The Department of Energy has backed off a $730 million conditional loan guarantee to a Russian company for a steel plant in Michigan, after Republicans complained about the proposed arrangement.
The Obama administration did not offer a specific reason for discontinuing federal support for Russian firm Severstal. Energy Department spokesman Damien LaVera said only that officials reached the decision after a review of the application.
“After conducting a thorough review of this loan application, the department has decided not to move forward with this loan,” he said in a statement.
“As we have consistently said, the additional due diligence the department conducts after a conditional commitment is signed is an important part of the process and is vital to protecting the taxpayers. Because our review of loan terms continues after the conditional commitment is signed, not every project that receives a conditional commitment closes its loan,” he said.
LaVera said the project still has “merit,” noting it has attracted some private funding. The federal government’s decision to pull its support does not necessarily kill the project, and LaVera said the administration hopes “the company will remain committed to its investment in Michigan.”
Severstal is controlled by Alexei Mordashov, a chief executive whose net worth is listed at $18.5 billion by Forbes magazine, and is known to have close ties to the Kremlin.
In October, Rep. Darrell Issa criticized the arrangement, saying the government was taking too big a risk without much reward. He said Friday he was “pleased” by the decision to pull back on the funding, but added “it’s deeply disconcerting to know that this loan would have gone forward had Congress not raised concerns.”
“Following the waste of taxpayer dollars in the collapse of Solyndra, the Department of Energy needs to work on being better guardians of taxpayer dollars,” said Issa, chairman of the House Oversight and Government Reform Committee, in reference to the $535 million loan guarantee to failed solar panel firm Solyndra.
Issa in October asked Energy Secretary Steven Chu why taxpayer money was needed when “announcements made by Severstal during the loan consideration process indicated that the company had ample means to carry out the project.”
Severstal was looking for help in improving an advanced high-strength steel plant in Dearborn, Mich.
At the time of Issa’s initial inquiries, the Energy Department noted the project had bipartisan support, while stressing no federal tax dollars had yet been spent on the project — since it was still under review.
While eventually pulling back on federal support, the department had estimated the project would support more than 2,500 construction jobs and more than 260 permanent manufacturing jobs in Michigan.
Fox News’ Mike Emanuel contributed to this report.
