The LPO is Already Efficient

No more own goals, please

Over the last two weeks, outlets have begun reporting that DOGE plans to gut the Department of Energy’s Loan Programs Office (LPO).

I think this is bad, and that it flies in the face of the President’s energy dominance agenda. But it’s actually quite a bit more backwards than that: by pursuing cuts to the LPO, DOGE is targeting one of the only currently-existing examples of Government Efficiency.

For the unfamiliar, the LPO was established to finance large-scale, high-impact energy infrastructure projects that strengthen America's energy security and economic competitiveness. In particular, the LPO plays a critical role in financing projects that private lenders often consider too large or technically complex. These projects include the likes of the Palisades Nuclear Plant restart, the first nuclear restart in U.S. history, and the Thacker Pass project, one of the world’s largest lithium mines. (Ironically, LPO also counts an early loan to Tesla among its more high-profile investments.)

But in recent months, LPO has come under pressure from DOGE amidst the initiative’s broader push to downsize government. Reporting to date has not surfaced an exact number, but it’s almost certain that DOGE is targeting more than 50 percent cuts to the LPO’s staff.

This would be an enormous own-goal. Government efficiency is a worthy pursuit, of course — hell, I work on permitting reform full time. But it is for this reason, not despite it, that I support the LPO. Because the LPO is unique in government: It operates on a leaner staffing model than private sector finance firms managing comparable portfolios. Most major asset management firms employ approximately 500 staff per $100 billion in assets. LPO currently functions with just around 400 staff managing $90 billion in obligations plus over $40 billion in pending commitments.

In other words, even at its January 2025 staffing levels, LPO would be considered very efficient by private sector standards. Given how many LPO employees have elected to resign in the last few weeks, the office functioning at its current numbers would be remarkable. And if DOGE cuts any deeper, LPO will be rendered useless. It will be impossible to issue new loans, and in some cases close conditional commitments. All this, for the office which has funded every single nuclear project this century, save for one (Watts Bar, which was funded by a different government arm).

In conversations with LPO skeptics, I’ve often heard that the office used to have far fewer staff and was still able to run just fine. This is true, insofar as LPO used to have a smaller team, which still issued loans. But there’s a simple reason for this: As recently as 2022, LPO’s portfolio was just ~$18 billion. At the time, the office had around 100 staff. In the three years since, LPO’s portfolio has grown more than 5x. Its staff size has not grown proportionally with it.

The last great irony is that LPO has strong financial performance, similar to that of commercial banks. Indeed, its overall loan portfolio has consistently turned a profit, returning more money to the Treasury Department than was outlayed. In this sense, the LPO is the furthest possible program from the much-and-often-fairly-maligned Biden-era grant initiatives.

There's a profound disconnect, then, between DOGE's stated mission and its actions toward the LPO. At a moment when America desperately needs every advantage it can get in the global energy race, hamstringing one of our most effective financing vehicles is tantamount to self-sabotage. I can only hope that DOGE recognizes, before it’s too late, that "government efficiency" sometimes means preserving the rare institutions that already embody it.