Loan Guarantees for Projects that Employ Innovative Technologies, 27471-27488 [E7-9297]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 72, Number 94 (Wednesday, May 16, 2007)]
[Proposed Rules]
[Pages 27471-27488]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9297]


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DEPARTMENT OF ENERGY

10 CFR Part 609

RIN 1901-AB21


Loan Guarantees for Projects that Employ Innovative Technologies

AGENCY: Office of the Chief Financial Officer, Department of Energy.

ACTION: Notice of proposed rulemaking and opportunity for comment.

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SUMMARY: The Department of Energy (DOE or Department) today proposes 
policies and procedures applicable to DOE's loan guarantee program 
authorized by Title XVII of the Energy Policy Act of 2005. Today's 
proposed rule, when final, also will further the President's Advanced 
Energy Initiative. Title XVII authorizes the Secretary of Energy to 
make loan guarantees for projects that ``avoid, reduce, or sequester 
air pollutants or anthropogenic emissions of greenhouse gases; and 
employ new or significantly improved technologies as compared to 
commercial technologies in service in the United States at the time the 
guarantee is issued.'' Title XVII also identifies ten categories of 
technologies that, if employed in commercial projects, are potentially 
eligible for a loan guarantee. A principal goal of Title XVII is to 
encourage commercial use in the United States of new or significantly 
improved energy-related technologies. DOE believes that accelerated 
commercial use of new and improved technologies will help sustain 
economic growth, yield environmental benefits, and produce a more 
stable and secure energy supply and economy for the United States.

[[Page 27472]]


DATES: Public comment on this proposed rule will be accepted until July 
2, 2007. A public meeting on the proposed rule will be held on Friday, 
June 15, 2007, from 9 a.m. to 4:30 p.m. in Washington, DC. Interested 
persons who wish to speak at the public meeting must telephone the DOE 
Loan Guarantee Program Office at (202) 586-8336 during the period 
Friday, June 1, through Tuesday, June 12, 2007, between the hours of 9 
a.m. and 4:30 p.m. Interested persons also may request to speak by 
writing to Mr. Howard G. Borgstrom at the address given in the 
ADDRESSES section of this notice, or by sending an e-mail to 
lgprogram@hq.doe.gov. Such requests must be received by 4:30 p.m. on 
Tuesday, June 12, 2007. The Department also requests that persons 
wishing to speak submit a copy of their prepared statement to Mr. 
Borgstrom by 4:30 p.m. on June 12, 2007. See section III. of this 
notice for details concerning public comment procedures.

ADDRESSES: You may submit comments, identified by RIN 1901-AB21, by any 
of the following methods:
    1. Federal eRulemaking Portal: https://www.regulations.gov. Follow 
the instructions for submitting comments.
    2. E-mail to lgprogram@hq.doe.gov. Include RIN 1901-AB21 in the 
subject line of the e-mail. Please include the full body of your 
comments in the text of the message or as an attachment.
    3. Mail: Address written comments to Mr. Howard G. Borgstrom, 
Director, Business Operations Center, Office of the Chief Financial 
Officer, U.S. Department of Energy, Mailstop CF-60, Room 4A-221, 1000 
Independence Avenue, SW., Washington, DC 20585.
    Due to potential delays in DOE's receipt and processing of mail 
sent through the U.S. Postal Service, we encourage respondents to 
submit comments electronically to ensure timely receipt.
    The public meeting for this rulemaking will be held in Washington, 
DC at the Forrestal Building in Room GE-086 (Main Auditorium), 1000 
Independence Avenue, SW., Washington, DC.
    This Notice of Proposed Rulemaking, the public meeting transcript, 
and any comments that DOE receives are being made available on the Web 
site at: https://www.lgprogram.energy.gov/.

FOR FURTHER INFORMATION CONTACT: The DOE Loan Guarantee Program Office, 
1000 Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-
8336, e-mail: lgprogram@hq.doe.gov; or Warren Belmar, Deputy General 
Counsel for Energy Policy, Office of the General Counsel, 1000 
Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-6758, e-
mail: warren.belmar@hq.doe.gov; or Lawrence R. Oliver, Assistant 
General Counsel for Fossil Energy and Energy Efficiency, Office of the 
General Counsel, 1000 Independence Avenue, SW., Washington, DC 20585-
0121, (202) 586-9521, e-mail: lawrence.oliver@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background
II. Discussion of Proposed Rule
    A. Technologies
    B. Project Costs
    C. Solicitation
    D. Payment of the Credit Subsidy Cost
    E. Assessment of Fees
    F. Financial Structure
    G. Eligible Lenders
    H. FCRA
    I. Default and Audit Provisions
    J. Tax Exempt Debt
    K. Full Faith and Credit
III. Public Comment Procedures
IV. Regulatory Review
    A. Executive Order 12866
    B. National Environmental Policy Act
    C. Regulatory Flexibility Act
    D. Paperwork Reduction Act
    E. Unfunded Mandates Reform Act of 1995
    F. Treasury and General Government Appropriations Act, 1999
    G. Executive Order 13132
    H. Executive Order 12988
    I. Treasury and General Government Appropriations Act, 2001
    J. Executive Order 13211

