Federal Register / Vol. 72, No. 94 / Wednesday, May 16, 2007 / Proposed Rules 27471 

Activities,’’ and in 7 CFR part 3015, 

subpart V. The Very Low to Moderate 

Income Housing Loans Program, 

Number 10.410, is not subject to the 

provisions of Executive Order 12372, 

which requires intergovernmental 

consultation with State and local 

officials. An intergovernmental review 

for this revision is not required or 

applicable. 

Paperwork Reduction Act 

There are no new reporting and 

recordkeeping requirements associated 

with this rule. 

E-Government Act Compliance 

The Agency is committed to 

complying with the E-Government Act, 

to promote the use of the Internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. (If appropriate—For 

information pertinent to E–GOV 

compliance related to this proposed 

rule, please contact Michel Mitias, 202–

720–9653. 

Background 

The quality of construction, age, and 

condition of an existing dwelling 

financed through the Agency’s single 

family housing programs may have a 

significant impact on the unit’s thermal 

efficiency. The Agency should consider 

the thermal performance of a home as 

part of its overall condition, rather than 

a separate factor. 

Newer residences, or older residences 

currently in average or good condition, 

generally can be accepted as being 

representative of their community, and 

are likely to have average thermal 

efficiency for the market in which they 

are located. These homes represent a 

typical residence in terms of overall 

design, construction, and appeal in the 

marketplace, and can be presumed to 

have reasonable, overall thermal 

performance. 

Aging residences, particularly those 

with significant deficiencies, or those 

designated as being in only fair 

condition or less, could represent a 

higher risk to the borrower and the 

Agency. Homes with older effective ages 

or in fair condition may be financed in 

some circumstances with certain 

upgrades, but should be thoroughly and 

carefully inspected to insure the overall 

soundness of the collateral, including 

thermal components. These homes may 

require thermal and insulation upgrades 

in order to ensure reasonable (average) 

heating and cooling costs for borrowers. 

The Agency’s existing thermal 

standards, or similar standard, may 

serve as a guide for an energy efficient 

home, however we recognize that 

incremental improvements to existing 

homes to reach this standard may not 

always be cost effective. The Agency 

should look at homes to be financed 

based on their overall condition. When 

a home needs improvement in order to 

be acceptable for our financing, the 

focus should be on reducing the 

effective age by improving the existing 

overall condition as well as increasing 

energy efficiency. 

A combination of Uniform Residential 

Appraisal Report (URAR) designations 

for ‘‘quality of construction’’ and 

‘‘condition’’, as well as ‘‘age’’ and 

‘‘effective age’’ may be used to judge the 

overall condition of a home, and 

whether additional analysis needs to be 

undertaken to ensure the dwelling will 

be reasonably thermally efficient for the 

market in which it is located. In 

addition, an on-site inspection by an 

Agency representative or designee may 

provide further information on the 

thermal performance of a home. Hence, 

the Agency has determined that it is no 

longer necessary to impose thermal 

standards for existing single family 

housing. 

This change will not be subject to 

Section 509(a) of the Housing Act of 

1949 because it pertains only to existing 

single family housing. All new single 

family housing construction must 

comply with the Minimum Property 

Standards (MPS) adopted by the 

Department of Housing and Urban 

Development (HUD), as well as national 

model codes adopted by the applicable 

jurisdiction, locality, or state. 

List of Subjects in 7 CFR Part 1924 

Agriculture, Construction 

management, Construction and repair, 

Energy conservation, Housing, Loan 

programs—Agriculture, Low and 

moderate income housing. 

For the reasons set forth in the 

preamble, Chapter XVIII, Title 7, of the 

Code of Federal Regulations is amended 

as follows: 

PART 1924—CONSTRUCTION AND 

REPAIR 

1. The authority citation for part 1924 

continues to read as follows: 

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 

U.S.C. 1480. 

Subpart A—Planning and Performing 

Construction and Other Development 

2. Exhibit D of subpart A is amended 

by: 

A. Removing the last sentence in 

paragraph II; 

B. Removing and reserving paragraph 

IV B; 

C. Revising the words ‘‘paragraphs IV 

A and IV B’’ in paragraph IV C 1 to read 

‘‘paragraph IV A’’; 

D. Revising the words ‘‘paragraphs IV 

A and B’’ in paragraph IV C 2 to read 

‘‘paragraph IV A’’; 

E. Revising the words ‘‘paragraphs IV 

A or IV B’’ in the first and last sentences 

of paragraph IV C 2b, and in paragraphs 

IV C 3 introductory text, IV C 3a and IV 

C 3b to read ‘‘paragraph IV A’’; and 

F. Removing the words ‘‘or B’’ in 

paragraphs IV C introductory text and 

IV C 3c. 

Dated: April 6, 2007. 

Russell T. Davis, 

Administrator, Rural Housing Service. 

[FR Doc. 07–2366 Filed 5–15–07; 8:45 am] 

BILLING CODE 3410–XV–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: Notice of proposed rulemaking 

and opportunity for comment. 

SUMMARY: The Department of Energy 

(DOE or Department) today proposes 

policies and procedures applicable to 

DOE’s loan guarantee program 

authorized by Title XVII of the Energy 

Policy Act of 2005. Today’s proposed 

rule, when final, also will further the 

President’s Advanced Energy Initiative. 

Title XVII authorizes the Secretary of 

Energy 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.’’ Title XVII also 

identifies ten categories of technologies 

that, if employed in commercial 

projects, are potentially eligible for a 

loan guarantee. A principal goal of Title 

XVII is to encourage commercial use in 

the United States of new or significantly 

improved energy-related technologies. 

DOE believes that accelerated 

commercial use of new and improved 

technologies will help sustain economic 

growth, yield environmental benefits, 

and produce a more stable and secure 

energy supply and economy for the 

United States. 


ycherry on PROD1PC64 with PROPOSALS
27472 Federal Register / Vol. 72, No. 94 / Wednesday, May 16, 2007 / Proposed Rules 

DATES: Public comment on this 

proposed rule will be accepted until 

July 2, 2007. A public meeting on the 

proposed rule will be held on Friday, 

June 15, 2007, from 9 a.m. to 4:30 p.m. 

in Washington, DC. Interested persons 

who wish to speak at the public meeting 

must telephone the DOE Loan 

Guarantee Program Office at (202) 586–

8336 during the period Friday, June 1, 

through Tuesday, June 12, 2007, 

between the hours of 9 a.m. and 4:30 

p.m. Interested persons also may request 

to speak by writing to Mr. Howard G. 

Borgstrom at the address given in the 

ADDRESSES section of this notice, or by 

sending an e-mail to 

lgprogram@hq.doe.gov. Such requests 

must be received by 4:30 p.m. on 

Tuesday, June 12, 2007. The Department 

also requests that persons wishing to 

speak submit a copy of their prepared 

statement to Mr. Borgstrom by 4:30 p.m. 

on June 12, 2007. See section III. of this 

notice for details concerning public 

comment procedures. 

ADDRESSES: You may submit comments, 

identified by RIN 1901–AB21, by any of 

the following methods: 

1. Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

2. E-mail to lgprogram@hq.doe.gov. 

Include RIN 1901–AB21 in the subject 

line of the e-mail. Please include the full 

body of your comments in the text of the 

message or as an attachment. 

3. Mail: Address written comments to 

Mr. Howard G. Borgstrom, Director, 

Business Operations Center, Office of 

the Chief Financial Officer, U.S. 

Department of Energy, Mailstop CF–60, 

Room 4A–221, 1000 Independence 

Avenue, SW., Washington, DC 20585. 

Due to potential delays in DOE’s 

receipt and processing of mail sent 

through the U.S. Postal Service, we 

encourage respondents to submit 

comments electronically to ensure 

timely receipt. 

The public meeting for this 

rulemaking will be held in Washington, 

DC at the Forrestal Building in Room 

GE–086 (Main Auditorium), 1000 

Independence Avenue, SW., 

Washington, DC. 

