WASHINGTON, D.C. – Buried in the 700-plus page energy bill currently under debate in the U.S. Senate is a provision that provides hundreds of millions of dollars worth of federal loan guarantees for a power project apparently to be built by four former Enron executives. One of the former executives is Thomas White, former head of Enron’s retail and energy trading in California during the energy crisis who later served as President Bush’s Secretary of the Army.

Title XIV, Section 1403(c)(1)(B) of the Senate energy bill provides federal loan guarantees for “a project to produce energy from coal … mined in the western United States using appropriate advanced integrated gasification combined cycle technology that minimizes and offers the potential to sequester carbon dioxide emissions and … shall be located in a western State at an altitude greater than 4,000 feet.”

Public Citizen’s investigation to find out who this loan would benefit narrowed the answer to just one company: Houston-based DKRW Energy. This company, named after the four Enron executives that founded it – Jon C. Doyle, Robert C. Kelly, H. David Ramm and White – formed a subsidiary, Medicine Bow Fuel & Power, to develop a $2.8 billion coal gasification project in Medicine Bow, Wyo. The DKRW facility meets all the criteria required in the legislation: The coal will be supplied from Arch Coal mines neighboring the power facility; it will stuff carbon dioxide emissions into oil wells; and the facility will be located in a western state (Wyoming) at an altitude above 4,000 feet.

“Congress should not be in the business of slipping taxpayer subsidies into large bills to benefit individual corporations, especially executives from a company that perpetrated one of the greatest corporate frauds in American history,” said Public Citizen President Joan Claybrook.

The federal loan guarantee makes taxpayers responsible for repaying the loan if the company defaults, or if the project ends up not being economically feasible after its construction. The provision states that if an energy company receiving such a loan guarantee defaults on that loan, the bank to which the loan is owed “shall have the right to demand payment of the unpaid [loan] amount from the Secretary” of Energy. Therefore, taxpayers hold all the risk while energy companies reap all the rewards.

“Has Congress learned nothing from the Enron bankruptcy and the fallout from the company’s fraudulent behavior?” said Tyson Slocum, research director for the energy program. “The fact that the Senate Energy and Natural Resources Committee is willing to back these former Enron executives with taxpayers’ money is truly unsettling.”

The committee has approved the bill, and it is scheduled for Senate action as early as this week. Among the members of the energy committee is Republican Craig Thomas of Wyoming. The provision is not in the House energy bill, which has been approved by the House.

Public Citizen speculated that these four former Enron executives are seeking taxpayer handouts because they have had a difficult time attracting the necessary private capital without the loan guarantee. White served as Secretary of the Army from May 2001 to March 2003. Prior to that, he served as vice chairman of one of Enron’s largest divisions, Enron Energy Services (EES).

Under White’s tenure, EES played a major role in the California energy crisis. In 1998, the year he became its vice chairman, EES was America’s 61st largest energy trader. When he left, his division was the 28th largest energy trading firm in the country. Until March 2001, the trading operations of EES were separate from the rest of Enron’s Wholesale Energy unit – meaning White was responsible for a huge trading operation that played a significant role in California’s energy crisis.

Also, under White’s direction, EES severed at least two large retail contracts in California in January/February 2001 during the height of the energy crisis, which Enron helped create. Based on the evidence on hand, it appears that EES took the power that had been obligated to serve these retail consumers and sold it in the wholesale market, where EES could fetch higher prices than it could by continuing to sell power at lower, fixed rates to retail customers. This significant wholesale trading operation, combined with White’s decision to break retail contracts in California, made the division a major player in California’s deregulated wholesale market.

The energy bill also contains other giveaways to energy corporations. Title XIV, Section 1403(c)(1)(C), provides $800 million in federal loan guarantees to a Minnesota company, Excelsior Energy, whose executives have ties to a company that filed for bankruptcy after amassing $9.2 billion in debt and paid $25 million to settle allegations of energy market manipulation. [See our November 2003 report.]

Title XIV, Section 1403(c)(1)(D), provides loan guarantees to Lexington, Ky.-based EnviRes to build a coal gasification facility in East St. Louis, Ill. The total cost of the project is $254.2 million. EnviRes is a joint venture of three companies, including Triad Research, which in turn is operated by Robert Addington of Addington Energy (AEI Resources), one of the nation’s largest coal conglomerates. Among the members of energy committee is Republican Jim Bunning of Kentucky.

“Since the energy bill was first drafted, it has been larded with pork for corporate America,” said Wenonah Hauter, director of Public Citizen’s Critical Mass Energy and Environment Program.” If this project can’t stand on its own, it shouldn’t get a taxpayer bailout. In this case, taxpayers take all the risk but the former Enron executives will reap all the rewards.”