I. Introduction and Background

    Title XVII of the Energy Policy Act of 2005 (Title XVII or the Act) 
(42 U.S.C. 16511-16514) authorizes the Secretary of Energy (Secretary 
or DOE), after consultation with the Secretary of the Treasury, to make 
loan guarantees for projects that ``avoid, reduce, or sequester air 
pollutants or anthropogenic emissions of greenhouse gases; and employ 
new or significantly improved technologies as compared to commercial 
technologies in service in the United States at the time the guarantee 
is issued.'' Commercial technology is defined as ``a technology in 
general use in the commercial marketplace'' and ``does not include a 
technology solely by use of the technology in a demonstration project 
funded by DOE.'' The following ten categories of projects are, by law, 
specifically made eligible for Title XVII loan guarantees:
    1. Renewable energy systems;
    2. Advanced fossil energy technology (including coal gasification 
meeting the criteria in paragraph 1703(d) of the Act);
    3. Hydrogen fuel cell technology for residential, industrial, or 
transportation applications;
    4. Advanced nuclear energy facilities;
    5. Carbon capture and sequestration practices and technologies, 
including agricultural and forestry practices that store and sequester 
carbon;
    6. Efficient electrical generation, transmission, and distribution 
technologies;
    7. Efficient end-use energy technologies;
    8. Production facilities for fuel efficient vehicles, including 
hybrid and advanced diesel vehicles;
    9. Pollution control equipment; and
    10. Refineries, meaning facilities at which crude oil is refined 
into gasoline.
    This list of ten types of projects is a nonexclusive list of the 
types of projects that are eligible for Title XVII guarantees.
    Today, DOE proposes regulations to establish generally applicable 
policies, procedures and requirements for the Title XVII loan guarantee 
program. These proposed regulations were referenced in the Guidelines 
for the program that DOE published on August 14, 2006 (Guidelines) (71 
FR 46451). The Guidelines stated that they would only apply to the 
first Title XVII solicitation, which was issued contemporaneously with 
the Guidelines, and that all subsequent solicitations would be governed 
by regulations to be adopted by DOE at a later date.
    In the first solicitation for Pre-Applications for ``Federal Loan 
Guarantees for Projects that Employ Innovative Technologies in support 
of the Advanced Energy Initiative,'' DOE focused on technologies that 
would advance the President's Advanced Energy Initiative. Although this 
meant the first solicitation did not cover all types of projects that 
potentially may be eligible for loan guarantees under Title XVII, there 
is nothing in Title XVII that requires all solicitations implementing 
that program be open to every project arguably eligible for a guarantee 
under the statute. DOE has the ability to tailor specific solicitations 
to certain types of projects, based on programmatic objectives, loan 
guarantee authority that is available, and the availability of funds to 
implement the program, among other relevant criteria. DOE will seek to 
have a broad portfolio of large and small projects, for a wide variety 
of technologies. For example, the Administration's 2008 Budget proposes 
that DOE may guarantee up to $4 billion in loans for central power 
generation facilities (for example, nuclear facilities or carbon 
sequestration optimized coal power plants); $4 billion in loans for 
projects that promote biofuels and clean transportation fuels; and $1 
billion in

[[Page 27473]]

loans for projects using new technologies for electric transmission 
facilities or renewable power generation systems. Precisely how any 
authorized loan guarantee authority would be allocated, however, 
ultimately would depend on the merits and benefits of particular 
project proposals and their compliance with statutory and regulatory 
requirements. The deadline for submission of Pre-Applications in 
response to the first solicitation was December 31, 2006, and DOE 
received 143 Pre-Applications.
    On February 15, 2007, President Bush signed into law Public Law 
110-5, the Revised Continuing Appropriations Resolution, 2007 (CR, or 
Pub. L. 110-5) which authorizes DOE to issue guarantees under the Title 
XVII program for loans in the ``total principal amount, any part of 
which is to be guaranteed, of $4,000,000,000.'' This authorization 
provides DOE sufficient authority, under Title XVII and the Federal 
Credit Reform Act of 1990 (FCRA) (2 U.S.C. 661(a) et seq) to issue loan 
guarantees. Section 20320(b) of the CR further provides that no loan 
guarantees may be issued under the Title XVII program until DOE 
promulgates final regulations that include ``programmatic, technical, 
and financial factors the Secretary [of Energy] will use to select 
projects for loan guarantees,'' ``policies and procedures for selecting 
and monitoring lenders and loan performance,'' and ``any other 
policies, procedures, or information necessary to implement Title XVII 
of the Energy Policy Act of 2005.''

II. Discussion of Proposed Rule

    The CR prohibits DOE from issuing any loan guarantees under the 
Title XVII program until the Department has issued final regulations 
that address a number of different matters. (Pub. L. 110-5, section 
20320(b)). However, section 20320 does not state whether or to what 
extent those final regulations must apply to any matters pursuant to 
the first solicitation under the Title XVII program, which DOE issued 
on August 8, 2006, and in response to which Pre-Applications were due 
by December 31, 2006, several weeks prior to the enactment of Public 
Law 110-5.
    In order to ensure that the Department complies with the CR but 
does not prejudice Pre-Applicants who responded to the first Title XVII 
solicitation, DOE proposes to specify, by regulation, that today's 
proposed rule, when final, shall not apply to the Pre-Applications, 
Applications, Conditional Commitments, and Loan Guarantee Agreements 
pursuant to the August 2006 solicitation. The only exceptions shall be 
with respect to the default, recordkeeping and audit requirements in 
sections 609.15 and 609.17, which Title XVII requires be established by 
regulation. However, the proposed regulations permit DOE and an 
Applicant to agree in a Loan Guarantee Agreement entered into pursuant 
to the first solicitation that additional provisions of the final rule 
shall apply to the particular project.
    However, Pre-Applicants who responded to the first solicitation 
will not necessarily be permanently exempt from these regulations. If 
the Department does not accept their Pre-Application and invite them to 
submit an Application pursuant to that solicitation, then their 
participation in the program in response to any future solicitation 
will be fully subject to the requirements of the final regulations. 
Moreover, to provide clarity, the regulation provides that the 
exception from applicability of these regulations applies only to those 
for whom the invitation to submit an Application is extended by the 
Department to a Pre-Applicant no later than December 31, 2007. The 
Department anticipates being able to invite selected Pre-Applicants to 
submit Applications in response to the first solicitation by that 
deadline, and perhaps well before that deadline. Pre-Applicants who are 
not being invited to submit an Application also will be notified that 
they have not been selected, and any further involvement by such Pre-
Applicants in the Title XVII program will be subject to all 
requirements of the final regulations.
    The Act authorizes the Secretary to make loan guarantees as an 
incentive for the use of new or improved technologies. Section 1702 of 
the Act outlines general terms and conditions for Loan Guarantee 
Agreements and directs the Secretary to include in Loan Guarantee 
Agreements ``such detailed terms and conditions as the Secretary 
determines appropriate to--(i) protect the interests of the United 
States in case of a default [as defined in regulations issued by the 
Secretary]; and (ii) have available all the patents and technology 
necessary for any person selected, including the Secretary, to complete 
and operate the project for which the loan guarantee was obtained.'' 
(42 U.S.C. 16512(g)(2)(c)) Section 1702(i) of the Act instructs the 
Secretary to prescribe regulations outlining record-keeping and audit 
requirements. This proposed rule sets forth application procedures, 
outlines terms and conditions for Loan Guarantee Agreements, and lists 
records and documents that project participants must keep. The proposed 
rule also sets forth other provisions that the CR requires DOE's 
regulations to address.

