Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules 39569 

(1) The date the program 

discrimination claim is resolved by 

USDA or 

(2) The date that a court of competent 

jurisdiction renders a final decision on 

the program discrimination claim if the 

farmer or rancher appeals the decision 

of USDA. 

Signed in Washington, DC, on August 3, 

2009. 

Jonathan Coppess, 

Administrator, Farm Service Agency. 

[FR Doc. E9–18986 Filed 8–6–09; 8:45 am] 

BILLING CODE 3410–05–P 

DEPARTMENT OF ENERGY 

10 CFR Part 609 

RIN 1901–AB21 

Loan Guarantees for Projects That 

Employ Innovative Technologies 

AGENCY: Office of the Chief Financial 

Officer, Department of Energy. 

ACTION: Proposed rule. 

SUMMARY: On October 23, 2007, the 

Department of Energy (DOE or the 

Department) published a final rule 

establishing regulations for the loan 

guarantee program authorized by 

Section 1703 of Title XVII of the Energy 

Policy Act of 2005 (Title XVII or the 

Act). Section 1703 of Title XVII 

authorizes the Secretary of Energy 

(Secretary) to make loan guarantees for 

projects that ‘‘avoid, reduce, or 

sequester air pollutants or 

anthropogenic emissions of greenhouse 

gases; and employ new or significantly 

improved technologies as compared to 

commercial technologies in service in 

the United States at the time the 

guarantee is issued.’’ Section 1703 of 

Title XVII also identifies ten categories 

of technologies and projects that are 

potentially eligible for loan guarantees. 

The two principal goals of section 1703 

of Title XVII are to encourage 

commercial use in the United States of 

new or significantly improved energyrelated technologies and to achieve 

substantial environmental benefits. DOE 

believes that commercial use of these 

technologies will help sustain and 

promote economic growth, produce a 

more stable and secure energy supply 

and economy for the United States, and 

improve the environment. 

Through experience gained 

implementing the loan guarantee 

program authorized by section 1703 of 

Title XVII, and information received 

from industry indicating the wide 

variety of ownership structures which 

participants would like to employ in 

implementing projects seeking loan 

guarantees, DOE believes it is 

appropriate to consider certain changes 

to the existing regulations to provide 

flexibility in the determination of an 

appropriate collateral package to secure 

guaranteed loan obligations, facilitate 

collateral sharing and related 

intercreditor arrangements with other 

project lenders, and to provide a more 

workable interpretation of certain 

statutory provisions regarding DOE’s 

treatment of collateral. 

DATES: Comments on this proposed rule 

must be postmarked no later than 

September 8, 2009. 

ADDRESSES: Comments may be 

submitted using any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: lgprogram@hq.doe.gov. 

• Postal Mail: David G. Frantz, 

Director, Loan Guarantee Program 

Office, Office of the Chief Financial 

Officer, 1000 Independence Avenue, 

SW., Washington, DC.20585–0121. 

Please submit one signed original paper 

copy. 

• Hand Delivery/Courier: David G. 

Frantz, Director, Loan Guarantee 

Program Office, Office of the Chief 

Financial Officer, 1000 Independence 

Avenue, SW., Washington, DC 20585– 

0121. Please submit one signed original 

paper copy. 

FOR FURTHER INFORMATION CONTACT: 

David G. Frantz, Director, Loan 

Guarantee Program Office, Office of the 

Chief Financial Officer, 1000 

Independence Avenue, SW., 

Washington, DC 20585–0121, (202) 586– 

8336, e-mail: lgprogram@hq.doe.gov; or 

Susan S. Richardson, Chief Counsel for 

the Loan Guarantee Program, Office of 

the General Counsel, 1000 

Independence Avenue, SW., 

Washington, DC 20585–0121, (202) 586– 

9521, e-mail: lgprogram@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background and Proposed Amendment 

II. Regulatory Review 

A. Executive Order 12866 

B. National Environmental Policy Act of 

1969 

C. The Regulatory Flexibility Act 

D. Paperwork Reduction Act 

E. Unfunded Mandates Reform Act of 1995 

F. Treasury and General Government 

Appropriations Act, 1999 

G. Executive Order 13132 

H. Executive Order 12988 

I. Treasury and General Government 

Appropriations Act, 2001 

J. Executive Order 13211 

K. Congressional Notification 

L. Approval by the Office of the Secretary 

of Energy 

I. Background and Proposed 

Amendment 

Today’s proposed rule would amend 

the regulations implementing the loan 

guarantee program authorized by 

section 1703 of Title XVII of the Energy 

Policy Act of 2005 (42 U.S.C. 16511– 

16514) (referred to as Title XVII). 

Section 1703 of Title XVII authorizes 

the Secretary of Energy (Secretary), after 

consultation with the Secretary of the 

Treasury, to make loan guarantees for 

projects that ‘‘(1) avoid, reduce, or 

sequester air pollutants or 

anthropogenic emissions of greenhouse 

gases; and (2) employ new or 

significantly improved technologies as 

compared to commercial technologies in 

service in the United States at the time 

the guarantee is issued.’’ (42 U.S.C. 

16513(a)) 

Section 1702 of Title XVII outlines 

general terms and conditions for loan 

guarantee agreements and directs the 

Secretary to include in loan guarantee 

agreements ‘‘such detailed terms and 

conditions as the Secretary determines 

appropriate to (i) protect the interests of 

the United States in case of a default; 

and (ii) have available all the patents 

and technology necessary for any person 

selected, including the Secretary, to 

complete and operate the project. (42 

U.S.C. 16512(g)(2)(c)). Further, section 

1702(d) addresses certain threshold 

requirements that must be met before 

the guaranty is made; and section 

1702(g) addresses the Secretary’s rights 

in the case of default of the loan. 

Specifically, section 1702(d) of Title 

XVII states, under the heading 

‘‘Repayment’’ and addressing 

‘‘Subordination,’’ that ‘‘[t]he 

[guaranteed] obligation shall be subject 

to the condition that the obligation is 

not subordinate to other financing.’’ 

Further, when addressing the situation 

of default, section 1702(g)(2) of Title 

XVII states, with respect to 

‘‘subrogation’’ and ‘‘superiority of 

rights,’’ that ‘‘[t]he rights of the 

Secretary, with respect to any property 

acquired pursuant to a guarantee or 

related agreements, shall be superior to 

the rights of any other person with 

respect to the property.’’ 

In the October 23, 2007 final rule 

implementing Title XVII, DOE 

interpreted the interplay between these 

two provisions of section 1702 such that 

both describe the rights the Secretary 

must secure as a condition of making a 

guarantee. This understanding is 

reflected in the text of the regulations 

which requires that the Secretary 

receive a first lien security interest in all 

project assets as an incident to making 

a guarantee. Moreover, this 


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interpretation of the applicability of the 

superiority of rights provision as a 

required element of the Secretary’s 

making a guarantee was embedded in 

the text of the rule and was made 

explicit in the preambles to the 

proposed and final rules implementing 

section 1703 of Title XVII. 

The Department has critically 

reexamined the statute, particularly its 

text and structure, and now concludes, 

as described below, that the 

interpretation of the statute requiring 

receipt of a first lien on all project assets 

is not one that it was legally compelled 

to adopt, and was not correct. A first 

lien on all project assets is better 

understood as one element that the 

Secretary may require for a particular 

project, but is not compelled by the 

statute to require. This proposed 

rulemaking reflects what the 

Department has concluded is the correct 

interpretation of section 1702. 

First, it should be borne in mind that 

nowhere does section 1702 itself require 

that the Secretary receive a first lien on 

all project assets as a condition of his 

ability to make a loan guarantee. Instead 

the statute requires only that the 

Secretary’s guaranteed obligation ‘‘not 

be subordinate to other financing.’’ In 

fact, section 1702 does not require that 

the lender or the Secretary receive any 

collateral as a statutory requirement for 

making a loan guarantee. 

Next, the ‘‘first lien on all project 

assets’’ requirement contained in the 

regulations seems traceable only to the 

‘‘superiority of rights’’ provision 

contained in section 1702(g)(2)(B). The 

structure of the statute, however, is 

suggestive that section 1702(g)’s 

provisions are designed to govern postdefault rights of the Secretary, rather 

than to impose conditions that must be 

met at the time the Secretary determines 

to make a loan guarantee. So 

understood, the ‘‘property acquired’’ as 

to which the Secretary’s rights ‘‘shall be 

superior to the rights of any other 

person’’ relates to property ‘‘acquired’’ 

by the Secretary pursuant to his right of 

subrogation to the rights of the lender in 

any collateral or security interest. 

As a structural matter, it is notable 

that the ‘‘superiority of rights’’ provision 

appears within and under the head 

‘‘subrogation’’ contained in section 

1702(g)(2). Consideration of the 

structure of the statute is aided by the 

various captions that introduce its 

various substantive provisions. In 

general, those captions—first 

‘‘repayment,’’ then ‘‘subordination,’’ 

then ‘‘defaults,’’ ‘‘payment by the 

Secretary,’’ ‘‘subrogation,’’ and then 

‘‘superiority of rights,’’—tend to 

reinforce the structural understanding of 

the statute as keying its particular 

provisions to the sequence of stages that 

are foreseeable in the loan guarantee 

relationship. So perceived, the topic of 

‘‘superiority of rights’’ would become 

germane only as a subset of the 

sequence that begins with a ‘‘default’’ 

and after ‘‘payment by the Secretary.’’ 

Moreover, in reviewing applications 

for projects seeking a loan guarantee 

under section 1703 of Title XVII, DOE 

became aware that its original reading of 

the statute was in tension with the 

financing structure of many commercial 

transactions in the energy sector. In 

particular, the tenancy in common 

ownership structure proposed for the 

next generation of nuclear generating 

facilities, under which multiple entities 

own undivided interests in a single 

facility, does not lend itself to the 

unitary project ownership anticipated 

by the regulations. In fact, tenancy in 

common is the typical form of 

ownership of utility grade power plants 

that are jointly owned by public power 

agencies, cooperative power systems 

and investor-owned utilities. 

Approximately one-third of all currently 

operating nuclear power reactors, and 

approximately one-third of all planned 

nuclear power reactors for which 

applications are pending at the Nuclear 

Regulatory Commission are jointly 

owned through tenancies in common. 

As such, each owner holds an 

undivided interest in the physical 

project assets, and each owner typically 

finances its investment in the project 

separately. In this scenario, DOE would 

not be lending directly to a project 

company, and may be lending only to 

some but not all of the project owners. 

As a result, it may not be commercially 

feasible to obtain a lien on all project 

assets. Moreover, in certain 

circumstances, both in large 

infrastructure projects and in smaller 

projects, creditworthy sponsors may be 

willing to offer a corporate lending 

structure in which DOE would rely on 

the balance sheet of the sponsor. In such 

a case, the credit of the sponsor may be 

sufficient to support a more modest 

pledge of assets. 