This Notice of Proposed Rulemaking, 

the public meeting transcript, and any 

comments that DOE receives are being 

made available on the Web site at: 

http://www.lgprogram.energy.gov/. 

FOR FURTHER INFORMATION CONTACT: The 

DOE Loan Guarantee Program Office, 

1000 Independence Avenue, SW., 

Washington, DC 20585–0121, (202) 586–

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

Warren Belmar, Deputy General Counsel 

for Energy Policy, Office of the General 

Counsel, 1000 Independence Avenue, 

SW., Washington, DC 20585–0121, (202) 

586–6758, e-mail: 

warren.belmar@hq.doe.gov; or Lawrence 

R. Oliver, Assistant General Counsel for 

Fossil Energy and Energy Efficiency, 

Office of the General Counsel, 1000 

Independence Avenue, SW., 

Washington, DC 20585–0121, (202) 586–

9521, e-mail: 

lawrence.oliver@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Introduction and Background 

II. Discussion of Proposed Rule 

A. Technologies 

B. Project Costs 

C. Solicitation 

D. Payment of the Credit Subsidy Cost 

E. Assessment of Fees 

F. Financial Structure 

G. Eligible Lenders 

H. FCRA 

I. Default and Audit Provisions 

J. Tax Exempt Debt 

K. Full Faith and Credit 

III. Public Comment Procedures 

IV. Regulatory Review 

A. Executive Order 12866 

B. National Environmental Policy Act 

C. 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 

I. Introduction and Background 

Title XVII of the Energy Policy Act of 

2005 (Title XVII or the Act) (42 U.S.C. 

16511–16514) authorizes the Secretary 

of Energy (Secretary or DOE), after 

consultation with the Secretary of the 

Treasury, 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.’’ Commercial 

technology is defined as ‘‘a technology 

in general use in the commercial 

marketplace’’ and ‘‘does not include a 

technology solely by use of the 

technology in a demonstration project 

funded by DOE.’’ The following ten 

categories of projects are, by law, 

specifically made eligible for Title XVII 

loan guarantees: 

1. Renewable energy systems; 

2. Advanced fossil energy technology 

(including coal gasification meeting the 

criteria in paragraph 1703(d) of the Act); 

3. Hydrogen fuel cell technology for 

residential, industrial, or transportation 

applications; 

4. Advanced nuclear energy facilities; 

5. Carbon capture and sequestration 

practices and technologies, including 

agricultural and forestry practices that 

store and sequester carbon; 

6. Efficient electrical generation, 

transmission, and distribution 

technologies; 

7. Efficient end-use energy 

technologies; 

8. Production facilities for fuel 

efficient vehicles, including hybrid and 

advanced diesel vehicles; 

9. Pollution control equipment; and 

10. Refineries, meaning facilities at 

which crude oil is refined into gasoline. 

This list of ten types of projects is a 

nonexclusive list of the types of projects 

that are eligible for Title XVII 

guarantees. 

Today, DOE proposes regulations to 

establish generally applicable policies, 

procedures and requirements for the 

Title XVII loan guarantee program. 

These proposed regulations were 

referenced in the Guidelines for the 

program that DOE published on August 

14, 2006 (Guidelines) (71 FR 46451). 

The Guidelines stated that they would 

only apply to the first Title XVII 

solicitation, which was issued 

contemporaneously with the 

Guidelines, and that all subsequent 

solicitations would be governed by 

regulations to be adopted by DOE at a 

later date. 

In the first solicitation for PreApplications for ‘‘Federal Loan 

Guarantees for Projects that Employ 

Innovative Technologies in support of 

the Advanced Energy Initiative,’’ DOE 

focused on technologies that would 

advance the President’s Advanced 

Energy Initiative. Although this meant 

the first solicitation did not cover all 

types of projects that potentially may be 

eligible for loan guarantees under Title 

XVII, there is nothing in Title XVII that 

requires all solicitations implementing 

that program be open to every project 

arguably eligible for a guarantee under 

the statute. DOE has the ability to tailor 

specific solicitations to certain types of 

projects, based on programmatic 

objectives, loan guarantee authority that 

is available, and the availability of funds 

to implement the program, among other 

relevant criteria. DOE will seek to have 

a broad portfolio of large and small 

projects, for a wide variety of 

technologies. For example, the 

Administration’s 2008 Budget proposes 

that DOE may guarantee up to $4 billion 

in loans for central power generation 

facilities (for example, nuclear facilities 

or carbon sequestration optimized coal 

power plants); $4 billion in loans for 

projects that promote biofuels and clean 

transportation fuels; and $1 billion in 


ycherry on PROD1PC64 with PROPOSALS
Federal Register / Vol. 72, No. 94 / Wednesday, May 16, 2007 / Proposed Rules 27473 

loans for projects using new 

technologies for electric transmission 

facilities or renewable power generation 

systems. Precisely how any authorized 

loan guarantee authority would be 

allocated, however, ultimately would 

depend on the merits and benefits of 

particular project proposals and their 

compliance with statutory and 

regulatory requirements. The deadline 

for submission of Pre-Applications in 

response to the first solicitation was 

December 31, 2006, and DOE received 

143 Pre-Applications. 

On February 15, 2007, President Bush 

signed into law Public Law 110–5, the 

Revised Continuing Appropriations 

Resolution, 2007 (CR, or Pub. L. 110–5) 

which authorizes DOE to issue 

guarantees under the Title XVII program 

for loans in the ‘‘total principal amount, 

any part of which is to be guaranteed, 

of $4,000,000,000.’’ This authorization 

provides DOE sufficient authority, 

under Title XVII and the Federal Credit 

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

661(a) et seq) to issue loan guarantees. 

Section 20320(b) of the CR further 

provides that no loan guarantees may be 

issued under the Title XVII program 

until DOE promulgates final regulations 

that include ‘‘programmatic, technical, 

and financial factors the Secretary [of 

Energy] will use to select projects for 

loan guarantees,’’ ‘‘policies and 

procedures for selecting and monitoring 

lenders and loan performance,’’ and 

‘‘any other policies, procedures, or 

information necessary to implement 

Title XVII of the Energy Policy Act of 

2005.’’

II. Discussion of Proposed Rule 

The CR prohibits DOE from issuing 

any loan guarantees under the Title XVII 

program until the Department has 

issued final regulations that address a 

number of different matters. (Pub. L. 

110–5, section 20320(b)). However, 

section 20320 does not state whether or 

to what extent those final regulations 

must apply to any matters pursuant to 

the first solicitation under the Title XVII 

program, which DOE issued on August 

8, 2006, and in response to which PreApplications were due by December 31, 

2006, several weeks prior to the 

enactment of Public Law 110–5. 

In order to ensure that the Department 

complies with the CR but does not 

prejudice Pre-Applicants who 

responded to the first Title XVII 

solicitation, DOE proposes to specify, by 

regulation, that today’s proposed rule, 

when final, shall not apply to the PreApplications, Applications, Conditional 

Commitments, and Loan Guarantee 

Agreements pursuant to the August 

2006 solicitation. The only exceptions 

shall be with respect to the default, 

recordkeeping and audit requirements 

in sections 609.15 and 609.17, which 

Title XVII requires be established by 

regulation. However, the proposed 

regulations permit DOE and an 

Applicant to agree in a Loan Guarantee 

Agreement entered into pursuant to the 

first solicitation that additional 

provisions of the final rule shall apply 

to the particular project. 

However, Pre-Applicants who 

responded to the first solicitation will 

not necessarily be permanently exempt 

from these regulations. If the 

Department does not accept their PreApplication and invite them to submit 

an Application pursuant to that 

solicitation, then their participation in 

the program in response to any future 

solicitation will be fully subject to the 

requirements of the final regulations. 