A. Technologies

    A principal purpose of the Act's Title XVII loan guarantee program 
is to support projects in the United States that ``employ new or 
significantly improved technologies as compared to commercial 
technologies in service in the United States at the time the guarantee 
is issued.'' Such technologies are identified as ``innovative 
technologies.'' Section 1701(1) of the Act defines ``commercial 
technology'' as ``a technology in general use in the commercial 
marketplace.'' Section 1701(1) further states that a technology does 
not become a ``commercial technology'' solely because it is used in a 
demonstration project funded by DOE.
    Because section 1702(d)(1) also requires a ``reasonable prospect of 
repayment of the principal and interest'' on all loans or other debt 
obligations issued to finance a project, technologies for project 
proposals must be mature enough to assure dependable commercial 
operations that generate sufficient revenues to service the project's 
debt. Therefore, projects that are solely research, development or 
demonstration projects (i.e., a project designed exclusively for 
research and development or to demonstrate feasibility of a technology 
on any scale) should not be eligible for Title XVII loan guarantees, 
and DOE is proposing to make such research, development or 
demonstration projects ineligible for a loan guarantee under Title 
XVII. DOE believes that accelerated commercial use of new or improved 
technologies, as distinguished from research, development or 
demonstrations at any scale of technological feasibility, will help to 
sustain economic growth, yield environmental benefits, and produce a 
more stable and secure energy supply, and be able to earn revenues that 
give the projects a ``reasonable prospect of repayment of the principal 
and interest'' on its debt obligations. Accordingly, DOE's loan 
guarantee program is not intended for technologies in the research, 
development or demonstration stages.
    Title XVII does not explain or define the phrase ``new or 
significantly improved'' in section 1703(a)(2). Nor does the Act 
explain or define the terms ``general use'' or ``commercial 
marketplace'' in section 1701(1), other than specifying that 
``commercial technology'' does not include a technology merely because 
it is used in a DOE-funded demonstration project. Therefore, DOE must 
use its discretion and judgment to define these terms.

[[Page 27474]]

    DOE believes that the phrase ``new or significantly improved 
technology'' is not readily susceptible to precise definition in these 
regulations. It is not possible to specify in advance precisely what 
should be considered ``new'' or what would constitute a ``significant 
improvement'' in a particular technology. Nonetheless, DOE does believe 
it is both possible and prudent to specify, in these regulations, 
parameters by which that determination will be made in particular cases 
in the future.
    Webster's II New College Dictionary (1999) defines the term ``new'' 
to mean ``[h]aving existed or been made for only a short time * * * 
[n]ever used before * * * [j]ust discovered, found, or learned * * *'' 
or somewhat unhelpfully, ``[n]ot yet old.'' The term ``significant'' is 
defined as ``meaningful * * * [m]omentous * * * important,'' and the 
term ``improve'' or ``improvement'' is defined as ``[t]o advance to a 
better quality or state * * * to increase the productivity or value * * 
* to make advantageous additions or changes.'' For purposes of the 
Title XVII program, moreover, it is important that a technology be new 
or significantly improved with respect to energy production, use, 
efficiency, or transportation, rather than with respect to other 
attributes. For example, a particular facility might have significantly 
improved aesthetic appeal in comparison to an older facility, but DOE 
does not believe that type of improvement alone should qualify a 
facility for a Title XVII loan guarantee.
    Thus, DOE proposes to define, by regulation, the term ``new or 
significantly improved technologies'' to mean technologies concerned 
with the production, consumption or transportation of energy, and that 
have either only recently been discovered or learned, or that involve 
or constitute meaningful and important improvements in the productivity 
or value of the technology. DOE requests comment on this definition.
    Because Title XVII focuses on encouraging and incentivizing 
innovative technologies, the Title XVII loan guarantee program should 
only be open to projects that employ a technology that has been used in 
a very limited number of commercial projects or for only a limited 
period of time. Indeed, when read together, sections 1701 and 1703 of 
Title XVII prohibit DOE from issuing loan guarantees for projects that 
only use commercial technologies that already are in general use in the 
United States at the time the guarantee is issued. In section 609.2 of 
the proposed regulations, DOE is proposing two possible ways of 
interpreting ``general use.'' First, DOE could interpret the term 
``general use'' to mean that a technology has been ordered for, 
installed in, or used in a certain number of commercial projects in the 
United States. So, as one alternative, DOE proposes to state in its 
regulations that a technology would be considered to be in general use, 
and therefore not eligible for a Title XVII loan guarantee, if it has 
been ordered for, installed in, or used in five or more projects in the 
United States at the time the loan guarantee is issued. Allowing loan 
guarantees for up to five projects employing the same type of 
technology would allow use of these guarantees to introduce innovative 
technologies to the commercial marketplace, but would also ensure that 
guarantees can only be issued for a limited number of projects before 
it will be up to the commercial marketplace to decide whether the 
economic and environmental benefits of a particular technology justify 
continued investments in it.
    As a second alternative, DOE proposes to state in its regulations 
that a technology would be considered to be in general use, and 
therefore not eligible for a Title XVII loan guarantee, if it has been 
in operation in a commercial project in the United States for a 
particular number of years. Under this alternative, there would be no 
numerical limit on the number of loan guarantees DOE could issue for a 
particular technology--it might be 50, 10, 5, 1 or even zero. Whether 
DOE could issue a guarantee would be determined in each case by whether 
the technology at issue had been in operation in a commercial project 
in the United States for a particular number of years, which DOE 
proposes to be five years. The five-year period would begin on the date 
that the technology is commissioned on the particular commercial 
project. DOE selected the period of five years because it believes that 
this period of time will allow a sufficient period for early commercial 
operation and for proving the viability of a technology in the 
commercial marketplace.
    DOE requests comment on these alternative interpretations and 
approaches. DOE furthermore requests comment as to whether, regardless 
of which alternative is adopted in the final rule, the same definition 
should apply to all types of projects and technologies. For example, if 
the first alternative described above is adopted, should the relevant 
number of projects or technologies be the same for renewable energy 
systems, advanced nuclear energy facilities, pollution control 
equipment, and all other potentially eligible technologies and 
projects? Or, should the number specified in DOE's regulations be 
different for different types of projects and technologies? Similarly, 
if the second alternative described above is adopted, should the time 
period be the same for all types of eligible projects and technologies? 
And if it should be different, why? Commenters who wish to express 
views on any of these issues are requested to supply specific 
information and data supporting their views.
    The Department notes that regardless of the resolution of the 
issues discussed above, a project may be eligible for a Title XVII loan 
guarantee if it uses technology that has been used in any number of 
projects outside the United States and for any period of time outside 
the United States, so long as the technology is not in ``general use'' 
in the United States.

B. Project Costs

    Proposed section 609.10, in accordance with section 1702(c) of the 
Act, provides that any loan guarantee issued by DOE may not exceed 80 
percent of total Project Costs. Sections 609.2 and 609.12 of the 
proposed rule define ``Project Costs'' as those that are necessary, 
reasonable, customary, and directly related to the design, engineering, 
financing, construction, startup, commissioning and shake down of an 
Eligible Project. Conversely, excluded costs cover initial research and 
development costs, the credit subsidy cost, any administrative fees 
paid subsequent to section 1702(h), and operating costs after the 
facility has been placed in service. These are costs associated with, 
and a condition of, receiving a federal loan guarantee. Furthermore, if 
theses costs were allowed, in the case of default, these costs would be 
shifted from the project sponsor to the federal taxpayer. DOE invites 
public comments on these issues.