Additionally, in response to prior 

solicitations, DOE has received 

expressions of interest from Export 

Credit Agencies (ECAs) concerning their 

possible participation in eligible 

projects as co-lenders, co-guarantors or 

insurers of loans. ECAs are 

governmental, quasi-governmental, or 

private institutions supported by and 

acting on behalf of their host 

governments that facilitate financing for 

home country exporters doing business 

in other nations. In addition to ECAs, 

there is a variety of other potential 

sources of financing for power 

generation projects, including 

municipal bond financing. There also 

could be interest rate or commodity 

hedging agreements and, after 

completion, working capital facilities 

for project companies. The ECAs, and 

likely the other sources of financing, 

will expect to share, on a pari passu 

basis, in collateral pledged to secure the 

borrower’s debt obligations. 

Thus, the interpretation of the statute 

contained in the October 23, 2007, final 

rule effectively disqualifies from 

participation in Title XVII programs 

proposed energy production facilities 

that employ innovative technologies, 

particularly in the nuclear power 

industry, that are jointly owned through 

a tenants in common structure or where 

there are appropriate co-lenders or coguarantors who require a pari passu 

structure. DOE does not believe that a 

statute intended to encourage 

commercial use in the United States of 

new or significantly improved energyrelated technologies would be written in 

a way as to make ineligible such 

industry participants. 

As stated and explained above, DOE 

has concluded that section 1702 of Title 

XVII does not mandate that DOE receive 

a first lien position on all projects 

assets. In light of this interpretation of 

section 1702 of Title XVII, DOE is 

proposing amendments to the existing 

regulations. Specifically, to ensure that 

the loan guarantee program has the 

ability to respond to the kinds of 

structuring issues discussed above, the 

proposed rule would delete the 

requirement of a first priority lien on all 

project assets (and other pledged 

collateral) and leave to the Secretary the 

determination of an appropriate 

collateral package, as well as 

intercreditor arrangements. Such a 

determination by the Secretary is 

contemplated by sections 1702(a) and 

1702 (g)(2)(C), and remains subject to 

the requirement of section 1702(d)(3) 

that the guaranteed obligation not be 

subordinate to other financing. The 

Department believes that having the 

flexibility to determine on a project by 

project basis the scope of the collateral 

package and whether pari passu lending 

is in the best interests of the United 

States, will enable the Department to 

reduce its exposure on individual 

projects, diversify its portfolio and 

maximize the benefits of the resources 

available for the loan guarantee 

program. 


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II. Regulatory Review 

A. Executive Order 12866 

Today’s proposed rule has been 

determined to be a significant regulatory 

action under Executive Order 12866, 

‘‘Regulatory Planning and Review,’’ 58 

FR 51735 (October 4, 1993). 

Accordingly, this action was subject to 

review under that Executive Order by 

the Office of Information and Regulatory 

Affairs at Office of Management and 

Budget (OMB). 

B. National Environmental Policy Act of 

1969 

Through the issuance of this proposed 

rule, DOE is making no decision relative 

to the approval of a loan guarantee for 

a particular proposed project. DOE has, 

therefore, determined that publication 

of the proposed rule is covered under 

the Categorical Exclusion found at 

paragraph A.6 of Appendix A to Subpart 

D, 10 CFR part 1021, which applies to 

the establishment of procedural 

rulemakings. Accordingly, neither an 

environmental assessment nor an 

environmental impact statement is 

required at this time. However, 

appropriate NEPA project review will be 

conducted prior to execution of a Loan 

Guarantee Agreement. 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of an initial regulatory flexibility 

analysis for any rule that by law must 

be proposed for public comment, unless 

the agency certifies that the rule, if 

promulgated, will not have a significant 

economic impact on a substantial 

number of small entities. As required by 

Executive Order 13272, ‘‘Proper 

Consideration of Small Entities in 

Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process (68 FR 7990). DOE 

has made its procedures and policies 

available on the Office of the General 

Counsel’s Web site: http:// 

www.gc.doe.gov. 

DOE is not obliged to prepare a 

regulatory flexibility analysis for this 

rulemaking because there is no 

requirement to publish a general notice 

of proposed rulemaking for rules related 

to loans under the Administrative 

Procedure Act (5 U.S.C. 553(a)(2)). 

D. Paperwork Reduction Act 

This proposed rule involves a 

collection of information previously 

approved by OMB under Control 

Number [1910–5134]. The burden 

imposed by that collection is ________. 

E. Unfunded Mandates Reform Act of 

1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (Act) (2 U.S.C. 1531 

et seq.) requires each Federal agency, to 

the extent permitted by law, to prepare 

a written assessment of the effects of 

any Federal mandate in an agency rule 

that may result in the expenditure by 

State, local, and tribal governments, in 

the aggregate, or by the private sector, of 

$100 million or more (adjusted annually 

for inflation) in any one year. The Act 

also requires a Federal agency to 

develop an effective process to permit 

timely input by elected officials of State, 

tribal, or local governments on a 

proposed ‘‘significant intergovernmental 

mandate,’’ and requires an agency plan 

for giving notice and opportunity to 

provide timely input to potentially 

affected small governments before 

establishing any requirements that 

might significantly or uniquely affect 

small governments. 

The term ‘‘Federal mandate’’ is 

defined in the Act to mean a Federal 

intergovernmental mandate or a Federal 

private sector mandate (2 U.S.C. 658(6)). 

Although the rule will impose certain 

requirements on non-Federal 

governmental and private sector 

applicants for loan guarantees, the Act’s 

definitions of the terms ‘‘Federal 

intergovernmental mandate’’ and 

‘‘Federal private sector mandate’’ 

exclude, among other things, any 

provision in legislation, statute, or 

regulation that is a condition of Federal 

assistance or a duty arising from 

participation in a voluntary program (2 

U.S.C. 658(5) and (7), respectively). 

Today’s proposed rule establishes 

requirements that persons voluntarily 

seeking loan guarantees for projects that 

would use certain new and improved 

energy technologies must satisfy as a 

condition of a Federal loan guarantee. 

Thus, the proposed rule falls under the 

exceptions in the definitions of ‘‘Federal 

intergovernmental mandate’’ and 

‘‘Federal private sector mandate’’ for 

requirements that are a condition of 

Federal assistance or a duty arising from 

participation in a voluntary program. 

The Act does not apply to this 

rulemaking. 

F. Treasury and General Government 

Appropriations Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any 

proposed rule that may affect family 

well being. This proposed rule would 

not have any impact on the autonomy 

or integrity of the family as an 

institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

G. Executive Order 13132 

Executive Order 13132, ‘‘Federalism,’’ 

64 FR 43255 (August 4, 1999) imposes 

certain requirements on agencies 

formulating and implementing policies 

or regulations that preempt State law or 

that have Federalism implications. 

Agencies are required to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and carefully assess the necessity 

for such actions. DOE has examined this 

proposed rule and has determined that 

it would not preempt State law and 

would not have a substantial direct 

effect on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. No further 

action is required by Executive Order 

13132. 

H. Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ 61 FR 4729 (February 7, 1996), 

imposes on Executive agencies the 

general duty to adhere to the following 

requirements: (1) Eliminate drafting 

errors and ambiguity; (2) write 

regulations to minimize litigation; and 

(3) provide a clear legal standard for 

affected conduct rather than a general 

standard and promote simplification 

and burden reduction. With regard to 

the review required by section 3(a), 

section 3(b) of Executive Order 12988 

specifically requires that Executive 

agencies make every reasonable effort to 

ensure that the regulation: (1) Clearly 

specifies the preemptive effect, if any; 

(2) clearly specifies any effect on 

existing Federal law or regulation; (3) 

provides a clear legal standard for 

affected conduct while promoting 

simplification and burden reduction; (4) 

specifies the retroactive effect, if any; (5) 

adequately defines key terms; and (6) 

addresses other important issues 

affecting clarity and general 

draftsmanship under any guidelines 

issued by the Attorney General. Section 

3(c) of Executive Order 12988 requires 

Executive agencies to review regulations 

in light of applicable standards in 

section 3(a) and section 3(b) to 

determine whether they are met or it is 


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39572 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules 

unreasonable to meet one or more of 

them. DOE has completed the required 

review and determined that, to the 

extent permitted by law, this proposed 

rule meets the relevant standards of 

Executive Order 12988. 

I. Treasury and General Government 

Appropriations Act, 2001 

The Treasury and General 

Government Appropriations Act, 2001 

(44 U.S.C. 3516 note) provides for 

agencies to review most disseminations 

of information to the public under 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. 

OMB’s guidelines were published at 

67 FR 8452 (February 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (October 7, 2002). DOE has 

reviewed today’s proposed rule under 

the OMB and DOE guidelines and has 

concluded that it is consistent with 

applicable policies in those guidelines. 

J. Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use,’’ 66 FR 28355 (May 

22, 2001) requires Federal agencies to 

prepare and submit to the OMB, a 

Statement of Energy Effects for any 

proposed significant energy action. A 

‘‘significant energy action’’ is defined as 

any action by an agency that 

promulgated or is expected to lead to 

promulgation of a final rule, and that: 

(1) Is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

Today’s regulatory action would not 

have a significant adverse effect on the 

supply, distribution, or use of energy 

and is therefore not a significant energy 

action. Accordingly, DOE has not 

prepared a Statement of Energy Effects. 

K. Approval by the Office of the 

Secretary of Energy 

The Secretary of Energy has approved 

the issuance of this proposed rule. 

List of Subjects in 10 CFR Part 609 

Administrative practice and 

procedure, Energy, Loan programs, and 

Reporting and recordkeeping 

requirements. 

Issued in Washington, DC, on July 31, 

2009. 

Steve Isakowitz, 

Chief Financial Officer. 

For the reasons stated in the 

preamble, chapter II of title 10 of the 

Code of Federal Regulations is proposed 

to be amended to read as set forth 

below. 

1. Part 609 is revised to read as 

follows: 

PART 609—LOAN GUARANTEES FOR 

PROJECTS THAT EMPLOY 

INNOVATIVE TECHNOLOGIES 

Sec. 

609.1 Purpose and Scope. 

609.2 Definitions. 

609.3 Solicitations. 

609.4 Submission of Pre-Applications. 

609.5 Evaluation of Pre-Applications. 

609.6 Submission of Applications. 

609.7 Programmatic, Technical and 

Financial Evaluation of Applications. 

609.8 Term Sheets and Conditional 

Commitments. 

609.9 Closing on the Loan Guarantee 

Agreement. 

609.10 Loan Guarantee Agreement. 

609.11 Lender Eligibility and Servicing 

Requirements. 

609.12 Project Costs. 

609.13 Principal and Interest Assistance 

Contract. 

609.14 Full Faith and Credit and 

Incontestability. 

609.15 Default, Demand, Payment, and 

Collateral Liquidation. 

609.16 Perfection of Liens and Preservation 

of Collateral. 

609.17 Audit and Access to Records. 

609.18 Deviations. 

Authority: 42 U.S.C. 7254, 16511–16514. 

§ 609.1 Purpose and Scope. 

(a) This part sets forth the policies 

and procedures that DOE uses for 

receiving, evaluating, and, after 

consultation with the Department of the 

Treasury, approving applications for 

loan guarantees to support Eligible 

Projects under Section 1703 of Title 

XVII of the Energy Policy Act of 2005, 

as amended. 

