Advanced Technology Vehicles Manufacturing Incentive Program, 66721-66737 [E8-26832]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 73, Number 219 (Wednesday, November 12, 2008)]
[Rules and Regulations]
[Pages 66721-66737]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26832]


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DEPARTMENT OF ENERGY

10 CFR Part 611

RIN 1901-AB25


Advanced Technology Vehicles Manufacturing Incentive Program

AGENCY: Office of the Chief Financial Officer, Department of Energy 
(Department or DOE).

ACTION: Interim final rule; request for comment.

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SUMMARY: Today's interim final rule establishes the Advanced Technology 
Vehicles Manufacturing Incentive Program authorized by section 136 of 
the Energy Independence and Security Act of 2007, as amended. Section 
136 provides for grants and loans to eligible automobile manufacturers 
and component suppliers for projects that reequip, expand, and 
establish manufacturing facilities in the United States to produce 
light-duty vehicles and components for such vehicles, which provide 
meaningful improvements in fuel economy performance beyond certain 
specified levels. Section 136 also provides that grants and loans may 
cover engineering integration costs associated with such projects. This 
interim final rule establishes applicant eligibility and project 
eligibility requirements for both the grant and the loan program. 
Today's interim final rule also establishes the application 
requirements and the general terms for the loan program. At present, 
Congress has appropriated funds through the Consolidated Security, 
Disaster Assistance, and Continuing Appropriations Act, 2009, for only 
the loan program. As such, DOE will be implementing the loan program 
only at this time, though issuing rules for both the grant and loan 
programs.

DATES: This interim final rule is effective November 12, 2008. 
Applications for a direct loan will be reviewed by DOE in tranches. To 
be eligible for the first tranche, applications may be submitted or 
hand delivered to the Postal Mail address listed in ADDRESSES until 
December 31, 2008. The deadline for loan applications for subsequent 
tranches of loans will be the end of every calendar quarter thereafter 
as funds and available loan authority permit. Comments must be received 
by DOE no later than December 12, 2008. 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 
accordingly under the DOE Freedom of Information regulations at 10 CFR 
1004.11.

ADDRESSES: You may submit comments, identified by any of the following 
methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: ATVMLoan@hq.doe.gov.
     Postal Mail: Advanced Technology Vehicles Manufacturing 
Incentive Program, U.S. Department of Energy, 1000 Independence Avenue, 
SW., Washington, DC 20585.
     Hand Delivery/Courier: Advanced Technology Vehicles 
Manufacturing Incentive Program, U.S. Department of Energy, 1000 
Independence Avenue, SW., Washington, DC 20585.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking.

FOR FURTHER INFORMATION CONTACT: Lachlan Seward, Advanced Technology 
Vehicles Manufacturing Incentive Program, U.S. Department of Energy, 
1000 Independence Avenue, SW., Washington, DC 20585, 202-586-8146; or 
Daniel Cohen, Assistant General Counsel for Legislation and Regulatory 
Law, Office of the General Counsel, 1000 Independence Avenue, SW., 
Washington, DC 20585, 202-586-2918.

SUPPLEMENTARY INFORMATION:
I. Introduction and Background
II. Discussion of Interim Final Rule
    A. Applicant Eligibility for Grant and Loan Programs--Statutory 
Criteria
    B. Applicant Eligibility for Direct Loan Program--Secretarial 
Determinations
    C. Project Eligibility for Grant and Loan Programs
    D. Terms for Direct Loans
    E. Application Process for Direct Loan Program
    F. Credit Subsidy Cost for Direct Loans
    G. Project Costs
    H. Assessment of Fees for Direct Loan Program
    I. Assessment of Applications and Program Priorities
III. Application Submission
IV. Regulatory Review
    A. Review Under Executive Order 12866
    B. Review Under National Environmental Policy Act of 1969
    C. Review Under the Regulatory Flexibility Act
    D. Review Under the Paperwork Reduction Act
    E. Review Under the Unfunded Mandates Reform Act of 1995
    F. Review Under the Treasury and General Government 
Appropriations Act, 1999
    G. Review Under Executive Order 13132
    H. Review Under Executive Order 12988
    I. Review Under the Treasury and General Government 
Appropriations Act, 2001
    J. Review Under Executive Order 13211
    K. Congressional Notification
    L. Approval by the Office of the Secretary of Energy

I. Introduction and Background

    Section 136 of the Energy Independence and Security Act of 2007 
(``EISA''), enacted on December 19, 2007, Public Law 110-140, 
authorizes the Secretary of Energy (``Secretary'') to make grants and 
direct loans to eligible applicants for projects that reequip, expand, 
or establish manufacturing facilities in the United States to produce 
qualified advanced technology vehicles, or qualifying components and 
also for

