Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 58085 

e-mail address: harder.stacy@epa.gov. 

For information regarding New Source 

Review, contact Ms. Kelly Fortin, Air 

Permits Section, at the same address 

above. Telephone number: (404) 562– 

9117; e-mail address: 

fortin.kelly@epa.gov. 

Dated: September 26, 2008. 

J.I. Palmer, Jr., 

Regional Administrator, Region 4. 

[FR Doc. E8–23554 Filed 10–3–08; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF THE INTERIOR 

Bureau of Reclamation 

43 CFR Part 403 

RIN 1006–AA53 

Bureau of Reclamation Loan 

Guarantees 

AGENCY: Bureau of Reclamation, 

Interior. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Bureau of Reclamation 

(Reclamation) proposes this rule 

establishing eligibility criteria and 

program requirements for loan 

guarantees authorized by the Twentyfirst Century Water Works Act (Title II 

of Pub. L. 109–451; 43 U.S.C. 2421– 

2434) (Act). This rule is intended to 

define for potential participants how the 

loan guarantees authorized by the Act 

will be administered. The Act 

authorizes the Secretary of the Interior 

(Secretary) to make loan guarantees for 

three categories of projects: 

Category (A) projects are rural water 

supply projects as defined in section 

102(9) of the Reclamation Rural Water 

Supply Act of 2006 (Title I of Pub. L. 

109–451; 43 U.S.C.2401–2409) (Rural 

Water Supply Act of 2006); 

A category (B) project is an 

extraordinary operation and 

maintenance activity for, or the 

rehabilitation or replacement of, a 

facility that is authorized by Federal 

reclamation laws and constructed by the 

United States under such law; or in 

connection with which there is a 

repayment or water service contract 

executed by the United States under 

Federal reclamation law; or 

A category (C) project is an 

improvement to water infrastructure 

directly associated with a reclamation 

project that, based on a determination of 

the Secretary improves water 

management; and fulfills other Federal 

goals. 

For purposes of this rule, these will be 

referred to as category (A), (B), or (C) 

projects. The Act provides that, subject 

to the availability of appropriations, the 

Secretary of the Interior may provide 

loan guarantees for eligible projects. The 

Act requires the Secretary to develop 

criteria for determining the eligibility of 

a project for financial assistance, and to 

publish them in the Federal Register. 

The intent of this rulemaking is to meet 

this requirement, as well as to define for 

potential participants how the loan 

guarantee will be administered. 

Reclamation will administer the 

program. Reclamation will take into 

account the comments on this rule in 

developing final regulations. 

Reclamation recognizes that the rule 

will be modified in the future to more 

specifically address category (A) 

projects and to address modifications in 

administration as a result of experience 

gained through the first requests. 

DATES: Submit comments on the rule by 

November 5, 2008. The Office of 

Management and Budget has up to 60 

days to approve the information 

collection in this rule, but may respond 

after 30 days; therefore public comment 

on the information collection must be 

received on or before November 5, 2008. 

Reclamation plans to hold informational 

meetings on the proposed rule and 

program. 

ADDRESSES: You may submit comments 

on this rule, identified by the number 

1006–AA53, by one of the following 

methods: 

—Use of the Federal rulemaking Web 

site: http://www.regulations.gov. 

Search on docket identification 

number BOR–2008–0005 when 

submitting comments on this rule. 

Follow the instructions for submitting 

comments. 

—By mail to: Bureau of Reclamation, 

Denver Federal Center, P.O. Box 

25007, Building 67, Denver CO 80225, 

Attention: Randy Christopherson, 

Mail Code 84–55000. Please include 

the number 1006–AA53 in your 

correspondence. 

Please submit comments on the 

information collection to the Desk 

Officer for the Department of the 

Interior at the Office of Management and 

Budget, Office of Information and 

Regulatory Affairs, via facsimile to (202) 

395–6566, or e-mail to OIRA_DOCKET@

omb.eop.gov. A copy of your comments 

should also be directed to the Bureau of 

Reclamation, attention Randy 

Christopherson at the contact 

information. 

You can obtain copies of the 

information collection forms by 

contacting us as specified in the FOR

FURTHER INFORMATION CONTACT section. 

FOR FURTHER INFORMATION CONTACT: 

Randy Christopherson, Bureau of 

Reclamation, P.O. Box 25007, Mail 

Code: 84–55000, Denver, CO 80225. 

Telephone: (303) 445–2729. E-mail: 

rchristopherson@do.usbr.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Act, enacted as Title II of Public 

Law 109–451 on December 22, 2006, 

authorizes the Secretary to issue loan 

guarantees to assist non-federal 

borrowers in financing (A) rural water 

supply projects; (B) extraordinary 

maintenance and rehabilitation of 

Reclamation project facilities; and (C) 

improvements to infrastructure directly 

related to a Reclamation project. For 

purposes of these loan guarantees, the 

Act defines the authorized non-federal 

borrower as (a) a State (including a 

department, agency, or political 

subdivision of a State); or (b) a 

conservancy district, irrigation district, 

canal company, water users’ association, 

Indian tribe, an agency created by 

interstate compact, or any other entity 

that has the capacity to contract with 

the United States. 

Authority and responsibility for 

implementing the provisions of the Act 

are delegated to Reclamation. 

Reclamation’s rulemaking will establish 

the eligibility criteria and program 

requirements for loan guarantees 

authorized by the Act. Reclamation 

expects to supplement these rules in the 

future with eligibility criteria and 

program requirements specific to those 

projects described in the Rural Water 

Supply Act of 2006 that are also deemed 

eligible for loan guarantees in 

accordance with section 202(6)(A). 

Section 202(6)(A) provides authority to 

issue loan guarantees for rural water 

supply programs (category A projects). 

The Rural Water Supply Act of 2006 

defines the term rural water supply 

project to include incidental 

noncommercial livestock watering and 

noncommercial irrigation of vegetation 

and small gardens of less than 1 acre, 

and projects to improve rural water 

infrastructure. Rural water projects must 

receive approval from the Congress 

prior to construction and are subject to 

the availability of appropriations. 

Accordingly, Reclamation expects to 

target initial solicitations for guaranteed 

loans pursuant to the Act on Category B 

and Category C projects and on 

assistance for operation and 

maintenance rather than assistance with 

new construction. 

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58086 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 

Discussion of Proposed Rule 

Section 203 of the Act requires the 

Secretary to develop criteria for 

determining the eligibility of a project 

for financial assistance, and to publish 

them in the Federal Register. The intent 

of this rule is to provide program 

requirements and eligibility criteria for 

both the non-federal borrower and 

lenders. The eligibility criteria must 

include (1) the lender’s submission of 

an application to the Secretary; (2) 

demonstration of the creditworthiness 

of the project, including a determination 

by the Secretary that any financing for 

the project has appropriate security 

features to ensure repayment; (3) 

demonstration by the non-federal 

borrower of its ability to repay the 

project financing from user fees or other 

dedicated revenue sources; (4) 

demonstration by the non-federal 

borrower of its ability to pay all 

operations, maintenance, and 

replacement costs of the project 

facilities; and (5) other criteria as the 

Secretary determines to be appropriate. 

Section 403.7 of this rule provides 

generally the requirements regarding 

what information must be included in 

an application and section 403.10 

provides the criteria on which 

Reclamation will evaluate a non-federal 

borrower’s application. Section 403.11 

identifies the prioritization criteria that 

Reclamation will use to determine 

which loan guarantee applications will 

be selected to participate in the loan 

guarantee program. 

We invite you to comment on all the 

requirements set forth in this rule, 

particularly regarding the appropriate 

requirements to provide protections to 

the financial interests of the United 

States. In addition, an information 

collection package has been prepared. 

The application for a loan guarantee 

identifies in more detail the supporting 

documentation that must accompany it, 

including: the current and previous 2 

years financial and income statements; 

the operating budget for the current 

operating cycle, a financial feasibility 

analysis and projected budgets, 

including schedule of all current 

installment debt; preliminary project 

plans and detailed cost estimates; proforma cashflows; the proposed loan 

amortization schedule and documents 

outlining proposed terms and 

conditions of the debt to be guaranteed; 

the non-federal borrower’s proposed 

environmental compliance actions; 

description of any debt; the lender’s 

credit evaluation; a description of any 

security available for the loan; 

authorizing resolutions of certificates; 

and any other documents and 

information the Secretary may request, 

including all documents and 

information relied upon by the lender in 

evaluating the non-federal borrower’s 

initial loan request. The Act specifies 

eligibility criteria that must be included 

in subsection 203(a)(2). Section 203(b) 

of the Act, authorizes the Secretary to 

waive any of the criteria in subsection 

203(a)(2) that the Secretary determines 

to be duplicative or unnecessary 

because of an action already taken by 

the United States. Reclamation would 

waive such criteria only in cases where 

the criteria have already been 

demonstrated to be satisfied. 

Consistent with statutory 

requirement, demonstration of a 

borrowers’ ability to repay the debt and 

continue operations and maintenance of 

its facility is a high priority of the loan 

guarantee program and must be 

demonstrated to the satisfaction of the 

Secretary. Reclamation will adopt 

policies to further establish guidance to 

ensure that borrowers and lenders use 

their best efforts to ensure the success 

of guaranteed loans. Reclamation will 

only offer loan guarantees to eligible 

projects that demonstrate, to the 

satisfaction of the Secretary, the 

creditworthiness of the project, 

including a determination by the 

Secretary that any financing for the 

project has appropriate security features 

to ensure repayment; the ability of the 

borrower to repay all project financing; 

and pay all operations, maintenance, 

and replacement costs of the project 

facilities. 

The statute explicitly defines the 

scope of lenders that are eligible to 

participate in the program. This is 

addressed in section 403.37 of this rule. 

A prospective lender must submit proof 

that it is eligible pursuant to the statute 

and meet the requirements as set out in 

this rule. A lender that meets the 

requirements and wishes to participate 

in the program must execute an 

agreement with Reclamation and 

thereupon will be considered an 

approved lender for a period of 2 years. 

The requirements, as set out in 

§§ 403.37, 403.38, and 403.39 of this 

rule, are intended to ensure that the 

lender has the appropriate experience 

and expertise to meet its fiduciary 

obligations in connection with the debt 

guaranteed pursuant to the Act. It is 

intended that lenders, who will bear at 

least 20 percent of the risk of the 

guaranteed loan, will exercise a high 

level of care and diligence in the 

underwriting and due diligence of the 

loans. As described in Section 403.39, 

we are proposing to require that lenders 

provide Reclamation periodic financial 

reports on the status and condition of 

the loan, consistent with the terms of 

the Lender’s Agreement; to service the 

loan consistent with the regulation and 

the Lender’s Agreement and notify 

Reclamation 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. We invite you to comment on the 

proposed lender eligibility criteria and 

requirements. We are specifically 

interested in how the criteria and 

requirements would be applied should 

the lender fall from eligibility after the 

loan has been originated. Comments are 

also invited on the potential additional 

efficiency or productivity benefits that 

may be realized by the improvement, 

repair, or replacement of the 

infrastructure, facilities, or asset. 

The Act defines the term ‘‘project’’ to 

include ‘‘an extraordinary operation and 

maintenance activity for, or the 

rehabilitation or replacement of a 

facility that is authorized by Federal 

reclamation law and constructed by the 

United States under such law; or in 

connection with which there is a 

repayment or water service contract 

executed by the United States’’ 

(Category B). The statute does not define 

the phrase ‘‘extraordinary operation and 

maintenance activity.’’ In section 403.2, 

we propose to define ‘‘extraordinary 

operation and maintenance activity as 

major, non-recurring maintenance to 

Reclamation-owned or operated 

facilities, or facility components, that is 

intended to ensure the continued safe, 

dependable, and reliable delivery of 

authorized reclamation project benefits; 

and greater than 10 percent of the 

borrower’s annual O & M budget for the 

facility, or greater than $100,000. 

