[Federal Register Volume 75, Number 24 (Friday, February 5, 2010)]
[Proposed Rules]
[Pages 5902-5904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2402]



[[Page 5902]]

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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1720

RIN-0572-ZA06


Guarantees for Bonds and Notes Issued for Electrification or 
Telephone Purposes

AGENCY: Rural Utilities Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Utilities Service (RUS) proposes to amend its 
regulations for the guarantee program for cooperative and other not-
for-profit lenders that make loans for eligible electric and telephone 
purposes. These proposed amendments implement changes adapted in the 
Food, Conservation, and Energy Act of 2008. The intended effect is to 
update agency regulations to reflect current statutory authority.

DATES: Written comments on this proposed action must be received by RUS 
no later than April 6, 2010.

ADDRESSES: Submit comments by either of the following methods:
    <bullet> Federal eRulemaking Portal: Go to http://www.regulations.gov. In the ``Search Documents'' box, enter RUS-09-
Electric-0005, check the box under the Search box labeled ``Select to 
find documents accepting comments or submissions,'' and click on the 
GO>> key. To submit a comment, choose ``Send a comment or submission,'' 
under the Docket Title. In order to submit your comment, the 
information requested on the ``Public Comment and Submission Form,'' 
must be completed. (If you click on the hyperlink of the docket when 
the search returns it, you will see the docket details. Click on the 
yellow balloon to receive the ``Public Comment and Submission Form.'') 
Information on using Regulations.gov, including instructions for 
accessing documents, submitting comments, and viewing the docket after 
the close of the comment period, is available through the site's ``How 
to Use this Site'' link.
    <bullet> Postal Mail/Commercial Delivery: Please send your comments 
addressed to Michele Brooks, Director, Program Development and 
Regulatory Analysis, USDA Rural Development, STOP 1522, Room 5162, 1400 
Independence Avenue, SW., Washington, DC 20250-1522. Please state that 
your comment refers to Docket No. RUS-09-Electric-0005.
    Other Information: Additional information about RUS and its 
programs is available at http://www.rurdev.usda.gov/index.html.

FOR FURTHER INFORMATION CONTACT: Karen L. Larsen, Policy Analysis and 
Loan Management Staff, Office of the Assistant Administrator, Electric 
Programs, Rural Utilities Service, United States Department of 
Agriculture, 1400 Independence Avenue, SW., Room 5165-S, Washington, DC 
20250-1560. Telephone (202) 720-9545; e-mail: 
<a href="/cdn-cgi/l/email-protection#42292330272c6c2e233031272c023526216c373126236c252d34"><span class="__cf_email__" data-cfemail="fc979d8e9992d2909d8e8f9992bc8b989fd2898f989dd29b938a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be not significant for 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by the Office of Management and Budget.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number assigned 
to the Electric Loan and Loan Guarantee program is 10.850 Rural 
Electrification Loans and Loan Guarantees. The catalog is available on 
the Internet and the General Services Administration's (GSA) free CFDA 
Web site at http://www.cfda.gov. The CFDA Web site also contains a PDF 
file version of the Catalog that, when printed, has the same layout as 
the printed document that the Government Printing Office (GPO) 
provides. GPO prints and sells the CFDA to interested buyers. For 
information about purchasing the Catalog of Federal Domestic Assistance 
from GPO, call the Superintendent of Documents at 202-512-1800 or toll 
free at 866-512-1800, or access GPO's on-line bookstore at http://bookstore.gpo.gov.

Executive Order 12372

    This proposed rule is excluded from the scope of Executive Order 
12372, Intergovernmental Consultation, which may require consultation 
with State and local officials. See the final rule related notice 
entitled, ``Department Programs and Activities Excluded from Executive 
Order 12372'' (50 FR 47034) advising that RUS loans and loan guarantees 
were not covered by Executive Order 12372.

Information Collection and Recordkeeping Requirements

    This rule contains no new reporting or recordkeeping burdens under 
the Office of Management and Budget (OMB) that would require approval 
under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

National Environmental Policy Act Certification

    The Administrator of RUS has determined that this proposed rule 
will not significantly affect the quality of the human environment as 
defined by the National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.). Therefore, this action does not require an environmental 
impact statement or assessment.