[[Page 66722]]

engineering integration costs associated with such projects.
    On September 30, 2008, President Bush signed into law the 
Consolidated Security, Disaster Assistance, and Continuing 
Appropriations Act, 2009. (Pub. L. 110-329; ``Continuing Resolution, 
2009''). Section 129(a) of the Continuing Resolution, 2009, 
appropriated $7,500,000,000 for the ``Advanced Technology Vehicles 
Manufacturing Loan Program Account'' for the cost of direct loans as 
authorized by EISA section 136(d) and states that commitments for 
direct loans using such amount shall not exceed $25,000,000,000 in 
total loan principal, and $10 million for DOE's administrative expenses 
for implementing the program.
    Further, section 129(c) of the Continuing Resolution, 2009, also 
made several substantive amendments to section 136. Specifically, 
section 136 was amended to provide:
    1. That the Department will pay the full credit subsidy cost of the 
loans;
    2. The Department with limited flexibility from the general rules 
applicable to the hiring of Federal staff and consultants necessary to 
administer the program; and
    3. That, not later than 60 days after enactment of the Continuing 
Resolution, 2009, the Secretary shall promulgate an interim final rule 
establishing regulations that the Secretary deems necessary to 
administer section 136 and any loans made by the Secretary pursuant 
thereto.
    By directing the Department to issue an interim final rule, 
Congress required the Department to issue a rule without having first 
issued a proposed rule for public comment. Though under no obligation 
to accept public comment prior to issuance, the Department received 
comments at a series of meetings it held with a variety of 
stakeholders. The comments received at those meetings were considered 
in the development of this interim final rule. A list of the meetings 
held and the written comments that were received can be viewed at: 
https://www.atvmloan.energy.gov. Through publication of this interim 
final rule, the Department is also providing a comment period until 
December 12, 2008. Comments submitted during this period will be 
reviewed and a final rule, responding to those comments as well as 
reflecting the experience the Department gains in implementing this 
interim final rule, will be issued at a later date.
    Today's interim final rule establishes regulations necessary to 
implement the loan and grant programs authorized by section 136 of 
EISA, as amended by the Continuing Resolution, 2009 (hereinafter 
referred to as ``section 136''). Additionally, concurrent with the 
release of today's interim final rule, the Department is announcing 
that applications for the first tranche of loans must be submitted to 
the Department on or before the effective date of today's interim final 
rule. The deadline for loan applications for subsequent tranches of 
loans will be every 90 days thereafter as funds and available loan 
authority permit.

II. Discussion of the Interim Final Rule

    Section 136 authorizes the Secretary to issue grants and direct 
loans to applicants for the costs of reequipping, expanding, or 
establishing manufacturing facilities in the United States to produce 
qualified advanced technology vehicles, or qualifying components. 
Section 136 also authorizes the Secretary to issue grants and direct 
loans for the costs of engineering integration performed in the United 
States of qualifying advanced technology vehicles and qualifying 
components. Section 136 sets forth certain specific conditions 
pertaining to the grant and direct loan programs, but also leaves to 
the Secretary's discretion the interpretation of other criteria. This 
interim final rule sets forth eligibility criteria, application 
procedures, outlines specific terms and conditions for the receipt of 
grants and direct loans, and sets forth interpretations of other 
provisions that section 136 requires the Department to address.
    Section 136 defines ``advanced technology vehicle'' as a ``light 
duty vehicle that meets--(A) the Bin 5 Tier II emission standard 
established in regulations issued by the Administrator of the 
Environmental Protection Agency under section 202(i) of the Clean Air 
Act (42 U.S.C. 7521(i)), or a lower-numbered Bin emission standard; (B) 
any new emission standard in effect for fine particulate matter 
prescribed by the Administrator under that Act (42 U.S.C. 7401 et 
seq.); and (C) at least 125 percent of the average base year combined 
fuel economy for vehicles with substantially similar attributes.''
    Section 136 defines the term ``qualifying components'' to mean 
``components that the Secretary determines to be--(A) designed for 
advanced technology vehicles; and (B) installed for the purpose of 
meeting the performance requirements of advanced technology vehicles.''
    Section 136 defines ``engineering integration costs'' to include 
the cost of engineering tasks relating to ``(A) incorporating 
qualifying components into the design of advanced technology vehicles; 
and (B) designing tooling and equipment and developing manufacturing 
processes and material suppliers for production facilities that produce 
qualifying components or advanced technology vehicles.''
    In today's interim final rule DOE adopts several definitions and 
provisions contained in the corporate average fuel economy (CAFE) 
regulations established by the National Highway Traffic Safety 
Administration (NHTSA) (codified at 49 CFR Parts 523-538). DOE 
recognizes that NHTSA has proposed to amend some of these definitions 
and provisions, in part, in response to EISA. See, 73 FR 24352; May 2, 
2008. It is anticipated that any amendments to the CAFE definitions 
that may result from NHTSA issuing a final rule will not impact the 
regulations established in today's interim final rule. However, if 
necessary, DOE may amend, in a future rulemaking document, today's 
interim final rule in response to future amendments to the CAFE 
regulations.

A. Applicant Eligibility for Grant and Direct Loan Programs--Statutory 
Criteria

    Section 136, as amended, directs the Secretary to establish 
``regulations that the Secretary deems necessary to administer this 
section and any loans made by the Secretary pursuant to this section.'' 
The statute requires the Department's regulations to establish 
eligibility requirements for both the grant and direct loan programs. 
To that end, section 136 lays out specific criteria for the Secretary 
to use to determine an applicant's eligibility, and directs the 
Secretary to make other determinations relating to eligibility prior to 
issuance of any loan or award of any grant.
    Section 136 contains a requirement that the Department promulgate 
regulations regarding eligibility of automobile manufacturers. There is 
no similar statutory eligibility requirement for component 
manufacturers. With regard to automobile manufacturers, section 136 
requires the Department's regulations to establish that

    [I]n order for an automobile manufacturer to be eligible for an 
award or loan under this section during a particular year, the 
adjusted average fuel economy of the manufacturer for light duty 
vehicles produced by the manufacturer during the most recent year 
for which data are available shall be not less than the average fuel 
economy for all light duty vehicles of the manufacturer for model 
year 2005.