Reclamation developed this definition 

during its Managing for Excellence 

efforts. The definition, developed as 

part of the public process associated 

with these efforts, was vetted both 

within Reclamation and with its water 

users, and it has been adopted in this 

rule. We request comment on this 

definition, the percentage and dollar 

thresholds, and the application and use 

of the definition within the proposed 

program. 

Project Costs. In section 403.2, we 

propose to define project costs as the 

expected financial obligations which 

may be incurred for the development 

and support of the various features of an 

eligible project, as specified in § 403.50. 

The key elements of estimating eligible 

project costs are detailed in existing 

Reclamation policies. Section 204 of the 

Act provides that the Secretary shall not 

issue loan guarantees that exceed 90 

percent of the cost of the project, as 

estimated at the time the loan guarantee 

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Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 58087 

is issued. Also, section 403.31 of this 

rule provides that the United States will 

guarantee up to 80 percent of eligible 

losses on a guaranteed loan, including 

principal outstanding and interest 

accrued as of the time of default by a 

borrower consistent with Federal credit 

policies under OMB circular A–129. 

Section 403.50 of this rule identifies the 

type of project costs that will be 

considered eligible to be included under 

a loan guarantee and which costs will 

not be considered eligible costs. 

Defaults. Consistent with section 205 

of the Act, we are proposing in Subpart 

F the options and processes that may be 

available if a borrower defaults on an 

obligation. Section 205 of the Act 

provides that, if a borrower defaults on 

the obligation, the holder of the loan 

guarantee shall have the right to 

demand claim payment from the 

Secretary per the terms of the Loan Note 

Guarantee Agreement. Section 403.66 of 

this rule prescribes actions and 

timelines for default proceedings, 

reflecting requirements both for default 

proceedings against loans for which 

collateral is pledged and against those 

for which it is not. The timeline and 

proceedings are expected to be shorter 

where there is no collateral, since 

liquidation is not a factor. 

Interest Rate. Section 204 of the Act 

provides that an obligation shall bear 

interest at a rate that does not exceed a 

level that the Secretary determines to be 

appropriate, taking into account the 

prevailing rate of interest in the private 

sector for similar loans and risks. In 

section 403.52 of this rule, we propose 

to require loans to bear fixed interest at 

a rate or rates negotiated between the 

borrower and the lender. However, rates 

charged should be similar to rates 

customarily charged to borrowers in the 

ordinary course of business. Interest 

rates are subject to Secretarial review 

and approval to determine 

appropriateness. Reclamation will 

consult with the Department of Treasury 

on appropriate interest rates. 

Term of Loan. A loan guaranteed 

under the Act must provide for 

complete amortization within 40 years. 

Section 403.48 of this rule recognizes 

that lenders may offer shorter terms. 

Reclamation will not approve a loan 

guarantee that exceeds the financial 

capability of the borrower, or for a term 

that exceeds the useful life of the 

project. 

Nonsubordination and Superior 

Rights. Consistent with section 205 of 

the Act, we propose in section 403.56 of 

this rule that no loan guaranteed under 

the Act shall be subordinated to other 

financing. We further propose that the 

lender must obtain a position of parity 

with regard to non-collateralized 

obligations of the borrower. This means 

that in the event of a default, all nonsecured lenders bear the risk of loss on 

a proportionate basis. Further, the nonguaranteed portion of a loan will not be 

paid first nor given any preference or 

priority over the guaranteed portion. 

Also, section 205(b)(2) of the Act states 

that the rights of the Secretary, with 

respect to any property acquired 

pursuant to a loan guarantee or related 

agreement, shall be superior to the 

rights of any other person with respect 

to the property. 

Prepayment and refinancing. The Act 

allows for prepayment and refinancing 

of the terms of a loan guarantee subject 

to the consent of the Secretary. Section 

403.53 of this rule recognizes that 

prepayment and refinancing terms of a 

loan may be negotiated between the 

non-federal borrower and the lender, 

subject to the Secretary’s consent as part 

of the overall approval of the loan to be 

guaranteed. Any changes to such terms 

must also be approved by the Secretary, 

and to the extent such changes were not 

captured in the original cost estimate for 

the loan guarantee, such approval 

would be subject to the availability of 

appropriations, in addition to all other 

applicable statutory and regulatory 

requirements. 

Full Faith and Credit. Consistent with 

section 211 of the Act, we propose in 

section 403.3 of this rule to pledge the 

full faith and credit of the United States 

to the payment of all guarantees issued, 

with respect to principal and interest. 

Section 403.3 further proposes that the 

full faith and credit of the United States 

is not contestable except in the case of 

fraud or misrepresentation of which the 

lender has actual knowledge, 

participates in, or condones. 

Interagency coordination and 

cooperation. Section 209 of the Act 

requires the Secretary to consult with 

the Secretary of Agriculture prior to 

implementing a loan guarantee program. 

Reclamation has been working closely 

with the Department of Agriculture, and 

has gained valuable information on 

carrying out such programs. Section 209 

also requires that a memorandum of 

agreement will be entered providing for 

the Department of Agriculture to carry 

out financial appraisal functions and 

loan guarantee administration activities. 

Both Departments are working toward 

development of this agreement. It is not 

the intent that this agreement will place 

any undue burdens on the 

implementation of the program; rather, 

Reclamation will be afforded the 

experience and help of the Department 

of Agriculture, which has extensive 

experience in issuing loan guarantees. 

Termination of Authority. Section 215 

of the Act provides that the Secretary’s 

authority to issue loan guarantees 

terminates 10 years after the date of 

enactment of the Act, which will be 

December 2016. However, the 

termination of authority shall have no 

effect on any loans already guaranteed 

or on the administration of any loan 

guaranteed prior to the date of the 

termination. 

Duplicative Assistance. With the 

exception of Rural Water projects 

authorized under Title I of Public Law 

109–451, loan guarantees under this 

program cannot be paired with other 

Federal assistance for the same project. 

II. Procedural Requirement 

1. Regulatory Planning and Review 

(Executive Order (E.O.) 12866) 

The Office of Management and Budget 

(OMB) has determined that this rule is 

a significant rule and has reviewed it 

under the requirements of E.O. 12866. 

The loan guarantee program 

addressed by this rule will facilitate the 

financing of extraordinary maintenance 

and rehabilitation needs of Reclamation 

projects and improvements to facilities 

directly associated with them. 

Beneficiaries already have financial 

responsibility for these costs, but often 

have significant difficulty meeting these 

responsibilities when the expenses are 

of an extraordinary nature. Facilitating 

the financing of these extraordinary 

expenditures is a tool that may help to 

ensure the continued benefits currently 

being generated by Reclamation projects 

throughout the western United States. 

In implementing this rule, we plan to 

use application forms very similar to 

those currently used by the U.S. 

Department of Agriculture (USDA) for 

its Rural Development Loan Guarantee 

Program (USDA Program). Review and 

approval for the use of these forms is 

taking place concurrently with the 

development of this rule. However, the 

facilities being repaired or rehabilitated 

with financing assistance under our 

proposed loan guarantee program likely 

will not be the same types of facilities 

whose construction is financed by the 

USDA Program. Reclamation has 

consulted with USDA regarding the 

details of USDA’s related programs, and 

will continue to do so. These 

consultations will likely result in USDA 

providing some assistance in the 

administration of our programs under 

Titles I and II of Public Law 109–451. 

2. Regulatory Flexibility Act 

The Department of the Interior 

(Interior) certifies that this action will 

not have a significant economic effect 

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58088 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 

on a substantial number of small entities 

under the Regulatory Flexibility Act (5 

U.S.C. 601, et seq.). The entities eligible 

for loan guarantees under this program 

may include small entities defined in 

the Regulatory Flexibility Act. However, 

this rule does not impose a requirement 

for small businesses to report or keep 

records on any of the requirements 

contained in this rule and does not 

mandate participation. Therefore, we 

have determined that the rule will not 

have a significant economic impact on 

a substantial number of small entities. 

3. Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

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

1531 et seq.) requires each Federal 

agency 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 UMR 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 those small 

governments. 

The term Federal mandate is defined 

in the UMR Act to mean a Federal 

intergovernmental mandate or a Federal 

private sector mandate. Although this 

rule will impose certain requirements 

on non-Federal governmental and 

private sector applicants for loan 

guarantees, the UMR 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). 

This rule does not impose an 

unfunded mandate or a requirement to 

expend monies on the part of State, 

local, or tribal governments or 

communities, or the private sector. 

Requests from any of these entities for 

loan guarantees under the proposed 

rules are strictly voluntary. Reclamation 

is not imposing a duty, requirement, or 

mandate on State, local, or tribal 

governments or communities, or the 

private sector to request such financing 

assistance. Thus this rule falls under the 

exceptions in the definitions of ‘‘Federal 

intergovernmental mandate’’ and 

‘‘Federal private sector mandate’’ for 

requirements that are a condition of 

Federal assistance or a duty arising from 

participation in a voluntary program. 

Therefore, the Act does not apply to this 

rulemaking and a statement containing 

information required by the Unfunded 

Mandates Reform Act (2 U.S.C. 1531, et 

seq.) is not required. 

4. Takings (E.O. 12630 and E.O. 13406) 

Under the criteria in E.O. 12630 and 

E.O. 13406, this rule does not have any 

significant takings implications. This 

rule sets forth the requirements for 

requesting and obtaining loan 

guarantees from Reclamation to assist in 

financing eligible projects for which 

Reclamation project beneficiaries are 

already financially responsible. While 

some of the project beneficiaries’ 

property may be pledged as collateral 

for the loans to be guaranteed, the 

property would only be transferred from 

the owner if default occurs and such a 

situation would not constitute a taking. 

A Takings Implication Assessment is 

therefore not required. 

5. Federalism (E.O. 13132) 

Under the criteria in E.O. 13132, this 

rule does not have any federalism 

implications to warrant the preparation 

of a Federalism Assessment. The rule is 

not associated with, nor will it have 

substantial direct effects 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. A Federalism 

Assessment is not required. 

6. Civil Justice Reform (E.O. 12988) 

This rule complies with the 

requirements of E.O. 12988. 

Specifically, this rule: 

(a) Does not unduly burden the 

judicial system; 

(b) Meets the criteria of section 3(a) 

requiring that all regulations be 

reviewed to eliminate errors and 

ambiguity and be written to minimize 

litigation; and 

(c) Meets the criteria of section 3(b)(2) 

requiring that all regulations be written 

in clear language and contain clear legal 

standards. 

7. Consultation with Indian Tribes (E.O. 

13175) 

Under the criteria of E.O. 13175, 

Reclamation has evaluated this rule and 

determined that it would have no 

substantial effects on Federally 

recognized Indian tribes. While many 

tribal entities may be eligible to apply 

for loan guarantees from Reclamation 

under this rule, such application is 

strictly voluntary. 