Regulatory Flexibility Act Certification

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this proposed rule since the Agency is not required by 5 
U.S.C. 551 et seq. or any other provision of law to publish a notice of 
proposed rulemaking with respect to the subject matter of this rule.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The Agency has determined that this proposed rule 
meets the applicable standards in section 3 of the Executive Order.

Unfunded Mandates

    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments for the private sector. Thus, this 
rule is not subject to the requirements of section 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

Executive Order 13132, Federalism

    The policies contained in this proposed rule do not have any 
substantial direct effect on 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. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13211

    This proposed rule does not have any adverse effects on energy 
supply, distribution, or use should the proposal be implemented. The 
Agency has determined that the preparation of Statement of Energy 
Effects under Executive Oder 13211 is not required.

E-Government Act Compliance

    The Agency is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to

[[Page 5903]]

provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Background

    The Rural Electrification Act of 1936 (the ``RE Act'') (7 U.S.C. 
901 et seq.) authorizes the Secretary to guarantee and make loans to 
persons, corporations, States, territories, municipalities, and 
cooperative, non-profit, or limited-dividend associations for the 
purpose of furnishing or improving electric and telephone service in 
rural areas. Responsibility for administering electrification and 
telecommunications loan and guarantee programs along with other 
functions the Secretary deemed appropriate have been assigned to RUS 
under the Department of Agriculture Reorganization Act of 1994 (7 
U.S.C. 6941 et seq.). The Administrator of RUS has been delegated 
responsibility for administering the programs and activities of RUS, 
see 7 CFR 1700.25.
    Section 6101 of the Farm Security and Rural Investment Act of 2002 
(Pub. L. 107-171) (FSRIA) amended the RE Act to add section 313A 
entitled ``Guarantees for Bonds and Notes Issued for Electrification or 
Telephone Purposes.'' This section created a new loan guarantee 
program. Final regulations implementing the program were published in 
the Federal Register on October 29, 2004, 69 FR 63045.
    Section 6106(a)(1)(A) of the Food, Conservation, and Energy Act of 
2008 (Pub. L. 110-246) amended section 313A of the RE Act extending the 
program authorization from September 30, 2007, to September 30, 2012, 
expanding eligible loan purposes, and setting an annual limit of 
$1,000,000,000 on the total amount of guarantees approved by the 
Secretary during a fiscal year, subject to the availability of funds. 
Prior to the 2008 amendment the total amount of a lender's bonds and 
notes that could be guaranteed under section 313A was limited to the 
total amount of loans made by the lender concurrently with a loan 
approved by the Secretary under the RE Act.
    Section 6106(a)(1)(B) further amended section 313A of the RE Act by 
removing the provision prohibiting the recipient from using any amount 
obtained from the reduction in funding costs as a result of a guarantee 
under section 313A to reduce the interest rate charged on a new or 
concurrent loan. New loan guarantees will not be subject to this 
limitation.
    The proposed amendments to part 1720 revise the current regulations 
to implement the changes made by the 2008 Farm Bill and to clarify 
existing provisions.

List of Subjects in 7 CFR Part 1720

    Electric power, Electric utilities, Loan programs--energy, 
Reporting and recordkeeping requirements, Rural areas.

    For reasons set out in the preamble, RUS proposes to amend chapter 
XVII of title 7 of the Code of Federal Regulations by amending part 
1720 as follows:

PART 1720--GUARANTEES FOR BONDS AND NOTES ISSUED FOR 
ELECTRIFICATION OR TELEPHONE PURPOSES

    1. The authority citation for part 1720 continues to read as 
follows:

    Authority: 7 U.S.C. 901 et seq.; 7 U.S.C. 940c-1.

    2. Revise Sec.  1720.2 to read as follows:


Sec.  1720.2  Background.

