On Tuesday, the Senate Energy and Natural Resources Committee (Senate ENR) released a draft of its portion of the budget reconciliation bill, focused on expanding leasing for various energy sources, including geothermal energy; refilling the Strategic Petroleum Reserve; and clawing back funding and financing authorities for various Inflation Reduction Act grant and loan programs, including for the Loan Programs Office—the country’s most capable and capacious energy financing institution.
The proposal repeals most of the Loan Programs Office’s Title 17 lending authorities and rescinds all of their unobligated balances, including for the marquee Section 1703 loan authority that supplies large volumes of catalytic financing to all kinds of innovative energy technologies.1 In the breach, the proposal repeals and replaces the Section 1706 “Energy Infrastructure Reinvestment” loan authority with a new “Energy Dominance Financing” program, supported with $661 million in credit subsidy earmarked toward “enabling” the operation of existing or recently shut-down energy- and critical minerals-related projects, with no emissions-reduction requirements attached.
This proposal would, in no uncertain terms, mean the end of the Loan Programs Office as we know it. And, as written, the Energy Dominance Financing program that Senate ENR has put forth to replace the LPO’s existing programs is not set up for success, either. In summary, the new Energy Dominance Financing program:
- Drops its predecessor’s emissions reduction requirements but adds critical minerals-related projects to the definition of “energy infrastructure”;
- Requires presidential signoff;
- Forcibly resets the LPO’s existing work, creating a chilling effect over project development rather than speeding it up;
- Provides the LPO with less financing with which to undertake transformative project development (14 percent of its IRA appropriation);
- Likely could not support ambitious projects such as coal-to-nuclear conversions;
- Abandons Section 1703, the more catalytic greenfield project development program; and
- Contrasts significantly with the President’s FY26 budget request, which supports Section 1703.
This post explains this proposal in detail, argues that it is inadequate to support our energy system or meet the administration’s stated objectives, and suggests a better path forward that preserves and augments the most transformative parts of the Loan Programs Office—the single financial institution anchoring America’s energy future.
Forcibly restarting the LPO would halt investment
The proposed Energy Dominance Financing program piggybacks significantly off of the statutory language authorizing the existing Section 1706 “Energy Infrastructure Reinvestment” (EIR) program, part of the Inflation Reduction Act. As written, the EIR program is a brownfield energy infrastructure remediation program: The LPO can use its 1706 authority to provide patient, low-cost financing to “retool, repower, repurpose, or replace energy infrastructure that has ceased operations” and to “enable operating energy infrastructure” to reduce its emissions profile. It had $5 billion in credit subsidy that the LPO could put toward up to $250 billion worth of projects before September 2026.
Various analysts have praised the catalytic nature of this loan authority. EIR’s statutory ability to lend and guarantee up to $250 billion in loans with its $5 billion credit subsidy suggested it could target 50x leverage on its authority—making it an incredibly powerful pathway toward regional decarbonization and industrial transformation. Utilities all around the country announced their desire to secure EIR loan financing to remediate their infrastructure and, in many cases, convert older fossil energy sources into clean energy sites. This leverage ratio seems generous on the surface but, insofar as utilities are generally creditworthy and lower-risk borrowers, the risk of default on any portfolio of 1706 loans is far lower than the risk of running out the clock on the program’s 2026 deadline.
The Energy Dominance Financing program drops the emissions reduction mission of its predecessor and adds critical minerals-related projects to the definition of energy infrastructure. Now any energy and minerals projects of any kind are eligible. The proposal’s intent seems to be to endow the LPO with the capacity to keep existing coal, gas, and nuclear facilities, as well as critical mineral extraction and processing facilities, operating and to bring mothballed ones back online to help meet a nationwide electricity demand spike. To be sure, the proposal requires the president to sign off, in writing, on any loan this program issues. It is possible that this presidential signoff requirement is not actually burdensome compared to the EIR status quo. But it does subject the program’s loans to the direct scrutiny of presidential priorities rather than to any policy goal written explicitly into statute.