8. Paperwork Reduction Act 

This rule would require applicants to 

provide information that will enable 

Reclamation to determine eligibility for 

the program and creditworthiness. The 

information will also be necessary to 

evaluate the merits of applications and 

effectively administer any guaranteed 

loans. The rule also proposes to require 

that lenders submit information to allow 

Reclamation to determine their 

eligibility for participation and to 

submit reports and other information 

related to loan guarantees and the 

borrower. Reclamation plans to use 

several forms very similar to those 

currently used for various USDA 

Programs. The purpose of the forms will 

be to obtain relevant financial 

information including income and 

expenses, collateral assets, previous 

credit history, and current loan status. 

Following are further details regarding 

the information collection: 

Title: Reclamation Loan Guarantees 

43 CFR Part 403. 

OMB No. 1006–NEW. 

Frequency: One-time voluntary 

application. 

Respondents for loan applications 

and participating lenders: Eligible 

entities (described in § 403.4 of the rule) 

that desire to obtain a private loan 

guaranteed by Reclamation and eligible 

lenders (described in § 403.37) that wish 

to participate in the loan guarantee 

program. 

Estimated Total Number of 

Respondents: 76. 

Estimated Number of Responses per 

Respondent: 1.2. 

Estimated Total Annual Burden on 

Respondents, including form and nonform requirements: 737 hours. 

Comments are Invited on: 

(a) Whether the proposed collection of 

information is necessary for the proper 

performance of our functions, including 

whether the information will have 

practical use; 

(b) The accuracy of our burden 

estimate for the proposed collection of 

information, including the validity of 

the methodology and assumptions used; 

(c) Ways to enhance the quality, 

usefulness, and clarity of the 

information collected; and 

(d) Ways to minimize the burden of 

the collection of information on 

respondents. 

As part of our continuing effort to 

reduce paperwork and respondent 

burdens, Reclamation invites the public 

and other Federal agencies to comment 

on any aspect of the reporting and 

recordkeeping burden. You may submit 

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Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 58089 

your comments directly to the Office of 

Information and Regulatory Affairs, 

OMB. You should provide Reclamation 

with a copy of your comments so that 

we can summarize all written comments 

and address them in the final rule 

preamble. Refer to the ADDRESSES

section for instructions on submitting 

comments. You may obtain a copy of 

the supporting statement for this new 

collection of information by contacting 

Reclamation’s Information Collection 

Clearance Officer at (303) 445–2055. 

The PRA provides that an agency may 

not conduct or sponsor a collection of 

information unless it displays a 

currently valid OMB control number. 

Until OMB approves this collection of 

information and assigns an OMB control 

number and the regulation becomes 

effective, you are not required to 

respond. The OMB is required to make 

a decision concerning the collection of 

information of this proposed regulation 

between 30 to 60 days after publication 

of this document in the Federal 

Register. Therefore, a comment to OMB 

is best assured of having its full effect 

if OMB receives it by November 5, 2008. 

This does not affect the deadline for the 

public to comment to Reclamation on 

the proposed regulation. OMB has up to 

60 days to approve the information 

collection in this rule, but may respond 

after 30 days; therefore public comment 

on the information collection must be 

received on or before November 5, 2008. 

9. National Environmental Policy Act of 

1969 (NEPA) 

This document has been reviewed in 

accordance with the Council on 

Environmental Quality (CEQ) 

regulations for implementing NEPA 

(40 CFR Parts 1500–1508). Reclamation 

has determined that this action does not 

constitute a major Federal action 

significantly affecting the quality of the 

human environment and, in accordance 

with the National Environmental Policy 

Act (NEPA) of 1969, 42 U.S.C. 4321 et 

seq., an Environmental Impact 

Statement is not required. Loan 

applications will be reviewed 

individually to determine compliance 

with NEPA. 

10. Data Quality Act 

In developing this rule, there was no 

need to conduct or use a study, 

experiment, or survey requiring peer 

review under the Data Quality Act (Pub. 

L. 106–554). 

11. Effects on the Energy Supply (E.O. 

13211) 

This rule is not a significant energy 

action under the definition in the E.O. 

13211, in that it is not likely to have a 

significant adverse effect on the supply, 

distribution, or use of energy. While 

loan guarantees will more commonly be 

extended to water supply facilities, any 

extension of the guarantees to power 

production facilities would have the 

same beneficial effects of credit 

assistance. No adverse effects on these 

facilities could result from the proposed 

rule. A Statement of Energy Effects is 

therefore not required. 

12. Clarity of This Regulation 

We are required by E.O. 12866 and 

12988, and by the Presidential 

Memorandum of June 1, 1998, to write 

all rules in plain language. This means 

each rule we publish must: 

(a) Be logically organized; 

(b) Use the active voice to address 

readers directly; 

(c) Use clear language rather than 

jargon; 

(d) Be divided into short sections and 

sentences; and 

(e) Use lists and tables wherever 

possible. 

If you believe we have not met these 

requirements, please send comments to 

Reclamation as instructed in the 

ADDRESSES section. Please make your 

comments as specific as possible, 

referring to specific sections and how 

they could be improved. For example, 

you should tell us the numbers of the 

sections or paragraphs that are unclearly 

written, which sections or sentences are 

too long, the sections where you believe 

lists or tables would be useful, etc. 

13. Public Comments 

Reclamation believes a 30 day public 

comment period is appropriate. The 

Loan Guarantee rule may provide a 

helpful financial tool to help 

accomplish Reclamation’s goals. 

Reclamation has encouraged public 

participation through public meetings 

and has incorporated into the proposed 

rule public input from these meetings. 

The public was involved in developing 

the framework documents which were 

utilized in preparing the rule. 

Reclamation specifically addressed the 

Loan Guarantee program during public 

meetings held in Salt Lake City, UT on 

September 19 and 20, 2006 and received 

valuable feedback. Considering that 

those interested in the proposed rule are 

already aware of the framework and 

have had opportunity to provide input 

through these public meetings, 

Reclamation believes 30 days provides 

sufficient time to provide additional 

input on the proposal. 

Before including your name, address, 

phone number, e-mail address, or other 

personal identifying information in your 

comment, you should be aware that 

your entire comment—including your 

personal identifying information—may 

be made publicly available at any time. 

While you can ask us in your comment 

to withhold your personal identifying 

information from public review, we 

cannot guarantee that we will be able to 

do so. 

List of Subjects in 43 CFR Part 403 

Loan guarantee, Water supply. 

Dated: September 29, 2008. 

Kameran L. Onley, 

Acting Assistant Secretary—Water and 

Science. 

For the reasons stated in the 

preamble, the Bureau of Reclamation 

proposes to add a new part 403 to Title 

43 of the Code of Federal Regulations as 

follows: 

PART 403—RECLAMATION LOAN 

GUARANTEES 

Subpart A—Loan Guarantee Program 

Overview 

Sec. 

403.1 What is the purpose of the program? 

403.2 What terms are used in this part? 

403.3 Are loan guarantees supported by the 

full faith and credit of the United States? 

403.4 Who is eligible for a loan guarantee? 

403.5 What can I finance under the 

program? 

403.6 How do I obtain a loan guarantee? 

403.7 What must be included in an 

application package? 

403.8 [Reserved] 

403.9 What are the criteria for program 

eligibility? 

403.10 How will Reclamation evaluate my 

application? 

403.11 What criteria will be used to 

prioritize loan requests? 

403.12–403.15 [Reserved] 

403.16 What permits must I obtain? 

403.17 Where can I get more information 

about loan guarantees? 

403.18 Does this rule contain an 

information collection that requires 

approval by OMB? 

403. 19 [Reserved] 

Subpart B—Borrower Roles and 

Responsibilities 

403.20 As a borrower, what is my role in 

the loan guarantee program? 

403.21 What is my role in preparation of 

environmental compliance documents? 

403.22 What is my role in preparing plans 

and specifications for the project? 

403.23–403.24 [Reserved] 

403.25 What are the application and 

contractual requirements if I apply for a 

guaranteed loan as a Joint Powers 

Authority (JPA)? 

403.26–403.28 [Reserved] 

Subpart C—Reclamation Roles and 

Responsibilities 

403.29 What is Reclamation’s role in the 

loan guarantee program? 

403.30 What information will Reclamation 

maintain on the lender? 

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403.31 How much of the loan will 

Reclamation guarantee? 

403.32 What is Reclamation’s role in 

preparation of NEPA and other 

environmental compliance documents? 

403.33 Can Reclamation make exceptions to 

requirements in this rule? 

403.34–403.36 [Reserved] 

Subpart D—Lender Criteria and 

Responsibilities 

403.37 Which lenders are eligible to 

participate in the program? 

403.38 What other requirements must a 

lender meet to participate in the 

program? 

403.39 What is the lender’s role in the 

program? 

403.40 Can the lender cancel or modify a 

Conditional Commitment for Guarantee, 

or transfer it to another lender? 

403.41 Can a lender sell or transfer the Loan 

Note Guarantee Agreement to another 

lender? 

403.42 Can a lender sell the debt obligation 

in a secondary market? 

403.43 What fees and costs is the lender 

responsible for? 

403.44 Can Reclamation guarantee bonds 

sold to finance eligible projects? 

403.45–403.46 [Reserved] 

Subpart E—Guaranteed Loan Terms and 

Details 

403.47 What conditions must be met before 

a Loan Note Guarantee Agreement is 

issued? 

403.48 What is the maximum term I can 

obtain on a guaranteed loan? 

403.49 Is there a limit on the size of a 

guaranteed loan? 

403.50 What project costs are eligible to be 

covered by my guaranteed loan? 

403.51 What if my project cost exceeds the 

estimated loan guarantee amount? 

403.52 What interest rates and charges 

apply to my guaranteed loan? 

403.53 Can I prepay or refinance a 

guaranteed loan? 

403.54 When can an entity begin actual ‘‘on 

the ground’’ work on the project to be 

financed? 

403.55 [Reserved] 

403.56 Can the repayment of a loan 

guarantee be subordinated to any other 

financing? 

403.57 Under what conditions would the 

United States not pay the guaranteed 

portion of a loan? 

403.58 Will the requirements of the 

Reclamation Reform Act of 1982 apply? 

403.59–403.62 [Reserved] 

Subpart F—Default Actions and 

Termination 

403.63 What options do I have if I have 

problems repaying the guaranteed loan? 

403.64 How can Reclamation help me if I 

can’t resolve repayment problems with 

my lender? 

403.65 What happens if I still can’t make 

my payments after working with the 

lender and Reclamation? 

403.66 What are the actions and timelines 

associated with default proceedings? 

403.67 What is the process for liquidation 

where collateral has been pledged? 

403.68 What is the timeline for filing a 

Final Report of Loss? 

403.69 [Reserved] 

403.70 What interest does the lender have 

in the guaranteed loan after Reclamation 

makes a loss payment? 

403.71 What will Reclamation do if a 

borrower defaults? 

403.72 When does the Loan Note Guarantee 

Agreement terminate? 

403.73 What happens if the non-Federal 

party breaches the existing Loan Note 

Guarantee Agreement? 

Authority: Pub. L. 109–451, 120 Stat. 3345 

(43 U.S.C. 2401 et seq.). 

Subpart A—Loan Guarantee Program 

Overview 

§ 403.1 What is the purpose of the 

program? 

(a) The purpose of the loan guarantee 

program is to provide Federal assistance 

to eligible non-Federal borrowers for 

eligible projects defined as follows: 

(1) A rural water supply project; 

(2) An extraordinary operation and 

maintenance (O&M) activity for, or the 

rehabilitation or replacement of, a 

facility— 

(i) That is authorized by Federal 

reclamation law and constructed by the 

United States under such law; or 

(ii) In connection with which there is 

a repayment or water service contract 

executed by the United States under 

Federal reclamation law; or 

(3) An improvement to water 

infrastructure directly associated with a 

reclamation project that, based on a 

determination of the Secretary— 

(i) Improves water management; and 

(ii) Fulfills other Federal goals. 