Moreover, to provide clarity, the 

regulation provides that the exception 

from applicability of these regulations 

applies only to those for whom the 

invitation to submit an Application is 

extended by the Department to a PreApplicant no later than December 31, 

2007. The Department anticipates being 

able to invite selected Pre-Applicants to 

submit Applications in response to the 

first solicitation by that deadline, and 

perhaps well before that deadline. PreApplicants who are not being invited to 

submit an Application also will be 

notified that they have not been 

selected, and any further involvement 

by such Pre-Applicants in the Title XVII 

program will be subject to all 

requirements of the final regulations. 

The Act authorizes the Secretary to 

make loan guarantees as an incentive for 

the use of new or improved 

technologies. Section 1702 of the Act 

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 [as defined in regulations 

issued by the Secretary]; and (ii) have 

available all the patents and technology 

necessary for any person selected, 

including the Secretary, to complete and 

operate the project for which the loan 

guarantee was obtained.’’ (42 U.S.C. 

16512(g)(2)(c)) Section 1702(i) of the Act 

instructs the Secretary to prescribe 

regulations outlining record-keeping 

and audit requirements. This proposed 

rule sets forth application procedures, 

outlines terms and conditions for Loan 

Guarantee Agreements, and lists records 

and documents that project participants 

must keep. The proposed rule also sets 

forth other provisions that the CR 

requires DOE’s regulations to address. 

A. Technologies 

A principal purpose of the Act’s Title 

XVII loan guarantee program is to 

support projects in the United States 

that ‘‘employ new or significantly 

improved technologies as compared to 

commercial technologies in service in 

the United States at the time the 

guarantee is issued.’’ Such technologies 

are identified as ‘‘innovative 

technologies.’’ Section 1701(1) of the 

Act defines ‘‘commercial technology’’ as 

‘‘a technology in general use in the 

commercial marketplace.’’ Section 

1701(1) further states that a technology 

does not become a ‘‘commercial 

technology’’ solely because it is used in 

a demonstration project funded by DOE. 

Because section 1702(d)(1) also 

requires a ‘‘reasonable prospect of 

repayment of the principal and interest’’

on all loans or other debt obligations 

issued to finance a project, technologies 

for project proposals must be mature 

enough to assure dependable 

commercial operations that generate 

sufficient revenues to service the 

project’s debt. Therefore, projects that 

are solely research, development or 

demonstration projects (i.e., a project 

designed exclusively for research and 

development or to demonstrate 

feasibility of a technology on any scale) 

should not be eligible for Title XVII loan 

guarantees, and DOE is proposing to 

make such research, development or 

demonstration projects ineligible for a 

loan guarantee under Title XVII. DOE 

believes that accelerated commercial 

use of new or improved technologies, as 

distinguished from research, 

development or demonstrations at any 

scale of technological feasibility, will 

help to sustain economic growth, yield 

environmental benefits, and produce a 

more stable and secure energy supply, 

and be able to earn revenues that give 

the projects a ‘‘reasonable prospect of 

repayment of the principal and interest’’

on its debt obligations. Accordingly, 

DOE’s loan guarantee program is not 

intended for technologies in the 

research, development or demonstration 

stages. 

Title XVII does not explain or define 

the phrase ‘‘new or significantly 

improved’’ in section 1703(a)(2). Nor 

does the Act explain or define the terms 

‘‘general use’’ or ‘‘commercial 

marketplace’’ in section 1701(1), other 

than specifying that ‘‘commercial 

technology’’ does not include a 

technology merely because it is used in 

a DOE-funded demonstration project. 

Therefore, DOE must use its discretion 

and judgment to define these terms. 


ycherry on PROD1PC64 with PROPOSALS
27474 Federal Register / Vol. 72, No. 94 / Wednesday, May 16, 2007 / Proposed Rules 

DOE believes that the phrase ‘‘new or 

significantly improved technology’’ is 

not readily susceptible to precise 

definition in these regulations. It is not 

possible to specify in advance precisely 

what should be considered ‘‘new’’ or 

what would constitute a ‘‘significant 

improvement’’ in a particular 

technology. Nonetheless, DOE does 

believe it is both possible and prudent 

to specify, in these regulations, 

parameters by which that determination 

will be made in particular cases in the 

future. 

Webster’s II New College Dictionary 

(1999) defines the term ‘‘new’’ to mean 

‘‘[h]aving existed or been made for only 

a short time * * * [n]ever used before 

* * * [j]ust discovered, found, or 

learned * * *’’ or somewhat 

unhelpfully, ‘‘[n]ot yet old.’’ The term 

‘‘significant’’ is defined as ‘‘meaningful 

* * * [m]omentous * * * important,’’

and the term ‘‘improve’’ or 

‘‘improvement’’ is defined as ‘‘[t]o 

advance to a better quality or state 

* * * to increase the productivity or 

value * * * to make advantageous 

additions or changes.’’ For purposes of 

the Title XVII program, moreover, it is 

important that a technology be new or 

significantly improved with respect to 

energy production, use, efficiency, or 

transportation, rather than with respect 

to other attributes. For example, a 

particular facility might have 

significantly improved aesthetic appeal 

in comparison to an older facility, but 

DOE does not believe that type of 

improvement alone should qualify a 

facility for a Title XVII loan guarantee. 

Thus, DOE proposes to define, by 

regulation, the term ‘‘new or 

significantly improved technologies’’ to 

mean technologies concerned with the 

production, consumption or 

transportation of energy, and that have 

either only recently been discovered or 

learned, or that involve or constitute 

meaningful and important 

improvements in the productivity or 

value of the technology. DOE requests 

comment on this definition. 

Because Title XVII focuses on 

encouraging and incentivizing 

innovative technologies, the Title XVII 

loan guarantee program should only be 

open to projects that employ a 

technology that has been used in a very 

limited number of commercial projects 

or for only a limited period of time. 

Indeed, when read together, sections 

1701 and 1703 of Title XVII prohibit 

DOE from issuing loan guarantees for 

projects that only use commercial 

technologies that already are in general 

use in the United States at the time the 

guarantee is issued. In section 609.2 of 

the proposed regulations, DOE is 

proposing two possible ways of 

interpreting ‘‘general use.’’ First, DOE 

could interpret the term ‘‘general use’’

to mean that a technology has been 

ordered for, installed in, or used in a 

certain number of commercial projects 

in the United States. So, as one 

alternative, DOE proposes to state in its 

regulations that a technology would be 

considered to be in general use, and 

therefore not eligible for a Title XVII 

loan guarantee, if it has been ordered 

for, installed in, or used in five or more 

projects in the United States at the time 

the loan guarantee is issued. Allowing 

loan guarantees for up to five projects 

employing the same type of technology 

would allow use of these guarantees to 

introduce innovative technologies to the 

commercial marketplace, but would also 

ensure that guarantees can only be 

issued for a limited number of projects 

before it will be up to the commercial 

marketplace to decide whether the 

economic and environmental benefits of 

a particular technology justify 

continued investments in it. 

As a second alternative, DOE 

proposes to state in its regulations that 

a technology would be considered to be 

in general use, and therefore not eligible 

for a Title XVII loan guarantee, if it has 

been in operation in a commercial 

project in the United States for a 

particular number of years. Under this 

alternative, there would be no 

numerical limit on the number of loan 

guarantees DOE could issue for a 

particular technology—it might be 50, 

10, 5, 1 or even zero. Whether DOE 

could issue a guarantee would be 

determined in each case by whether the 

technology at issue had been in 

operation in a commercial project in the 

United States for a particular number of 

years, which DOE proposes to be five 

years. The five-year period would begin 

on the date that the technology is 

commissioned on the particular 

commercial project. DOE selected the 

period of five years because it believes 

that this period of time will allow a 

sufficient period for early commercial 

operation and for proving the viability 

of a technology in the commercial 

marketplace. 

DOE requests comment on these 

alternative interpretations and 

approaches. DOE furthermore requests 

comment as to whether, regardless of 

which alternative is adopted in the final 

rule, the same definition should apply 

to all types of projects and technologies. 