C. Solicitation

    Section 609.3 of the proposed regulations requires DOE to issue a 
solicitation to start the process that ultimately would culminate in 
the Department issuing a loan guarantee. This section also sets forth 
certain minimum requirements for each solicitation, including the fees 
that will be required of persons invited to submit Applications and 
criteria that the Department will use to weigh competing Pre-
Applications, when Pre-Applications are requested, and Applications, 
and to make ultimate selections for loan guarantees.

[[Page 27475]]

    Generally, DOE plans to solicit Pre-Applications only when Pre-
Applications can minimize or reduce the financial burdens on Project 
Sponsors prior to a determination that a particular technology will 
likely not be sufficiently developed or mature to satisfy the minimum 
requirements for successful commercial operations. This approach would 
also reduce DOE's administrative costs incurred for detailed review of 
multiple full Applications in technology areas where most of the 
projects will likely not be ready for commercial operations.
    The proposed regulations permit DOE to start the solicitation 
process by soliciting Pre-Applications, or by skipping the Pre-
Application stage and soliciting Applications, because DOE believes a 
Pre-Application stage may be appropriate and necessary for some 
technologies and projects but perhaps not for others. Solicitations for 
Pre-Applications or Applications issued after promulgation of the final 
rule must address many important aspects of the application process, 
including the relevant period of time during which Pre-Applications or 
Applications for loan guarantees may be filed. Because each project 
will be unique and each loan guarantee potentially subjects the Federal 
government to significant financial liability, DOE plans to engage in a 
rigorous review of a proposed project before determining whether it may 
be eligible for a Loan Guarantee Agreement and subsequently approving 
and issuing loan guarantees.
    DOE does not intend to substantively review and evaluate Pre-
Applications or Applications for any proposals that do not meet the 
specific requirements of the applicable solicitation. Likewise, only 
Applications invited by DOE or submitted in response to a solicitation 
will be considered for a Loan Guarantee Agreement. Consistent with 
section 20320(b) of Public Law 110-5, the proposed regulations require 
that programmatic, technical and financial factors to be used by DOE to 
select projects for loan guarantees. Section 609.7 satisfied this 
requirement.

D. Payment of the Credit Subsidy Cost

    Section 1702(b) of the Act states that: ``No guarantee shall be 
made unless (1) an appropriation for the cost has been made; or (2) the 
Secretary has received from the borrower a payment in full for the cost 
of the obligation and deposited the payment into the Treasury.'' (42 
U.S.C. 16512) Therefore, either Congress must appropriate funds to 
cover the Credit Subsidy Cost of the Loan Guarantee or the Borrower 
must make payment to DOE of this cost. DOE has neither requested nor 
received appropriations to make partial or full payment of the Credit 
Subsidy Cost. However, section 20320(a) of Pub. L. 110-5 authorized DOE 
to accept Credit Subsidy Cost payments from Borrowers to pay the full 
subsidy costs of loan guarantees, and DOE's current intent is to 
implement the Title XVII program only through the self-pay authority of 
section 1702(b)(2) of the Act. Furthermore, DOE interprets section 
1702(b) as not allowing for partial payment of the Credit Subsidy Cost 
by Borrower with the remainder covered by a Congressional 
appropriation; section 1702(b) authorizes either an appropriation or 
payment of this cost in full by the Borrower. DOE proposes to 
memorialize this interpretation of section 1702(b) of the Act in 
section 609.9 of the regulations.

E. Assessment of Fees

    In addition to the Credit Subsidy Cost, section 1702(h) also 
requires DOE to ``charge and collect fees for guarantees'' to cover the 
Administrative Cost of Issuing a Loan Guarantee. Proposed Sec. Sec.  
609.6, 609.8 and 609.10 provide that DOE shall collect fees for 
administrative expenses to cover all phases of an Eligible Project. As 
defined in proposed Sec.  609.2, fees consist of the administrative 
expenses that DOE incurs during:
    (1) The evaluation of a Pre-Application, if a Pre-Application is 
requested in a solicitation, and an Application for a loan guarantee;
    (2) The offering of a Term Sheet, executing the Conditional 
Commitment, negotiation, and closing of a Loan Guarantee Agreement; and
    (3) The servicing and monitoring of the Loan Guarantee Agreement, 
including during construction, start-up, commissioning, shakedown, and 
the operational phases of an Eligible Project.
    The Act, and section 1702(h) in particular, affords DOE discretion 
with respect to the fees it imposes to cover applicable administrative 
costs. For the first solicitation issued by DOE in August 2006, DOE 
elected not to impose fees in connection with the Pre-Application stage 
and reserved the right to charge an Application fee as part of the 
invitation to submit an Application. DOE proceeded in this manner so as 
not to unduly discourage potential project sponsors from submitting 
Pre-Applications. In the proposed regulations, DOE is requiring that 
the payment of administrative fees start with the submission of an 
Application. If implemented by DOE in the final rule, this would mean 
that Project Sponsors who submit Pre-Applications and are denied 
further consideration will not be charged any fees for expenses 
incurred by DOE in reviewing their Pre-Application materials. In 
addition, Pre-Applicants that are invited to submit Applications but 
decline to do so will also not be charged a fee. DOE does anticipate 
incurring significant administrative expenses as part of its review of 
Pre-Applications, and Applications which, in the absence of Pre-
Application and Application fees, would not be fully recouped by DOE. 
Under the proposed rule, the fees assessed to Borrowers who submit 
Applications and enter into Conditional Commitments will only cover the 
expenses attendant to that Borrower's project proposal and will not 
cover the costs incurred by DOE for reviewing other Pre-Applications 
that were denied further consideration. As stated above, section 
1702(h) requires that DOE ``charge and collect fees for guarantees * * 
* sufficient to cover applicable administrative expenses.'' DOE 
interprets this requirement as allowing it to charge and collect fees 
from the Applicant/Borrower to cover DOE's administrative expenses in 
connection with that particular Applicant/Borrower's project, or to 
charge and collect fees from Applicant/ Borrower to cover a 
proportionate share of DOE's administrative expenses for the entire 
loan guarantee program. In its proposed regulations, DOE adopts the 
former approach.
    Proposed section 609.6 provides that the Applicant must pay a 
filing fee with the submission of an Application (First Fee). This 
First Fee must be in an amount sufficient to cover DOE's administrative 
expenses in connection with DOE's review and evaluation of a Pre-
Application, if any, and the Application. A Second Fee (Second Fee) 
will be collected when DOE and the Applicant execute a Term Sheet which 
constitutes a Conditional Commitment. This Second Fee must be an amount 
sufficient to cover DOE's administrative expenses during the Term Sheet 
through the closing phase.
    At the closing and subsequent thereto, DOE will collect fees, as 
specified in the Conditional Commitment, for DOE's servicing and 
monitoring expenses throughout the term of the guaranteed loan (Third 
Fee). The Third Fee may be assessed and collected quarterly, annually, 
or more or less frequently, as determined by the Secretary, including 
one lump sum payment at the closing. The Third Fee may be a percentage 
of the amount of Guaranteed Obligations outstanding from time to time 
or specific dollar amounts based on DOE's