(b) The program does not include 

loans for routine O&M work. 

§ 403.2 What terms are used in this part? 

The following definitions apply for 

terms used in this part: 

Applicant means a non-Federal entity 

meeting the criteria in § 403.4 that seeks 

to obtain a Reclamation-guaranteed loan 

for a project meeting the criteria in 

§ 403.5. The applicant is often referred 

to as ‘‘you’’ in this part. 

Borrower means an Applicant who 

has entered into a Loan Note Guarantee 

Agreement with an eligible lender and 

Reclamation. 

Collateral means non-Federal 

property of value pledged as security for 

satisfaction of the debt. 

Conditional Commitment for 

Guarantee means a document issued by 

Reclamation and accepted by the 

Applicant and the lender, with the 

understanding of the parties that if the 

Applicant thereafter satisfies all 

specified and precedent funding 

obligations and all other contractual, 

statutory and regulatory requirements, 

or other requirements specified in the 

document, DOI, the Applicant, and the 

lender may execute a Loan Note 

Guarantee Agreement: Provided that the 

Secretary may terminate a Conditional 

Commitment for Guarantee for any 

reason at any time prior to the execution 

of the Loan Note Guarantee Agreement. 

The Conditional Commitment is nonbinding. Reclamation will only offer 

Conditional Commitments for Guarantee 

to the extent appropriations are 

available to support the loan guarantee. 

Extraordinary operation and 

maintenance means major, nonrecurring maintenance to Reclamationowned or operated facilities, or facility 

components, that is: 

(1) Intended to ensure the continued 

safe, dependable, and reliable delivery 

of authorized Reclamation project 

benefits; and 

(2) Greater than 10 percent of the 

borrower’s annual O&M budget for the 

facility, or greater than $100,000. 

Financial capability to repay loan 

means the borrower’s ability to repay 

the loan as determined by the Secretary. 

Factors determining a borrower’s 

financial capability may include, but are 

not limited to: Expenses as a ratio to 

income, amount of current debts/ 

liabilities, projected revenues, including 

user fees or other dedicated revenue 

sources available to repay the 

guaranteed loan, the ability of 

Reclamation project beneficiaries to 

meet all operations, maintenance, and 

rehabilitation costs of the subject 

facilities and previous record of 

repaying obligations. 

Improvement to Water Infrastructure 

means a valuable addition made to 

property, or an enhancement of its 

condition, including modernization, 

upgrades or other enhancements meant 

to conserve water, increase water use 

efficiency, or enhance water 

management, and does not include 

routine maintenance. 

Joint Financing means a situation 

where two or more lenders (or any 

combination of lenders and other nonFederal financial sources) make 

separate, relatively contemporaneous 

loans or grants to supply the funds 

required by one borrower. 

Joint Powers Authority (JPA) means a 

regional agency that: 

(1) Represents two or more local 

entities (e.g., Reclamation repayment or 

water service contractors); and 

(2) Exercises common powers as 

authorized by the State in which the 

local entities operate (some States may 

refer to such regional agencies by 

another name). 

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Lender means a non-Federal lending 

institution meeting the criteria in 

§ 403.40 that has an agreement with 

Reclamation to participate in the loan 

guarantee program. The lender requests 

a loan guarantee from Reclamation and 

then works directly with the borrower to 

originate and service the loan. 

Lender’s Agreement means the signed 

agreement between Reclamation and the 

lender providing proof of the lender’s 

eligibility to participate in the loan 

guarantee program, and containing the 

lender’s responsibilities as defined in 

subpart D of this part. The Lender’s 

Agreement is a single document that is 

valid for two years, as indicated in 

§ 403.38. Only one Lender’s Agreement 

will be required for each eligible lender. 

Loan Guarantee means any guarantee, 

insurance, or other pledge by 

Reclamation to pay all or part of the 

principal of and interest on a loan or 

other debt obligation of a non-Federal 

borrower to a lender. 

Loan Guarantee Closing Report means 

the Reclamation form prepared at the 

time a Loan Note Guarantee Agreement 

is issued and upon payment of 

guaranteed loan fees, or when the terms 

or conditions of the loan guarantee 

change, such as the assumption or 

assignment of guaranteed loans. This 

form must accompany all loan guarantee 

fee payments. The lender delivers this 

form and applicable fee to Reclamation. 

Loan Note Guarantee Agreement 

means a written agreement that, when 

entered into by Reclamation, a 

borrower, and an eligible lender, 

pursuant to the Act, establishes the 

obligation of Reclamation to guarantee 

the payment of all or a portion of the 

principal and interest on specified 

guaranteed obligations of a borrower to 

eligible lenders or other Holders subject 

to the terms and conditions specified in 

the Loan Guarantee Agreement. 

Project means: 

(1) A rural water supply project (as 

defined in section 102(9) of Title I of 

Public Law 109–451); 

(2) An extraordinary operation and 

maintenance activity for, or the 

rehabilitation or replacement of, a 

facility— 

(i) That is authorized by Federal 

reclamation law and constructed by the 

United States under such law; or 

(ii) In connection with which there is 

a repayment or water service contract 

executed by the United States under 

Federal reclamation law; or 

(3) An improvement to water 

infrastructure directly associated with a 

reclamation project that, based on a 

determination of the Secretary— 

(i) Improves water management; and 

(ii) Fulfills other Federal goals. 

Project Costs means the expected 

financial obligations which may be 

incurred for the development and 

support of the various features of an 

eligible project, as specified in § 403.50. 

The key elements of estimating eligible 

project costs are detailed in existing 

Reclamation policy. Project costs do not 

include costs for the items set forth in 

§ 403.50(b). 

Reclamation means the Bureau of 

Reclamation, also referred to in this part 

as ‘‘us’’ and ‘‘we.’’ 

Reclamation Project means a 

geographically-defined system of 

structures specifically authorized by 

Congress, such as the Central Arizona 

Project or the Central Valley Project. 

Rehabilitation and Replacement 

means the processes of renovating a 

facility or system where performance is 

failing to meet the original criteria and 

needs of the Reclamation Project. This 

process is generally significant in terms 

of magnitude of work involved and 

related costs and, thus, also may benefit 

from the use of the loan guarantee 

program. Replacements are typically 

related to items with a defined service 

life. Examples of this could include the 

replacement of a dam gate or valve that 

has met or exceeded its expected service 

life, replacements of a reach of canal 

lining, or other work beyond the 

capability of the borrower to finance 

from annual O&M budgets or reserve 

funds. 

Report of Loss means the Reclamation 

form used by lenders when reporting a 

loss on a Reclamation guaranteed loan. 

Reserved Works means facilities 

owned, operated, and maintained by 

Reclamation, O&M costs of which may 

be paid in part by authorized 

Reclamation Project entities. 

Routine Operation and Maintenance 

means recurring operation and 

maintenance activities such as minor 

repairs and replacement of parts and 

structural components, and other dayto-day activities needed to preserve a 

facility so that it continues to provide 

acceptable services and achieves its 

expected life. It excludes extraordinary 

operation and maintenance, 

rehabilitation, and replacement. 

Transferred Works means facilities for 

which the management, funding (full or 

partial), and operation and maintenance 

has been transferred to one or more of 

the Reclamation Project beneficiaries. 

Reclamation still maintains ownership 

of the facilities. 

§ 403.3 Are loan guarantees supported by 

the full faith and credit of the United States? 

Yes. The full faith and credit of the 

United States is pledged to the payment 

of all guarantees issued under this 

regulation with respect to principal and 

interest. Issuance of a Loan Note 

Guarantee Agreement constitutes an 

obligation supported by the full faith 

and credit of the United States and is 

not contestable except for fraud or 

misrepresentation of which the lender 

has actual knowledge, participates in, or 

condones. Some exceptions may apply 

in cases where the lender does not 

perform reasonable and customary 

servicing of the loan, as described in 

§ 403.60. 

§ 403.4 Who is eligible for a loan 

guarantee? 

To be eligible for a loan guarantee 

under this part, an entity must be either: 

(a) A State (including department, 

agency, or political subdivision of a 

State); or 

(b) A conservancy district, irrigation 

district, canal company, water users 

association, Indian tribe, an agency 

created by interstate compact or any 

other entity that has the capacity to 

contract with the United States under 

Federal reclamation law (e.g., a rural 

water association or a JPA). 

§ 403.5 What can I finance under the 

program? 

You can finance project costs as 

described in § 403.50(a) for any of the 

types of work listed in paragraphs (a), 

(b), or (c) of this section. 

(a) Construction of projects 

determined to be eligible under Title I 

of Public Law 109–451, The Rural Water 

Supply Act of 2006. 

(b) Extraordinary operation and 

maintenance for, or the rehabilitation or 

replacement of, a facility that: 

(1) Is authorized by Federal 

reclamation law and constructed by the 

United States under that law; or 

(2) Has in place a repayment or water 

service contract under Federal 

reclamation law. In addition to facilities 

where Reclamation holds title, this 

would include facilities constructed and 

operated by the U.S. Army Corps of 

Engineers, where irrigation water users 

contract with Reclamation for use of the 

water from the facilities and pay some 

portion of the O&M costs associated 

with those facilities. 

(c) Improvements to water 

infrastructure directly associated with a 

Reclamation project. If you have 

existing facilities that are physically 

connected to or receive water directly 

from a Reclamation project, 

improvements to those facilities may 

qualify for financing under the program. 

Decisions on which facilities qualify 

under this section will be made on a 

case-by-case basis. 

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§ 403.6 How do I obtain a loan guarantee? 

(a) After receiving appropriations for 

the loan guarantee program, we will 

issue solicitations to invite the 

submission of Applications for loan 

guarantees for eligible projects. We will 

issue a solicitation before proceeding 

with other steps in the loan guarantee 

process, including issuance of a loan 

guarantee. Each solicitation may include 

programmatic, technical, financial and 

other factors we will use to evaluate 

applications and such other information 

as we may deem appropriate. 

(b) To obtain a loan guarantee under 

this rule, a proposed project must meet 

the eligibility criteria described in 

§ 403.5 as well as any other criteria that 

may be identified in the solicitation. 

(c) We recommend that you visit 

several qualified lenders to discuss the 

planned work, qualifications for a 

guaranteed loan, conditions or terms of 

a loan, etc. See § 403.37 for descriptions 

of eligible lending institutions. Once 

you determine which lending 

institution to use, you will work directly 

ith the lender to secure its approval of 

your loan request based on its own 

financial analysis. 

(d) Following a lender’s approval of 

your loan request, you and the lender 

must prepare an application package to 

submit to us, as detailed in § 403.7, to 

request consideration for a loan 

guarantee. You and the lender may meet 

with us at this point in the process to 

discuss the requirements of the 

application package. 

(e) When we receive your application, 

we will review it based on the criteria 

in § 403.10, and notify you and the 

lender whether we require additional 

information or the application has been 

denied. After completion of our review 

and evaluation, Reclamation may offer a 

conditional commitment for guarantee. 

(f) You and the lender complete and 

sign the Acceptance of Conditions and 

return a copy to us. You will then 

continue to work with the lender to 

meet the conditions set forth in the 

Conditional Commitment for Guarantee. 

(g) Once terms and conditions of the 

Conditional Commitment (such as 

NEPA compliance; necessary local, 

State, tribal, or Federal permits; and 

district election to approve 

indebtedness, if applicable), and any 

other applicable statutory, regulatory, 

and budgetary requirements are met, 

and the Secretary determines that the 

loan merits a guarantee, Reclamation, 

you, and the lender will sign the Loan 

Note Guarantee Agreement. 