For example, if the first alternative 

described above is adopted, should the 

relevant number of projects or 

technologies be the same for renewable 

energy systems, advanced nuclear 

energy facilities, pollution control 

equipment, and all other potentially 

eligible technologies and projects? Or, 

should the number specified in DOE’s 

regulations be different for different 

types of projects and technologies? 

Similarly, if the second alternative 

described above is adopted, should the 

time period be the same for all types of 

eligible projects and technologies? And 

if it should be different, why? 

Commenters who wish to express views 

on any of these issues are requested to 

supply specific information and data 

supporting their views. 

The Department notes that regardless 

of the resolution of the issues discussed 

above, a project may be eligible for a 

Title XVII loan guarantee if it uses 

technology that has been used in any 

number of projects outside the United 

States and for any period of time outside 

the United States, so long as the 

technology is not in ‘‘general use’’ in the 

United States. 

B. Project Costs 

Proposed section 609.10, in 

accordance with section 1702(c) of the 

Act, provides that any loan guarantee 

issued by DOE may not exceed 80 

percent of total Project Costs. Sections 

609.2 and 609.12 of the proposed rule 

define ‘‘Project Costs’’ as those that are 

necessary, reasonable, customary, and 

directly related to the design, 

engineering, financing, construction, 

startup, commissioning and shake down 

of an Eligible Project. Conversely, 

excluded costs cover initial research 

and development costs, the credit 

subsidy cost, any administrative fees 

paid subsequent to section 1702(h), and 

operating costs after the facility has 

been placed in service. These are costs 

associated with, and a condition of, 

receiving a federal loan guarantee. 

Furthermore, if theses costs were 

allowed, in the case of default, these 

costs would be shifted from the project 

sponsor to the federal taxpayer. DOE 

invites public comments on these 

issues. 

C. Solicitation 

Section 609.3 of the proposed 

regulations requires DOE to issue a 

solicitation to start the process that 

ultimately would culminate in the 

Department issuing a loan guarantee. 

This section also sets forth certain 

minimum requirements for each 

solicitation, including the fees that will 

be required of persons invited to submit 

Applications and criteria that the 

Department will use to weigh competing 

Pre-Applications, when PreApplications are requested, and 

Applications, and to make ultimate 

selections for loan guarantees. 


ycherry on PROD1PC64 with PROPOSALS
Federal Register / Vol. 72, No. 94 / Wednesday, May 16, 2007 / Proposed Rules 27475 

Generally, DOE plans to solicit PreApplications only when PreApplications can minimize or reduce 

the financial burdens on Project 

Sponsors prior to a determination that a 

particular technology will likely not be 

sufficiently developed or mature to 

satisfy the minimum requirements for 

successful commercial operations. This 

approach would also reduce DOE’s 

administrative costs incurred for 

detailed review of multiple full 

Applications in technology areas where 

most of the projects will likely not be 

ready for commercial operations. 

The proposed regulations permit DOE 

to start the solicitation process by 

soliciting Pre-Applications, or by 

skipping the Pre-Application stage and 

soliciting Applications, because DOE 

believes a Pre-Application stage may be 

appropriate and necessary for some 

technologies and projects but perhaps 

not for others. Solicitations for PreApplications or Applications issued 

after promulgation of the final rule must 

address many important aspects of the 

application process, including the 

relevant period of time during which 

Pre-Applications or Applications for 

loan guarantees may be filed. Because 

each project will be unique and each 

loan guarantee potentially subjects the 

Federal government to significant 

financial liability, DOE plans to engage 

in a rigorous review of a proposed 

project before determining whether it 

may be eligible for a Loan Guarantee 

Agreement and subsequently approving 

and issuing loan guarantees. 

DOE does not intend to substantively 

review and evaluate Pre-Applications or 

Applications for any proposals that do 

not meet the specific requirements of 

the applicable solicitation. Likewise, 

only Applications invited by DOE or 

submitted in response to a solicitation 

will be considered for a Loan Guarantee 

Agreement. Consistent with section 

20320(b) of Public Law 110–5, the 

proposed regulations require that 

programmatic, technical and financial 

factors to be used by DOE to select 

projects for loan guarantees. Section 

609.7 satisfied this requirement. 

D. Payment of the Credit Subsidy Cost 

Section 1702(b) of the Act states that: 

‘‘No guarantee shall be made unless (1) 

an appropriation for the cost has been 

made; or (2) the Secretary has received 

from the borrower a payment in full for 

the cost of the obligation and deposited 

the payment into the Treasury.’’ (42 

U.S.C. 16512) Therefore, either Congress 

must appropriate funds to cover the 

Credit Subsidy Cost of the Loan 

Guarantee or the Borrower must make 

payment to DOE of this cost. DOE has 

neither requested nor received 

appropriations to make partial or full 

payment of the Credit Subsidy Cost. 

However, section 20320(a) of Pub. L. 

110–5 authorized DOE to accept Credit 

Subsidy Cost payments from Borrowers 

to pay the full subsidy costs of loan 

guarantees, and DOE’s current intent is 

to implement the Title XVII program 

only through the self-pay authority of 

section 1702(b)(2) of the Act. 

Furthermore, DOE interprets section 

1702(b) as not allowing for partial 

payment of the Credit Subsidy Cost by 

Borrower with the remainder covered by 

a Congressional appropriation; section 

1702(b) authorizes either an 

appropriation or payment of this cost in 

full by the Borrower. DOE proposes to 

memorialize this interpretation of 

section 1702(b) of the Act in section 

609.9 of the regulations. 

E. Assessment of Fees 

In addition to the Credit Subsidy Cost, 

section 1702(h) also requires DOE to 

‘‘charge and collect fees for guarantees’’

to cover the Administrative Cost of 

Issuing a Loan Guarantee. Proposed 

§§ 609.6, 609.8 and 609.10 provide that 

DOE shall collect fees for administrative 

expenses to cover all phases of an 

Eligible Project. As defined in proposed 

§ 609.2, fees consist of the 

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 

the Loan Guarantee Agreement, 

including during construction, start-up, 

commissioning, shakedown, and the 

operational phases of an Eligible Project. 

The Act, and section 1702(h) in 

particular, affords DOE discretion with 

respect to the fees it imposes to cover 

applicable administrative costs. For the 

first solicitation issued by DOE in 

August 2006, DOE elected not to impose 

fees in connection with the PreApplication stage and reserved the right 

to charge an Application fee as part of 

the invitation to submit an Application. 

DOE proceeded in this manner so as not 

to unduly discourage potential project 

sponsors from submitting PreApplications. In the proposed 

regulations, DOE is requiring that the 

payment of administrative fees start 

with the submission of an Application. 

If implemented by DOE in the final rule, 

this would mean that Project Sponsors 

who submit Pre-Applications and are 

denied further consideration will not be 

charged any fees for expenses incurred 

by DOE in reviewing their PreApplication materials. In addition, PreApplicants that are invited to submit 

Applications but decline to do so will 

also not be charged a fee. DOE does 

anticipate incurring significant 

administrative expenses as part of its 

review of Pre-Applications, and 

Applications which, in the absence of 

Pre-Application and Application fees, 

would not be fully recouped by DOE. 

Under the proposed rule, the fees 

assessed to Borrowers who submit 

Applications and enter into Conditional 

Commitments will only cover the 

expenses attendant to that Borrower’s 

project proposal and will not cover the 

costs incurred by DOE for reviewing 

other Pre-Applications that were denied 

further consideration. As stated above, 

section 1702(h) requires that DOE 

‘‘charge and collect fees for guarantees 

* * * sufficient to cover applicable 

administrative expenses.’’ DOE 

interprets this requirement as allowing 

it to charge and collect fees from the 

Applicant/Borrower to cover DOE’s 

administrative expenses in connection 

with that particular Applicant/ 

Borrower’s project, or to charge and 

collect fees from Applicant/ Borrower to 

cover a proportionate share of DOE’s 

administrative expenses for the entire 

loan guarantee program. In its proposed 

regulations, DOE adopts the former 

approach. 