[[Page 27476]]

actual and/or reasonably anticipated administrative expenses.
    The First and Second Fees are not refundable and must be paid 
regardless of whether a Loan Guarantee Agreement is executed. The Third 
Fee is also not refundable and the amount and method of payment of the 
Third Fee will be specified in the Loan Guarantee Agreement. This will 
enable DOE to comply with the mandate of section 1702(h) of the Act to 
charge fees to cover DOE's administrative expenses ``for guarantees'' 
while also ensuring that Applicants act in good faith when submitting 
an Application and use their best efforts to meet all specified 
requirements of the Conditional Commitment. DOE invites public comments 
as to all aspects concerning the assessment of fees for the 
Department's administrative expenses.

F. Financial Structure

    The Act does not impose any specific limitations on the financial 
structure of proposed projects, other than that the loan guarantee 
``shall not exceed an amount equal to 80 percent of the project cost of 
the facility that is the subject of the guarantee as estimated at the 
time at which the guarantee is issued.'' (42 U.S.C. 16512(c)) However, 
section 1702(d)(1) provides: ``No guarantee shall be made unless the 
Secretary determines that there is reasonable prospect of repayment of 
the principal and interest on the obligation by the Borrower.'' (42 
U.S.C. 16512(d)(1)) DOE therefore must make repayment of debt a very 
high priority of the loan guarantee program and DOE is authorized to 
adopt policies to ensure that Borrowers and Eligible Lenders use their 
best efforts to ensure repayment of Guaranteed Obligations.
    This view is bolstered by the mandate of section 1702(g)(2)(B), 
which requires that ``with respect to any property acquired pursuant to 
a guarantee or related agreements, [the rights of the Secretary] shall 
be superior to the rights of any other person with respect to the 
property.'' DOE interprets this statutory provision to require that DOE 
possess a first lien priority in the assets of the project and other 
assets pledged as security. Because DOE believes it is not permitted by 
the Act to adopt a pari passu security structure, holders of the non-
guaranteed portion of a loan or debt instrument will have a subordinate 
claim to DOE in the event of default.
    To harmonize and balance the twin goals of issuing loan guarantees 
to encourage use of new or significantly improved technologies in 
Eligible Projects while limiting the financial exposure of the Federal 
government, DOE expressed a preference in the August 2006 Guidelines 
for guaranteeing no more than 80 percent of the total face amount of 
any single debt instrument. The Guidelines further provided that under 
no circumstances would DOE guarantee 100 percent of a loan or other 
debt obligation.
    In today's rule, DOE is proposing to guarantee up to 90 percent of 
a particular debt instrument or loan obligation for an Eligible Project 
that can be guaranteed by a Title XVII loan guarantee, so long as DOE's 
guarantees do not account for more than 80 percent of Project Costs. 
Furthermore, in connection with any loan guaranteed by DOE that may be 
participated, syndicated, traded, or otherwise sold on the secondary 
market, DOE is proposing to require that the guaranteed portion and the 
non-guaranteed portion of the debt instrument or loan be sold on a pro-
rata basis. The guaranteed portion of the debt may not be ``stripped'' 
from the non-guaranteed portion, i.e. sold separately as an instrument 
fully guaranteed by the Federal government. DOE invites public comment 
on the 90 percent loan guarantee limitation and the prohibition on 
``stripping.''
    The primary purpose of the Title XVII loan guarantee program is to 
support projects using or employing ``new or significantly improved 
technologies.'' These new technologies, by definition, have not been 
proven in commercial projects in the United States and therefore may 
present significant risks for Title XVII loan guarantees. DOE believes 
that the sum of Title XVII requirements suggest that a guarantee of up 
to 90% of the face value of a loan may be required to achieve program 
goals.
    DOE intends to gain valuable experience from the first round of 
proposals submitted under the Guidelines, where some Pre-Applicants 
sought loan guarantees for 80% or less of their proposed debt 
instruments. In developing final regulations, DOE will take into 
account, among other things, the comments on this proposal, DOE's 
experience with the first round of proposals, and whether there are 
other methods of assuring that Eligible Lenders bear some of the 
financial risk exist while at the same time assuring that the 
objectives of the Title XVII program are accomplished. DOE requests 
public comment on the proposal to allow up to a 90 percent loan 
guarantee, the technology or circumstance that might warrant providing 
this level of guarantee, whether Eligible Lenders will perform adequate 
due diligence in the absence of assuming some amount of risk, the 
applicability of practices employed by other Federal agencies to DOE's 
loan guarantee program, and whether DOE's proposal will facilitate the 
goal of offering loan guarantees to encourage early commercial use of 
innovative technologies.
    DOE also will consider whether Project Sponsors have a significant 
financial commitment to the project. The Act does not mandate a 
specific equity contribution, but DOE is proposing to require that the 
Project Sponsors have a significant equity stake in a project. DOE 
solicits comments on the merits of adopting a minimum equity percentage 
requirement for projects.
    In addition, DOE intends to consider whether a Project Sponsor will 
rely upon other government assistance (e.g., grants, tax credits, other 
loan guarantees) to support financing, construction or operation of a 
project. DOE will manage the loan guarantee program in a manner that 
seeks to minimize support of projects that rely on multiple forms of 
significant Federal financial assistance; in general, DOE believes it 
is desirable that each project receive only one form of such 
assistance. Therefore, if an applicant is or will be receiving multiple 
forms of significant Federal financial assistance, that fact generally 
will be a negative factor when DOE evaluates loan guarantee 
applications. Nonetheless, the receipt of other forms of assistance 
will not disqualify a project from being eligible for a DOE loan 
guarantee, and DOE furthermore recognizes that in some situations--such 
as, for example, with respect to the first new nuclear generating 
facilities, which may be eligible for risk insurance agreements, loan 
guarantees and tax credits--multiple forms of federal assistance to the 
same project could advance important national energy policy priorities.
    Finally, DOE is proposing to require with submission of 
Applications, a credit assessment for the project without a loan 
guarantee from a nationally recognized rating agency, where the size 
and estimated cost of the project justify such an assessment. 
Additionally, DOE is proposing to require not later than 30 days prior 
to closing, that Applicants provide a credit rating from a nationally 
recognized rating agency reflecting the Final Term Sheet for the 
project without a Federal guarantee. The Department requests comment as 
to whether it should establish a project size (dollar) threshold below 
which the Department would have authority to waive this credit rating 
requirement.