(b) Except as set forth in paragraph (c) 

of this section, this part applies to all 

Pre-Applications, Applications, 

Conditional Commitments and Loan 

Guarantee Agreements to support 

Eligible Projects under Section 1703 of 

Title XVII of the Energy Policy Act of 

2005, as amended. 

(c) Sections 609.3, 609.4 and 609.5 of 

this part shall not apply to any PreApplications, Applications, Conditional 

Commitments or Loan Guarantee 

Agreements under the Guidelines issued 

by DOE on August 8, 2006, which were 

published in the Federal Register on 

August 14, 2006 (71 FR 46451) and the 

solicitation issued on August 8, 2006 

under Title XVII of the Energy Policy 

Act of 2005, provided the PreApplication is accepted under the 

Guidelines and an Application is 

invited pursuant to such PreApplication no later than December 31, 

2007. 

(d) Part 1024 of chapter X of title 10 

of the Code of Federal Regulations shall 

not apply to actions taken under this 

part. 

§ 609.2 Definitions. 

Act means Title XVII of the Energy 

Policy Act of 2005 (42 U.S.C. 16511– 

16514), as amended. 

Administrative Cost of Issuing a Loan 

Guarantee means the total of all 

administrative expenses that DOE 

incurs during: 

(1) The evaluation of a PreApplication, if a Pre-Application is 

requested in a solicitation, and an 

Application for a loan guarantee; 

(2) The offering of a Term Sheet, 

executing the Conditional Commitment, 

negotiation, and closing of a Loan 

Guarantee Agreement; and 

(3) The servicing and monitoring of a 

Loan Guarantee Agreement, including 

during the construction, startup, 

commissioning, shakedown, and 

operational phases of an Eligible Project. 

Applicant means any person, firm, 

corporation, company, partnership, 

association, society, trust, joint venture, 

joint stock company, or other business 

entity or governmental non-Federal 

entity that has submitted an Application 

to DOE and has the authority to enter 

into a Loan Guarantee Agreement with 

DOE under the Act. 

Application means a comprehensive 

written submission in response to a 

solicitation or a written invitation from 

DOE to apply for a loan guarantee 

pursuant to § 609.6 of this part. 

Borrower means any Applicant who 

enters into a Loan Guarantee Agreement 

with DOE and issues Guaranteed 

Obligations. 

Commercial Technology means a 

technology in general use in the 

commercial marketplace in the United 

States at the time the Term Sheet is 

issued by DOE. A technology is in 

general use if it has been installed in 

and is being used in three or more 

commercial projects in the United States 

in the same general application as in the 

proposed project, and has been in 

operation in each such commercial 

project for a period of at least five years. 

The five year period shall be measured, 

for each project, starting on the service 

date of the project or facility employing 


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that particular technology. For purposes 

of this section, commercial projects 

include projects that have been the 

recipients of a loan guarantee from DOE 

under this part. 

Conditional Commitment means a 

Term Sheet offered by DOE and 

accepted by the Applicant, with the 

understanding of the parties that if the 

Applicant thereafter satisfies all 

specified and precedent funding 

obligations and all other contractual, 

statutory and regulatory requirements, 

or other requirements, DOE and the 

Applicant will execute a Loan 

Guarantee Agreement: Provided that the 

Secretary may terminate a Conditional 

Commitment for any reason at any time 

prior to the execution of the Loan 

Guarantee Agreement; and Provided 

further that the Secretary may not 

delegate this authority to terminate a 

Conditional Commitment. 

Contracting Officer means the 

Secretary of Energy or a DOE official 

authorized by the Secretary to enter 

into, administer and/or terminate DOE 

Loan Guarantee Agreements and related 

contracts on behalf of DOE. 

Credit Subsidy Cost has the same 

meaning as ‘‘cost of a loan guarantee’’ in 

section 502(5)(C) of the Federal Credit 

Reform Act of 1990 (2 U.S.C. 

661a(5)(C)), which is the net present 

value, at the time the Loan Guarantee 

Agreement is executed, of the following 

estimated cash flows, discounted to the 

point of disbursement: 

(1) Payments by the Government to 

cover defaults and delinquencies, 

interest subsidies, or other payments; 

less 

(2) Payments to the Government 

including origination and other fees, 

penalties, and recoveries; including the 

effects of changes in loan or debt terms 

resulting from the exercise by the 

Borrower, Eligible Lender or other 

Holder of an option included in the 

Loan Guarantee Agreement. 

DOE means the United States 

Department of Energy. 

Eligible Lender means: 

(1) Any person or legal entity formed 

for the purpose of, or engaged in the 

business of, lending money, including, 

but not limited to, commercial banks, 

savings and loan institutions, insurance 

companies, factoring companies, 

investment banks, institutional 

investors, venture capital investment 

companies, trusts, or other entities 

designated as trustees or agents acting 

on behalf of bondholders or other 

lenders; and 

(2) Any person or legal entity that 

meets the requirements of § 609.11 of 

this part, as determined by DOE; or 

(3) The Federal Financing Bank. 

Eligible Project means a project 

located in the United States that 

employs a New or Significantly 

Improved Technology that is not a 

Commercial Technology, and that meets 

all applicable requirements of section 

1703 of the Act (42 U.S.C. 16513), the 

applicable solicitation and this part. 

Equity means cash contributed by the 

Borrowers and other principals. Equity 

does not include proceeds from the nonguaranteed portion of Title XVII loans, 

proceeds from any other non-guaranteed 

loans, or the value of any form of 

government assistance or support. 

Federal Financing Bank means an 

instrumentality of the United States 

government created by the Federal 

Financing Bank Act of 1973 (12 U.S.C. 

2281 et seq.). The Bank is under the 

general supervision of the Secretary of 

the Treasury. 

Guaranteed Obligation means any 

loan or other debt obligation of the 

Borrower for an Eligible Project for 

which DOE guarantees all or any part of 

the payment of principal and interest 

under a Loan Guarantee Agreement 

entered into pursuant to the Act. 

Holder means any person or legal 

entity that owns a Guaranteed 

Obligation or has lawfully succeeded in 

due course to all or part of the rights, 

title, and interest in a Guaranteed 

Obligation, including any nominee or 

trustee empowered to act for the Holder 

or Holders. 

Intercreditor Agreement means any 

agreement between or among DOE and 

one or more other persons providing 

financing for the benefit of an Eligible 

Project, entered into in connection with 

a Loan Guarantee upon a determination 

by DOE that such agreement is 

reasonable and necessary to protect the 

interests of the United States and 

addressing customary matters, such as 

priorities and voting rights among 

lenders, as such agreement may be 

amended or modified from time to time 

with the consent of DOE. 

Loan Agreement means a written 

agreement between a Borrower and an 

Eligible Lender or other Holder 

containing the terms and conditions 

under which the Eligible Lender or 

other Holder will make loans to the 

Borrower to start and complete an 

Eligible Project. 

Loan Guarantee Agreement means a 

written agreement that, when entered 

into by DOE and a Borrower, an Eligible 

Lender or other Holder, pursuant to the 

Act, establishes the obligation of DOE to 

guarantee the payment of all or a 

portion of the principal and interest on 

specified Guaranteed Obligations of a 

Borrower to Eligible Lenders or other 

Holders subject to the terms and 

conditions specified in the Loan 

Guarantee Agreement. 

New or Significantly Improved 

Technology means a technology 

concerned with the production, 

consumption or transportation of energy 

and that is not a Commercial 

Technology, and that has either: 

(1) Only recently been developed, 

discovered or learned; or 

(2) Involves or constitutes one or more 

meaningful and important 

improvements in productivity or value, 

in comparison to Commercial 

Technologies in use in the United States 

at the time the Term Sheet is issued. 

OMB means the Office of Management 

and Budget in the Executive Office of 

the President. 

Pre-Application means a written 

submission in response to a DOE 

solicitation that broadly describes the 

project proposal, including the 

proposed role of a DOE loan guarantee 

in the project, and the eligibility of the 

project to receive a loan guarantee under 

the applicable solicitation, the Act and 

this part. 

Project Costs means those costs, 

including escalation and contingencies, 

that are to be expended or accrued by 

Borrower and are necessary, reasonable, 

customary and directly related to the 

design, engineering, financing, 

construction, startup, commissioning 

and shakedown of an Eligible Project, as 

specified in § 609.12 of this part. Project 

costs do not include costs for the items 

set forth in § 609.12(c) of this part. 

Project Sponsor means any person, 

firm, corporation, company, 

partnership, association, society, trust, 

joint venture, joint stock company or 

other business entity that assumes 

substantial responsibility for the 

development, financing, and structuring 

of a project eligible for a loan guarantee 

and, if not the Applicant, owns or 

controls, by itself and/or through 

individuals in common or affiliated 

business entities, a five percent or 

greater interest in the proposed Eligible 

Project, or the Applicant. 

Secretary means the Secretary of 

Energy or a duly authorized designee or 

successor in interest. 

Term Sheet means an offering 

document issued by DOE that specifies 

the detailed terms and conditions under 

which DOE may enter into a 

Conditional Commitment with the 

Applicant. A Term Sheet imposes no 

obligation on the Secretary to enter into 

a Conditional Commitment. 

United States means the several 

states, the District of Columbia, the 

Commonwealth of Puerto Rico, the 

Virgin Islands, Guam, American Samoa 


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or any territory or possession of the 

United States of America. 

§ 609.3 Solicitations. 

(a) DOE may issue solicitations to 

invite the submission of PreApplications or Applications for loan 

guarantees for Eligible Projects. DOE 

must issue a solicitation before 

proceeding with other steps in the loan 

guarantee process including issuance of 

a loan guarantee. A Project Sponsor or 

Applicant may only submit one PreApplication or Application for one 

project using a particular technology. A 

Project Sponsor or Applicant, in other 

words, may not submit a PreApplication or Application for multiple 

projects using the same technology. 

(b) Each solicitation must include, at 

a minimum, the following information: 

(1) The dollar amount of loan 

guarantee authority potentially being 

made available by DOE in that 

solicitation; 

(2) The place and time for response 

submission; 

(3) The name and address of the DOE 

representative whom a potential Project 

Sponsor may contact to receive further 

information and a copy of the 

solicitation; 

(4) The form, format, and page limits 

applicable to the response submission; 

(5) The amount of the application fee 

(First Fee), if any, that will be required; 

(6) The programmatic, technical, 

financial and other factors the Secretary 

will use to evaluate response 

submissions, including the loan 

guarantee percentage requested by the 

Applicant and the relative weightings 

that DOE will use when evaluating 

those factors; and 

(7) Such other information as DOE 

may deem appropriate. 

§ 609.4 Submission of Pre-Applications. 

In response to a solicitation 

requesting the submission of PreApplications, either Project Sponsors or 

Applicants may submit PreApplications to DOE. Pre-Applications 

must meet all requirements specified in 

the solicitation and this part. At a 

minimum, each Pre-Application must 

contain all of the following: 

(a) A cover page signed by an 

individual with full authority to bind 

the Project Sponsor or Applicant that 

attests to the accuracy of the 

information in the Pre-Application, and 

that binds the Project Sponsor(s) or 

Applicant to the commitments made in 

the Pre-Application. In addition, the 

information requested in paragraphs (b) 

and (c) should be submitted in a volume 

one and the information requested in 

paragraphs (d) through (h) of this 

section should be submitted in a volume 

two, to expedite the DOE review 

process. 