(42 U.S.C. 17013(e))

[[Page 66723]]

    To determine the relevant fuel economy baselines for a new 
manufacturer or for a manufacturer that has not previously produced 
equivalent vehicles, the statute allows the Secretary to substitute 
industry averages. (42 U.S.C. 17013(e))
    Today's interim final rule establishes the regulations necessary to 
determine whether an automobile manufacturer meets the minimum fuel 
economy improvement threshold. If the applicant is an automobile 
manufacturer that manufactured vehicles in model year (MY) 2005 that 
were subject to the CAFE standards (existing manufacturers), that 
manufacturer must demonstrate that the fuel economy of its vehicle 
fleet (the manufacturer's passenger and light-duty truck fleets) for 
the most recent MY that data are available is no less than the fuel 
economy of its MY 2005 fleet.
    The statute requires that an existing manufacturer's MY 2005 
average fuel economy is to be compared to the adjusted average fuel 
economy of that manufacturer's light-duty fleet from the most recent 
year for which there is available data, but the statute does not 
specify which data. DOE interprets the ``most recent year for which 
data are available'' to mean the most recent model year for which a 
manufacturer has final data for the purpose of compliance with the fuel 
economy standards for passenger automobiles (49 CFR Part 531) and light 
trucks (49 CFR Part 533).\1\ By relying on the most recent MY for which 
final CAFE compliance data are available, the fuel economy comparison 
for existing manufacturers will be based on data approved by the U.S. 
Environmental Protection Agency (EPA) under 10 CFR Part 600.\1\
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    \1\ Compliance with the fuel economy standards is based on data 
approved by EPA. (See, 49 CFR 537.9).
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    Section 136 directs that this fuel economy comparison is to be 
based on an adjusted average fuel economy. Although the statute does 
not define ``adjusted average fuel economy,'' DOE, for purposes of 
today's interim final rule, has defined ``adjusted average fuel 
economy'' to mean a harmonic production weighted average of the 
combined fuel economy, as determined under the Energy Policy and 
Conservation Act (Pub. L. 94-163; ``EPCA''), as amended, of the 
vehicles within a manufacturer's vehicle fleet. In MY 2005, there was a 
CAFE standard applicable to vehicles defined as passenger automobiles 
\2\ and a CAFE standard applicable to vehicles defined as light 
trucks.\3\ The adjusted average fuel economy combines a manufacturer's 
passenger automobile fleet and light truck fleet, measured in miles per 
gallon (mpg).
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    \2\ ``Passenger automobile'' is defined for the purpose of CAFE 
as essentially any 4-wheeled vehicle propelled by fuel which is 
manufactured primarily for use on public roads, is rated at 10,000 
pounds gross vehicle weight or less, is manufactured primarily for 
the use in the transportation of 10 or fewer individuals, and is not 
a ``light truck.'' (See, 42 FR 38362, July 28, 1977, as amended at 
43 FR 12013, March 23, 1978; 44 FR 4493, Jan. 2, 1979)
    \3\ ``Light truck'' is defined for the purpose of the CAFE 
requirements, as
    (a) an automobile other than a passenger automobile which is 
either designed for off-highway operation, as described in paragraph 
(b) of this section, or designed to perform at least one of the 
following functions:
    (1) Transport more than 10 persons;
    (2) Provide temporary living quarters;
    (3) Transport property on an open bed;
    (4) Provide greater cargo-carrying than passenger-carrying 
volume; or
    (5) Permit expanded use of the automobile for cargo-carrying 
purposes or other nonpassenger-carrying purposes through the removal 
of seats by means installed for that purpose by the automobile's 
manufacturer or with simple tools, such as screwdrivers and 
wrenches, so as to create a flat, floor level surface extending from 
the forward most point of installation of those seats to the rear of 
the automobile's interior.
    (b) An automobile capable of off-highway operation is an 
automobile--
    (1)(i) That has 4-wheel drive; or
    (ii) Is rated at more than 6,000 pounds gross vehicle weight; 
and
    (2) That has at least four of the following characteristics [ 
]--
    (i) Approach angle of not less than 28 degrees.
    (ii) Breakover angle of not less than 14 degrees.
    (iii) Departure angle of not less than 20 degrees.
    (iv) Running clearance of not less than 20 centimeters.
    (v) Front and rear axle clearances of not less than 18 
centimeters each.
    (See, 42 FR 38362, July 28, 1977, as amended at 43 FR 12013, 
Mar. 23, 1978; 58 FR 18029, Apr. 7, 1993).
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    The fuel economy improvement threshold for eligibility specified in 
section 136(e) requires that automobile manufacturers applying under 
either the loan or grant program demonstrate a history of maintaining 
or improving the fuel economy of its fleet. Consistent with section 
136, DOE is requiring that an existing manufacturer demonstrate that 
the fuel economy of its passenger automobile and light duty truck fleet 
is at least as efficient as that manufacturer's MY 2005 fleet.
    To demonstrate compliance with the fuel economy level as required 
by subsection (e) of section 136, the adjusted average fuel economy of 
an existing automobile manufacturer's MY 2005 passenger automobile and 
light truck fleet is compared to the adjusted average fuel economy of 
that manufacturer's passenger automobile and light truck fleet for the 
most recent year in which final CAFE compliance data are available. The 
adjusted average fuel economy of an existing automobile manufacturer's 
fleet in the most recent year for which CAFE compliance data are 
available must be no less than the adjusted average fuel economy of 
that manufacturer's fleet in MY 2005.
    For example, if in MY 2005 a manufacturer produced vehicles as 
follows:

------------------------------------------------------------------------
                                                              Production
                       Model                           MPG      volume
------------------------------------------------------------------------
Passenger Automobile A.............................      27      150,000
Light Truck B......................................      20      200,000
Light Truck C......................................      17      100,000
------------------------------------------------------------------------

the adjusted average fuel economy for that manufacturer in MY 2005 
would be calculated as:
[GRAPHIC] [TIFF OMITTED] TR12NO08.008

In this example, the manufacturer's adjusted fuel economy average for 
the most recent year, at time of application, for which CAFE compliance 
data are available, must be no less than 20.99 mpg. Otherwise the 
manufacturer would not be eligible for a section 136 grant award or 
direct loan.

[[Page 66724]]

    If an automobile manufacturer is a new manufacturer, or has not 
previously produced ``equivalent vehicles'' (new automobile 
manufacturer), section 136 permits the Secretary to base the fuel 
economy improvement comparison on ``industry averages.'' Section 136 
does not define ``new manufacturer''' nor does it define ``equivalent 
vehicles.'' Based on the statute's specification of MY 2005 as the MY 
against which the fuel economy is compared, DOE interprets ``new 
manufacturer'' to mean a manufacturer that did not manufacture vehicles 
in MY 2005 that were subject to the CAFE standards.
    Further, section 136 does not define the term ``equivalent 
vehicles.'' The comparison for new automobile manufacturers is in terms 
of ``equivalent vehicles,'' which indicates a comparison at a level 
other than the fleet wide comparison required for existing 
manufacturers, i.e., a comparison of ``light duty vehicles produced by 
the manufacturer.'' However, use of ``equivalent vehicles'' in section 
136(e) does not indicate that the fuel economy comparison should be at 
a level as narrow as the comparison between vehicles with 
``substantially similar attributes'' as the statute specifies for 
criteria in determining whether a vehicle is an ``advanced technology 
vehicle.'' DOE interprets ``equivalent vehicle'' to mean a vehicle 
within the same class as is defined for the purpose of CAFE compliance, 
i.e., a passenger automobile or a light truck.
    For a new automobile manufacturer, eligibility under subsection (e) 
of section 136 is based on the fuel economy of the vehicle or vehicles 
that are the subject of the application. The projected combined fuel 
economy of the vehicles that are the subject of the application must be 
at least equal to the adjusted average fuel economy for all vehicles 
that were in the same vehicle class as the subject vehicles in MY 2005. 
It is likely that a new manufacturer will not have CAFE compliance data 
for a vehicle that is the subject of an application. In demonstrating 
the projected combined fuel economy of a vehicle for CAFE compliance 
data are not available, a new manufacturer must rely on a peer reviewed 
model (e.g., the Powertrain System Analysis Toolkit(copyright) (PSAT) 
\4\). A new automobile manufacturer is eligible if the demonstrated 
combined fuel economy of the subject vehicle is at least as efficient 
as the industry average for that vehicle class in MY 2005.
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    \4\ See, https://www.transportation.anl.gov/modeling_simulation/
PSAT/.
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    As noted above, an applicant that is a manufacturer of a qualifying 
component does not need to make a showing of improved fuel economy for 
the purpose of threshold applicant eligibility for a section 136 grant 
or loan. However, a component manufacturer will be required to 
demonstrate the contributions to fuel economy improvements of the 
qualifying component that is the subject of the grant or loan 
application. The necessary demonstration of a qualifying component's 
improvement to fuel economy is discussed later in this document.