[[Page 27477]]

G. Eligible Lenders

    In further support of DOE's objective to ensure full repayment of 
debt, consistent with section 20320(b)(2) of the CR, participating 
Eligible Lenders or other servicers must meet certain eligibility, 
monitoring, and performance requirements. These requirements, set forth 
in sections 609.2 and 609.11 of the proposed regulations, are intended 
to ensure that the Eligible Lender or other servicer has the financial 
wherewithal and appropriate experience and expertise to meet its 
fiduciary obligations in connection with the debt guaranteed by DOE. As 
provided in proposed section 609.11, Eligible Lenders or other 
servicers must exercise a high level of care and diligence in the 
review and evaluation of a project, and in enforcing the conditions 
precedent to all loan disbursements, as provided in the Loan Guarantee 
Agreement, Loan Agreement, and related documents, throughout the term 
of the Guaranteed Obligation. Moreover, as provided in proposed section 
609.11, DOE also expects each Eligible Lender or other servicer to 
diligently perform its duties in the servicing and collection of the 
loan or other debt obligation as well as in ensuring that the 
collateral package securing the loan remains uncompromised. Proposed 
section 609.11 requires the Eligible Lender or other servicer to 
provide to DOE regular, periodic financial reports on the status and 
condition of the loan or other debt obligation, consistent with the 
terms of the Loan Guarantee Agreement. The Eligible Lender or other 
servicer is required to notify DOE promptly if it becomes aware of any 
problems or irregularities concerning the project or the ability of the 
Borrower to make payment on the loan or other debt obligations.

H. FCRA

    The Federal Credit Reform Act of 1990 (FCRA) provides that for any 
federal credit program, new direct loans and loan guarantees may not be 
made unless authority has been provided in appropriations Acts(s). See 
2 U.S.C. 661c(b). Title XVII only authorizes future appropriations 
action. The Department does not understand section 1702(b) of the Act 
as constituting either budget authority or other authority to make any 
individual loan guarantee, as is required by FCRA. Thus, the Department 
reads the Act and FCRA in harmony, which means that while Title XVII 
authorizes DOE to carry out the loan guarantee program, the Department 
may not issue guarantees until it receives new budget authority or is 
otherwise provided authority to make guarantees in an appropriations 
Act. While DOE notes that the Government Accountability Office has 
expressed disagreement with this interpretation, the Department intends 
to follow its own interpretation of Title XVII and FCRA in carrying out 
this program.
    On February 15, 2007, President Bush signed the CR into law. The CR 
provides DOE with the necessary authority, consistent with FCRA and 
Title XVII section 1702, to guarantee, in the aggregate, up to $4 
billion in loans for Title XVII projects. The authority to issue 
guarantees, however, was limited to Borrowers who pay the applicable 
Credit Subsidy Costs.

I. Default and Audit Provisions

    Title XVII, sections 1702(g) and 1702(i), specifically require that 
DOE promulgate regulations to address default and audit requirements. 
(42 U.S.C. 16512(g), (i)) Sections 609.15 and 609.17, respectively, 
address these requirements. These provisions will apply to all loan 
guarantees issued under the Title XVII program, including those in 
response to the August 2006 Solicitation.

J. Tax Exempt Debt

    Section 103(a) of the Internal Revenue Code (IRC), 26 U.S.C. 
103(a), provides that ``gross income'' does not include interest on any 
state or local bond, with certain exceptions. Section 149(b) of the 
IRC, 26 U.S.C. 149(b), however, provides that the section 103(a) 
exclusion from gross income ``shall not apply to a state or local bond 
if such bond is federally guaranteed.'' Section 149(b) in effect 
converts tax exempt debt to taxable debt when such debt is guaranteed 
by the Federal government. Accordingly, section 609.10 of today's 
proposed regulations prohibits DOE from directly or indirectly 
guaranteeing tax exempt obligations.

K. Full Faith and Credit

    Section 609.14 of the proposed regulations provides that the full 
faith and credit of the United States is pledged to the payment of all 
Guaranteed Obligations. It further provides that the guarantee shall be 
conclusive evidence that it has been properly obtained, that the 
underlying loan qualified for the guarantee, and that but for fraud or 
material misrepresentation by the Holder, is presumed to be valid, 
legal and enforceable. Section 609.14 is consistent with the model 
provision set forth in OMB Circular A-129, ``Policies for Federal 
Credit Programs and Non-Tax Receivables,'' as well as similar 
provisions in the regulations governing a number of other federal 
credit programs. The Department maintains a strong interest in ensuring 
that the debt incurred in order to finance innovative projects eligible 
for Title XVII loan guarantees can be financed and sold in secondary 
markets and requests comment on whether the language of section 609.14 
needs to be modified in order to accomplish this goal, while at the 
same time ensuring that the Federal Government is not exposed to undue 
financial risk because of fraud or misrepresentation.

III. Public Comment Procedures

A. Written Comments

    Interested persons are invited to participate in this proceeding by 
submitting data, views, and arguments. Written comments should be 
submitted to the address, and in the form, indicated in the ADDRESSES 
section of this Notice of Proposed Rulemaking. To help DOE review the 
comments, interested persons are asked to refer to specific proposed 
rule provisions, whenever possible.
    If you submit information that you believe to be exempt by law from 
public disclosure, you should submit one complete copy, as well as one 
copy from which the information claimed to be exempt by law from public 
disclosure has been deleted. DOE is responsible for the final 
determination with regard to disclosure or nondisclosure of the 
information and for treating it in accordance with the DOE's Freedom of 
Information regulations (10 CFR 1004.11). It is DOE's intention to 
honor requests for nondisclosure of information by an Applicant or 
Project Sponsor to the extent permitted under applicable laws.