Proposed section 609.6 provides that 

the Applicant must pay a filing fee with 

the submission of an Application (First 

Fee). This First Fee must be in an 

amount sufficient to cover DOE’s 

administrative expenses in connection 

with DOE’s review and evaluation of a 

Pre-Application, if any, and the 

Application. A Second Fee (Second Fee) 

will be collected when DOE and the 

Applicant execute a Term Sheet which 

constitutes a Conditional Commitment. 

This Second Fee must be an amount 

sufficient to cover DOE’s administrative 

expenses during the Term Sheet through 

the closing phase. 

At the closing and subsequent thereto, 

DOE will collect fees, as specified in the 

Conditional Commitment, for DOE’s 

servicing and monitoring expenses 

throughout the term of the guaranteed 

loan (Third Fee). The Third Fee may be 

assessed and collected quarterly, 

annually, or more or less frequently, as 

determined by the Secretary, including 

one lump sum payment at the closing. 

The Third Fee may be a percentage of 

the amount of Guaranteed Obligations 

outstanding from time to time or 

specific dollar amounts based on DOE’s 


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actual and/or reasonably anticipated 

administrative expenses. 

The First and Second Fees are not 

refundable and must be paid regardless 

of whether a Loan Guarantee Agreement 

is executed. The Third Fee is also not 

refundable and the amount and method 

of payment of the Third Fee will be 

specified in the Loan Guarantee 

Agreement. This will enable DOE to 

comply with the mandate of section 

1702(h) of the Act to charge fees to 

cover DOE’s administrative expenses 

‘‘for guarantees’’ while also ensuring 

that Applicants act in good faith when 

submitting an Application and use their 

best efforts to meet all specified 

requirements of the Conditional 

Commitment. DOE invites public 

comments as to all aspects concerning 

the assessment of fees for the 

Department’s administrative expenses. 

F. Financial Structure 

The Act does not impose any specific 

limitations on the financial structure of 

proposed projects, other than that the 

loan guarantee ‘‘shall not exceed an 

amount equal to 80 percent of the 

project cost of the facility that is the 

subject of the guarantee as estimated at 

the time at which the guarantee is 

issued.’’ (42 U.S.C. 16512(c)) However, 

section 1702(d)(1) provides: ‘‘No 

guarantee shall be made unless the 

Secretary determines that there is 

reasonable prospect of repayment of the 

principal and interest on the obligation 

by the Borrower.’’ (42 U.S.C. 

16512(d)(1)) DOE therefore must make 

repayment of debt a very high priority 

of the loan guarantee program and DOE 

is authorized to adopt policies to ensure 

that Borrowers and Eligible Lenders use 

their best efforts to ensure repayment of 

Guaranteed Obligations. 

This view is bolstered by the mandate 

of section 1702(g)(2)(B), which requires 

that ‘‘with respect to any property 

acquired pursuant to a guarantee or 

related agreements, [the rights of the 

Secretary] shall be superior to the rights 

of any other person with respect to the 

property.’’ DOE interprets this statutory 

provision to require that DOE possess a 

first lien priority in the assets of the 

project and other assets pledged as 

security. Because DOE believes it is not 

permitted by the Act to adopt a pari 

passu security structure, holders of the 

non-guaranteed portion of a loan or debt 

instrument will have a subordinate 

claim to DOE in the event of default. 

To harmonize and balance the twin 

goals of issuing loan guarantees to 

encourage use of new or significantly 

improved technologies in Eligible 

Projects while limiting the financial 

exposure of the Federal government, 

DOE expressed a preference in the 

August 2006 Guidelines for 

guaranteeing no more than 80 percent of 

the total face amount of any single debt 

instrument. The Guidelines further 

provided that under no circumstances 

would DOE guarantee 100 percent of a 

loan or other debt obligation. 

In today’s rule, DOE is proposing to 

guarantee up to 90 percent of a 

particular debt instrument or loan 

obligation for an Eligible Project that 

can be guaranteed by a Title XVII loan 

guarantee, so long as DOE’s guarantees 

do not account for more than 80 percent 

of Project Costs. Furthermore, in 

connection with any loan guaranteed by 

DOE that may be participated, 

syndicated, traded, or otherwise sold on 

the secondary market, DOE is proposing 

to require that the guaranteed portion 

and the non-guaranteed portion of the 

debt instrument or loan be sold on a 

pro-rata basis. The guaranteed portion of 

the debt may not be ‘‘stripped’’ from the 

non-guaranteed portion, i.e. sold 

separately as an instrument fully 

guaranteed by the Federal government. 

DOE invites public comment on the 90 

percent loan guarantee limitation and 

the prohibition on ‘‘stripping.’’

The primary purpose of the Title XVII 

loan guarantee program is to support 

projects using or employing ‘‘new or 

significantly improved technologies.’’

These new technologies, by definition, 

have not been proven in commercial 

projects in the United States and 

therefore may present significant risks 

for Title XVII loan guarantees. DOE 

believes that the sum of Title XVII 

requirements suggest that a guarantee of 

up to 90% of the face value of a loan 

may be required to achieve program 

goals. 

DOE intends to gain valuable 

experience from the first round of 

proposals submitted under the 

Guidelines, where some Pre-Applicants 

sought loan guarantees for 80% or less 

of their proposed debt instruments. In 

developing final regulations, DOE will 

take into account, among other things, 

the comments on this proposal, DOE’s 

experience with the first round of 

proposals, and whether there are other 

methods of assuring that Eligible 

Lenders bear some of the financial risk 

exist while at the same time assuring 

that the objectives of the Title XVII 

program are accomplished. DOE 

requests public comment on the 

proposal to allow up to a 90 percent 

loan guarantee, the technology or 

circumstance that might warrant 

providing this level of guarantee, 

whether Eligible Lenders will perform 

adequate due diligence in the absence of 

assuming some amount of risk, the 

applicability of practices employed by 

other Federal agencies to DOE’s loan 

guarantee program, and whether DOE’s 

proposal will facilitate the goal of 

offering loan guarantees to encourage 

early commercial use of innovative 

technologies. 

DOE also will consider whether 

Project Sponsors have a significant 

financial commitment to the project. 

The Act does not mandate a specific 

equity contribution, but DOE is 

proposing to require that the Project 

Sponsors have a significant equity stake 

in a project. DOE solicits comments on 

the merits of adopting a minimum 

equity percentage requirement for 

projects. 

In addition, DOE intends to consider 

whether a Project Sponsor will rely 

upon other government assistance (e.g., 

grants, tax credits, other loan 

guarantees) to support financing, 

construction or operation of a project. 

DOE will manage the loan guarantee 

program in a manner that seeks to 

minimize support of projects that rely 

on multiple forms of significant Federal 

financial assistance; in general, DOE 

believes it is desirable that each project 

receive only one form of such 

assistance. Therefore, if an applicant is 

or will be receiving multiple forms of 

significant Federal financial assistance, 

that fact generally will be a negative 

factor when DOE evaluates loan 

guarantee applications. Nonetheless, the 

receipt of other forms of assistance will 

not disqualify a project from being 

eligible for a DOE loan guarantee, and 

DOE furthermore recognizes that in 

some situations—such as, for example, 

with respect to the first new nuclear 

generating facilities, which may be 

eligible for risk insurance agreements, 

loan guarantees and tax credits—

multiple forms of federal assistance to 

the same project could advance 

important national energy policy 

priorities. 

Finally, DOE is proposing to require 

with submission of Applications, a 

credit assessment for the project without 

a loan guarantee from a nationally 

recognized rating agency, where the size 

and estimated cost of the project justify 

such an assessment. Additionally, DOE 

is proposing to require not later than 30 

days prior to closing, that Applicants 

provide a credit rating from a nationally 

recognized rating agency reflecting the 

Final Term Sheet for the project without 

a Federal guarantee. The Department 

requests comment as to whether it 

should establish a project size (dollar) 

threshold below which the Department 

would have authority to waive this 

credit rating requirement. 


