Oversight Chairman Issa Questions Energy Department About $700 Million Loan Offer to Severstal
Steel company owned by Russian oligarch worth $18.5 billion, producing steel already in excess supply
(WASHINGTON)—Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) has asked Energy Secretary Steven Chu to provide answers about the decision-making processes regarding a department-approved $730 million loan to Severstal North America for its Dearborn, Mich., facility. The firm is a subsidiary of the Russian steel and mining company, OAO Severstal, led by Alexei Mordashov, one of the world’s wealthiest businessmen, with a personal net worth over $18 billion. The story was first reported tonight on Fox News Channel’s Special Report with Bret Baier.
Issa raised the issues with Secretary Chu because it appeared there was no immediate need for this private firm to require federal financing, nor was it clear that the type of steel was even eligible for federal loan consideration under the Advanced Technology Vehicle Manufacturing Program (ATVM) overseen by the Department of Energy (DOE). The firm requested the loan to improve an advanced high strength steel (AHSS) plant. Chairman Issa’s letter also pointed out that AHSS steel is not in short supply in the United states, and that current facilities are producing below capacity.
In March 2011, before receiving taxpayer funds, Severstal had already sold plants in Ohio, West Virginia, and Maryland in order to shift financial resources to its Dearborn facility. Following these closings, Severstal then announced a $740 million modernization project at the facility. “Surprisingly, in June 2011, the DOE granted an ATVM loan to Severstal, months after the decision to undertake the Dearborn project had already been made,” the letter said.
“Announcements made by Severstal during the loan consideration process indicated that the company had ample means to carry out the project,” Issa wrote. Given the immense wealth and power of Severstal’s CEO and the fact that the corporation had already made significant investments in the project, it is surprising that DOE would choose Severstal for a loan meant to spark new businesses and technologies within the automotive industry.”
A copy of Chairman Issa’s October 19 letter is here.