B. Public Meeting

    A public meeting will be held at the time, date, and place 
indicated in the DATES and ADDRESSES sections of this Notice of 
Proposed Rulemaking. Any person or representative of a group or class 
of persons who has an interest in this proposed rule may request an 
opportunity to make an oral presentation. A person wishing to speak 
must submit his or her request to make an oral presentation to the 
person and in the manner specified in the DATES section of this notice 
by 4:30 p.m. on the date specified for making such requests. The person 
should provide a daytime phone number where he or she can be reached. 
Each oral presentation will be limited to 20 minutes, unless the 
presiding official determines that the number of persons wishing to 
speak

[[Page 27478]]

warrants a different amount of time. Persons making oral presentations 
are requested to bring 3 copies of their prepared statement to the 
meeting and submit them to the registration desk.
    DOE reserves the right to select the persons who will speak. DOE 
also reserves the right to schedule speakers' presentations and to 
establish the procedures for conducting the meeting. A DOE official 
will be designated to preside at the meeting. The meeting will not be a 
judicial or evidentiary-type hearing, but will be conducted in 
accordance with 42 U.S.C. 7191. Any further procedural rules for the 
conduct of the meeting will be announced by the presiding official.
    A transcript of the meeting will be made, and the entire record of 
this rulemaking will be retained by DOE and made available as provided 
in the ADDRESSES section of this Notice of Proposed Rulemaking.

IV. Regulatory Review

A. Executive Order 12866

    Today's proposed rule has been determined to be a significant 
regulatory action under Executive Order 12866, ``Regulatory Planning 
and Review,'' 58 FR 51735 (October 4, 1993). Accordingly, this action 
was subject to review under that Executive Order by the Office of 
Information and Regulatory Affairs at OMB.

B. National Environmental Policy Act

    Through the issuance of this proposed rule, DOE is making no 
decision relative to the approval of a loan guarantee for a particular 
proposed project. DOE has, therefore, determined that publication of 
the proposed rule is covered under the Categorical Exclusion found at 
paragraph A.6 of Appendix A to Subpart D, 10 CFR Part 1021, which 
applies to the establishment of procedural rulemakings. Accordingly, 
neither an environmental assessment nor an environmental impact 
statement is required at this time. However, appropriate NEPA project 
review will be conducted prior to execution of a Loan Guarantee 
Agreement.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by Executive Order 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published 
procedures and policies on February 19, 2003, to ensure that the 
potential impacts of its rules on small entities are properly 
considered during the rulemaking process (68 FR 7990). DOE has made its 
procedures and policies available on the Office of General Counsel's 
Web site: https://www.gc.doe.gov.
    DOE is not obliged to prepare a regulatory flexibility analysis for 
this rulemaking because there is no requirement to publish a general 
notice of proposed rulemaking for loan guarantee rules under the 
Administrative Procedure Act (5 U.S.C. 553).

D. Paperwork Reduction Act

    Proposed sections 609.4 and 609.6 provide that Pre-Applications and 
Applications for loan guarantees submitted to DOE in response to a 
solicitation must contain certain information. This information will be 
used by DOE to determine if a project sponsor who submits a Pre-
Application will be invited to submit an Application for a loan 
guarantee; to determine if a project is eligible for a loan guarantee; 
and to evaluate Applications under criteria specified in the proposed 
rule. Proposed Sec.  609.17 provides that borrowers must submit to DOE 
annual project performance reports and audited financial statements 
along with other information. DOE will use this information to evaluate 
the progress of projects for which loan guarantees are issued. DOE has 
submitted this collection of information to the Office of Management 
and Budget for approval pursuant to the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501 et seq.) and the procedures implementing that Act, 5 
CFR 1320.1 et seq.
    DOE estimates that the annual reporting and recordkeeping burden 
for this collection of information will be 13,000 hours per year at a 
total annual cost of $1,750,000. Burden means the total time, effort, 
or financial resources expended by persons to generate, maintain, 
retain, or disclose or provide information to or for a federal agency. 
An agency may not conduct or sponsor, and a person is not required to 
respond to a collection of information unless it displays a currently 
valid OMB control number.
    Interested persons are invited to submit comments to OMB addressed 
to: Department of Energy Desk Officer, Office of Information and 
Regulatory Affairs, OMB, 725 17th Street, NW., Washington, DC 20503. 
Persons submitting comments to OMB also are requested to send a copy to 
the DOE contact person at the address given in the ADDRESSES section of 
this notice. OMB is particularly interested in comments on: (1) The 
necessity of the proposed information collection requirements, 
including whether the information will have practical utility; (2) the 
accuracy of DOE's estimates of the burden; (3) ways to enhance the 
quality, utility, and clarity of the information to be maintained; and 
(4) ways to minimize the burden of the requirements on respondents.

E. Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (Act) (2 
U.S.C. 1531 et seq.) requires each federal agency, to the extent 
permitted by law, to prepare a written assessment of the effects of any 
federal mandate in an agency rule that may result in the expenditure by 
state, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. The Act also requires a federal agency to 
develop an effective process to permit timely input by elected 
officials of state, tribal, or local governments on a proposed 
``significant intergovernmental mandate,'' and requires an agency plan 
for giving notice and opportunity to provide timely input to 
potentially affected small governments before establishing any 
requirements that might significantly or uniquely affect small 
governments.
    The term ``federal mandate'' is defined in the Act to mean a 
federal intergovernmental mandate or a federal private sector mandate 
(2 U.S.C. 658(6)). Although the rule will impose certain requirements 
on non-federal governmental and private sector applicants for loan 
guarantees, the Act's definitions of the terms ``federal 
intergovernmental mandate'' and ``federal private sector mandate'' 
exclude, among other things, any provision in legislation, statute, or 
regulation that is a condition of federal assistance or a duty arising 
from participation in a voluntary program (2 U.S.C. 658(5) and (7), 
respectively). Today's rule establishes requirements that persons 
voluntarily seeking loan guarantees for projects that would use certain 
new and improved energy technologies must satisfy as a condition of a 
federal loan guarantee. Thus, the rule falls under the exceptions in 
the definitions of ``federal intergovernmental mandate'' and ``federal 
private sector mandate'' for requirements that are a condition of 
federal assistance or a duty arising from

[[Page 27479]]

participation in a voluntary program. The Act does not apply to this 
rulemaking.

F. Treasury and General Government Appropriations Act, 1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any proposed rule that may affect family 
well being. The proposed rule would not have any impact on the autonomy 
or integrity of the family as an institution. Accordingly, DOE has 
concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

G. Executive Order 13132

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 4, 1999) 
imposes certain requirements on agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. Agencies are required to examine the constitutional and 
statutory authority supporting any action that would limit the 
policymaking discretion of the States and carefully assess the 
necessity for such actions. DOE has examined this proposed rule and has 
determined that it would not preempt State law and would not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. No further 
action is required by Executive Order 13132.

H. Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) Clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction; 
(4) specifies the retroactive effect, if any; (5) adequately defines 
key terms; and (6) addresses other important issues affecting clarity 
and general draftsmanship under any guidelines issued by the Attorney 
General. Section 3(c) of Executive Order 12988 requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. DOE has completed the 
required review and determined that, to the extent permitted by law, 
the proposed rule meets the relevant standards of Executive Order 
12988.