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G. Eligible Lenders 

In further support of DOE’s objective 

to ensure full repayment of debt, 

consistent with section 20320(b)(2) of 

the CR, participating Eligible Lenders or 

other servicers must meet certain 

eligibility, monitoring, and performance 

requirements. These requirements, set 

forth in sections 609.2 and 609.11 of the 

proposed regulations, are intended to 

ensure that the Eligible Lender or other 

servicer has the financial wherewithal 

and appropriate experience and 

expertise to meet its fiduciary 

obligations in connection with the debt 

guaranteed by DOE. As provided in 

proposed section 609.11, Eligible 

Lenders or other servicers must exercise 

a high level of care and diligence in the 

review and evaluation of a project, and 

in enforcing the conditions precedent to 

all loan disbursements, as provided in 

the Loan Guarantee Agreement, Loan 

Agreement, and related documents, 

throughout the term of the Guaranteed 

Obligation. Moreover, as provided in 

proposed section 609.11, DOE also 

expects each Eligible Lender or other 

servicer to diligently perform its duties 

in the servicing and collection of the 

loan or other debt obligation as well as 

in ensuring that the collateral package 

securing the loan remains 

uncompromised. Proposed section 

609.11 requires the Eligible Lender or 

other servicer to provide to DOE regular, 

periodic financial reports on the status 

and condition of the loan or other debt 

obligation, consistent with the terms of 

the Loan Guarantee Agreement. The 

Eligible Lender or other servicer is 

required to notify DOE promptly if it 

becomes aware of any problems or 

irregularities concerning the project or 

the ability of the Borrower to make 

payment on the loan or other debt 

obligations. 

H. FCRA 

The Federal Credit Reform Act of 

1990 (FCRA) provides that for any 

federal credit program, new direct loans 

and loan guarantees may not be made 

unless authority has been provided in 

appropriations Acts(s). See 2 U.S.C. 

661c(b). Title XVII only authorizes 

future appropriations action. The 

Department does not understand section 

1702(b) of the Act as constituting either 

budget authority or other authority to 

make any individual loan guarantee, as 

is required by FCRA. Thus, the 

Department reads the Act and FCRA in 

harmony, which means that while Title 

XVII authorizes DOE to carry out the 

loan guarantee program, the Department 

may not issue guarantees until it 

receives new budget authority or is 

otherwise provided authority to make 

guarantees in an appropriations Act. 

While DOE notes that the Government 

Accountability Office has expressed 

disagreement with this interpretation, 

the Department intends to follow its 

own interpretation of Title XVII and 

FCRA in carrying out this program. 

On February 15, 2007, President Bush 

signed the CR into law. The CR provides 

DOE with the necessary authority, 

consistent with FCRA and Title XVII 

section 1702, to guarantee, in the 

aggregate, up to $4 billion in loans for 

Title XVII projects. The authority to 

issue guarantees, however, was limited 

to Borrowers who pay the applicable 

Credit Subsidy Costs. 

I. Default and Audit Provisions 

Title XVII, sections 1702(g) and 

1702(i), specifically require that DOE 

promulgate regulations to address 

default and audit requirements. (42 

U.S.C. 16512(g), (i)) Sections 609.15 and 

609.17, respectively, address these 

requirements. These provisions will 

apply to all loan guarantees issued 

under the Title XVII program, including 

those in response to the August 2006 

Solicitation. 

J. Tax Exempt Debt 

Section 103(a) of the Internal Revenue 

Code (IRC), 26 U.S.C. 103(a), provides 

that ‘‘gross income’’ does not include 

interest on any state or local bond, with 

certain exceptions. Section 149(b) of the 

IRC, 26 U.S.C. 149(b), however, 

provides that the section 103(a) 

exclusion from gross income ‘‘shall not 

apply to a state or local bond if such 

bond is federally guaranteed.’’ Section 

149(b) in effect converts tax exempt debt 

to taxable debt when such debt is 

guaranteed by the Federal government. 

Accordingly, section 609.10 of today’s 

proposed regulations prohibits DOE 

from directly or indirectly guaranteeing 

tax exempt obligations. 

K. Full Faith and Credit 

Section 609.14 of the proposed 

regulations provides that the full faith 

and credit of the United States is 

pledged to the payment of all 

Guaranteed Obligations. It further 

provides that the guarantee shall be 

conclusive evidence that it has been 

properly obtained, that the underlying 

loan qualified for the guarantee, and 

that but for fraud or material 

misrepresentation by the Holder, is 

presumed to be valid, legal and 

enforceable. Section 609.14 is consistent 

with the model provision set forth in 

OMB Circular A–129, ‘‘Policies for 

Federal Credit Programs and Non-Tax 

Receivables,’’ as well as similar 

provisions in the regulations governing 

a number of other federal credit 

programs. The Department maintains a 

strong interest in ensuring that the debt 

incurred in order to finance innovative 

projects eligible for Title XVII loan 

guarantees can be financed and sold in 

secondary markets and requests 

comment on whether the language of 

section 609.14 needs to be modified in 

order to accomplish this goal, while at 

the same time ensuring that the Federal 

Government is not exposed to undue 

financial risk because of fraud or 

misrepresentation. 

III. Public Comment Procedures 

A. Written Comments 

Interested persons are invited to 

participate in this proceeding by 

submitting data, views, and arguments. 

Written comments should be submitted 

to the address, and in the form, 

indicated in the ADDRESSES section of 

this Notice of Proposed Rulemaking. To 

help DOE review the comments, 

interested persons are asked to refer to 

specific proposed rule provisions, 

whenever possible. 

If you submit information that you 

believe to be exempt by law from public 

disclosure, you should submit one 

complete copy, as well as one copy from 

which the information claimed to be 

exempt by law from public disclosure 

has been deleted. DOE is responsible for 

the final determination with regard to 

disclosure or nondisclosure of the 

information and for treating it in 

accordance with the DOE’s Freedom of 

Information regulations (10 CFR 

1004.11). It is DOE’s intention to honor 

requests for nondisclosure of 

information by an Applicant or Project 

Sponsor to the extent permitted under 

applicable laws. 

B. Public Meeting 

A public meeting will be held at the 

time, date, and place indicated in the 

DATES and ADDRESSES sections of this 

Notice of Proposed Rulemaking. Any 

person or representative of a group or 

class of persons who has an interest in 

this proposed rule may request an 

opportunity to make an oral 

presentation. A person wishing to speak 

must submit his or her request to make 

an oral presentation to the person and 

in the manner specified in the DATES

section of this notice by 4:30 p.m. on the 

date specified for making such requests. 

The person should provide a daytime 

phone number where he or she can be 

reached. Each oral presentation will be 

limited to 20 minutes, unless the 

presiding official determines that the 

number of persons wishing to speak 


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warrants a different amount of time. 

Persons making oral presentations are 

requested to bring 3 copies of their 

prepared statement to the meeting and 

submit them to the registration desk. 

DOE reserves the right to select the 

persons who will speak. DOE also 

reserves the right to schedule speakers’

presentations and to establish the 

procedures for conducting the meeting. 

A DOE official will be designated to 

preside at the meeting. The meeting will 

not be a judicial or evidentiary-type 

hearing, but will be conducted in 

accordance with 42 U.S.C. 7191. Any 

further procedural rules for the conduct 

of the meeting will be announced by the 

presiding official. 

A transcript of the meeting will be 

made, and the entire record of this 

rulemaking will be retained by DOE and 

made available as provided in the 

ADDRESSES section of this Notice of 

Proposed Rulemaking. 

IV. 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 OMB. 

B. National Environmental Policy Act 

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 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 loan 

guarantee rules under the 

Administrative Procedure Act (5 U.S.C. 

