, and this criteria should not be used to determine the eligibility of advanced biofuel companies for the loan guarantee program.

(2) Recognize that applicants, by definition, may not have commercial scale financial data and to consider applications that “employ new or significantly improved technologies compared to commercial technologies in service in the U.S.” as outlined in the law.

(3) Review applications that have been declined to determine what fixes can be made to correct perceived deficiencies. The current structure forces these applications back into the applicant queue, resulting in a delay in the progress of these companies. Allowing for a review would ensure no qualified application is overlooked and progress on the development and construction of these technologies and facilities could continue without unnecessary delay.

Following up on that, the RFA met with DOE leadership in charge of the program to varying degrees of success. A follow up letter can be viewed here.

Additionally, the RFA has made recommendations to the Department of Agriculture to ensure the loan guarantee program it is currently developing works for cellulosic ethanol producers.