B. Applicant Eligibility for Direct Loan Program--Secretarial 
Determinations

    Section 136 directs the Secretary to make certain determinations 
with regard to applicants for direct loans. First, the Secretary must 
determine that the applicant is ``financially viable without the 
receipt of additional Federal funding associated with the proposed 
project [.]'' In today's interim final rule, the Department interprets 
the term ``financially viable'' to mean that an applicant must 
demonstrate a reasonable prospect that the Applicant will be able to 
make payments of principal and interest on the loan as and when such 
payments become due under the terms of the loan documents, and that the 
applicant has a net present value which is positive, taking all costs, 
existing and future, into account. Determining whether an applicant has 
met this criterion is a decision committed by law to the Secretary. In 
making that determination, today's regulations provide that the 
Secretary will consider a number of factors, including, but not limited 
to:
    (1) The applicant's debt-to-equity ratio as of the date of the loan 
application;
    (2) The applicant's earnings before interest, taxes, depreciation, 
and amortization (EBITDA) for the applicant's most recent fiscal year 
prior to the date of the loan application;
    (3) The applicant's debt to EBITDA ratio as of the date of the loan 
application;
    (4) the applicant's interest coverage ratio (calculated as EBITDA 
divided by interest expenses) for the applicant's most recent fiscal 
year prior to the date of the loan application;
    (5) the applicant's fixed charge coverage ratio (calculated as 
EBITDA plus fixed charges divided by fixed charges plus interest 
expenses) for the applicant's most recent fiscal year prior to the date 
of the loan application;
    (6) the applicant's liquidity as of the date of the loan 
application;
    (7) statements from applicant's lenders that the applicant is 
current with all payments due under loans made by those lenders at the 
time of the loan application; and
    (8) financial projections demonstrating the applicant's solvency 
through the period of time that the loan is outstanding.
    As stated in section 136, the Secretary must find that the loan 
recipient is financially viable without ``additional Federal funding 
associated with the proposed project.'' In today's interim final rule, 
the Department interprets the term ``additional Federal funding'' to 
mean any loan, grant, guarantee, insurance, payment, rebate, subsidy, 
credit, tax benefit, or any other form of direct or indirect assistance 
from the Federal government, or any agency or instrumentality thereof, 
other than the proceeds of a loan approved under section 136, that is, 
or is expected to be made available with respect to, the project or 
activities for which the loan is sought under section 136, and is to be 
received by the applicant after entering into an Agreement with DOE.
    Section 136 also requires the Secretary to ensure that the proceeds 
of the direct loan are expended ``efficiently and effectively.'' The 
Secretary will carry out this obligation by reviewing documents 
required in 611.109 for purposes of loan monitoring and audit. Loan 
funds will be considered as being expended ``efficiently and 
effectively'' if that documentation demonstrates, in the sole judgment 
of the Secretary, that the borrower is making appropriate progress 
toward achieving the purpose for which the loan was originally made. 
The Department anticipates that in order to meet this requirement, loan 
proceeds will be disbursed through periodic drawdowns that correspond 
to actual project expenses.
    Section 136 also requires applicants to submit to the Secretary 
written assurance that ``(A) all laborers and mechanics employed by 
contractors or subcontractors during construction, alteration, or 
repair that is financed, in whole or in part, by a loan under this 
section shall be paid wages at rates not less than those prevailing on 
similar construction in the locality, as determined by the Secretary of 
Labor in accordance with sections 3141-3144, 3146, and 3147 of title 
40, United States Code; and (B) the Secretary of Labor shall, with 
respect to the labor standards described in this paragraph, have the 
authority and functions set forth in Reorganization Plan Numbered 14 of 
1950 (5 U.S.C. App.) and section 3145 of title 40, United States 
Code.'' Accordingly, section 611.101(m) of

[[Page 66725]]

today's interim final rule requires applicants to submit this required 
assurance as part of any direct loan application.

C. Project Eligibility for Grant and Loan Programs

    Under section 136, grants and direct loans may be provided for the 
costs of reequipping, expanding, or establishing manufacturing 
facilities in the United States to produce qualified advanced 
technology vehicles, or qualifying components. Section 136 also 
authorizes the Secretary to issue grants and direct loans for the costs 
of engineering integration performed in the United States of qualifying 
advanced technology vehicles and qualifying components. Specifically, 
subsection (b) of section 136 directs that for the grant program \5\--
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    \5\ At this time, no funds have been appropriated for the 
purpose of making grant awards under section 136(b).

    The Secretary shall provide facility funding awards under this 
section to automobile manufacturers and component suppliers to pay 
not more than 30 \6\ percent of the cost of--
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    \6\ As discussed later in this document, section 136 does not 
place a restriction on the percent of costs eligible under the 
direct loan program.
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    (1) reequipping, expanding, or establishing a manufacturing 
facility in the United States to produce--
    (A) qualifying advanced technology vehicles; or
    (B) qualifying components; and
    (2) engineering integration performed in the United States of 
qualifying vehicles and qualifying components.

(42 U.S.C. 17013(b))
    Under the loan provisions of section 136, the Secretary is directed 
``to provide a total of not more than $25,000,000,000 in loans to 
eligible individuals and entities (as determined by the Secretary) for 
the costs of activities described in subsection (b).'' (42 U.S.C. 
17013(d)(1)). Section 136 provides two categories of projects eligible 
for direct loans: (1) Manufacturing facilities in the United States 
designed to produce qualified advanced technology vehicles or qualified 
components; and (2) engineering integration performed in the United 
States of qualifying advanced technology vehicles and qualifying 
components. Eligible costs of such projects are: (a) Those costs that 
are reasonably related to the reequipping, expanding, or establishing a 
manufacturing facility in the United States to produce qualifying 
advanced technology vehicles or qualifying components; (b) costs of 
engineering integration performed in the United States for qualifying 
vehicles or qualifying components. Costs eligible for payment with loan 
proceeds are costs incurred, but not yet paid by the borrower, after a 
substantially complete application has been submitted to DOE and costs 
incurred after the closing of the loan.
    The statute defines ``advanced technology vehicle'' as--

    [L]ight duty vehicle that meets--
    (A) the Bin 5 Tier II emission standard established in 
regulations issued by the Administrator of the Environmental 
Protection Agency under section 202(i) of the Clean Air Act (42 
U.S.C. 7521(i)), or a lower-numbered Bin emission standard;
    (B) any new emission standard in effect for fine particulate 
matter prescribed by the Administrator under that Act (42 U.S.C. 
7401 et seq.); and
    (C) at least 125 percent of the average base year combined fuel 
economy for vehicles with substantially similar attributes.