(b) An executive summary briefly 

encapsulating the key project features 

and attributes of the proposed project; 

(c) A business plan which includes an 

overview of the proposed project, 

including: 

(1) A description of the Project 

Sponsor, including all entities involved, 

and its experience in project 

investment, development, construction, 

operation and maintenance; 

(2) A description of the new or 

significantly improved technology to be 

employed in the project, including: 

(i) A report detailing its successes and 

failures during the pilot and 

demonstration phases; 

(ii) The technology’s commercial 

applications; 

(iii) The significance of the 

technology to energy use or emission 

control; 

(iv) How and why the technology is 

‘‘new’’ or ‘‘significantly improved’’ 

compared to technology already in 

general use in the commercial 

marketplace in the United States; 

(v) Why the technology to be 

employed in the project is not in 

‘‘general use;’’ 

(vi) The owners or controllers of the 

intellectual property incorporated in 

and utilized by such technologies; and 

(vii) The manufacturer(s) and 

licensee(s), if any, authorized to make 

the technology available in the United 

States, the potential for replication of 

commercial use of the technology in the 

United States, and whether and how the 

technology is or will be made available 

in the United States for further 

commercial use; 

(3) The estimated amount, in 

reasonable detail, of the total Project 

Costs; 

(4) The timeframe required for 

construction and commissioning of the 

project; 

(5) A description of any primary offtake or other revenue-generating 

agreements that will provide the 

primary sources of revenues for the 

project, including repayment of the debt 

obligations for which a guarantee is 

sought. 

(6) An overview of how the project 

complies with the eligibility 

requirements in section 1703 of the Act 

(42 U.S.C. 16513); 

(7) An outline of the potential 

environmental impacts of the project 

and how these impacts will be 

mitigated; 

(8) A description of the anticipated air 

pollution and/or anthropogenic 

greenhouse gas reduction benefits and 

how these benefits will be measured 

and validated; and 

(9) A list of all of the requirements 

contained in this part and the 

solicitation and where in the PreApplication these requirements are 

addressed; 

(d) A financing plan overview 

describing: 

(1) The amount of equity to be 

invested and the sources of such equity; 

(2) The amount of the total debt 

obligations to be incurred and the 

funding sources of all such debt if 

available; 

(3) The amount of the Guaranteed 

Obligation as a percentage of total 

project debt; and as a percentage of total 

project cost; and 

(4) A financial model detailing the 

investments in and the cash flows 

generated and anticipated from the 

project over the project’s expected lifecycle, including a complete explanation 

of the facts, assumptions, and 

methodologies in the financial model; 

(e) An explanation of what estimated 

impact the loan guarantee will have on 

the interest rate, debt term, and overall 

financial structure of the project; 

(f) Where the Federal Financing Bank 

is not the lender, a copy of a letter from 

an Eligible Lender or other Holder(s) 

expressing its commitment to provide, 

or interest in providing, the required 

debt financing necessary to construct 

and fully commission the project; 

(g) A copy of the equity commitment 

letter(s) from each of the Project 

Sponsors and a description of the 

sources for such equity; and 

(h) A commitment to pay the 

Application fee (First Fee), if invited to 

submit an Application. 

§ 609.5 Evaluation of Pre-Applications. 

(a) Where Pre-Applications are 

requested in a solicitation, DOE will 

conduct an initial review of the PreApplication to determine whether: 

(1) The proposal is for an Eligible 

Project; 

(2) The submission contains the 

information required by § 609.4 of this 

part; and 

(3) The submission meets all other 

requirements of the applicable 

solicitation. 

(b) If a Pre-Application fails to meet 

the requirements of paragraph (a) of this 

section, DOE may deem it nonresponsive and eliminate it from further 

review. 

(c) If DOE deems a Pre-Application 

responsive, DOE will evaluate: 

(1) The commercial viability of the 

proposed project; 

(2) The technology to be employed in 

the project; 


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(3) The relevant experience of the 

principal(s); and 

(4) The financial capability of the 

Project Sponsor (including personal 

and/or business credit information of 

the principal(s)). 

(d) After the evaluation described in 

paragraph (c) of this section, DOE will 

determine if there is sufficient 

information in the Pre-Application to 

assess the technical and commercial 

viability of the proposed project and/or 

the financial capability of the Project 

Sponsor and to assess other aspects of 

the Pre-Application. DOE may ask for 

additional information from the Project 

Sponsor during the review process and 

may request one or more meetings with 

the Project Sponsor. 

(e) After reviewing a Pre-Application 

and other information acquired under 

paragraph (c) of this section, DOE may 

provide a written response to the Project 

Sponsor or Applicant either inviting the 

Applicant to submit an Application for 

a loan guarantee and specifying the 

amount of the Application filing fee 

(First Fee) or advising the Project 

Sponsor that the project proposal will 

not receive further consideration. 

Neither the Pre-Application nor any 

written or other feedback that DOE may 

provide in response to the PreApplication eliminates the requirement 

for an Application. 

(f) No response by DOE to, or 

communication by DOE with, a Project 

Sponsor, or an Applicant submitting a 

Pre-Application or subsequent 

Application shall impose any obligation 

on DOE to enter into a Loan Guarantee 

Agreement. 

§ 609.6 Submission of Applications. 

(a) In response to a solicitation or 

written invitation to submit an 

Application, an Applicant submitting an 

Application must meet all requirements 

and provide all information specified in 

the solicitation and/or invitation and 

this part. 

(b) An Application must include, at a 

minimum, the following information 

and materials: 

(1) A completed Application form 

signed by an individual with full 

authority to bind the Applicant and the 

Project Sponsors; 

(2) Payment of the Application filing 

fee (First Fee) for the Pre-Application, if 

any, and Application phase; 

(3) A detailed description of all 

material amendments, modifications, 

and additions made to the information 

and documentation provided in the PreApplication, if a Pre-Application was 

requested in the solicitation, including 

any changes in the proposed project’s 

financing structure or other terms; 

(4) A description of how and to what 

measurable extent the project avoids, 

reduces, or sequesters air pollutants 

and/or anthropogenic emissions of 

greenhouse gases, including how to 

measure and verify those benefits; 

(5) A description of the nature and 

scope of the proposed project, 

including: 

(i) Key milestones; 

(ii) Location of the project; 

(iii) Identification and commercial 

feasibility of the new or significantly 

improved technology(ies) to be 

employed in the project; 

(iv) How the Applicant intends to 

employ such technology(ies) in the 

project; and 

(v) How the Applicant intends to 

assure, to the extent possible, the further 

commercial availability of the 

technology(ies) in the United States; 

(6) A detailed explanation of how the 

proposed project qualifies as an Eligible 

Project; 

(7) A detailed estimate of the total 

Project Costs together with a description 

of the methodology and assumptions 

used; 

(8) A detailed description of the 

engineering and design contractor(s), 

construction contractor(s), equipment 

supplier(s), and construction schedules 

for the project, including major activity 

and cost milestones as well as the 

performance guarantees, performance 

bonds, liquidated damages provisions, 

and equipment warranties to be 

provided; 

(9) A detailed description of the 

operations and maintenance provider(s), 

the plant operating plan, estimated 

staffing requirements, parts inventory, 

major maintenance schedule, estimated 

annual downtime, and performance 

guarantees and related liquidated 

damage provisions, if any; 

(10) A description of the management 

plan of operations to be employed in 

carrying out the project, and 

information concerning the management 

experience of each officer or key person 

associated with the project; 

(11) A detailed description of the 

project decommissioning, 

deconstruction, and disposal plan, and 

the anticipated costs associated 

therewith; 

(12) An analysis of the market for any 

product to be produced by the project, 

including relevant economics justifying 

the analysis, and copies of any 

contractual agreements for the sale of 

these products or assurance of the 

revenues to be generated from sale of 

these products; 

(13) A detailed description of the 

overall financial plan for the proposed 

project, including all sources and uses 

of funding, equity and debt, and the 

liability of parties associated with the 

project over the term of the Loan 

Guarantee Agreement; 

(14) A copy of all material 

agreements, whether entered into or 

proposed, relevant to the investment, 

design, engineering, financing, 

construction, startup commissioning, 

shakedown, operations and 

maintenance of the project; 

(15) A copy of the financial closing 

checklist for the equity and debt to the 

extent available; 

(16) Applicant’s business plan on 

which the project is based and 

Applicant’s financial model presenting 

project pro forma statements for the 

proposed term of the Guaranteed 

Obligations including income 

statements, balance sheets, and cash 

flows. All such information and data 

must include assumptions made in their 

preparation and the range of revenue, 

operating cost, and credit assumptions 

considered; 

(17) Financial statements for the past 

three years, or less if the Applicant has 

been in operation less than three years, 

that have been audited by an 

independent certified public 

accountant, including all associated 

notes, as well as interim financial 

statements and notes for the current 

fiscal year, of Applicant and parties 

providing Applicant’s financial backing, 

together with business and financial 

interests of controlling or commonly 

controlled organizations or persons, 

including parent, subsidiary and other 

affiliated corporations or partners of the 

Applicant; 

(18) A copy of all legal opinions, and 

other material reports, analyses, and 

reviews related to the project; 

(19) An independent engineering 

report prepared by an engineer with 

experience in the industry and 

familiarity with similar projects. The 

report should address: The project’s 

siting and permitting, engineering and 

design, contractual requirements, 

environmental compliance, testing and 

commissioning and operations and 

maintenance; 

(20) Credit history of the Applicant 

and, if appropriate, any party who owns 

or controls, by itself and/or through 

individuals in common or affiliated 

business entities, a five percent or 

greater interest in the project or the 

Applicant; 

(21) A preliminary credit assessment 

for the project without a loan guarantee 

from a nationally recognized rating 

agency for projects where the estimated 

total Project Costs exceed $25 million. 

For projects where the total estimated 

Project Costs are $25 million or less and 


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where conditions justify, in the sole 

discretion of the Secretary, DOE may 

require such an assessment; 

(22) A list showing the status of and 

estimated completion date of 

Applicant’s required project-related 

applications or approvals for Federal, 

State, and local permits and 

authorizations to site, construct, and 

operate the project; 

(23) A report containing an analysis of 

the potential environmental impacts of 

the project that will enable DOE to 

assess whether the project will comply 

with all applicable environmental 

requirements, and that will enable DOE 

to undertake and complete any 

necessary reviews under the National 

Environmental Policy Act of 1969; 

(24) A listing and description of assets 

associated, or to be associated, with the 

project and any other asset that will 

serve as collateral for the Guaranteed 

Obligations, including appropriate data 

as to the value of the assets and the 

useful life of any physical assets. With 

respect to real property assets listed, an 

appraisal that is consistent with the 

‘‘Uniform Standards of Professional 

Appraisal Practice,’’ promulgated by the 

Appraisal Standards Board of the 

Appraisal Foundation, and performed 

by licensed or certified appraisers, is 

required; 

(25) An analysis demonstrating that, 

at the time of the Application, there is 

a reasonable prospect that Borrower will 

be able to repay the Guaranteed 

Obligations (including interest) 

according to their terms, and a complete 

description of the operational and 

financial assumptions and 

methodologies on which this 

demonstration is based; 

(26) Written affirmation from an 

officer of the Eligible Lender or other 

Holder confirming that it is in good 

standing with DOE’s and other Federal 

agencies’ loan guarantee programs; 

(27) A list of all of the requirements 

contained in this part and the 

solicitation and where in the 

Application these requirements are 

addressed; 

(28) A statement from the Applicant 

that it believes that there is ‘‘reasonable 

prospect’’ that the Guaranteed 

Obligations will be fully paid from 

project revenue; and 

(29) Any other information requested 

in the invitation to submit an 

Application or requests from DOE in 

order to clarify an Application; 

(c) DOE will not consider any 

Application complete unless the 

Applicant has paid the First Fee and the 

Application is signed by the appropriate 

entity or entities with the authority to 

bind the Applicant to the commitments 

and representations made in the 

Application. 