§ 403.7 What must be included in an 

application package? 

An application package must contain 

the following: 

(a) Application for Loan Guarantee on 

Form 7–2580; 

(b) Proposed loan agreement between 

you and the lender; 

(c) A report containing an analysis of 

the potential environmental impacts of 

the project. The report should be 

pursuant to the National Environmental 

Policy Act and in accordance with 

appropriate Reclamation standards. 

(d) Preliminary architectural and/or 

engineering report, including financial 

feasibility analysis (as appropriate); 

(e) Project cost estimates as described 

in § 403.50; 

(f) Appraisal reports for real property 

serving as collateral, consistent with the 

Uniform Standards of Professional 

Appraisal Practice, promulgated by the 

Appraisal Standards Board of the 

Appraisal Foundation and conducted by 

a state licensed or certified appraiser; 

(g) Credit reports; 

(h) Pro-forma cashflows; 

(i) A loan schedule and 

documentation outlining the terms and 

conditions of the loan to be guaranteed; 

(j) The lender’s credit analysis which 

shall include an analysis demonstrating 

that at the time of the application, there 

is reasonable prospect that the Borrower 

will be able to repay the guaranteed 

obligation (including interest) from user 

fees or other dedicated revenue sources, 

as well as an analysis demonstrating 

that the borrower has the ability to pay 

all operation, maintenance, and 

rehabilitation costs of the project 

facilities; 

(k) A full description of all security 

features (such as any project or nonproject assets pledged as collateral to 

the obligation) that would ensure 

repayment; 

(l) Proposed timeline for work 

accomplishment; and 

(m) Any additional information 

required, as determined by Reclamation, 

including other information relied upon 

by the lender in approving the 

borrower’s initial loan request. 

§ 403.8 [Reserved] 

§ 403.9 What are the criteria for program 

eligibility? 

Section 403.4 defines who is eligible 

for a loan guarantee. In addition to 

meeting the entity eligibility criteria, a 

proposal must: 

(a) Meet acceptable engineering, 

financial, public health, and 

environmental standards; 

(b) Be for extraordinary repair, 

rehabilitation, replacement or 

betterment to facilities owned by 

Reclamation, or for facilities which are 

associated with a repayment or water 

service contract executed by the United 

States under Federal Reclamation law; 

(c) Be for improvements to water 

infrastructure directly associated with a 

Reclamation project; 

(d) Be prepared or reviewed by a 

certified professional engineer; 

(e) Have been reviewed by a financial 

institution for financial feasibility, and 

a letter of intent regarding the issuance 

of sufficient loan financing accompanies 

the proposal; 

(f) Be accompanied by appropriate 

documentation prepared pursuant to the 

National Environmental Policy Act and 

in accordance with appropriate 

Reclamation standards; 

(g) Demonstrate approval, as 

appropriate, of any party necessary for 

the borrower to enter into a Loan Note 

Guarantee Agreement; 

(h) Demonstrate to the satisfaction of 

the Secretary the creditworthiness of the 

project, including a determination by 

the Secretary that any financing for the 

project has appropriate security features 

to ensure repayment; 

(i) Demonstrate to the satisfaction of 

the Secretary that the borrower has the 

ability to repay the project financing 

from user fees or other dedicated 

revenue sources; 

(j) Demonstrate to the satisfaction of 

the Secretary that the borrower has the 

ability to pay all operation, 

maintenance, and rehabilitation costs of 

the project facilities; 

(k) Describe the borrower’s efforts to 

obtain alternative financing for the 

proposed project; 

(l) Demonstrate that the borrower’s 

proposed activities will be well 

managed, have clear deliverables, will 

be accomplished on schedule and 

within budget; and 

(m) Describe how these planned 

activities will ensure the continued safe, 

dependable, and reliable delivery of 

authorized project benefits. 

§ 403.10 How will Reclamation evaluate my 

application? 

(a) In addition to the amount of funds 

available to use for loan guarantees, we 

will consider many different factors in 

evaluating your loan guarantee 

application and in determining whether 

to issue a Conditional Commitment for 

Guarantee and ultimately a Loan Note 

Guarantee Agreement. For projects 

described in §§ 403.5(b) and 403.5(c), 

the factors include, but are not limited 

to, the information provided pursuant to 

§ 403.7 above, as well as: 

(1) Engineering need; 

(2) Your historical diligence and 

effectiveness in performance of O&M, 

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and demonstration of financial 

capability to meet routine O&M 

expenditures; 

(3) Efficiency opportunities; 

(4) Environmental effects/impacts; 

(5) Range of alternatives considered 

(including a comparison of major 

rehabilitation or repair versus 

replacement of the affected facilities, if 

replacement is an appropriate 

alternative)); and 

(6) Your financial capability to repay 

the guaranteed loan, assessed on the 

basis of: 

(i) Outstanding debts and all other 

financial obligations; 

(ii) Amount of loan, rates, and terms; 

(iii) Past performance in repaying 

loans or other debts; 

(iv) Collateral/equity as appropriate; 

(v) Financial backing or support from 

local, State, or other non-Federal 

entities; and 

(vi) Availability of reliable revenue 

sources, such as user fees and ad 

valorem taxes. 

(b) While we do not expect to do so, 

we may waive certain criteria consistent 

with Title II of Public Law 109–451 

section 203(b) that we determine to be 

duplicative or rendered unnecessary 

because of an action already taken by 

the United States. 

(c) For projects described in 

§ 403.5(a), a determination of eligibility 

under Title I of Public Law 109–451 will 

establish eligibility for participation in 

the loan guarantee program. Additional 

eligibility criteria and program 

requirements for such projects will be 

published in the future as supplements 

to this part. 

(d) As a part of our evaluation of your 

loan application, we will use any 

additional information that we deem 

appropriate to verify the data included 

in your loan guarantee application in 

order to: 

(1) Determine the eligibility of a 

project; 

(2) Establish a priority ranking of all 

eligible projects; and 

(3) Determine which projects we will 

offer a Conditional Commitment for 

Guarantee. 

(e) If your application fails to meet the 

requirements of paragraph (a) of this 

section, we will notify you of the 

criteria we deem to be deficient and 

may take one or more of the following 

actions: 

(1) Request additional information to 

correct identified deficiencies; 

(2) Request one or more meetings with 

you to address deficiencies; 

(3) Return the application and request 

that you address identified deficiencies; 

or 

(4) Eliminate your application from 

further review. 

(f) You may modify your application 

to correct deficiencies identified in 

paragraph (e) of this section and, in the 

case of paragraph (e)(3) of this section, 

resubmit your application to us for reevaluation if allowed under the terms of 

the solicitation. We will not complete 

our evaluation of an application until all 

identified deficiencies are resolved and 

resubmission of the application does not 

impose any obligation or requirement 

for us to offer a Conditional 

Commitment for Guarantee or a Loan 

Note Guarantee Agreement. 

(g) Any form of response or 

communication from us, or lack thereof, 

regarding your loan guarantee 

application shall not impose any 

obligation on us to issue a Conditional 

Commitment for Guarantee. 

§ 403.11 What criteria will be used to 

prioritize loan requests? 

Applicants will be evaluated against 

other applicants and greater weight will 

be given to applicants with the greatest 

engineering need. After meeting the 

program eligibility criteria provided in 

§ 403.9, loan guarantee proposals will be 

prioritized based on the following 

criteria. Applicants will be evaluated 

against other applicants and greater 

weight will be given to applicants with 

the greatest engineering need and any 

other factors that may be identified in 

the solicitation, including those noted 

below. 

(a) Engineering Need. (1) For category 

(B) and (C) projects, a major factor in 

prioritization of eligible applicants will 

be the extent to which engineering 

analysis demonstrates that the facilities 

face existing or potential conditions that 

would severely impair their 

performance (e.g., significant reduction 

of service delivery or reliability). The 

analysis can be provided by the 

applicant, a consultant to the applicant, 

or by Reclamation, in the case of 

facilities operated and maintained by 

Reclamation for which the applicant is 

required to share in the O&M costs. The 

analysis should cite: 

(i) The time frame over which the 

impairment could reasonably be 

expected; 

(ii) The consequences of impairment; 

and 

(iii) Risk factors that could be 

mitigated if the project is undertaken. 

(2) For Category (B) projects, 

proposals should cite findings from 

Reclamation’s Review of Operation and 

Maintenance (RO&M) Program and 

Facility Review reports as support for 

the maintenance or rehabilitation need. 

(b) History of Operations and 

Maintenance. For Category (B) projects, 

the proposal will document the history 

of O&M activities by the applicant, 

supported by Reclamation’s RO&M and 

Facility Review reports. An evaluation 

will be made as to the applicant’s 

diligence in operating and maintaining 

the assets entrusted to them by 

Reclamation. For all other projects with 

existing history, evaluation will be 

made based on information provided in 

the application and any other available 

information sources. 

(c) Efficiency Opportunities. 

Engineering analysis demonstrates that 

there is a significant opportunity to 

substantially reduce future routine O&M 

costs associated with the facility and/or 

conserve or more efficiently manage the 

water that would be otherwise lost to 

seepage, evaporation, or other factors 

which directly result from facility 

deterioration due to age or use. The 

expected amount of O&M cost reduction 

or water saved will be one of the 

prioritization considerations. 

(d) Financial Strength/Need/ 

Feasibility. The overall financial 

strength of the proposed project, 

including the borrower’s capacity to 

repay the loan and meet all other 

obligations (beyond demonstration to 

the satisfaction of the Secretary of the 

capacity to repay the loan and other 

financial eligibility requirements) will 

be considered in the prioritization as 

well. The proposal will also 

demonstrate the portion of the work to 

be funded by private sources, as well as 

any contribution expected from any 

non-Federal governmental agency. The 

proposal must demonstrate that it is 

infeasible for the applicant to finance 

the project using its current resources 

(e.g., reserve funds, tax base, etc.). 

(e) Environmental Effects. The 

potential for the proposed project to 

further reduce existing negative 

environmental effects or to provide 

environmental benefits. 

(f) Alternatives Considered. The 

proposal will document alternatives to 

the anticipated proposed work, 

including the ‘‘no action’’ alternative, 

the estimated costs for such alternatives, 

and reasons those alternatives were not 

selected. The extent to which all viable 

alternatives have been considered will 

also be taken into account in the 

prioritization process. 

(g) Best Management Practices. The 

proposal demonstrates that the 

borrower’s proposed activities have 

clear deliverables, can reasonably be 

expected to be accomplished on 

schedule, within budget, and have 

tangible performance targets. 

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58094 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 

§§ 403.12–403.15 [Reserved] 

§ 403.16 What permits must I obtain? 

Environmental compliance processes 

and other permits are required by law, 

and your project schedule and budget 

must account for this activity. You 

should consult with your local 

Reclamation office regarding details on 

the environmental compliance and 

permitting process. The following 

provides examples of permits and 

approvals often required: 

(a) Federal—NEPA, Endangered 

Species Act, Fish and Wildlife 

Coordination Act, National Historic 

Preservation Act compliance, and Clean 

Water Act permits (401, 402, 404 

permits); 

(b) State—rights-of-way, water use, 

mineral use permits, and State 

environmental compliance; 

(c) Tribal—rights-of-way, water use, 

cultural resources, mineral use permits, 

etc.; and 

(d) Local/private—rights-of-way, 

water use, mineral use permits, and 

road use permits. 