(42 U.S.C. 17013(a)(1))
    As stated above, the statute does not define ``light duty 
vehicle.'' DOE interprets ``light duty vehicles'' to be vehicles 
currently subject to the CAFE requirements under EPCA, (i.e., passenger 
automobiles and light trucks).
    The first two provisions of the statutory definition of ``advanced 
technology vehicle'' ensure that such a vehicle has low emissions. 
Pursuant to its authority under the Clean Air Act, on February 10, 
2000, the EPA published a final rule establishing new Federal emission 
standards for passenger cars and light trucks (see 65 FR 6698). Known 
as the Tier II Program, the emissions standards in EPA's final rule 
cover light-duty vehicles (i.e., passenger cars and light trucks with a 
gross vehicle weight rating (GVWR) of 6,000 pounds or less, as well as 
``medium-duty passenger vehicles'' (MDPVs)).\7\
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    \7\ An MDPV is defined as a light truck rated at more than 8,500 
lbs GVWR, or that has a vehicle curb weight of more than 6,000 
pounds, or that has a basic vehicle frontal area in excess of 45 
square feet. MDPV does not include a vehicle that:
    Is an ``incomplete truck''; or
    Has a seating capacity of more than 12 persons; or
    Is designed for more than 9 persons in seating rearward of the 
driver's seat; or
    Is equipped with an open cargo area (for example, a pick-up 
truck box or bed) of 72.0 inches in interior length or more. A 
covered box not readily accessible from the passenger compartment 
will be considered an open cargo area for purposes of this 
definition.
    40 CFR 86-1803-01.
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    The Tier II standards are designed to reduce the emissions most 
responsible for the ozone and particulate matter impact from these 
vehicles (e.g., nitrous oxides and non-methane organic gases) and 
contributing to ambient volatile organic compounds.
    The Tier II emission standards are based on a system of emission 
bins in which light-duty vehicles are certified in one of eight bins; 
Bin 1 represents the cleanest or lowest emitting vehicles, and Bin 8 
represents the highest emitting vehicles of the Tier II bins. The 
emission standards for a manufacturer's vehicle fleet must comply on 
average with the Tier II Bin 5 level. Thus, the Tier II Bin 5 emission 
certification levels are the average of the Tier II emission levels 
with lower bins (i.e., 4, 3, 2, or 1) representing lower emitting 
vehicles and higher bins (i.e., 6, 7, or 8) representing vehicles that 
are more polluting. 72 FR 29102, 29103 (May 24, 2007). Section 136 
limits ``advanced technology vehicles'' to those vehicles that, at a 
minimum, comply with Bin 5 levels at the time an application is 
submitted to DOE.
    The grant and loan programs provide assistance for the production 
of vehicles and components that demonstrate advanced fuel economy 
improvements. In order to qualify as an ``advanced technology vehicle'' 
a vehicle must meet at least 125 percent of the average base year 
combined fuel economy for vehicles with substantially similar 
attributes.\8\ It should be noted that the at least 25 percent 
improvement in fuel economy performance necessary for a vehicle to 
qualify as an advanced technology vehicle is the minimum improvement 
necessary for eligibility under the section 136 grant and loan 
programs. As discussed later in this notice, in prioritizing projects 
to receive either a grant or a loan, DOE will consider the extent to 
which an advanced technology vehicle exceeds the 125 percent minimum.
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    \8\ In calculating the percent improvement in average base year 
combined fuel economy, if the vehicle at issue is an all electric 
drive, a range extended electric vehicle, or a plug in hybrid 
vehicle, then the applicant will need to submit information that 
allows the Department to determine that the vehicle meets the 125% 
average combined fuel economy test.
---------------------------------------------------------------------------

    For the purpose of demonstrating the at least 25 percent 
improvement, vehicle fuel economies are compared without consideration 
of whether the vehicles are dual fueled automobiles under CAFE. A 
``dual fueled automobile'' is an automobile that is capable of 
operating on alternative fuel or a mixture of biodiesel and diesel, and 
on gasoline or diesel. 49 U.S.C. 32901(a)(9). Dual fueled vehicles are 
commonly referred to as flexible fuel vehicles.
    The CAFE statute specifies special calculations for determining the 
fuel economy of dual fueled automobiles that give those vehicles higher 
fuel economy ratings than automobiles that

[[Page 66726]]

are identical except that they are not dual fueled.\9\ 49 U.S.C. 
32905(b). The incentive provided to dual fueled vehicles was enacted to 
encourage the production of vehicles that would promote consumer 
acceptance and ultimately lead to the development of infrastructure to 
distribute and make alternative fuel available. (See 69 FR 7689, 7691; 
February 19, 2004.) While DOE supports the development and increased 
distribution of dual fueled vehicles, we have determined not to 
consider dual fueled capabilities under the criteria for identifying an 
advanced technology vehicle. For the purpose of determining whether a 
vehicle achieves a fuel economy performance of at least 125 percent of 
the average base year combined fuel economy for vehicles with 
substantially similar attributes, DOE will consider the fuel economy 
performance of vehicles as calculated for non-dual fueled vehicles.
---------------------------------------------------------------------------

    \9\ Through MY 2014, manufacturers may use this ``dual-fuel'' 
incentive to raise their average fuel economy up to 1.2 miles a 
gallon higher than it would otherwise be; after MY 2014, Congress 
has set a schedule by which the dual-fuel incentive diminishes 
ratably until it is extinguished after MY 2019. 49 U.S.C. 32906(a).
---------------------------------------------------------------------------

