Minnesota's Sage Electrochromics Inc. has been ready for months to move on just the sort of project the Obama administration hopes will bolster the U.S. economy: a $65 million factory that would make energy-saving windows and generate 250 new jobs.
So what's holding it up? The Energy Department, whose fledgling loan-guarantee office has yet to approve a single project, including the proposed Sage glass factory, since the loan program launched in early 2007.
President Barack Obama plans to rely heavily on agencies like the Energy Department to approve contracts and issue loan guarantees and grants at a record clip in the $789 billion stimulus plan.
But there are signs that parts of the federal bureaucracy will need an overhaul to handle the huge workload heading their way. Such worries are apparent at the Energy Department, which will play a key role in Mr. Obama's bid to revive the economy and wean the country off oil.
Energy Secretary Steven Chu, with President Barack Obama, says he plans to speed up spending at the DOE.
The stimulus bill nearing a final vote in Congress could pump as much as $170 billion into projects such as highways, Internet broadband and public-housing repairs. Of that, about a quarter -- or some $40 billion -- could go to the Energy Department. The agency would be under the gun to swiftly hand out money to projects that would modernize the electric grid, build electric cars and make homes and buildings more energy efficient.
The new energy secretary, Steven Chu, has barely moved into his office overlooking the Smithsonian Castle. He says he'll have to transform how parts of his agency work if the president's stimulus plan is to succeed.
"We've got to do it," Mr. Chu said in an interview. "Otherwise it's just going to be a bust."
Other agencies face steep challenges, too. An obscure Commerce Department office with a $19 million budget and fewer than 20 grant officers could end up in charge of $7 billion in grants to expand Internet access in rural areas. A Congressional Budget Office report said it could take eight years for those grants to be issued because the amount of money would "far exceed" the agency's traditional budget and require the deployment of technology that is "not widely available today."
The spending demands could prove particularly taxing at the DOE. The Energy Department has had limited experience pulling off big, transformative energy projects. Most of the department's $25 billion budget goes toward maintaining the nation's nuclear stockpile, cleaning up former weapons plants, and doing basic scientific research.
"DOE is going to have to dramatically change how it does business if it hopes to push all this money out the door," says Karen Harbert, a former senior Energy Department official who now directs the U.S. Chamber of Commerce's lobbying efforts on energy issues. "They are going to need more people, more oversight and more freedom to waive regulations."
History of Delays
The department has a history of delays and of letting costs spiral. It has missed so many deadlines for setting energy-efficiency standards for appliances, for example, that Mr. Obama last week ordered the agency to get it done by August this year. The approval process for guaranteeing loans to energy projects, meanwhile, has dragged on for roughly two years and counting. And last month, the Government Accountability Office cited the agency's "inadequate management and oversight of its contractors" when it put the department on its list of agencies at "high risk" for waste, fraud, abuse and mismanagement.
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Gregory Friedman, the DOE's inspector general, whose office acts as the agency's in-house watchdog, knows the department's weak spots well after holding the position for more than a decade. The House version of the stimulus bill before Congress gives Mr. Friedman's office $15 million to track how all the new money coming into the DOE will be spent.
"Forty billion dollars is a huge amount of money," says Mr. Friedman of the DOE's potential windfall. "Absorbing the money, making sure it's spent appropriately and gets into the hands of the right recipients...are going to be significant challenges."
A Four-Week Window
Mr. Chu, a Nobel Prize-winning physicist whose last job was running the Lawrence Berkeley National Laboratory in California, says one of his first priorities at the DOE is getting projects that are already in the pipeline, like the Sage glass factory, up and running. To agency employees who say such projects need months of additional consideration, "we're saying, 'Tell us what you need to do in order to get them [decided] in four weeks,'" Mr. Chu says.
Sage and more than a dozen other companies have so far labored for more than two years to win loan guarantees through a program authorized by Congress in 2005. Wary of financing projects that might default, the Bush administration took another two years to adopt regulations governing the program. Congress eventually authorized the DOE to issue $42.5 billion in loan guarantees for ventures that many lenders would otherwise consider too risky.
The program is now seen as a test of the department's ability to speed up projects that could both create jobs and help steer the country away from a reliance on oil. But the experience of some of the companies still awaiting their loan guarantees raises questions about whether the DOE will be able to radically change its ways fast enough.
Sage Electrochromics makes windows that can get darker or lighter on command, making rooms easier to cool in summer or warmer in winter. Sage first approached the Energy Department in late 2006 about securing a loan guarantee that would allow the company to build its first commercial-scale glass factory about 40 miles south of the Twin Cities in Minnesota.
![[department of energy]](http://s.wsj.net/public/resources/images/P1-AO700_DOEjmp_NS_20090212221229.gif)
In October 2007, Sage was one of 16 companies that won initial approval. The company, which is seeking a $65 million loan guarantee, is now awaiting a ruling from the DOE on whether it will have to pay a fee for the service. After that comes a due-diligence review that will require a team of lawyers, engineers and market researchers, and could cost up to $1 million, according to Sage estimates.
"I'm guessing that we will have the money by the end of the year at the earliest," says Mike Kennedy, Sage's chief financial officer. "There has to be a way to do this faster."
In Massachusetts, Beacon Power Co. has stood in line for 25 months to win approval for a $50 million loan guarantee that would let the company break ground on an electricity-storage plant about 30 miles southeast of Albany, N.Y. The plant would absorb power and feed it back onto the grid when the supply drops, a function that traditional power plants do much less efficiently.
The vetting has been so thorough, says Beacon spokesman Gene Smith, that the company to date has supplied the Energy Department with 96 documents, which together fill six thick, three-ring binders. One of the documents is a draft 87-page environmental-impact study for the proposed two-acre site. That study required Beacon to hire archaeologists to scour the site for signs of prehistoric remains. The team found a mound of debris from a century ago that was deemed of no historic value.
David Frantz, who directs the DOE's loan-guarantee program, said he couldn't comment on specific applications, but said the agency is moving to "significantly shorten the cycle time from application to loan guarantee to ensure good projects get funded quickly."
On Thursday, Andy Karsner, assistant secretary for energy efficiency and renewable energy under President George W. Bush, told a Senate panel that a combination of "bureaucratic dysfunction," "organizational intransigence," and "institutional barriers" had contributed to the agency's "painfully slow" progress on loan-guarantee applications in recent years.
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