§ 403.17 Where can I get more information 

about loan guarantees? 

You may contact your nearest 

Reclamation office for more information 

or assistance. Contact information may 

be found at http://www.usbr.gov. 

§ 403.18 Does this rule contain an 

information collection that requires 

approval by OMB? 

Yes. It does contain an information 

collection that is approved by OMB, 

under Control Number 1006–XXXX. 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. 

403.19 [Reserved] 

Subpart B—Borrower Roles and 

Responsibilities 

§ 403.20 As a borrower, what is my role in 

the loan guarantee program? 

As the borrower, you are the initiator 

of the loan guarantee process. You must 

do all of the following: 

(a) Apply for participation in the loan 

guarantee program; 

(b) Work with the lender for approval 

and conditions/terms of the loan; 

(c) Work with both the lender and us 

throughout the process and life of the 

loan; 

(d) Be financially responsible to repay 

the money borrowed under this 

program; 

(e) Be responsible for obtaining all 

necessary approvals, permits, or other 

conditions necessary for the project, and 

ensuring all contractual and other 

requirements related to the project, the 

facility, and the loan guarantee are met; 

and 

(f) Be responsible for ensuring all 

required documents are completed and 

submitted as required in order to 

complete your project. 

§ 403.21 What is my role in preparation of 

environmental compliance documents? 

(a) NEPA and other documents may 

be prepared by Reclamation, by you, or 

by a consultant employed by you and 

approved by Reclamation. You will 

work with your local Reclamation office 

to decide who will prepare these 

documents. Regardless of who prepares 

the NEPA documents, we must 

independently evaluate them for 

sufficiency before final approval. We 

will work closely with you and any 

consultant involved. 

(b) If the NEPA document is an 

Environmental Impact Statement, 

Reclamation must select, alone or in 

cooperation with you, any NEPA 

contractor before they begin work on the 

document. 

(c) We will allocate all costs 

associated with NEPA and other forms 

of required environmental compliance 

among the authorized purposes 

benefiting from the project for which the 

loan guarantee is being sought, and you 

will be responsible for your allocated 

share of those costs. 

§ 403.22 What is my role in preparing 

plans and specifications for the project? 

If your project meets the descriptions 

in §§ 403.5(b) and 403.5(c), you may 

request that we prepare the plans and 

specifications, you may hire a 

consultant to prepare them, or you may 

prepare them yourself. Regardless of 

who prepares the documents, we must 

review and approve them. Reclamation 

must be consulted on any subsequent 

changes to determine if further approval 

is required. You must pay us for all 

appropriate allocated costs incurred in 

this review and approval. If you ask us 

to prepare these documents, you must 

also pay our costs for the preparation. 

§§ 403.23–403.24 [Reserved] 

§ 403.25 What are the application and 

contractual requirements if I apply for a 

guaranteed loan as a Joint Powers 

Authority (JPA)? 

If you are a JPA, you must meet all of 

the requirements of this section. 

(a) Your application must: 

(1) Identify each of the participating 

local water entities responsible to your 

JPA for revenues to repay the 

guaranteed loan; 

(2) Identify each participating entity’s 

authority to act on behalf of its water 

users or other constituents relative to 

the proposed obligation; and 

(3) Identify the authorities through 

which the participating entities will 

assess and collect revenues necessary to 

repay through the JPA its share of the 

proposed loan obligation. 

(b) You must supply required 

financial information for each local 

entity. 

(c) You must determine the allocation 

of the loan obligation among the various 

entities of your JPA. 

(d) The participating entities must 

formally acknowledge their respective 

portions of the loan obligation and must 

sign all applicable loan agreements. 

§§ 403.26–403.28 [Reserved] 

Subpart C—Reclamation Roles and 

Responsibilities 

§ 403.29 What is Reclamation’s role in the 

loan guarantee program? 

Reclamation has general oversight and 

administers the loan guarantee program. 

In these capacities we: 

(a) Issue solicitations for loan 

guarantee applications, as described in 

§ 403.6(a); 

(b) Work with you and the lender 

when you submit your request for a loan 

guarantee; 

(c) Review all applications received 

and determine who will receive loan 

guarantees and for how much; 

(d) Ensure appropriate completion of 

the project in accordance with plans 

and specifications; and 

(e) Manage and ensure proper 

oversight of the overall loan guarantee 

program. 

§ 403.30 What information will 

Reclamation maintain on the lender? 

We will maintain an operational file 

on each lender. This file will contain, 

among other things: 

(a) Information on the guaranteed 

loans originated and serviced by the 

lender; 

(b) Any correspondence between us 

and the lender; 

(c) Any Conditional Commitments for 

Guarantee; 

(d) The Lender’s Agreement; 

(e) Any Loan Note Guarantee 

Agreements issued to the lender; and 

(f) Any Loan Guarantee Closing 

Report prepared for each loan. 

§ 403.31 How much of the loan will 

Reclamation guarantee? 

We will guarantee up to 80 percent of 

the principal and up to 90 days accrued 

interest from the first missed payment 

for eligible losses, as set forth in Subpart 

F and in the Lender’s Agreement. This 

guarantee is backed by the full faith and 

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credit of the United States, provided the 

lender does not demonstrate negligence 

in loan origination and servicing. 

§ 403.32 What is Reclamation’s role in 

preparation of NEPA and other 

environmental compliance documents? 

We will determine the appropriate 

level of NEPA documentation for each 

project. The NEPA documentation may 

be prepared by Reclamation, by you, or 

by a consultant employed by you and 

approved by us. We will work with you 

to decide who can best prepare the 

documentation. Regardless of who 

prepares the NEPA documents, we must 

independently evaluate them for 

sufficiency before final approval. 

§ 403.33 Can Reclamation make 

exceptions to requirements in this rule? 

Yes. The Secretary may waive any of 

the eligibility criteria that he/she 

determines to be duplicative or 

rendered unnecessary because of an 

action already taken by the United 

States. Waivers will only be considered 

to the extent that the criteria have been 

demonstrated to be satisfied. 

§§ 403.34–403.36 [Reserved] 

Subpart D—Lender Criteria and 

Responsibilities 

§ 403.37 Which lenders are eligible to 

participate in the program? 

(a) An eligible lender is: 

(1) Any non-Federal qualified 

institutional buyer (as defined in 17 

CFR 230.144A(a), or any successor 

regulation, known as Rule 144A(a) of 

the Securities and Exchange 

Commission); or 

(2) Any clean renewable energy bond 

lender (as defined in section 54(j)(2) of 

the Internal Revenue Code of 1986 (as 

in effect on the date of enactment of 

Public Law 109–451)). 

(b) [Reserved] 

§ 403.38 What other requirements must a 

lender meet to participate in the program? 

A lender wishing to participate in the 

loan guarantee program must submit 

proof to us that they are an eligible 

lender under § 403.37 and that they 

meet the requirements of this section 

prior to submitting an application 

package as described in § 403.7. Once a 

lender has executed a Lender’s 

Agreement with us, they will be 

considered an approved lender for a 

period of two years provided that there 

is no adverse event that would affect the 

status of the lender, such as those listed 

in § 403.39(c), and need not resubmit 

proof of eligibility for each subsequent 

guaranteed loan application. At the end 

of this two-year period or upon 

information that the lender may no 

longer meet current eligibility criteria, 

we will re-evaluate the lender’s 

eligibility under the program. 

(a) If the lender has losses or 

deficiencies in processing and servicing 

any federally guaranteed loans, they 

must not be above a level that indicates 

an inability to properly process and 

service a loan guaranteed by 

Reclamation. We may consult with 

other Federal agencies to determine if 

previous problems, as evidenced in 

monitoring reports, excessive loss 

claims, or denial of loss claims, should 

be considered in this determination. 

(b) The lender must be subject to 

credit examination and supervision by 

an acceptable State or Federal regulatory 

agency listed below. Examination will 

normally include a review of the 

lender’s asset quality, management 

practices, financial condition, and 

compliance with applicable laws and 

regulations. Regulating agencies may 

include: 

(1) Federal Deposit Insurance 

Corporation (FDIC); 

(2) Office of Comptroller of the 

Currency; 

(3) Office of Thrift Supervision; 

(4) Federal Reserve Bank; 

(5) Farm Credit Administration (FCA); 

(6) National Credit Union 

Administration; and 

(7) State banking Commissions. 

(c) The lender and its principal 

officers and staff must demonstrate 

capability to fulfill guaranteed loan 

servicing responsibilities. 

(d) If the lender is regulated only by 

a State regulatory agency, and not a 

Federal regulatory agency, then it must 

also meet the following financial and 

capital requirements: 

(1) Have a record of successfully 

making at least three commercial loans 

annually for at least the most recent 3 

years, with delinquent loans not 

exceeding 2 percent of loans 

outstanding and historic losses not 

exceeding 1 percent of dollars loaned; 

(2) Have tangible balance sheet equity 

of at least eight percent of tangible 

assets and sufficient funds available to 

disburse the guaranteed loans it 

proposes to approve within the first 6 

months of being approved as a 

guaranteed lender; and 

(3) The lender, its officers, or agents 

must not be debarred or suspended from 

participation in government contracts or 

programs and must not be delinquent on 

a Federal Government debt. 

§ 403.39 What is the lender’s role in the 

program? 

The lender must evaluate and 

administer the guaranteed loans as 

required by paragraph (a) of this section 

and notify us of changes in status, as 

required by paragraph (b) of this section. 

(a) The lender is responsible for all of 

the following: 

(1) Determining whether the loan 

guarantee applicants meet the general 

eligibility requirements for a loan 

guarantee, from its perspective; 

(2) Performing underwriting, due 

diligence, and evaluating the 

creditworthiness of the project 

consistent with the lender’s standard 

lending policies and considering all 

relevant information; 

(3) Determining if the proposed 

borrower is delinquent on any debt (if 

the borrower is delinquent on any debt, 

processing of the application may 

continue only with our written 

approval); 

(4) Disclosing to Reclamation any 

business or ownership relationships 

between principals of the lender and 

borrower where the lender’s officers, 

stockholders, directors, or partners, or 

the borrower, its officers, stockholders, 

directors, or partners own, or have 

management responsibilities in each 

other (this does not necessarily preclude 

such relationships); 

(5) Originating and servicing all 

Reclamation guaranteed loans in its 

portfolio in accordance with the 

Lender’s Agreement, including all of the 

requirements of paragraph (b) of this 

section; 

(6) Assessing late charges of any kind 

including default charges and default 

interest in accordance with the terms 

and conditions approved by 

Reclamation under the Loan Note 

Guarantee Agreement (Note: None of 

these will be covered by the guarantee); 

(7) Notifying us of any actions taken 

to cure a guaranteed loan experiencing 

repayment difficulties as discussed in 

§ 403.63; 

(8) Allowing us to inspect and make 

copies of any of the records of the 

lender pertaining to the guaranteed 

loans. Such inspection and copying may 

be made during regular office hours of 

the lender or at any other time the 

lender and Reclamation agree upon; 

(9) Obtaining written approval from 

us before making any new loans to, or 

additional expenditures on behalf of, 

the borrower, which approval is subject 

to our discretion; 

(10) Protecting the guaranteed loan 

debt and any collateral securing it in 

bankruptcy proceedings; 

(11) Advising Reclamation promptly 

and in writing of any changes or 

conditions of the loan that may result in 

delinquency, inability to pay, or default 

by the borrower; and 

(12) Advising Reclamation promptly 

and in writing of any financial problems 

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or circumstances that the non-Federal 

entity may have that would cause them 

to be delinquent in repayment of an 

existing obligation. 