    Section 136 does not define the term ``base year'' and therefore 
DOE may exercise its sound policy discretion in defining that term. DOE 
is defining ``base year'' as MY 2005.
    DOE recognizes that the fuel economy standard for light trucks 
increases in stringency through MY 2010, and that NHTSA has proposed to 
increase the stringency of both the passenger car and further increase 
the light truck fuel economy standard beginning MY 2011. See 49 CFR 
533.5 and 73 FR 24352, respectively. Given the potential for a vehicle 
that is the subject of an application to begin being manufactured in a 
future MY, DOE considered using a future MY for the base year. However, 
the definition of ``advanced technology vehicle'' requires a fuel 
economy performance comparison to be in terms of vehicles with 
``substantially similar attributes.''
    At present, DOE does not have sufficient data on the types of 
vehicles to be manufactured in future MYs, including the fuel economy 
performance of vehicles yet to be manufactured. Although manufacturers 
have product plans for future years, that information is subject to 
change. DOE considered relying on fuel economy targets established for 
specific vehicle footprint values (i.e., area calculated by multiplying 
vehicle width by vehicle length). In the MYs 2008-2010, standards for 
light trucks, NHTSA assigns a fuel economy target for each light truck 
based on vehicle footprint. 49 CFR 533.5. There are currently no 
similar targets established for passenger automobiles.
    As a result of the lack of sufficient data for future MYs and the 
lack of attribute-based fuel economy targets for passenger cars, DOE 
has decided that the ``base year'' should be a year for which CAFE 
compliance data are available. To date, NHTSA has not received all of 
the approved compliance data from EPA for MY 2007.\10\ DOE notes that 
the total fleet fuel economy for MY 2006 is higher than in MY 2005 
(25.8 mpg as compared to 25.4 mpg), the industry average for passenger 
automobile fuel economy is higher in MY 2005 than in MY 2006 (30.3 mpg 
as compared to 30.1 mpg).\11\ However, relying on MY 2006 as a base 
year would not necessarily result in a more stringent fuel economy 
comparison for determining whether a particular vehicle is an advanced 
technology vehicle. Furthermore, MY 2005 CAFE data are fully available 
and known at the present time, and using MY 2005 would promote 
efficient and effective administration of the section 136 program. 
Thus, and consistent with the model year for which Congress established 
automobile manufacturer eligibility under section 136(e), DOE has 
interpreted base year for the purpose of defining an ``advanced 
technology vehicle'' to mean MY 2005.
---------------------------------------------------------------------------

    \10\ For CAFE compliance purposes the average fuel economy of 
passenger automobiles and light trucks is determined in accordance 
with procedures established by EPA. 49 CFR 531.6(a) and 533.6(b), 
respectively. To date, EPA has not approved the data for Ford's 
domestic passenger automobile fleet.
    \11\ Summary of Fuel Economy Performance, NHTSA (March 2008).
---------------------------------------------------------------------------

    A determination of whether a vehicle has sufficiently improved fuel 
economy to qualify as an advanced technology vehicle is further refined 
by section 136's reference to vehicles with ``substantially similarly 
attributes.'' To identify those vehicles with substantially similar 
attributes, DOE first relied on the vehicle classes used for EPA's fuel 
economy guidelines. EPA, in conjunction with DOE, publishes information 
on the fuel economy performance of the vehicle fleet for each model 
year.\12\ EPA segments the vehicle fleet by size classes to permit more 
practicable comparisons of fuel economy performance between vehicles. 
The size class for cars is based on interior passenger and cargo 
volumes as described below. The size class for trucks is defined by 
GVWR, which is the weight of the vehicle and its carrying capacity. For 
MY 2005, EPA has identified the various classes as follows.
---------------------------------------------------------------------------

    \12\ https://www.fueleconomy.gov/feg/info.shtml (last visited 
October 30, 2008).

------------------------------------------------------------------------
               Class                 Passenger & cargo volume (cu. ft.)
------------------------------------------------------------------------
                                  Cars
------------------------------------------------------------------------
Two-Seaters.......................  Any (cars designed to seat only two
                                     adults).
Sedans
    Minicompact...................  < 85.
    Subcompact....................  85-99.
    Compact.......................  100-109.
    Mid-Size......................  110-119.
    Large.........................  120 or more.
Station Wagons
    Small.........................  <130.
    Mid-Size......................  130-159.
    Large.........................  160 or more.
------------------------------------------------------------------------
  Class...........................  Gross Vehicle Weight Rating (GVWR)
------------------------------------------------------------------------
                                 Trucks
------------------------------------------------------------------------
Pickup Trucks
    Small.........................  < 4,500 pounds.