    The Rural Electrification Act of 1936 (the ``RE Act'') (7 U.S.C. 
901 et seq.) authorizes the Secretary to guarantee and make loans to 
persons, corporations, States, territories, municipalities, and 
cooperative, non-profit, or limited-dividend associations for the 
purpose of furnishing or improving electric and telephone service in 
rural areas. Responsibility for administering electrification and 
telecommunications loan and guarantee programs along with other 
functions the Secretary deemed appropriate have been assigned to RUS 
under the Department of Agriculture Reorganization Act of 1994 (7 
U.S.C. 6941 et seq.). The Administrator of RUS has been delegated 
responsibility for administering the programs and activities of RUS, 
see 7 CFR 1700.25. Section 6101 of the Farm Security and Rural 
Investment Act of 2002 (Pub. L. 107-171) (FSRIA) amended the RE Act to 
include a new program under section 313A entitled Guarantees for Bonds 
and Notes Issued for Electrification or Telephone Purposes. This 
measure directed the Secretary of Agriculture to promulgate regulations 
that carry out the Program. The Secretary published the regulations for 
the program in the Federal Register as a final rule on October 29, 
2004, adding Part 1720 to Title 7 of the Code of Federal Regulations. 
Section 6106(a)(1)(A) of the Food, Conservation, and Energy Act of 2008 
(Pub. L. 110-246) amended section 313A of the RE Act by replacing the 
level of ``concurrent loans'' as a factor limiting the amount of bonds 
and notes that could be guaranteed and inserted ``for eligible 
electrification or telephone purposes'' as the limitation on the amount 
of bonds and notes that can be guaranteed under section 313A up to an 
annual program limit of $1,000,000,000, subject to availability of 
funds. Section 6106(a)(1)(B) further amended section 313A of the RE Act 
by removing the prohibition against the recipient using an amount 
obtained from the reduction in funding costs as a result of a new 
guarantee under section 313A to reduce the interest rate charged on a 
new or concurrent loan.
    3. Amend Sec.  1720.3 by adding the definition of ``Eligible Loan'' 
to read as follows:


Sec.  1720.3  Definitions.

* * * * *
    Eligible Loan means a loan that a guaranteed lender extends to a 
borrower for up to 100 percent of the cost of eligible electrification 
or telephone purposes consistent with the RE Act.
* * * * *
    4. Amend Sec.  1720.4 by revising paragraphs (a)(2), (3), (4), and 
(b)(2) to read as follows:


Sec.  1720.4  General standards.

    (a) * * *
    (2) At the time the guarantee is executed, the total principal 
amount of guaranteed bonds outstanding would not exceed the principal 
amount of outstanding eligible loans previously made by the guaranteed 
lender;
    (3) The proceeds of the guaranteed bonds will not be used directly 
or indirectly to fund projects for the generation of electricity; and
    (4) The guaranteed lender will not use any amounts obtained from 
the reduction in funding costs provided by a loan guarantee issued 
prior to June 18, 2008, to reduce the interest rates borrowers are 
paying on new or outstanding loans, other than new concurrent loans as 
provided in 7 CFR part 1710, of this chapter.
    (b) * * *
    (2) Maintain sufficient collateral equal to the principal amount 
outstanding, for guaranteed lenders having a credit rating below ``A-'' 
on its senior secured debt without regard to the guarantee, or in the 
case of a lender that does not have senior secured debt, a corporate 
(counterparty) credit rating below ``A-'' without regard to the 
guarantee. Collateral shall be in the form of specific and identifiable 
unpledged securities equal to the value of the guaranteed amount. In 
the case of a guaranteed lender's default, the U.S. government claim 
shall not be subordinated to the claims of other creditors, and the 
indenture must provide that in the event

[[Page 5904]]

of default, the government has first rights on the asset. Upon 
application and throughout the term of the guarantee, guaranteed 
lenders not subject to collateral pledging requirements shall identify, 
with the concurrence of the Secretary, specific assets to be held as 
collateral should the credit rating of its senior secured debt, or its 
corporate credit rating, as applicable, without regard to the guarantee 
fall below ``A-.'' The Secretary has discretion to require collateral 
at any time should circumstances warrant.
* * * * *
    5. Amend Sec.  1720.5 by revising paragraphs (a)(1) and (b)(1) to 
read as follows:


Sec.  1720.5  Eligibility criteria.