(b) For purposes of paragraph (a) (4) 

of this section, originating and servicing 

guaranteed loans includes all of the 

following: 

(1) Servicing the entire loan in 

accordance with the Lender’s 

Agreement. The un-guaranteed portion 

of the loan will not be paid first nor 

given any preference or priority over the 

guaranteed portion of the loan; 

(2) Taking all servicing actions that a 

prudent lender would perform in 

servicing a portfolio of loans that are not 

guaranteed, including, but not limited 

to, collecting payments, obtaining 

compliance with the covenants and 

provisions in the note, loan agreement, 

security instrument, or any 

supplemental agreements, verifying the 

payment of taxes and insurance 

premiums as appropriate, maintaining 

necessary liens on any collateral, and 

notifying Reclamation of any violation 

of the loan agreement with the borrower 

within 30 days of such violation; 

(3) Obtaining financial statements 

required by the Lender’s Agreement, 

analyzing these statements, and 

providing the statements, along with the 

lender’s analysis of the financial 

conditions of the borrower and 

supporting documentation, to us within 

120 days of the end of the borrowers 

fiscal year; 

(4) When applicable, requiring audits 

of the borrower in accordance with 

Office of Management and Budget 

circulars, available from the 

Reclamation contacts listed in § 403.17; 

(5) Reporting monthly data on a 

quarterly basis to Reclamation the 

outstanding principal and interest 

balance on each guaranteed loan in its 

portfolio, and other information as 

specified in the Lender’s Agreement; 

and 

(6) Servicing delinquent loans in 

accordance with the Lender’s 

Agreement and reasonable and prudent 

lending standards, to include monthly 

reporting to us on the status of 

delinquent loans; and 

(7) Inspecting any collateral as often 

as necessary to ensure the proper 

maintenance of its value. 

(c) The lender must immediately 

notify us in writing if it: 

(1) Becomes insolvent; 

(2) Has filed for any type of 

bankruptcy protection, has been forced 

into involuntary bankruptcy, or has 

requested an assignment for the benefit 

of creditors; 

(3) Has taken any action to cease 

operations, or to discontinue servicing 

its portfolio guaranteed by Reclamation; 

(4) Intends to sell the guaranteed loan 

to another entity; 

(5) Changes its name, location, 

address, tax identification number, or 

corporate structure; 

(6) Is or has been debarred, 

suspended, or sanctioned in connection 

with its participation in any Federal 

loan guarantee program; or is or has 

been debarred, suspended, or 

sanctioned by any Federal or State 

licensing or certification authority. 

§ 403.40 Can the lender cancel or modify 

a Conditional Commitment for Guarantee, 

or transfer it to another lender? 

(a) Once the Conditional Commitment 

for Guarantee is issued and accepted, no 

modifications may be made as to the 

scope and overall concept of the project 

or the project purpose, use of the 

proceeds, or other significant terms and 

conditions. 

(b) Before issuance of the Loan Note 

Guarantee Agreement, Reclamation may 

approve the transfer of the Conditional 

Commitment for Guarantee to a new 

eligible lender, provided that: 

(1) The former lender states in writing 

why it does not wish to continue to be 

the lender for the project; 

(2) No substantive changes in 

ownership or control of the borrower 

have occurred; 

(3) No substantive changes in the 

borrower’s written plan, scope of work, 

or changes in the purpose or intent of 

the project have occurred; 

(4) No substantive changes in the loan 

agreement with the borrower or the 

Conditional Commitment for Guarantee 

are required; 

(5) The new lender is acceptable to 

Reclamation, and has a current Lender’s 

Agreement, or will have a Lender’s 

Agreement in place prior to the sale; 

and 

(6) Such a transfer meets all other 

statutory, regulatory, and other 

requirements. 

§ 403.41 Can a lender sell or transfer the 

Loan Note Guarantee Agreement to another 

lender? 

A lender can sell or transfer a 

guaranteed loan to another lender if all 

of the requirements of this section are 

met. 

(a) We must approve the sale or 

transfer in writing by executing a 

modification of the guarantee to identify 

the new lender and the amount of debt 

at the time of the substitution. Any 

change must meet all applicable 

statutory, regulatory, and budgetary 

requirements for approval. 

(b) The new lender must agree in 

writing to: 

(1) Assume all servicing and other 

responsibilities of the original lender 

and to acquire both the guaranteed and 

non-guaranteed portions of the loan; 

(2) Execute a Lender’s Agreement if 

one is not in effect; and 

(3) Give the borrower written notice of 

the substitution. 

(c) The original lender must obtain 

written concurrence from the borrower 

if the rate or terms are changed (and 

such changes have been approved). 

(d) The original lender must assign its 

promissory note, lien instruments, loan 

agreements, and other documents to the 

new lender. 

§ 403.42 Can a lender sell the debt 

obligation in a secondary market? 

A lender can sell the debt obligation 

in a secondary market (for example, as 

a participation). However, the lender 

must: 

(a) Notify us of the sale, and the 

associated holder information; 

(b) Sell both the guaranteed and the 

non-guaranteed portions of the loan 

together proportionally; and 

(c) Continue to service the loan. 

§ 403.43 What fees and costs is the lender 

responsible for? 

The lender is responsible for: 

(a) Paying a loan guarantee fee of 1 

percent to Reclamation; and 

(b) At least 20 percent of the 

outstanding loan amount, if the 

borrower defaults on the loan. 

(c) The lender’s own costs associated 

with the loan guarantee program, 

including underwriting, servicing, and 

liquidation of a loan, including any 

legal or other costs. 

§ 403.44 Can Reclamation guarantee 

bonds sold to finance eligible projects? 

No. Reclamation cannot guarantee 

bonds. Bond issuers do not qualify as 

eligible lenders under § 403.37. 

§§ 403.45–403.46 [Reserved] 

Subpart E—Guaranteed Loan Terms 

and Details 

§ 403.47 What conditions must be met 

before a Loan Note Guarantee Agreement is 

issued? 

The Loan Note Guarantee Agreement 

may be issued only after the following 

have occurred: 

(a) All terms of the Conditional 

Commitment for Guarantee have been 

met, to the satisfaction of Reclamation; 

(b) No changes have been made in the 

lender’s loan conditions and 

requirements since the issuance of the 

Conditional Commitment for Guarantee 

except those approved by Reclamation 

in writing; 

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(c) The lender certifies that there have 

been no substantive adverse changes in 

the borrower’s financial condition or 

any other adverse change in the 

borrower during the period of time from 

the issuance of the Conditional 

Commitment for Guarantee to issuance 

of the Loan Note Guarantee Agreement; 

(d) Land access and all necessary 

permits are obtained; 

(e) Environmental compliance has 

been completed and approved by 

Reclamation; 

(f) Federal funds are available; 

(g) Reclamation has approved final 

plans and specifications; 

(h) All applicable security, safety, and 

health issues are resolved; 

(i) The lender has executed the 

Lender’s Agreement with us, paid the 

appropriate guarantee fee, and a Loan 

Guarantee Closing Report has been 

completed; 

(j) All other applicable statutory, 

regulatory, and budgetary requirements 

have been met; 

(k) Reclamation, in consultation with 

other Federal agencies determines that 

the project is consistent with all 

applicable Federal and United States 

Treasury policies and is in the best 

interest of the Federal government; and 

(l) The Secretary has approved the 

loan for a Loan Note Guarantee 

Agreement. 

§ 403.48 What is the maximum term I can 

obtain on a guaranteed loan? 

A loan guarantee must provide for 

complete amortization of the loan 

within the useful life of the project, but 

not more than 40 years. Lenders may 

offer shorter terms. 

§ 403.49 Is there a limit on the size of a 

guaranteed loan? 

Public Law 109–451 limits the size of 

the loan to 90 percent of eligible project 

costs. Reclamation would only 

guarantee up to 80% of that total loan 

amount. 

§ 403.50 What project costs are eligible to 

be covered by my guaranteed loan? 

Before issuing a Loan Note Guarantee 

Agreement, we will determine the 

adequacy and appropriateness of 

estimated Project Costs for the project 

that is the subject of the agreement. In 

order for us to make that determination, 

the application must include an 

estimate of project costs that complies 

with applicable Reclamation policy. 

Among other things, you must calculate 

the sum of necessary, reasonable and 

customary costs that you have paid and 

expect to pay, which are directly related 

to the project, including costs for 

escalation and contingencies, to 

estimate the total Project Costs. All 

estimated costs must be clearly 

described and documented in your 

application for a loan guarantee. 

(a) Project Costs may 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 rehabilitating or 

replacing the facility; including 

materials, labor, services, travel and 

transportation for facility design, 

construction, and startup; 

(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) Costs of necessary and appropriate 

insurance and bonds of all types; 

(7) Contract costs and non-contract 

costs, including appropriate 

contingencies, allowances for 

procurement strategies, and cost 

escalation estimates; 

(8) Capitalized interest necessary to 

meet market requirements, reasonably 

required reserve funds and other 

carrying costs during construction; and 

(9) Other necessary and reasonable 

costs. 

(b) 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) Costs that are excessive or are not 

directly required to carry out the 

project, as determined by us, including 

but not limited to the cost of hedging 

instruments; and 

(4) Operating costs. 

§ 403.51 What if my project cost exceeds 

the estimated loan amount? 

If a project satisfies the criteria in 

§§ 403.5(b) or 403.5(c), and costs exceed 

the estimated, then: 

(a) If your project cost estimate 

increases after we issue a Conditional 

Commitment for Guarantee, but before 

we enter into the Loan Note Guarantee 

Agreement, you will be required to 

notify us of the increase and justify the 

increase to us. We will then determine 

how such changes would affect any 

applicable statutory, regulatory, and 

budgetary requirements, and whether to 

re-evaluate the revised project to receive 

a loan guarantee, or reject your revised 

application. If we determine that we can 

re-evaluate your project, we may require 

you to make arrangements for additional 

funds or financing which are agreeable 

to us and the lender. 

(b) If your actual project costs exceed 

the amount specified in the Loan Note 

Guarantee Agreement, you will notify us 

and we will consult with you regarding 

such cost increases to determine what 

course of action to take, including 

requiring you to obtain additional funds 

to finish the project in a manner 

satisfactory to us and the lender. 

(c) Any additional funding or 

financing must be consistent with 

Public Law 109–451, all requirements of 

this part, and any other statutory, 

regulatory, or budgetary requirements 

necessary for Reclamation approval. 

§ 403.52 What interest rates and charges 

apply to my guaranteed loan? 

(a) Your loan will bear interest at a 

rate or rates negotiated between you and 

the lender. They must be fixed rates. 

Interest rates will be those rates 

customarily charged borrowers in 

similar circumstances in the ordinary 

course of business and are subject to our 

review and approval. We will determine 

if the rate is reasonable after 

consultation with the Treasury 

Department, taking into account the 

range of interest rates prevailing in the 

private sector for similar obligations of 

comparable risk guaranteed by the 

Federal government. 

(b) Any change in the interest rate 

between the date of issuance of the 

Conditional Commitment for Guarantee 

and before the issuance of the Loan Note 

Guarantee Agreement must be approved 

by us. 

§ 403.53 Can I prepay or refinance a 

guaranteed loan? 

You must negotiate any prepayment 

or refinancing terms on a loan guarantee 

with the lender, subject to our consent. 

All applicable statutory, regulatory, and 

budgetary requirements must be met for 

Reclamation consent. 