§ 609.7 Programmatic, Technical and 

Financial Evaluation of Applications. 

(a) In reviewing completed 

Applications, and in prioritizing and 

selecting those to whom a Term Sheet 

should be offered, DOE will apply the 

criteria set forth in the Act, the 

applicable solicitation, and this part. 

Applications will be considered in a 

competitive process, i.e. each 

Application will be evaluated against 

other Applications responsive to the 

Solicitation. Greater weight will be 

given to applications that rely upon a 

smaller guarantee percentage, all else 

being equal. Concurrent with its review 

process, DOE will consult with the 

Secretary of the Treasury regarding the 

terms and conditions of the potential 

loan guarantee. Applications will be 

denied if: 

(1) The project will be built or 

operated outside the United States; 

(2) The project is not ready to be 

employed commercially in the United 

States, cannot yield a commercially 

viable product or service in the use 

proposed in the project, does not have 

the potential to be employed in other 

commercial projects in the United 

States, and is not or will not be available 

for further commercial use in the United 

States; 

(3) The entity or person issuing the 

loan or other debt obligations subject to 

the loan guarantee is not an Eligible 

Lender or other Holder, as defined in 

§ 609.11 of this part; 

(4) The project is for demonstration, 

research, or development; 

(5) The project does not avoid, reduce 

or sequester air pollutants or 

anthropogenic emissions of greenhouse 

gases; or 

(6) The Applicant will not provide an 

equity contribution. 

(b) In evaluating Applications, DOE 

will consider the following factors: 

(1) To what measurable extent the 

project avoids, reduces, or sequesters air 

pollutants or anthropogenic emissions 

of greenhouses gases; 

(2) To what extent the new or 

significantly improved technology to be 

employed in the project, as compared to 

Commercial Technology in general use 

in the United States, is ready to be 

employed commercially in the United 

States, can be replicated, yields a 

commercially viable project or service 

in the use proposed in the project, has 

potential to be employed in other 

commercial projects in the United 

States, and is or will be available for 

further commercial use in the United 

States; 

(3) To what extent the new or 

significantly improved technology used 

in the project constitutes an important 

improvement in technology, as 

compared to Commercial Technology, 

used to avoid, reduce or sequester air 

pollutants or anthropogenic emissions 

of greenhouse gases, and the Applicant 

has a plan to advance or assist in the 

advancement of that technology into the 

commercial marketplace; 

(4) The extent to which the requested 

amount of the loan guarantee, and 

requested amount of Guaranteed 

Obligations are reasonable relative to 

the nature and scope of the project; 

(5) The total amount and nature of the 

Eligible Project Costs and the extent to 

which Project Costs are funded by 

Guaranteed Obligations; 

(6) The likelihood that the project will 

be ready for full commercial operations 

in the time frame stated in the 

Application; 

(7) The amount of equity commitment 

to the project by the Applicant and 

other principals involved in the project; 

(8) Whether there is sufficient 

evidence that the Applicant will 

diligently pursue the project, including 

initiating and completing the project in 

a timely manner; 

(9) Whether and to what extent the 

Applicant will rely upon other Federal 

and non-Federal governmental 

assistance such as grants, tax credits, or 

other loan guarantees to support the 

financing, construction, and operation 

of the project and how such assistance 

will impact the project; 

(10) The feasibility of the project and 

likelihood that the project will produce 

sufficient revenues to service the 

project’s debt obligations over the life of 

the loan guarantee and assure timely 

repayment of Guaranteed Obligations; 

(11) The levels of safeguards provided 

to the Federal government in the event 

of default through collateral, warranties, 

and other assurance of repayment 

described in the Application, including 

the nature of any anticipated 

intercreditor arrangements; 

(12) The Applicant’s capacity and 

expertise to successfully operate the 

project, based on factors such as 

financial soundness, management 

organization, and the nature and extent 

of corporate and personal experience; 

(13) The ability of the applicant to 

ensure that the project will comply with 

all applicable laws and regulations, 

including all applicable environmental 

statutes and regulations; 

(14) The levels of market, regulatory, 

legal, financial, technological, and other 

risks associated with the project and 

their appropriateness for a loan 

guarantee provided by DOE; 


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(15) Whether the Application contains 

sufficient information, including a 

detailed description of the nature and 

scope of the project and the nature, 

scope, and risk coverage of the loan 

guarantee sought to enable DOE to 

perform a thorough assessment of the 

project; and 

(16) Such other criteria that DOE 

deems relevant in evaluating the merits 

of an Application. 

(c) During the Application review 

process DOE may raise issues or 

concerns that were not raised during the 

Pre-Application review process where a 

Pre-Application was requested in the 

applicable solicitation. 

(d) If DOE determines that a project 

may be suitable for a loan guarantee, 

DOE will notify the Applicant and 

Eligible Lender or other Holder in 

writing and provide them with a Term 

Sheet. If DOE reviews an Application 

and decides not to proceed further with 

the issuance of a Term Sheet, DOE will 

inform the Applicant in writing of the 

reason(s) for denial. 

§ 609.8 Term Sheets and Conditional 

Commitments. 

(a) DOE, after review and evaluation 

of the Application, additional 

information requested and received by 

DOE, potentially including a 

preliminary credit rating or credit 

assessment, and information obtained as 

the result of meeting with the Applicant 

and the Eligible Lender or other Holder, 

may offer to an Applicant and the 

Eligible Lender or other Holder detailed 

terms and conditions that must be met, 

including terms and conditions that 

must be met by the Applicant and the 

Eligible Lender or other Holder. 

(b) The terms and conditions required 

by DOE will be expressed in a written 

Term Sheet signed by a Contracting 

Officer and addressed to the Applicant 

and the Eligible Lender or other Holder, 

where appropriate. The Term Sheet will 

request that the Project Sponsor and the 

Eligible Lender or other Holder express 

agreement with the terms and 

conditions contained in the Term Sheet 

by signing the Term Sheet in the 

designated place. Each person signing 

the Term Sheet must be a duly 

authorized official or officer of the 

Applicant and Eligible Lender or other 

Holder. The Term Sheet will include an 

expiration date on which the terms 

offered will expire unless the 

Contracting Officer agrees in writing to 

extend the expiration date. 

(c) The Applicant and/or the Eligible 

Lender or other Holder may respond to 

the Term Sheet offer in writing or may 

request discussions or meetings on the 

terms and conditions contained in the 

Term Sheet, including requests for 

clarifications or revisions. When DOE, 

the Applicant, and the Eligible Lender 

or other Holder agree on all of the final 

terms and conditions and all parties 

sign the Term Sheet, the Term Sheet 

becomes a Conditional Commitment. 

When and if all of the terms and 

conditions specified in the Conditional 

Commitment have been met, DOE and 

the Applicant may enter into a Loan 

Guarantee Agreement. 

(d) DOE’s obligations under each 

Conditional Commitment are 

conditional upon statutory authority 

having been provided in advance of the 

execution of the Loan Guarantee 

Agreement sufficient under FCRA and 

Title XVII for DOE to execute the Loan 

Guarantee Agreement, and either an 

appropriation has been made or a 

borrower has paid into the Treasury 

sufficient funds to cover the full Credit 

Subsidy Cost for the loan guarantee that 

is the subject of the Conditional 

Commitment. 

(e) The Applicant is required to pay 

fees to DOE to cover the Administrative 

Cost of Issuing a Loan Guarantee for the 

period of the Term Sheet through the 

closing of the Loan Guarantee 

Agreement (Second Fee). 

§ 609.9 Closing on the Loan Guarantee 

Agreement. 

(a) Subsequent to entering into a 

Conditional Commitment with an 

Applicant, DOE, after consultation with 

the Applicant, will set a closing date for 

execution of Loan Guarantee 

Agreement. 

(b) By the closing date, the Applicant 

and the Eligible Lender or other Holder 

must have satisfied all of the detailed 

terms and conditions contained in the 

Conditional Commitment and other 

related documents and all other 

contractual, statutory, and regulatory 

requirements. If the Applicant and the 

Eligible Lender or other Holder has not 

satisfied all such terms and conditions 

by the closing date, the Secretary may, 

in his/her sole discretion, set a new 

closing date or terminate the 

Conditional Commitment. 

(c) In order to enter into a Loan 

Guarantee Agreement at closing: 

(1) DOE must have received authority 

in an appropriations act for the loan 

guarantee; and 

(2) All other applicable statutory, 

regulatory, or other requirements must 

be fulfilled. 

(d) Prior to, or on, the closing date, 

DOE will ensure that: 

(1) Pursuant to section 1702(b) of the 

Act, DOE has received payment of the 

Credit Subsidy Cost of the loan 

guarantee, as defined in § 609.2 of this 

part from either (but not from a 

combination) of the following: 

(i) A Congressional appropriation of 

funds; or 

(ii) A payment from the Borrower. 

(2) Pursuant to section 1702(h) of the 

Act, DOE has received from the 

Borrower the First and Second Fees and, 

if applicable, the Third fee, or portions 

thereof, for the Administrative Cost of 

Issuing the Loan Guarantee, as specified 

in the Loan Guarantee Agreement; 

(3) OMB has reviewed and approved 

DOE’s calculation of the Credit Subsidy 

Cost of the loan guarantee; 

(4) The Department of the Treasury 

has been consulted as to the terms and 

conditions of the Loan Guarantee 

Agreement; 

(5) The Loan Guarantee Agreement 

and related documents contain all terms 

and conditions DOE deems reasonable 

and necessary to protect the interest of 

the United States; and 

(6) All conditions precedent specified 

in the Conditional Commitment are 

either satisfied or waived by a 

Contracting Officer and all other 

applicable contractual, statutory, and 

regulatory requirements are satisfied. 

(e) Not later than the period approved 

in writing by the Contracting Officer, 

which may not be less than 30 days 

prior to the closing date, the Applicant 

must provide in writing updated project 

financing information if the terms and 

conditions of the financing 

arrangements changed between 

execution of the Conditional 

Commitment and that date. The 

Conditional Commitment must be 

updated to reflect the revised terms and 

conditions. 