553). 

D. Paperwork Reduction Act 

Proposed sections 609.4 and 609.6 

provide that Pre-Applications and 

Applications for loan guarantees 

submitted to DOE in response to a 

solicitation must contain certain 

information. This information will be 

used by DOE to determine if a project 

sponsor who submits a Pre-Application 

will be invited to submit an Application 

for a loan guarantee; to determine if a 

project is eligible for a loan guarantee; 

and to evaluate Applications under 

criteria specified in the proposed rule. 

Proposed § 609.17 provides that 

borrowers must submit to DOE annual 

project performance reports and audited 

financial statements along with other 

information. DOE will use this 

information to evaluate the progress of 

projects for which loan guarantees are 

issued. DOE has submitted this 

collection of information to the Office of 

Management and Budget for approval 

pursuant to the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.) and 

the procedures implementing that Act, 5 

CFR 1320.1 et seq. 

DOE estimates that the annual 

reporting and recordkeeping burden for 

this collection of information will be 

13,000 hours per year at a total annual 

cost of $1,750,000. Burden means the 

total time, effort, or financial resources 

expended by persons to generate, 

maintain, retain, or disclose or provide 

information to or for a federal agency. 

An agency may not conduct or sponsor, 

and a person is not required to respond 

to a collection of information unless it 

displays a currently valid OMB control 

number. 

Interested persons are invited to 

submit comments to OMB addressed to: 

Department of Energy Desk Officer, 

Office of Information and Regulatory 

Affairs, OMB, 725 17th Street, NW., 

Washington, DC 20503. Persons 

submitting comments to OMB also are 

requested to send a copy to the DOE 

contact person at the address given in 

the ADDRESSES section of this notice. 

OMB is particularly interested in 

comments on: (1) The necessity of the 

proposed information collection 

requirements, including whether the 

information will have practical utility; 

(2) the accuracy of DOE’s estimates of 

the burden; (3) ways to enhance the 

quality, utility, and clarity of the 

information to be maintained; and (4) 

ways to minimize the burden of the 

requirements on respondents. 

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 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 

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 


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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. The 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 

unreasonable to meet one or more of 

them. DOE has completed the required 

review and determined that, to the 

extent permitted by law, the 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. 

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 May 10, 

2007. 

James T. Campbell, 

Acting Chief Financial Officer. 

For the reasons stated in the 

Preamble, DOE proposes to amend 

chapter II of title 10 of the Code of 

Federal Regulations by adding a new 

part 609 as set forth below. 

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, Monitoring and 

Performance 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 Title XVII of the Energy 

Policy Act of 2005. 

(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 Title XVII of the 

Energy Policy Act of 2005. 

(c)(1) This part shall not apply to any 

Pre-Applications, Applications, 

Conditional Commitments or Loan 


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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 

Pre-Application is accepted under the 

Guidelines and an Application is 

invited pursuant to such PreApplication no later than December 31, 

2007. 

(2) Notwithstanding paragraph (c)(1) 

of this section, §§ 609.15 and 609.17 

shall apply to any Loan Guarantee 

Agreement entered into pursuant to or 

in response to DOE’s August 8, 2006 

solicitation. 

(3) Notwithstanding paragraph (c)(1) 

of this section, DOE and any Applicant 

who submitted an Application under 

the August 8, 2006 solicitation may 

agree to make additional provisions of 

this part applicable to the particular 

project. 

(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). 

Administrative Cost of Issuing a Loan 

Guarantee means the total of all 

administrative expenses that DOE 

incurs during: 

(1) The evaluation of a PreApplication 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, 

and the potentially higher costs of 

servicing and monitoring trouble loans. 

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. 

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, but does not include a 

technology solely by use of such 

technology in a demonstration project 

funded by DOE. A technology is in 

general use if it: [Alternative 1: Has been 

ordered for, installed in, or used in five 

or more projects in the United States] 

[Alternative 2: Has been in operation in 

a commercial project in the United 

States for a period of five years, as 

measured beginning on the date the 

technology was commission on a 

project.] 

Conditional Commitment means a 

Term Sheet offered by DOE and 

accepted by the Applicant, with the 

understanding of the parties that the 

Applicant thereafter satisfies all 

specified and precedent funding 

obligations, and all other contractual, 

statutory, regulatory or other 

requirements. A Conditional 

Commitment imposes no obligation on 

the Secretary to execute the Loan 

Guarantee Agreement. 

Contracting Officer means the 

Secretary of Energy or a DOE official 

authorized by the Secretary to enter 

into, administer and/or terminate 

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: 

(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 Fees paid to 

DOE pursuant to Section 1702(h) to 

cover the applicable administrative 

expenses for the loan guarantee are 

excluded from the calculation. 

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. 

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. 

Guaranteed Obligation means any 

loan or other debt obligation of the 

Borrower for an Eligible Project for 

which DOE guarantees 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. 

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 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 has either only recently 

been discovered or learned, or that 

involves or constitutes one or more 

meaningful and important 

improvements in the productivity or 

value of the technology. 

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 Act and this part. 

Project Costs means those costs, 

including escalation and contingencies, 

that are to be expended or accrued by 


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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 general terms and conditions under 

which DOE anticipates that it may 

guarantee payment of principal and 

accrued interest on specified loans or 

other debt obligations of a Borrower in 

connection with an Eligible Project. A 

Term Sheet is not a loan Guarantee 

Agreement and imposes no obligation 

on the Secretary to execute a Loan 

Guarantee Agreement. 

United States means the several 

states, the District of Columbia, the 

Commonwealth of Puerto Rico, the 

Virgin Islands, Guam, American Samoa 

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. 

(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, 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. Only one 

Pre-Application may be submitted per 

project. At a minimum, each PreApplication 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; 

(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) The owners or controllers of the 

intellectual property incorporated in 

and utilized by such technologies; and 

(vi) 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; and 

(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 loan a guarantee is 

sought. 

(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: 

(3) The amount of the Guaranteed 

Obligation as a percentage of total 

project debt; and as a percentage of that 

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) A copy of a commitment letter 

from an Eligible Lender or other Holder 

expressing its commitment to provide 

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; 

(h) An overview of how the project 

complies with the eligibility 

requirements in section 1703 of the Act 

(42 U.S.C. 16513); 

(i) An outline of the potential 

environmental impacts of the project 

and how these impacts will be 

mitigated; 

(j) A description of the anticipated air 

pollution and/or anthropogenic 

greenhouse gas reduction benefits and 

how these benefits will be measured 

and validated; 

(k) A list of all of the requirements 

contained in this part and the 

solicitation and where in the PreApplication these requirements are 

addressed; and 

(l) 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 


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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. DOE will notify any Project 

Sponsor whose Pre-Application has 

been eliminated from further review 

under this subsection. 

(c) If DOE deems a Pre-Application 

responsive, DOE will evaluate the 

commercial viability of the proposed 

project, the technology to be employed 

in the project, relevant experience of the 

principal(s) and the financial capability 

of the Project Sponsor (including 

personal and/or business credit 

information of the principal(s)) to 

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. 

(d) 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 or 

advising the Project Sponsor that the 

project proposal will not receive further 

consideration. Neither the PreApplication nor any written or other 

feedback that DOE may provide in 

response to the Pre-Application 

eliminates the requirement for an 

Application. 

(e) 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 issue a loan guarantee for a 

project. 

§ 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. There may be only one 

Applicant per project. 

(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 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 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 

estimated 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; 

(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 


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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 credit assessment, for the 

project without a loan guarantee from a 

nationally recognized rating agency, 

where the size and estimated cost of the 

project justify 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 Guarantee 

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 Guarantee 

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. 