§ 403.54 When can an entity begin actual 

‘‘on the ground’’ work on the project to be 

financed? 

(a) An entity can begin actual work on 

the facilities or components upon 

issuance of the Loan Note Guarantee 

Agreement. 

(b) Any work done by a water user 

entity more than 90 days before a Loan 

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58098 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 

Note Guarantee Agreement is issued 

may not be included in the eligible 

project costs. In addition, any work 

initiated by a water user entity 90 or 

fewer days prior to our issuing a Loan 

Note Guarantee Agreement may or may 

not be included in the eligible project 

costs and would be done at the risk of 

not receiving the loan guarantee, even 

though such work may have been 

approved by us and included in the 

Conditional Commitment for Guarantee. 

§ 403.55 [Reserved] 

§ 403.56 Can the repayment of a 

guaranteed loan be subordinated to any 

other financing? 

No. We will only guarantee a loan 

under this part subject to the condition 

that the obligation is not subordinate to 

other financing. In addition: 

(a) For projects without pledged 

collateral, the loan must be superior to 

any other financing for the project (as 

approved by Reclamation) and on a 

position of parity with regard to other 

non-collateralized obligations of the 

borrower; i.e., in the event of a default, 

all non-secured lenders are affected on 

a proportionate basis. 

(b) For all other eligible projects, the 

loan must be fully secured through 

project facilities pledged as collateral for 

the loan and there shall be no other 

liens on such collateral. Consistent with 

the requirements of the Act, the rights 

of the Secretary, with respect to any 

property acquired pursuant to a loan 

guarantee or related agreement, shall be 

superior to the rights of any other 

person with respect to the property. 

(c) Where joint financing of a project 

occurs, the loan for which a guarantee 

is sought from Reclamation must have at 

least a parity position with the other 

lender(s), such that in the event of 

default, each lender will be affected in 

proportion to the share of financing it 

provides. 

(d) The non-guaranteed portion of the 

loan will not be paid first nor given any 

preference or priority over the 

guaranteed portion. 

§ 403.57 Under what conditions would the 

United States not pay the guaranteed 

portion of a loan? 

(a) The Loan Note Guarantee 

Agreement will not be enforceable by 

the lender to the extent that any loss is 

a result of fraud, violation of usury laws, 

negligent servicing, or failure to obtain 

any security designated in the Lender’s 

Agreement, regardless of when 

Reclamation acquires knowledge of any 

of the foregoing. 

(b) For purposes of this provision, 

negligent servicing is defined as the 

failure to perform those services which 

a reasonably prudent lender would 

perform in servicing its own portfolio of 

loans that are not guaranteed. The term 

includes not only the concept of a 

failure to act, but also not acting in a 

reasonably timely manner, or acting 

significantly contrary to the manner in 

which a reasonable and prudent lender 

would act up to the time of loan 

maturity, or until a final loss is paid. 

(c) Any losses occasioned will not be 

enforceable by the lender to the extent 

that loan funds are used for purposes 

other than those specifically approved 

by Reclamation in the Conditional 

Commitment for Guarantee and Loan 

Note Guarantee Agreement. Reclamation 

will review all loss claims, and claims 

may be denied, for example, in cases 

where the lender does not perform 

reasonable and customary servicing of 

the loan or claims include amounts not 

covered under the terms of the Loan 

Note Guarantee Agreement. 

§ 403.58 Will the requirements of the 

Reclamation Reform Act of 1982 apply? 

No. The loan to be guaranteed is 

between the borrower and a private 

lending institution and therefore does 

not meet the definition of a contract as 

provided in Section 202(1) of the 

Reclamation Reform Act of 1982. 

§§ 403.59–403.62 [Reserved] 

Subpart F—Default Actions and 

Termination. 

§ 403.63 What options do I have if I have 

problems repaying the guaranteed loan? 

If you have problems paying your 

loan, contact Reclamation and your 

lender for consideration of possible 

options. 

§ 403.64 How can Reclamation help me if 

I can’t resolve repayment problems with my 

lender? 

If you cannot resolve repayment 

problems with your lender, Reclamation 

may, before default, enter into an 

agreement with your lender to pay the 

principal and interest payment you 

currently owe the lender. Although we 

do not anticipate having sufficient funds 

or justification to exercise this option, 

we may consider this option if all of the 

following conditions are met: 

(a) The non-Federal borrower is 

unable to meet the payment and is not 

in default; 

(b) We determine that it is in the 

public interest that you be permitted to 

continue your project, and that the 

probable net benefit to the Federal 

Government in making such payment 

on your behalf is greater than that which 

would result if your guaranteed loan 

defaulted; 

(c) We have sufficient funds 

specifically appropriated and available 

for this purpose; 

(d) The payment authorized is not 

greater than the amount of principal and 

interest that you are obligated to pay 

under the terms of the Loan Note 

Guarantee Agreement; 

(e) You agree to execute all written 

agreements required by us for such 

purpose and reimburse us for the 

payment we make on terms and 

conditions satisfactory to us; and 

(f) You will, and are financially able 

to, continue to make the scheduled 

payments on the remaining portion of 

the principal and interest due and on 

other debt obligations of the project. 

§ 403.65 What happens if I still can’t make 

my payments after working with the lender 

and Reclamation? 

If you cannot make payments after 

working with the lender and with 

Reclamation under § 403.63, then the 

lender may start default proceedings. 

§ 403.66 What are the actions and 

timelines associated with default 

proceedings? 

The lender will notify us when your 

loan payment is 30 days past due. If the 

payment becomes 60 days past due, the 

lender will meet with you and us to 

discuss default proceedings and 

potential resolution of the problem. The 

timeframe for default proceedings are 

shown in the following table: 

Action in the default process 

Timeframe 

(days from pmt due date) 

Collateral 

pledged 

No collateral 

pledged 

Lender notifies Reclamation that loan is past due .......................................................................................... 30 30 

Lender meets with Reclamation and borrower to discuss default proceedings and potential resolution of 

the problem .................................................................................................................................................. 60 60 

Reclamation, Borrower, and lender seek possible cures ................................................................................ 75 75 

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Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Proposed Rules 58099 

Action in the default process 

Timeframe 

(days from pmt due date) 

Collateral 

pledged 

No collateral 

pledged 

Reclamation and lender determine whether a cure is possible. If no cure can be found, the loan is in default and any collateral pledged for the loan becomes eligible for liquidation ............................................ 90 90

Lender submits a proposed method of liquidation in writing .......................................................................... 120 N/A 

Reclamation informs lender if liquidation plan is approved ............................................................................ 150 N/A 

Lender files an estimated loss claim if liquidation will exceed 90 days .......................................................... 180 N/A 

Lender files final Report of Loss ..................................................................................................................... 210 120 

Reclamation makes loss payment ................................................................................................................... 270 180 

§ 403.67 What is the process for 

liquidation of pledged collateral? 

(a) Any of the following factors may 

lead to a decision to liquidate: 

(1) The loan has been delinquent 90 

days; 

(2) Delaying liquidation will 

jeopardize recovery of the loan 

collateral; or 

(3) Borrower or lender has been 

uncooperative in resolving the default; 

(b) The lender must, within 30 days 

after a decision to liquidate, submit to 

Reclamation in writing a proposed 

method of liquidation. Reclamation will 

not make any payments for estimated or 

actual losses prior to final Report of 

Loss. 

(c) Within 30 days after receiving the 

liquidation plan, we will inform the 

lender in writing whether we concur. 

(d) The lender will discontinue 

interest accrual at the point of default, 

or 90 days after the first payment was 

missed, whichever is earlier. 

(e) When the lender conducts the 

liquidation, it must account for funds 

during the period of liquidation and 

will provide us with reports at least 

quarterly on the progress of the 

liquidation. Only expenses authorized 

by Chapter 9 plans or Chapter 11 

reorganizations, or Chapters 11 or 7 

liquidations (United States Bankruptcy 

Code) may be deducted from collateral 

proceeds, if any. 

§ 403.68 What is the timeline for filing a 

Final Report of Loss? 

Within 30 days after liquidation of all 

collateral, the lender must prepare a 

final Report of Loss and submit it to us. 

We will not guarantee interest beyond 

the point of borrower default. We will 

pay the approved loss payment within 

60 days after reviewing the final Report 

of Loss and accounting of the collateral. 

§ 403.69 [Reserved] 

§ 403.70 What interest does the lender 

have in the guaranteed loan after 

Reclamation makes a loss payment? 

When we receive a final Report of 

Loss and pay the loss claim, we are 

immediately subrogated to the lender in 

all rights with respect to the guaranteed 

loan. The lender must sign and deliver 

to Reclamation an assignment of any 

rights it may have had with respect to 

the guaranteed loan. 

§ 403.71 What will Reclamation do if a 

borrower defaults? 

If a borrower defaults, we are required 

to notify the Attorney General. The 

Attorney General will take appropriate 

action to recover the unpaid principal 

and interest due from assets of the 

defaulting non-Federal borrower 

associated with the obligation, or any 

other collateral pledged to secure the 

obligation. 

§ 403.72 When does the Loan Note 

Guarantee Agreement terminate? 

A Loan Note Guarantee Agreement 

under this part will terminate 

automatically upon: 

(a) Full Repayment of the guaranteed 

loan; 

(b) Full Payment of any loss 

obligation or negotiated loss settlement 

as described in the Lender’s Agreement; 

or 

(c) Written request from the lender to 

Reclamation, upon return of the Loan 

Note Guarantee Agreement to 

Reclamation. 

§ 403.73 What happens if the non-Federal 

party breaches the existing Loan Note 

Guarantee Agreement? 

The Federal Government reserves the 

right to prosecute both the borrower and 

the lender to the fullest extent possible 

under existing laws until full 

recompense has been made and the 

conditions of the Loan Note Guarantee 

Agreement have been fulfilled. In 

addition, if a Loan Note Guarantee 

Agreement is breached, the Borrower 

will no longer be eligible to receive a 

Federally-guaranteed loan for any of its 

future activities or projects, and may not 

be eligible for other Federal assistance. 

Furthermore, any lender in breach of a 

Loan Note Guarantee Agreement will be 

responsible for paying any additional 

fees as determined necessary to the 

Federal Government and will not be 

allowed to hold a Federal Government 

note until the United States Treasury 

has been paid in full. 

[FR Doc. E8–23444 Filed 10–3–08; 8:45 am] 

BILLING CODE 4310–MN–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 697 

[Docket No. 070717357–7593–02] 

RIN 0648–AV77 

Atlantic Coastal Fisheries Cooperative 

Management Act Provisions; American 

Lobster Fishery 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: NMFS proposes new Federal 

American lobster (Homarus 

americanus) regulations that would 

implement a mandatory Federal lobster 

dealer electronic reporting requirement, 

changes to the maximum carapace 

length regulations for several lobster 

conservation management areas 

(LCMAs/Areas), and a modification of 

the v-notch definition in certain 

LCMAs. This action responds to the 

recommendations for Federal action in 

the Atlantic States Marine Fisheries 

Commission’s (Commission) Interstate 

Fishery Management Plan for American 

Lobster (ISFMP). Implementation of a 

mandatory Federal lobster dealer 

reporting requirement would be 

consistent with the recommendations 

for Federal action by the Commission in 

Addendum X to Amendment 3 of the 

ISFMP and would assist in providing a 

more comprehensive and consistent 

coastwide accounting of lobster harvest 

data to facilitate stock assessment and 

fishery management. Additionally, this 

action intends to implement new and 

revise existing Federal lobster 

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