    (a) * * *
    (1) A bank or other lending institution organized as a private, 
not-for-profit cooperative association, or otherwise organized on a 
non-profit basis; and
* * * * *
    (b) * * *
    (1) The guaranteed lender must furnish the Secretary with a 
certified list of the principal balances of eligible loans then 
outstanding and certify that such aggregate balance is at least equal 
to the sum of the proposed principal amount of guaranteed bonds to be 
issued, and any previously issued guaranteed bonds outstanding; and
* * * * *
    6. Amend Sec.  1720.6 by revising paragraph (a)(7) to read as 
follows:


Sec.  1720.6  Application process.

    (a) * * *
    (7) Evidence of a credit rating, from a Rating Agency, on its 
senior secured debt or its corporate credit rating, as applicable, 
without regard to the government guarantee and satisfactory to the 
Secretary; and
* * * * *
    7. Amend Sec.  1720.7 by revising paragraphs (b)(3) and (4), adding 
new paragraphs (b)(5) and (6), and revising paragraph (d) to read as 
follows:


Sec.  1720.7  Application evaluation.

* * * * *
    (b) * * *
    (3) The applicant's demonstrated performance of financially sound 
business practices as evidenced by reports of regulators, auditors and 
credit rating agencies;
    (4) The extent to which the applicant is subject to supervision, 
examination, and safety and soundness regulation by an independent 
federal agency;
    (5) The extent of concentration of financial risk that RUS may have 
resulting from previous guarantees made under Section 313A of the RE 
Act; and
    (6) The extent to which providing the guarantee to the applicant 
will help reduce the cost and/or increase the supply of credit to rural 
America, or generate other economic benefits, including the amount of 
fee income available to be deposited into the Rural Economic 
Development Subaccount, maintained under section 313(b)(2)(A) of the RE 
Act (7 U.S.C. 940c(b)(2)(A)), after payment of the subsidy amount.
* * * * *
    (d) Decisions by the Secretary. The Secretary shall approve or deny 
applications in a timely manner as such applications are received; 
provided, however, that in order to facilitate competitive evaluation 
of applications, the Secretary may from time to time defer a decision 
until more than one application is pending. The Secretary may limit the 
number of guarantees made to a maximum of five per year, to ensure a 
sufficient examination is conducted of applicant requests. RUS shall 
notify the applicant in writing of the Secretary's approval or denial 
of an application. Approvals for guarantees shall be conditioned upon 
compliance with 7 CFR 1720.4 and 1720.6 of this part. The Secretary 
reserves the discretion to approve an application for an amount less 
than that requested.
    8. Amend Sec.  1720.8 by revising paragraphs (a)(3), (4), and (8) 
to read as follows:


Sec.  1720.8  Issuance of the guarantee.

    (a) * * *
    (3) Prior to the issuance of the guarantee, the applicant must 
certify to the Secretary that the proceeds from the guaranteed bonds 
will be applied to fund new eligible loans under the RE Act, to 
refinance concurrent loans, or to refinance existing debt instruments 
of the guaranteed lender used to fund eligible loans;
    (4) The applicant provides a certified list of eligible loans and 
their outstanding balances as of the date the guarantee is to be 
issued;
* * * * *
    (8) The applicant shall provide evidence of a credit rating on its 
senior secured debt or its corporate credit rating, as applicable, 
without regard to the guarantee and satisfactory to the Secretary; and
* * * * *
    9. Amend Sec.  1720.12 by revising paragraph (a)(5) to read as 
follows:


Sec.  1720.12  Reporting requirements.

    (a) * * *
    (5) Credit rating, by a Rating Agency, on its senior secured debt 
or its corporate credit rating, as applicable, without regard to the 
guarantee and satisfactory to the Secretary; and
* * * * *
    10. Revise Sec.  1720.13 to read as follows:


Sec.  1720.13  Limitations on guarantees.

    In a given year the maximum amount of guaranteed bonds that the 
Secretary may approve will be subject to budget authority, together 
with receipts authority from projected fee collections from guaranteed 
lenders, the principal amount of outstanding eligible loans made by the 
guaranteed lender, and Congressionally-mandated ceilings on the total 
amount of credit. The Secretary may also impose other limitations as 
appropriate to administer this guarantee program.

    Dated: January 8, 2010.
Jonathan Adelstein,
Administrator, Rural Utilities Service.
[FR Doc. 2010-2402 Filed 2-4-10; 8:45 am]
BILLING CODE 3410-15-P


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