I. Treasury and General Government Appropriations Act, 2001

    The Treasury and General Government Appropriations Act, 2001 (44 
U.S.C. 3516 note) provides for agencies to review most disseminations 
of information to the public under guidelines established by each 
agency pursuant to general guidelines issued by OMB.
    OMB's guidelines were published at 67 FR 8452 (February 22, 2002), 
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). 
DOE has reviewed today's proposed rule under the OMB and DOE guidelines 
and has concluded that it is consistent with applicable policies in 
those guidelines.

J. Executive Order 13211

    Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 
(May 22, 2001) requires Federal agencies to prepare and submit to the 
OMB, a Statement of Energy Effects for any proposed significant energy 
action. A ``significant energy action'' is defined as any action by an 
agency that promulgated or is expected to lead to promulgation of a 
final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use. Today's regulatory 
action would not have a significant adverse effect on the supply, 
distribution, or use of energy and is therefore not a significant 
energy action. Accordingly, DOE has not prepared a Statement of Energy 
Effects.

List of Subjects in 10 CFR Part 609

    Administrative practice and procedure, Energy, Loan programs, and 
Reporting and recordkeeping requirements.

    Issued in Washington, DC, on May 10, 2007.
James T. Campbell,
Acting Chief Financial Officer.
    For the reasons stated in the Preamble, DOE proposes to amend 
chapter II of title 10 of the Code of Federal Regulations by adding a 
new part 609 as set forth below.

PART 609--LOAN GUARANTEES FOR PROJECTS THAT EMPLOY INNOVATIVE 
TECHNOLOGIES

Sec.
609.1 Purpose and Scope.
609.2 Definitions.
609.3 Solicitations.
609.4 Submission of Pre-Applications.
609.5 Evaluation of Pre-Applications.
609.6 Submission of Applications.
609.7 Programmatic, Technical and Financial Evaluation of 
Applications.
609.8 Term Sheets and Conditional Commitments.
609.9 Closing on the Loan Guarantee Agreement.
609.10 Loan Guarantee Agreement.
609.11 Lender Eligibility, Monitoring and Performance Requirements.
609.12 Project Costs.
609.13 Principal and Interest Assistance Contract.
609.14 Full Faith and Credit and Incontestability.
609.15 Default, Demand, Payment, and Collateral Liquidation.
609.16 Perfection of Liens and Preservation of Collateral.
609.17 Audit and Access to Records.
609.18 Deviations.

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


Sec.  609.1  Purpose and Scope.

    (a) This part sets forth the policies and procedures that DOE uses 
for receiving, evaluating, and, after consultation with the Department 
of the Treasury, approving applications for loan guarantees to support 
Eligible Projects under Title XVII of the Energy Policy Act of 2005.
    (b) Except as set forth in paragraph (c) of this section, this part 
applies to all Pre-Applications, Applications, Conditional Commitments 
and Loan Guarantee Agreements to support Eligible Projects under Title 
XVII of the Energy Policy Act of 2005.
    (c)(1) This part shall not apply to any Pre-Applications, 
Applications, Conditional Commitments or Loan

[[Page 27480]]

Guarantee Agreements under the Guidelines issued by DOE on August 8, 
2006, which were published in the Federal Register on August 14, 2006 
(71 FR 46451) and the solicitation issued on August 8, 2006 under Title 
XVII of the Energy Policy Act of 2005, provided the Pre-Application is 
accepted under the Guidelines and an Application is invited pursuant to 
such Pre-Application no later than December 31, 2007.
    (2) Notwithstanding paragraph (c)(1) of this section, Sec. Sec.  
609.15 and 609.17 shall apply to any Loan Guarantee Agreement entered 
into pursuant to or in response to DOE's August 8, 2006 solicitation.
    (3) Notwithstanding paragraph (c)(1) of this section, DOE and any 
Applicant who submitted an Application under the August 8, 2006 
solicitation may agree to make additional provisions of this part 
applicable to the particular project.
    (d) Part 1024 of chapter X of title 10 of the Code of Federal 
Regulations shall not apply to actions taken under this part.


Sec.  609.2  Definitions.

    Act means Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 
16511-16514).
    Administrative Cost of Issuing a Loan Guarantee means the total of 
all administrative expenses that DOE incurs during:
    (1) The evaluation of a Pre-Application and an Application for a 
loan guarantee;
    (2) The offering of a Term Sheet, executing the Conditional 
Commitment, negotiation, and closing of a Loan Guarantee Agreement; and
    (3) The servicing and monitoring of a Loan Guarantee Agreement, 
including during the construction, startup, commissioning, shakedown, 
and operational phases of an Eligible Project, and the potentially 
higher costs of servicing and monitoring trouble loans.
    Applicant means any person, firm, corporation, company, 
partnership, association, society, trust, joint venture, joint stock 
company, or other business entity or governmental non-Federal entity 
that has submitted an Application to DOE and has the authority to enter 
into a Loan Guarantee Agreement with DOE under the Act.
    Application means a comprehensive written submission in response to 
a solicitation or a written invitation from DOE to apply for a loan 
guarantee.
    Borrower means any Applicant who enters into a Loan Guarantee 
Agreement with DOE and issues Guaranteed Obligations.
    Commercial Technology means a technology in general use in the 
commercial marketplace in the United States, but does not include a 
technology solely by use of such technology in a demonstration project 
funded by DOE. A technology is in general use if it: [Alternative 1: 
Has been ordered for, installed in, or used in five or more projects in 
the United States] [Alternative 2: Has been in operation in a 
commercial project in the United States for a period of five years, as 
measured beginning on the date the technology was commission on a 
project.]
    Conditional Commitment means a Term Sheet offered by DOE and 
accepted by the Applicant, with the understanding of the parties that 
the Applicant thereafter satisfies all specified and precedent funding 
obligations, and all other contractual, statutory, regulatory or other 
requirements. A Conditional Commitment imposes no obligation on the 
Secretary to execute the Loan Guarantee Agreement.
    Contracting Officer means the Secretary of Energy or a DOE official 
authorized by the Secretary to enter into, administer and/or terminate 
contracts on behalf of DOE.
    Credit Subsidy Cost has the same meaning as ``cost of a loan 
guarantee'' in section 502(5)(C) of the Federal Credit Reform Act of 
1990 (2 U.S.C. 661a(5)(C)), which is the net present value, at the time 
the Loan Guarantee Agreement is executed, of the following estimated 
cash flows:
    (1) Payments by the Government to cover