(f) Where the total Project Costs for an 

Eligible Project are projected to exceed 

$25 million, the Applicant must provide 

a credit rating from a nationally 

recognized rating agency reflecting the 

revised Conditional Commitment for the 

project without a Federal guarantee. 

Where total Project Costs are projected 

to be $25 million or less than $25 

million, the Secretary may, on a case-bycase basis, require a credit rating. If a 

rating is required, an updated rating 

must be provided to the Secretary not 

later than 30 days prior to closing. 

(g) Changes in the terms and 

conditions of the financing 

arrangements will affect the Credit 

Subsidy Cost for the Loan Guarantee 

Agreement. DOE may postpone the 

expected closing date pursuant to any 

changes submitted under paragraph (e) 

and (f) of this section. In addition, DOE 

may choose to terminate the Conditional 

Commitment. 


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§ 609.10 Loan Guarantee Agreement. 

(a) Only a Loan Guarantee Agreement 

executed by a duly authorized DOE 

Contracting Officer can contractually 

obligate DOE to guarantee loans or other 

debt obligations. 

(b) DOE is not bound by oral 

representations made during the PreApplication stage, if Pre-Applications 

were solicited, or Application stage, or 

during any negotiation process. 

(c) Except if explicitly authorized by 

an Act of Congress, no funds obtained 

from the Federal Government, or from a 

loan or other instrument guaranteed by 

the Federal Government, may be used to 

pay for Credit Subsidy Costs, 

administrative fees, or other fees 

charged by or paid to DOE relating to 

the Title XVII program or any loan 

guarantee there under. 

(d) Prior to the execution by DOE of 

a Loan Guarantee Agreement, DOE must 

ensure that the following requirements 

and conditions, which must be specified 

in the Loan Guarantee Agreement, are 

satisfied: 

(1) The project qualifies as an Eligible 

Project under the Act and is not a 

research, development, or 

demonstration project or a project that 

employs Commercial Technologies in 

service in the United States; 

(2) The project will be constructed 

and operated in the United States, the 

employment of the new or significantly 

improved technology in the project has 

the potential to be replicated in other 

commercial projects in the United 

States, and this technology is or is likely 

to be available in the United States for 

further commercial application; 

(3) The face value of the debt 

guaranteed by DOE is limited to no 

more than 80 percent of total Project 

Costs. 

(4)(i) Where DOE guarantees 100 

percent of the Guaranteed Obligation, 

the loan shall be funded by the Federal 

Financing Bank; 

(ii) Where DOE guarantees more than 

90 percent of the Guaranteed Obligation, 

the guaranteed portion cannot be 

separated from or ‘‘stripped’’ from the 

non-guaranteed portion of the 

Guaranteed Obligation if the loan is 

participated, syndicated or otherwise 

resold in the secondary market; 

(iii) Where DOE guarantees 90 percent 

or less of the Guaranteed Obligation, the 

guaranteed portion may be separated 

from or ‘‘stripped’’ from the nonguaranteed portion of the Guaranteed 

Obligation, if the loan is participated, 

syndicated or otherwise resold in the 

secondary debt market; 

(5) The Borrower and other principals 

involved in the project have made or 

will make a significant equity 

investment in the project; 

(6) The Borrower is obligated to make 

full repayment of the principal and 

interest on the Guaranteed Obligations 

and other project debt over a period of 

up to the lesser of 30 years or 90 percent 

of the projected useful life of the 

project’s major physical assets, as 

calculated in accordance with generally 

accepted accounting principles and 

practices. The non-guaranteed portion 

of any Guaranteed Obligation must be 

repaid on a pro-rata basis, and may not 

be repaid on a shorter amortization 

schedule than the guaranteed portion; 

(7) The loan guarantee does not 

finance, either directly or indirectly, 

tax-exempt debt obligations, consistent 

with the requirements of section 149(b) 

of the Internal Revenue Code; 

(8) The amount of the loan 

guaranteed, when combined with other 

funds committed to the project, will be 

sufficient to carry out the project, 

including adequate contingency funds; 

(9) There is a reasonable prospect of 

repayment by Borrower of the principal 

of and interest on the Guaranteed 

Obligations and other project debt; 

(10) The Borrower has pledged project 

assets and other collateral or surety, 

including non project-related assets, 

determined by DOE to be necessary to 

secure the repayment of the Guaranteed 

Obligations; 

(11) The Loan Guarantee Agreement 

and related documents include detailed 

terms and conditions necessary and 

appropriate to protect the interest of the 

United States in the case of default, 

including ensuring availability of all the 

intellectual property rights, technical 

data including software, and physical 

assets necessary for any person or 

entity, including DOE, to complete, 

operate, convey, and dispose of the 

defaulted project; 

(12) The interest rate on any 

Guaranteed Obligation is determined by 

DOE, after consultation with the 

Treasury Department, to be reasonable, 

taking into account the range of interest 

rates prevailing in the private sector for 

similar obligations of comparable risk 

guaranteed by the Federal Government; 

(13) Any Guaranteed Obligation is not 

subordinate to any loan or other debt 

obligation; 

(14) There is satisfactory evidence 

that Borrower and Eligible Lenders or 

other Holders are willing, competent, 

and capable of performing the terms and 

conditions of the Guaranteed 

Obligations and other debt obligation 

and the Loan Guarantee Agreement, and 

will diligently pursue the project; 

(15) The Borrower has made the 

initial (or total) payment of fees for the 

Administrative Cost of Issuing a Loan 

Guarantee for the construction and 

operational phases of the project (Third 

Fee), as specified in the Conditional 

Commitment; 

(16) The Eligible Lender, other Holder 

or servicer has taken and is obligated to 

continue to take those actions necessary 

to perfect and maintain liens on assets 

which are pledged as collateral for the 

Guaranteed Obligation; 

(17) If Borrower is to make payment 

in full for the Credit Subsidy Cost of the 

loan guarantee pursuant to section 

1702(b)(2) of the Act, such payment 

must be received by DOE prior to, or at 

the time of, closing; 

(18) DOE or its representatives have 

access to the project site at all 

reasonable times in order to monitor the 

performance of the project; 

(19) DOE, the Eligible Lender, or other 

Holder and Borrower have reached an 

agreement as to the information that 

will be made available to DOE and the 

information that will be made publicly 

available; 

(20) The prospective Borrower has 

filed applications for or obtained any 

required regulatory approvals for the 

project and is in compliance, or 

promptly will be in compliance, where 

appropriate, with all Federal, State, and 

local regulatory requirements; 

(21) Borrower has no delinquent 

Federal debt, including tax liabilities, 

unless the delinquency has been 

resolved with the appropriate Federal 

agency in accordance with the standards 

of the Debt Collection Improvement Act 

of 1996; 

(22) The Loan Guarantee Agreement 

and related agreements contain such 

other terms and conditions as DOE 

deems reasonable and necessary to 

protect the interests of the United 

States, including without limitation 

provisions for— 

(i) Such collateral and other credit 

support for the Guaranteed Obligation, 

(ii) Such lien sharing and (subject 

always to Section 1702(d)(3) of Title 

XVII) priorities among lenders, and 

(iii) Such intercreditor arrangements 

as, in each case, DOE deems reasonable 

and necessary to protect the interests of 

the United States; and 

(23)(i) The Lender is an Eligible 

Lender, as defined in § 609.2 of this 

part, and meets DOE’s lender eligibility 

and performance requirement contained 

in §§ 609.11 (a) and (b) of this part; and 

(ii) The servicer meets the servicing 

performance requirements of § 609.11(c) 

of this part. 

(e) The Loan Guarantee Agreement 

must provide that, in the event of a 

default by the Borrower: 


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(1) Interest accrues on the Guaranteed 

Obligations at the rate stated in the Loan 

Guarantee Agreement or Loan 

Agreement, until DOE makes full 

payment of the defaulted Guaranteed 

Obligations and, except when debt is 

funded through the Federal Financing 

Bank, DOE is not required to pay any 

premium, default penalties, or 

prepayment penalties; 

(2) Upon payment of the Guaranteed 

Obligations by DOE, DOE is subrogated 

to the rights of the Holders of the debt, 

including all related liens, security, and 

collateral rights. 

(3) The Eligible Lender or other 

servicer acting on DOE’s behalf is 

obligated to take those actions necessary 

to perfect and maintain liens on assets 

which are pledged as collateral for the 

Guaranteed Obligations. 

(4) The holder of pledged collateral is 

obligated to take such actions as DOE 

may reasonably require to provide for 

the care, preservation, protection, and 

maintenance of such collateral so as to 

enable the United States to achieve 

maximum recovery upon default by 

Borrower on the Guaranteed 

Obligations. 

(f) The Loan Guarantee Agreement 

must contain audit provisions which 

provide, in substance, as follows: 

(1) The Eligible Lender or other 

Holder or other party servicing the 

Guaranteed Obligations, as applicable, 

and the Borrower, must keep such 

records concerning the project as are 

necessary to facilitate an effective and 

accurate audit and performance 

evaluation of the project as required in 

§ 609.17 of this part. 

(2) DOE and the Comptroller General, 

or their duly authorized representatives, 

must have access, for the purpose of 

audit and examination, to any pertinent 

books, documents, papers, and records 

of the Borrower, Eligible Lender or other 

Holder, or other party servicing the 

Guaranteed Obligations, as applicable. 

Examination of records may be made 

during the regular business hours of the 

Borrower, Eligible Lender or other 

Holder, or other party servicing the 

Guaranteed Obligations, or at any other 

time mutually convenient as required in 

§ 609.17 of this part. 

(g)(1) An Eligible Lender or other 

Holder may sell, assign or transfer a 

Guaranteed Obligation to another 

Eligible Lender that meets the 

requirements of § 609.11 of this part. 

Such Eligible Lender to which a 

Guaranteed Obligation is assigned or 

transferred, is required to fulfill all 

servicing, monitoring, and reporting 

requirements contained in the Loan 

Guarantee Agreement and these 

regulations if the transferring Eligible 

Lender was forming these functions and 

transfer such functions to the new 

Eligible Lender. Any assignment or 

transfer, however, of the servicing, 

monitoring, and reporting functions 

must be approved by DOE in writing in 

advance of such assignment. 

(2) The Secretary, or the Secretary’s 

designee or contractual agent, for the 

purpose of identifying Holders with the 

right to receive payment under the 

guarantees shall include in the Loan 

Guarantee Agreement or related 

documents a procedure for tracking and 

identifying Holders of Guarantee 

Obligations. These duties usually will 

be performed by the servicer. Any 

contractual agent approved by the 

Secretary to perform this function 

cannot transfer or assign this 

responsibility without the prior written 

consent of the Secretary. 

§ 609.11 Lender Eligibility and Servicing 

Requirements. 

(a) An Eligible Lender shall meet the 

following requirements: 

(1) Not be debarred or suspended 

from participation in a Federal 

Government contract (under 48 CFR 

subpart 9.4) or participation in a nonprocurement activity (under a set of 

uniform regulations implemented for 

numerous agencies, such as DOE, at 2 

CFR part 180); 

(2) Not be delinquent on any Federal 

debt or loan; 

(3) Be legally authorized to enter into 

loan guarantee transactions authorized 

by the Act and these regulations and is 

in good standing with DOE and other 

Federal agency loan guarantee 

programs; 

(4) Be able to demonstrate, or has 

access to, experience in originating and 

servicing loans for commercial projects 

similar in size and scope to the project 

under consideration; and 

(5) Be able to demonstrate experience 

or capability as the lead lender or 

underwriter by presenting evidence of 

its participation in large commercial 

projects or energy-related projects or 

other relevant experience; or 

(6) Be the Federal Financing Bank. 