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 does not avoid, reduce, 

or sequester air pollutants or 

anthropogenics emissions of greenhouse 

gases; 

(3) The project is not ready to be 

employed commercially in the United 

States, cannot be replicated, 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; 

(4) 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 

Section 609.11 of this part; 

(5) The project is for demonstration, 

research, or development; or 

(6) The applicant will not provide a 

significant 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 

service in the United States, is ready to 

be employed commercially in the 

United States, can be replicated, yields 

a commercial 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 the extent that the new or 

significantly improved technology used 

in the project constitutes an important 

improvement in 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 timeframe stated in the 

Applications; 

(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 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; 

(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; 


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(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; 

(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 may determine, after review 

and evaluation of the Application, 

additional information requested and 

received by DOE, and information 

obtained as the result of meeting with 

the Applicant and the Eligible Lender or 

other Holder, that it would be 

appropriate to offer 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 before DOE may 

enter into a Loan Guarantee Agreement. 

(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. 

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, but neither party 

is legally obligated to do so. 

(d) 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 will set a closing date 

for the 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 any other 

contractual, statutory, regulatory or 

other requirements have been met. 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 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 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 updated project financing 

information and a new final Term Sheet 

must be executed by DOE and the 

Applicant if the terms and conditions of 

the financing arrangements changed 

between execution of the Conditional 

Commitment and that date (Final Term 

Sheet). 

(f) Not later than 30 days prior to 

closing, the applicant must provide a 

credit rating from a nationally 

recognized rating agency reflecting the 

Final Term Sheet for the project without 

a Federal guarantee. 

(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) 

of this section. In addition, DOE may 

choose to terminate the Conditional 

Commitment. 

§ 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, 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 thereunder. 


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(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 that 

are in ‘‘general use’’ 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 and the loan guarantee is limited 

to no more than 90 percent of the total 

face value of the loans(s) or other debt 

obligation(s); 

(4) The guaranteed portion of a loan, 

or any portion of the guaranteed portion 

of a loan, will not be separated from or 

‘‘stripped’’ from the non-guaranteed 

portion of the loan, 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; 

(7) The loan guarantee does not 

finance, either directly or indirectly, 

tax-exempt debt obligations; 

(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 the 

guaranteed loan 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) The Guaranteed Obligation is not 

subordinate to any loan or other debt 

obligation and is in a first lien position 

on all assets of the project and all 

additional collateral pledged as security 

for the Guaranteed Obligations and 

other project debt; 

(14) There is satisfactory evidence 

that Borrower and Eligible Lenders are 

willing, competent, and capable of 

performing the terms and conditions of 

the Guaranteed Obligation 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 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 

contains such other terms and 

conditions as DOE deems reasonable 

and necessary to protect the interest of 

the United States; and 

(23) The Lender is an Eligible Lender, 

as defined in § 609.2 of this part, and 

meets DOE’s lender eligibility, 

monitoring and performance criteria in 

§ 609.11 of this part. 

(e) The Loan Guarantee Agreement 

must provide that, in the event of a 

default by the Borrower: 

(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 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 and has superior rights 

in and to the property acquired from the 

recipient of the payment as provided in 

§ 609.15 of this part. 

(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 

section 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 


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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 

section 609.17 of this part. 

(g) The Loan Guarantee Agreement 

must contain provisions related to the 

assignment or transfer of Guaranteed 

Obligations which provide that: 

(1) The Eligible Lender must provide 

written notification to DOE prior to any 

assignment or transfer of any portion of 

a Guaranteed Obligation, or any pledge 

or other use of a Guaranteed Obligation 

as security, including but not limited to 

any derivatives transaction. 

(2) An Eligible Lender or other Holder 

may assign or transfer a Guaranteed 

Obligation covered under the Loan 

Guarantee Agreement 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, 

requirements monitoring, and reporting 

contained in the Loan Guarantee 

Agreement and these regulations if the 

transferring Eligible Lender was forming 

these functions. Any assignment or 

transfer, however, of the servicing, 

monitoring, and reporting functions 

must be approved by DOE. 

§ 609.11 Lender Eligibility, Monitoring and 

Performance Requirements. 

(a) An Eligible Lender shall meet the 

following requirements: 

(1) Be a ‘‘qualified institutional 

buyer,’’ as defined in 17 CFR 

230.144A(a), including a qualified 

retirement plan, or governmental plan; 

(2) Not be debarred or suspended 

from participation in a Federal 

government contract (under 48 CFR part 

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); 

(3) Not be delinquent on any Federal 

debt or loan; 

(4) 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; 

(5) 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 

(6) Be able to demonstrate experience 

or capability as the lead lender or 

underwriter by presenting evidence of 

its participation in other energy-related 

projects. 

(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, and subsequently 

when performing the loan servicing 

duties during the term of the Loan 

Guarantee Agreement, the Eligible 

Lender or other servicer shall exercise 

the level of care and diligence that a 

reasonable and prudent lender would 

exercise when reviewing, evaluating, 

disbursing and servicing a loan made by 

it 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) Even though DOE may rely on the 

Eligible Lender or other servicer to 

service and monitor the Guaranteed 

Obligation, DOE will also conduct its 

own 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, but are not 

limited to: 

(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 

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 

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 

to cover the possibility of cost increases 

during the processing of the application 

and during construction; and 

(11) Capitalized interest necessary to 

meet market requirements, reasonably 

required reserve funds and other 

carrying costs during construction. 

(12) Other necessary and reasonable 

costs approved by DOE; and 

(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 


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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; and 

(7) Borrower-paid Credit Subsidy 

Costs and the Administrative Cost of 

Issuing a Loan Guarantee; and 

(8) Expenses incurred after startup, 

commissioning, and shakedown before 

the facility has been placed in service. 

§ 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) Borrower: 

(1) Is unable to meet 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 will 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 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 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 the 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, such 

supporting documentation as may be 

reasonably 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, applicable 

law, the Act, and this part. 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 and shall have superior rights 

in and to the property acquired from 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. 

(h) Where the Loan Guarantee 

Agreement so provides, the Eligible 

Lender or other Holder, or other 

servicer, as appropriate, and the 

Secretary may jointly agree to a plan of 

liquidation of the assets pledged to 

secure the Guaranteed Obligation. 

(i) Where payment of the Guaranteed 

Obligation has been made and the 

Eligible Lender or other Holder or other 

servicer has not undertaken a plan of 

liquidation, the Secretary, in accordance 

with the rights received through 

subrogation and acting through the U.S. 


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27488 Federal Register / Vol. 72, No. 94 / Wednesday, May 16, 2007 / Proposed Rules 

Attorney General, 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 is awarded title to 

collateral assets pursuant to a 

foreclosure proceeding, the Secretary 

may take action to complete, maintain, 

operate, or lease the project facilities, or 

otherwise dispose of any property 

acquired pursuant to the Loan 

Guarantee Agreement or take any other 

necessary action which the Secretary 

deems appropriate, 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 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 

and 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) No action taken by the Eligible 

Lender or other Holder or other servicer 

in the liquidation 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, 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. 

(m) 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 of 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 the Holder’s 

interest in the project upon liquidation. 

§ 609.16 Perfection of Liens and 

Preservation of Collateral 

(a) The Loan Guarantee Agreement 

and other documents related thereto 

shall provide that: The Eligible Lender 

or other Holder or other servicer will 

take those actions necessary to perfect 

and maintain liens, as applicable, on 

assets which are pledged as collateral 

for the guaranteed portion of the loan; 

and upon default by the Borrower, the 

holder of pledged collateral shall take 

such actions as the Secretary 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 

actions required by the Secretary. 

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 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 PreApplication, 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 nonproject 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 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 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 

(except environmental considerations 

and requirements) 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. Recommendation for 

any deviation shall be submitted in 

writing to DOE. Such recommendations 

must include a supporting statement, 

which indicates briefly the nature of the 

deviation requested and the reasons in 

support thereof. Any deviation, 

however, that was not captured in the 

Credit Subsidy Cost will require either 

additional fees or discretionary 

appropriations. 

[FR Doc. E7–9297 Filed 5–15–07; 8:45 am] 

BILLING CODE 6450–01–P 


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