Watchdog calls for halt to energy loans amid insufficient conflict of interest controls

An internal government watchdog is calling on the Energy Department’s loan office to halt its financing for energy projects, saying there are insufficient controls in place to prevent conflicts of interest.

In a letter last week, Inspector General Teri Donaldson called on the Loan Programs Office (LPO) to “put into abeyance all loan and loan guarantee packages” until it can ensure that all of its contractors “are complying with conflicts of interest regulations.”

Specifically, her office found that the office is “not collecting information about and tracking all parties involved in loan administration” and therefore does not know whether companies it may loan money to "have strategically hired the same third-party experts … that the LPO has retained to assist with loan processing."

In addition, the Office of Inspector General (OIG) found that the LPO “had no records” of conflict of interest disclosures for contractors who provide the office with technical or financial support. 
Donaldson described her office’s finding as “interim” but said the finding was particularly urgent due to the loan office’s "stated intention to process $22 billion before January 20, 2025.”

She noted that through funding provided by Congress in recent years, the office has already closed loans or loan guarantees for more than $15 billion since 2021. 

The Loan Programs Office finances “high-impact, large-scale” energy infrastructure projects — and it has particularly focused on technology that can provide climate solutions. In recent weeks, the office has announced tentative commitments to help finance several electric vehicle-related projects.

In response to the memo, Biden administration officials rejected the suggestion to halt its loans, saying it will carry on “without regard to the OIG’s remarkable and unprecedented suggestion.”

They also said that the office has a "robust system in place for identifying and mitigating organizational conflicts of interest through active communication with its partners and by holding them contractually accountable and financially liable for compliance.”

The loan office noted that the watchdog has “not identified any organizational conflicts of interest.” It said that the OIG’s findings are based on “mistaken facts and a misunderstanding of the law” and claimed its memo “is so vague or imprecise that we may be unable to get at the root of the confusion without further clarification.”