(b) When performing its duties to 

review and evaluate a proposed Eligible 

Project prior to the submission of a PreApplication or Application, as 

appropriate, by the Project Sponsor 

through the execution of a Loan 

Guarantee Agreement, the Eligible 

Lender or DOE if loans are funded by 

the Federal Financing Bank, shall 

exercise the level of care and diligence 

that a reasonable and prudent lender 

would exercise when reviewing, 

evaluating and disbursing a loan made 

by it without a Federal guarantee. 

(c) The servicing duties shall be 

performed by the Eligible Lender, DOE 

or other servicer if approved by the 

Secretary. When performing the 

servicing duties the Eligible Lender, 

DOE or other servicer shall exercise the 

level of care and diligence that a 

reasonable and prudent lender would 

exercise when servicing a loan made 

without a Federal guarantee, including: 

(1) During the construction period, 

enforcing all of the conditions precedent 

to all loan disbursements, as provided 

in the Loan Guarantee Agreement, Loan 

Agreement and related documents; 

(2) During the operational phase, 

monitoring and servicing the Debt 

Obligations and collection of the 

outstanding principal and accrued 

interest as well as ensuring that the 

collateral package securing the 

Guaranteed Obligations remains 

uncompromised; and 

(3) As specified by DOE, providing 

annual or more frequent financial and 

other reports on the status and 

condition of the Guaranteed Obligations 

and the Eligible Project, and promptly 

notifying DOE if it becomes aware of 

any problems or irregularities 

concerning the Eligible Project or the 

ability of the Borrower to make payment 

on the Guaranteed Obligations or other 

debt obligations. 

(c) With regard to partial guarantees, 

even though DOE may in part rely on 

the Eligible Lender or other servicer to 

service and monitor the Guaranteed 

Obligation, DOE will also conduct its 

own independent monitoring and 

review of the Eligible Project. 

§ 609.12 Project Costs. 

(a) Before entering into a Loan 

Guarantee Agreement, DOE shall 

determine the estimated Project Costs 

for the project that is the subject of the 

agreement. To assist the Department in 

making that determination, the 

Applicant must estimate, calculate and 

record all such costs incurred in the 

design, engineering, financing, 

construction, startup, commissioning 

and shakedown of the project in 

accordance with generally accepted 

accounting principles and practices. 

Among other things, the Applicant must 

calculate the sum of necessary, 

reasonable and customary costs that it 

has paid and expects to pay, which are 

directly related to the project, including 

costs for escalation and contingencies, 

to estimate the total Project Costs. 

(b) Project Costs include: 

(1) Costs of acquisition, lease, or 

rental of real property, including 

engineering fees, surveys, title 

insurance, recording fees, and legal fees 

incurred in connection with land 


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acquisition, lease or rental, site 

improvements, site restoration, access 

roads, and fencing; 

(2) Costs of engineering, architectural, 

legal and bond fees, and insurance paid 

in connection with construction of the 

facility; and materials, labor, services, 

travel and transportation for facility 

design, construction, startup, 

commissioning and shakedown; 

(3) Costs of equipment purchases; 

(4) Costs to provide equipment, 

facilities, and services related to safety 

and environmental protection; 

(5) Financial and legal services costs, 

including other professional services 

and fees necessary to obtain required 

licenses and permits and to prepare 

environmental reports and data; 

(6) The cost of issuing project debt, 

such as fees, transaction and legal costs 

and other normal charges imposed by 

Eligible Lenders and other Holders; 

(7) Costs of necessary and appropriate 

insurance and bonds of all types; 

(8) Costs of design, engineering, 

startup, commissioning and shakedown; 

(9) Costs of obtaining licenses to 

intellectual property necessary to 

design, construct, and operate the 

project; 

(10) A reasonable contingency reserve 

for cost overruns during construction; 

and 

(11) Capitalized interest necessary to 

meet market requirements, reasonably 

required reserve funds and other 

carrying costs during construction; and 

(12) Other necessary and reasonable 

costs. 

(c) Project Costs do not include: 

(1) Fees and commissions charged to 

Borrower, including finder’s fees, for 

obtaining Federal or other funds; 

(2) Parent corporation or other 

affiliated entity’s general and 

administrative expenses, and nonproject related parent corporation or 

affiliated entity assessments, including 

organizational expenses; 

(3) Goodwill, franchise, trade, or 

brand name costs; 

(4) Dividends and profit sharing to 

stockholders, employees, and officers; 

(5) Research, development, and 

demonstration costs of readying the 

innovative energy or environmental 

technology for employment in a 

commercial project; 

(6) Costs that are excessive or are not 

directly required to carry out the 

project, as determined by DOE, 

including but not limited to the cost of 

hedging instruments; 

(7) Expenses incurred after startup, 

commissioning, and shakedown before 

the facility has been placed in service; 

(8) Borrower-paid Credit Subsidy 

Costs and Administrative Costs of 

Issuing a Loan Guarantee; and 

(9) Operating costs. 

§ 609.13 Principal and Interest Assistance 

Contract. 

With respect to the guaranteed 

portion of any Guaranteed Obligation, 

and subject to the availability of 

appropriations, DOE may enter into a 

contract to pay Holders, for and on 

behalf of Borrower, from funds 

appropriated for that purpose, the 

principal and interest charges that 

become due and payable on the unpaid 

balance of the guaranteed portion of the 

Guaranteed Obligation, if DOE finds 

that: 

(a) The Borrower: 

(1) Is unable to make the payments 

and is not in default; and 

(2) Will, and is financially able to, 

continue to make the scheduled 

payments on the remaining portion of 

the principal and interest due under the 

non-guaranteed portion of the debt 

obligation, if any, and other debt 

obligations of the project, or an 

agreement, approved by DOE, has 

otherwise been reached in order to 

avoid a payment default on nonguaranteed debt. 

(b) It is in the public interest to permit 

Borrower to continue to pursue the 

purposes of the project; 

(c) In paying the principal and 

interest, the Federal Government 

expects a probable net benefit to the 

Government will be greater than that 

which would result in the event of a 

default; 

(d) The payment authorized is no 

greater than the amount of principal and 

interest that Borrower is obligated to 

pay under the terms of the Loan 

Guarantee Agreement; and 

(e) Borrower agrees to reimburse DOE 

for the payment (including interest) on 

terms and conditions that are 

satisfactory to DOE and executes all 

written contracts required by DOE for 

such purpose. 

§ 609.14 Full Faith and Credit and 

Incontestability. 

The full faith and credit of the United 

States is pledged to the payment of all 

Guaranteed Obligations issued in 

accordance with this part with respect 

to principal and interest. Such 

guarantee shall be conclusive evidence 

that it has been properly obtained; that 

the underlying loan qualified for such 

guarantee; and that, but for fraud or 

material misrepresentation by the 

Holder, such guarantee will be 

presumed to be valid, legal, and 

enforceable. 

§ 609.15 Default, Demand, Payment, and 

Collateral Liquidation. 

(a) In the event that the Borrower has 

defaulted in the making of required 

payments of principal or interest on any 

portion of a Guaranteed Obligation, and 

such default has not been cured within 

the period of grace provided in the Loan 

Guarantee Agreement and/or the Loan 

Agreement, the Eligible Lender or other 

Holder, or nominee or trustee 

empowered to act for the Eligible 

Lender or other Holder (referred to in 

this section collectively as ‘‘Holder’’), 

may make written demand upon the 

Secretary for payment pursuant to the 

provisions of the Loan Guarantee 

Agreement. 

(b) In the event that the Borrower is 

in default as a result of a breach of one 

or more of the terms and conditions of 

the Loan Guarantee Agreement, note, 

mortgage, Loan Agreement, or other 

contractual obligations related to the 

transaction, other than the Borrower’s 

obligation to pay principal or interest on 

the Guaranteed Obligation, as provided 

in paragraph (a) of this section, the 

Holder will not be entitled to make 

demand for payment pursuant to the 

Loan Guarantee Agreement, unless the 

Secretary agrees in writing that such 

default has materially affected the rights 

of the parties, and finds that the Holder 

should be entitled to receive payment 

pursuant to the Loan Guarantee 

Agreement. 

(c) In the event that the Borrower has 

defaulted as described in paragraph (a) 

of this section and such default is not 

cured during the grace period provided 

in the Loan Guarantee Agreement, the 

Secretary shall notify the U.S. Attorney 

General and, subject to and in addition 

to the terms of any applicable 

Intercreditor Agreement, may cause the 

principal amount of all Guaranteed 

Obligations, together with accrued 

interest thereon, and all amounts owed 

to the United States by Borrower 

pursuant to the Loan Guarantee 

Agreement, to become immediately due 

and payable by giving the Borrower 

written notice to such effect (without 

the need for consent or other action on 

the part of the Holders of the 

Guaranteed Obligations). In the event 

the Borrower is in default as described 

in paragraph (b) of this section, where 

the Secretary determines in writing that 

such a default has materially affected 

the rights of the parties, the Borrower 

shall be given the period of grace 

provided in the Loan Guarantee 

Agreement to cure such default. If the 

default is not cured during the period of 

grace, the Secretary may, subject to and 

in addition to the terms of any 

applicable Intercreditor Agreement, 


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cause the principal amount of all 

Guaranteed Obligations, together with 

accrued interest thereon, and all 

amounts owed to the United States by 

Borrower pursuant to the Loan 

Guarantee Agreement, to become 

immediately due and payable by giving 

the Borrower written notice to such 

effect (without any need for consent or 

other action on the part of the Holders 

of the Guaranteed Obligations). 

(d) No provision of this regulation 

shall be construed to preclude 

forbearance by any Holder with the 

consent of the Secretary for the benefit 

of the Borrower. 

(e) Upon the making of demand for 

payment as provided in paragraph (a) or 

(b) of this section, the Holder shall 

provide, in conjunction with such 

demand or immediately thereafter, at 

the request of the Secretary, the 

supporting documentation specified in 

the Loan Guarantee Agreement and any 

other supporting documentation as may 

reasonably be required to justify such 

demand. 

(f) Payment as required by the Loan 

Guarantee Agreement of the Guaranteed 

Obligation shall be made 60 days after 

receipt by the Secretary of written 

demand for payment, provided that the 

demand complies with the terms of the 

Loan Guarantee Agreement. The Loan 

Guarantee Agreement shall provide that 

interest shall accrue to the Holder at the 

rate stated in the Loan Guarantee 

Agreement until the Guaranteed 

Obligation has been fully paid by the 

Federal government. 

(g) The Loan Guarantee Agreement 

shall provide that, upon payment of the 

Guaranteed Obligations, the Secretary 

shall be subrogated to the rights of the 

Holders. The Holder shall transfer and 

assign to the Secretary all rights held by 

the Holder of the Guaranteed 

Obligation. Such assignment shall 

include all related liens, security, and 

collateral rights to the extent held by the 

Holder. 