The Energy Dominance Financing program has bigger problems, anyway. To say nothing of the fact that repealing the LPO’s other authorities would amount to the effective closure of the LPO and layoffs for most, if not all of its staff, this proposal would also amount to abandoning utilities and project developers. Shuttering the existing 1706 program and creating a new program, even if statutorily similar, will close the applicant pool currently waiting on EIR financing. This chilling effect may prevent them from reapplying and, even if they wanted to, they would have to wait for new guidance on a new application process, which the LPO—which is now staffed with far fewer people than in the previous administration—might take months, if not a year or more, to complete. This proposal amounts to a forced reset of the Loan Programs Office; it slows down, rather than speeds up, any prospect of preserving or transforming existing energy infrastructure. A brownout at the LPO would only exacerbate the threat of brownouts across the country.
Brownfield project development challenges
Both the existing EIR program and the proposed Energy Dominance Financing program can be used to remediate and upgrade existing infrastructure. The Energy Dominance Financing proposal appropriates $661 million in credit subsidy and, assuming that it carries the same 50x leverage ratio as its predecessor, therefore promises about $33 billion in total loan and guarantee authority. (However, the proposal does not set a maximum loan guarantee amount, suggesting that this assumed leverage ratio is not fixed. It is also possible that the absence of a maximum loan guarantee amount prevents OMB from scoring transactions.)
Not only is this only 14 percent the credit subsidy it was appropriated in the Inflation Reduction Act, but more speculative, higher-risk critical minerals-related projects will use up a higher portion of this limited credit subsidy compared to lower-risk energy projects with creditworthy utility borrowers. (The LPO is required by law to use more of its credit subsidy on higher-risk projects as a risk-mitigation strategy.) This recent analysis from RMI, as shown below, quantifies the degree to which riskier projects will quickly draw down this limited subsidy: “Some credit subsidy modeling shows that while Baa companies and above don’t require any additional credit subsidy, riskier companies (like critical mineral ventures) are much more limited! Even just one full notch down to Ba means you only have ~$6.8B in loans, or ~10x leverage.” It’s disappointing, then, that the proposal gives the LPO so much less financing to deploy creatively.
Insofar as the administration is likely to use this proposed program to preserve and/or restart older energy infrastructure, the LPO will likely use this proposed authority to pursue coal plant preservation and nuclear restarts. LPO financing will certainly make the former—the administration’s attempts at which are currently threatening to significantly raise consumer costs compared to the building of new cleaner energy sources—cheaper for both utilities and consumers, especially insofar as the proposal requires utilities to pass on any savings from drawing on LPO financing to consumers. (The EIR program has the same requirement.) But there are physical and economic limits to restarting older nuclear power plants. The LPO is already providing up to $3 billion to support the restart of Holtec’s Palisades nuclear power station in Michigan. But nuclear industry analysts have concluded that the total amount of plants that can feasibly be re-commissioned is “probably in the single digits.”
Coal-to-nuclear conversions are possible under both the status quo and the proposed new authority. But seeing as the total cost of developing Vogtle 3 and 4 in Georgia rose to nearly $30 billion, it is possible that even a single conversion would use up a significant portion of the Energy Dominance Financing program’s assumed loan guarantee authority. In other words, this proposal simply does not provide enough financing for the kind of transformative infrastructure investment that the administration has stated it intends to pursue.
Section 1703 is the key—and the administration knows it!
As written, the proposed Energy Dominance Financing program cannot undertake the kind of ambitious greenfield energy project development that would further the administration’s stated “energy dominance” agenda. Indeed, Section 1706 was never the authority under which the LPO could deliver truly ambitious or path-breaking projects—that was always Section 1703, which gave the LPO authority to finance the development of new projects utilizing innovative energy technologies.
