Statement on Signing the Bill Extending Conditional Loan Guarantee Agreements for Ethanol Fuel Production Facilities

April 16, 1985

I have signed S. 781, an amendment to the Biomass Energy and Alcohol Fuels Act of 1980, that extends for 5 months the deadline for four ethanol fuel production projects to meet the terms and conditions required for Federal loan guarantees.

Conservation and renewable energy sources are an important component of this administration's national energy policy. We support efforts by the private sector to develop alternative energy sources that are economically viable in the Nation's competitive marketplace.

To give the alcohol fuels industry an opportunity to develop into a competitive alternate energy source, the Department of Energy entered into four conditional commitments in 1981 to guarantee loans for the construction of ethanol fuel production facilities. Three of these conditional commitments have since expired, and a fourth expires on April 30, 1985. Although the sponsors of these projects have not yet been able to meet satisfactorily the terms and conditions, they believe that an extension of the conditional agreements until September 30, 1985, will enable them to complete these transactions. By passage of S. 781, the Congress has determined that they should be provided a last additional opportunity to do so.

This amendment does not grant any new loan guarantee authority or provide for any new commitments. However, the conditional agreements being extended commit the Government to a potential liability of some $250 million should the projects default. Utmost care must be taken to protect the taxpayers from a loss of this magnitude. In view of these circumstances, I have directed the Secretary of Energy to issue loan guarantees only to those projects that pass a rigorous economic analysis. The ethanol industry must ultimately stand on its own in the energy marketplace, competing fairly with other energy sources. The Nation will not attain greater energy security if the Government subsidizes energy sources that do not demonstrate their competitiveness. Therefore, we will not make any Federal commitments on behalf of projects that are not determined to be economically viable. To do otherwise would shift the burden of a high-risk business venture onto the shoulders of the American taxpayer.

Note: S. 781, approved April 16, was assigned Public Law No. 99 - 24.