(h) Where the Loan Guarantee 

Agreement or any applicable 

Intercreditor Agreement so provides, the 

Eligible Lender or other Holder, or other 

agent or servicer, as appropriate, and the 

Secretary may jointly agree to a workout strategy, and/or a plan of liquidation 

of the assets pledged to secure the 

Guaranteed Obligation and other 

applicable debt. 

(i) Where payment of the Guaranteed 

Obligation has been made and the 

Eligible Lender or other Holder or other 

agent or servicer has not undertaken a 

plan of liquidation (or at any such 

earlier time as may be permitted by 

applicable agreements), the Secretary, 

acting through the U.S. Attorney 

General, in accordance with the rights 

received through subrogation or other 

applicable agreements, subject to any 

applicable Intercreditor Agreement, may 

seek to foreclose on the collateral assets 

and/or take such other legal action as 

necessary for the protection of the 

Government. 

(j) If the Secretary (or an agent acting 

for the benefit of the Secretary) is 

awarded title to collateral assets 

pursuant to a foreclosure proceeding, 

the Secretary may take action to 

complete, maintain, operate, or lease 

such assets, or otherwise dispose of any 

such assets or take any other necessary 

action which the Secretary deems 

appropriate (and consistent with any 

applicable Intercreditor Agreement), in 

order that the original goals and 

objectives of the project will, to the 

extent possible, be realized. 

(k) In addition to foreclosure and sale 

of collateral pursuant thereto, the U.S. 

Attorney General shall take appropriate 

action in accordance with rights 

contained in the Loan Guarantee 

Agreement and any applicable 

Intercreditor Agreement to recover costs 

incurred by the Government as a result 

of the defaulted loan or other defaulted 

obligation. Any recovery so received by 

the U.S. Attorney General on behalf of 

the Government shall be applied in the 

following manner: First to the expenses 

incurred by the U.S. Attorney General, 

DOE and any agent acting for the benefit 

of DOE in effecting such recovery; 

second, to reimbursement of any 

amounts paid by DOE as a result of the 

defaulted obligation; third, to any 

amounts owed to DOE under related 

principal and interest assistance 

contracts; and fourth, to any other 

lawful claims held by the Government 

on such process. Any sums remaining 

after full payment of the foregoing shall 

be available for the benefit of other 

parties lawfully entitled to claim them. 

(l) If there was a partial guarantee by 

DOE of the Guaranteed Obligation or if 

any other creditors are secured by a lien 

on collateral pledged to secure the 

Guaranteed Obligation, the proceeds 

received by the collateral agent or other 

responsible party as a result of any 

liquidation or sale of, collection from or 

other realization on any such collateral 

may, if so agreed in advance, be applied 

as follows (with any money distributed 

to the Federal Government to be further 

distributed according to § 609.15 (k)): 

(1) First, to the payment of reasonable 

and customary fees and expenses 

incurred in the liquidation or sale, 

collection or other realization (including 

without limitation any fees and 

expenses that the Attorney General of 

the United States is lawfully entitled to 

claim in connection with such action); 

(2) Second, distributed among the 

Holders of the Guaranteed Debt 

(including DOE, as subrogee) and the 

other creditors entitled to share in such 

proceeds on no greater than a pro rata 

share basis; and 

(3) As otherwise provided in the 

applicable agreement or agreements. 

(m) No action taken by the Eligible 

Lender or other Holder or other agent or 

servicer in respect of any pledged assets 

will affect the rights of any party, 

including the Secretary, having an 

interest in the loan or other debt 

obligations, to pursue, jointly or 

severally, to the extent provided in the 

Loan Guarantee Agreement or other 

applicable agreement, legal action 

against the Borrower or other liable 

parties, for any deficiencies owing on 

the balance of the Guaranteed 

Obligations or other debt obligations 

after application of the proceeds 

received upon liquidation. 

(n) In the event that the Secretary 

considers it necessary or desirable to 

protect or further the interest of the 

United States in connection with the 

liquidation or sale of, collection from or 

other realization on the collateral or 

recovery of deficiencies due under the 

loan, the Secretary will take such action 

as may be appropriate under the 

circumstances. 

(o) Nothing in this part precludes the 

Secretary from purchasing any Holder’s 

or other person’s interest in the project 

upon liquidation or sale of, collection 

from or other realization on the 

collateral. 

§ 609.16 Perfection of Liens and 

Preservation of Collateral. 

(a) The Loan Guarantee Agreement 

and other documents related thereto 

shall provide that: 

(1) The Eligible Lender, or DOE in 

conjunction with the Federal Financing 

Bank where the loan is funded by the 

Federal Financing Bank, or other Holder 

or other agent or servicer will take those 

actions necessary to perfect and 

maintain liens, as applicable, on assets 

which are pledged as collateral for the 

Guaranteed Obligation; and 

(2) Upon default by the Borrower, the 

holder of pledged collateral shall take 

such actions as the Secretary (subject to 

any applicable Intercreditor Agreement) 

may reasonably require to provide for 

the care, preservation, protection, and 

maintenance of such collateral so as to 

enable the United States to achieve 

maximum recovery from the pledged 

assets. The Secretary shall reimburse the 

holder of collateral for reasonable and 

appropriate expenses incurred in taking 


pwalker on DSK8KYBLC1PROD with PROPOSALS
39582 Federal Register / Vol. 74, No. 151 / Friday, August 7, 2009 / Proposed Rules 

actions required by the Secretary (unless 

otherwise provided in applicable 

agreements). Except as provided in 

§ 609.15, no party may waive or 

relinquish, without the consent of the 

Secretary, any collateral securing the 

Guaranteed Obligation to which the 

United States would be subrogated upon 

payment under the Loan Guarantee 

Agreement. 

(b) In the event of a default, the 

Secretary may enter into such contracts 

as the Secretary determines are required 

to preserve the collateral. The cost of 

such contracts may be charged to the 

Borrower. 

§ 609.17 Audit and Access to Records. 

(a) The Loan Guarantee Agreement 

and related documents shall provide 

that: 

(1) The Eligible Lender, or DOE in 

conjunction with the Federal Financing 

Bank where loans are funded by the 

Federal Financing Bank or other Holder 

or other party servicing the Guaranteed 

Obligations, as applicable, and the 

Borrower, shall keep such records 

concerning the project as is necessary, 

including the Pre-Application, 

Application, Term Sheet, Conditional 

Commitment, Loan Guarantee 

Agreement, Credit Agreement, mortgage, 

note, disbursement requests and 

supporting documentation, financial 

statements, audit reports of independent 

accounting firms, lists of all project 

assets and non-project assets pledged as 

security for the Guaranteed Obligations, 

all off-take and other revenue producing 

agreements, documentation for all 

project indebtedness, income tax 

returns, technology agreements, 

documentation for all permits and 

regulatory approvals and all other 

documents and records relating to the 

Eligible Project, as determined by the 

Secretary, to facilitate an effective audit 

and performance evaluation of the 

project; and 

(2) The Secretary and the Comptroller 

General, or their duly authorized 

representatives, shall have access, for 

the purpose of audit and examination, 

to any pertinent books, documents, 

papers and records of the Borrower, 

Eligible Lender or DOE or other Holder 

or other party servicing the Guaranteed 

Obligation, as applicable. Such 

inspection may be made during regular 

office hours of the Borrower, Eligible 

Lender or DOE or other Holder, or other 

party servicing the Eligible Project and 

the Guaranteed Obligations, as 

applicable, or at any other time 

mutually convenient. 

(b) The Secretary may from time to 

time audit any or all items of costs 

included as Project Costs in statements 

or certificates submitted to the Secretary 

or the servicer or otherwise, and may 

exclude or reduce the amount of any 

item which the Secretary determines to 

be unnecessary or excessive, or 

otherwise not to be an item of Project 

Costs. The Borrower will make available 

to the Secretary all books and records 

and other data available to the Borrower 

in order to permit the Secretary to carry 

out such audits. The Borrower should 

represent that it has within its rights 

access to all financial and operational 

records and data relating to Project 

Costs, and agrees that it will, upon 

request by the Secretary, exercise such 

rights in order to make such financial 

and operational records and data 

available to the Secretary. In exercising 

its rights hereunder, the Secretary may 

utilize employees of other Federal 

agencies, independent accountants, or 

other persons. 

§ 609.18 Deviations. 

To the extent that such requirements 

are not specified by the Act or other 

applicable statutes, DOE may authorize 

deviations on an individual request 

basis from the requirements of this part 

upon a finding that such deviation is 

essential to program objectives and the 

special circumstances stated in the 

request make such deviation clearly in 

the best interest of the Government. 

DOE will consult with OMB and the 

Secretary of the Treasury before DOE 

grants any deviation that would 

constitute a substantial change in the 

financial terms of the Loan Guarantee 

Agreement and related documents. Any 

deviation, however, that was not 

captured in the Credit Subsidy Cost will 

require either additional fees or 

discretionary appropriations. A 

recommendation for any deviation shall 

be submitted in writing to DOE. Such 

recommendation must include a 

supporting statement, which indicates 

briefly the nature of the deviation 

requested and the reasons in support 

thereof. 

[FR Doc. E9–18810 Filed 8–6–09; 8:45 am] 

BILLING CODE 6450–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2009–0317; Directorate 

Identifier 79–ANE–18] 

RIN 2120–AA64 

Airworthiness Directives; Pratt & 

Whitney JT8D–7, –7A, –7B, –9, –9A, 

–11, –15, and –17 Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to 

supersede an existing airworthiness 

directive (AD) for Pratt & Whitney 

JT8D–1, –1A, –1B, –7, –7A, –7B, –9, 

–9A, –11, –15, and –17 turbofan engines 

with 2nd stage fan blades, part number 

(P/N) 433802, 645902, 759902, 695932, 

678102, or 746402 installed. That AD 

currently requires initial and repetitive 

ultrasonic inspection (UI) and 

fluorescent penetrant inspection (FPI) of 

those P/N 2nd stage fan blades. This 

proposed AD would replace the 

required FPI with eddy current 

inspection (ECI) on all affected 2nd 

stage fan blades and would maintain the 

requirement of ultrasonic inspection 

(UI) of the blade root attachment on 

some of the affected 2nd stage fan 

blades. This proposed AD would also 

introduce an optional terminating action 

to the repetitive blade inspections for 

certain engine models. This proposed 

AD results from reports of 10 fractures 

of 2nd stage fan blades since AD 87–14– 

01R1 became effective. We are 

proposing this AD to prevent 

uncontained failure of 2nd stage fan 

blades, which could result in damage to 

the airplane. 

DATES: We must receive any comments 

on this proposed AD by October 6, 2009. 

ADDRESSES: Use one of the following 

addresses to comment on this proposed 

AD. 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov and follow 

the instructions for sending your 

comments electronically. 

• Mail: Docket Management Facility, 

U.S. Department of Transportation, 1200 

New Jersey Avenue, SE., West Building 

Ground Floor, Room W12–140, 

Washington, DC 20590–0001. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

• Fax: (202) 493–2251. 


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