The Section 1703 loan authority was created in 2005 to support the financing of any projects that “employ new or significantly improved technologies as compared to commercial technologies.” These projects do not have to sit on existing energy infrastructure of any kind; project developers anywhere across the country can apply for this program provided their projects are large enough and utilize innovative energy technologies. It’s through Section 1703 in particular that the LPO supports the scale-up and commercialization of first-of-a-kind technologies. This is how the LPO has financed transmission, virtual power plants, bioenergy, batteries, carbon management, and hydrogen projects, among others. It’s also how the LPO would finance the construction of new advanced nuclear plants in line with the administration’s recent executive orders, as well as deploy new geothermal power stations at scale.
The Infrastructure Investment and Jobs Act and the Inflation Reduction Act expanded Section 1703 to allow the LPO to finance innovative supply chain projects and to work alongside states to deploy already-commercialized technologies. CPE has written extensively about the latter possibility: The “State Energy Financing Institution carveout” in Section 1703 allows the LPO to collaborate with state instrumentalities to deploy portfolios of non-innovative energy technologies at scale to meet local and regional energy affordability and reliability goals. The Senate ENR proposal to repeal 1703 in its entirety and, with it, most avenues for commercializing first-of-a-kind technologies and speeding up deployment of commercialized technologies across states.
The Senate ENR proposal contrasts significantly with the Trump administration’s FY26 budget request, which requests $750 million in credit subsidy authority and $30 billion in maximum loan guarantee authority for Section 1703 (implying 40x leverage). To be sure, this is far less than the $3.6 billion in credit subsidy authority that the Inflation Reduction Act provided Section 1703. The LPO currently has above $60 billion of loan guarantee authority left to use for this program, $40 billion of which was authorized in the Inflation Reduction Act. The administration does not try to rewrite the LPO’s statutory authorities in any way, nor does it circumscribe the program’s focus in statute; it seems to recognize the value of Section 1703 relative to the LPO’s other programs and is acting to support it.
To be sure, the administration states its desire to deploy this credit subsidy toward the development of advanced nuclear reactors, in line with its stated energy policy priorities. But it does not seem to repeal or otherwise target the LPO’s other lending authorities, except the CIFIA program, which finances carbon transport pipelines.
In short, the President’s budget request does more to support the LPO than the Senate ENR proposal does. While neither approaches the level of support the Inflation Reduction Act provided, and while neither maximizes the LPO’s catalytic potential for industrial transformation, the Senate ENR proposal is far from realistic both from the perspective of advancing decarbonization and from the perspective of supporting the administration’s stated energy policy agenda.
Next steps
The rest of the Senate will undoubtedly negotiate over Senate ENR’s proposal. Supporters of the LPO’s catalytic authorities should recognize that the repealing and rewriting the LPO’s authorities would prevent it from providing financing to any project for quite some time. In light of the fact that the budget reconciliation process will likely circumscribe the scope of the various energy tax credits and speed up their phaseout timelines, a forced reset of the LPO combined with a sharper tax credit phaseout would end up preventing many ambitious energy project developers from even undertaking project development in the first place. This outcome would be work against Americans’ interests: It would exacerbate the rise in consumer energy costs, fail to support the reliability and resilience of our energy system, and raise the likelihood of power shortages across the country especially as energy demand continues to skyrocket.
If the Senate ENR’s proposal does not meet the moment, policymakers should advance a proposal that does. The President’s budget request, which supports Section 1703 is a good start—but, ideally, Section 1703 should not have its existing appropriations rescinded, but increased instead. The Energy Infrastructure Reinvestment Program in Section 1706, as written, is extremely well-endowed and already has a large applicant pool; for the sake of the health of our energy system and the financial sustainability of our utilities, under no circumstances should it be repealed. Far better would be for policymakers to scrap its 2026 end date and let it exist indefinitely alongside an augmented Section 1703 program.
Thanks to Christian Fong at RMI for discussing the potential impacts of the Senate ENR proposal with CPE. His analysis of the proposed credit subsidy, posted on Twitter/X, can be accessed here.
- Technically speaking, the proposal rescinds all unobligated balances appropriated by the Inflation Reduction Act in particular. This would leave Section 1703 with around $11 million left in credit subsidy, which it would likely have to use for administrative costs rather than for supporting any new higher-risk loans. ↩︎