[[Page 66727]]

 
    Standard......................  4,500-8,500 pounds.
Vans
    Passenger.....................  < 8,500 pounds.
    Cargo.........................  < 8,500 pounds.
Minivans..........................  < 8,500 pounds.
Sport Utility Vehicles (SUVs).....  < 8,500 pounds.
------------------------------------------------------------------------

    DOE notes that in MY 2005 not every EPA vehicle class was populated 
by vehicle models manufactured in that model year (i.e., small pickups 
and large wagons). If an EPA class did not have a representative MY 
2005 model, DOE combined that class with another EPA class in a manner 
consistent with the grouping of vehicles by ``substantially similar 
attributes.''
    DOE further categorized vehicles by performance. Performance 
vehicles generally have lower fuel economy ratings than non-performance 
vehicles in the same EPA class. Also, different fuel economy 
technologies may be applicable to performance as opposed to non-
performance vehicles (i.e., additional aerodynamic improvements may not 
be available for performance vehicles). In order to distinguish between 
vehicles that are manufactured to achieve higher performance from other 
similarly sized non-performance vehicles, DOE evaluated the peak 
horsepower to curb weight ratio of each vehicle in a size class. DOE 
plotted the peak horsepower to curb weight ratio for each vehicle by 
EPA class. Generally, if there was at least a doubling of the peak 
horsepower to curb weight ratio along the plotted line, as compared to 
the lowest plotted value, DOE then looked at the plotted data to see if 
there was a reasonably identifiable point beyond the doubling that 
divided the vehicles, i.e., a break point. For those classes in which 
DOE was able to identify a break point, DOE created an additional 
``performance'' class. DOE identified a point in several of the EPA 
classes at which there was a substantial increase in the ratio. In 
those instances in which there was a marked increase, the more powerful 
vehicles were placed into a ``performance class.'' This additional 
analysis resulted in a total of 17 classes.

------------------------------------------------------------------------
      Class of vehicles with
 substantially similar attributes        Example of MY 2005 vehicles
------------------------------------------------------------------------
Two-seater........................  Mazda MX-5 Miata, Chrysler Crossfire
                                     Roadster, Porsche Boxter.
Two Seater Performance............  GMC Corvette, Mercedes SL65 AMG,
                                     Chrysler Viper Coupe.
Minicompact sedan.................  Mini Cooper, Volkswagen Beetle
                                     Convertible, Mitsubishi Eclipse
                                     Spyder.
Minicompact sedan Performance.....  Porsche 911, Ford Jaguar XKR
                                     Convertible, Mercedes CLK55 AMG.
Subcompact sedan..................  GMC Aveo, Toyota Celica, Honda
                                     Acura.
Subcompact performance sedan......  Mercedes CLK500, BMW M3.
Compact sedan.....................  Volkswagen Jetta, Toyota Corolla,
                                     Ford Focus, Chrysler Sebring
                                     convertible.
Compact performance sedan.........  Mercedes CL 55 AMG, Bentley
                                     Continental GT.
Mid-size sedan....................  Mercury Sable, Chevrolet Malibu,
                                     Honda Accord, GM Monte Carlo,
                                     Hyundai Sonata, Toyota Camry,
                                     Nissan Altima.
Mid-size performance sedan........  Ford Jaguar S-Type, Mercedes E55
                                     AMG, Nissan Infiniti G35.
Large sedan.......................  Mercedes S C lass, Cadillac Deville,
                                     Kia Amanti, Dodge 300 Base, Ford
                                     Five Hundred, General Motors
                                     Impala.
Small wagon.......................  Toyota Corolla Matrix, GMC Vibe,
                                     Chrysler PT Cruiser, Toyota Scion.
Mid-size and large wagons.........  Volkswagen Passat Wagon, Ford Taurus
                                     wagon, Mercedes E320, GM Saab 9-5
                                     Wagon.
Small and standard pickup.........  Ford F150, GM Silverado, Nissan
                                     Frontier, Dodge Dakota, Toyota
                                     Tundra, GM Sierra.
Minivan...........................  Dodge Caravan, Chrysler Town &
                                     Country, Toyota Sienna, GMC
                                     Montana, Nissan Quest, Honda
                                     Odyssey, Ford Monterey Wagon.
Cargo van.........................  Chevrolet Astro, Ford E150.
Sport Utility Vehicle.............  Jeep Wrangler, Ford Escape,
                                     Chevrolet Blazer, Range Rover,
                                     Mercedes M-class, GM Equinox,
                                     Toyota Sequoia, GMC Envoy.
------------------------------------------------------------------------

    In order to determine the average combined fuel economy for each 
class, DOE will calculate the harmonic production weighted average for 
each class. As previously stated, DOE relied on the MY 2005 CAFE 
compliance data that are available, and assumed each vehicle was a non-
dual fueled vehicle.

----------------------------------------------------------------------------------------------------------------
                                                                                     2005 Fuel
                          Vehicle class                             Power \1\/        economy       2005 mpg x
                                                                    weight \2\      average \3\        125%
----------------------------------------------------------------------------------------------------------------
Two-Seater......................................................         < 0.121            25.3            31.6
Two-Seater Performance..........................................        >= 0.121            22.2            27.8
Minicompact Sedan...............................................         < 0.088            29.3            36.7
Minicompact Performance Sedan...................................        >= 0.088            22.4            28.0
Subompact Sedan.................................................         < 0.082            29.6            37.0
Subcompact Performance Sedan....................................        >= 0.082            22.8            28.5
Compact Sedan...................................................         < 0.073            33.8            42.2
Compact Performance Sedan.......................................        >= 0.073            23.6            29.5
Mid-Size Sedan..................................................         < 0.085            29.4            36.7
Mid-Size Performance Sedan......................................        >= 0.085            23.1            28.9

[[Page 66728]]

 
Large Sedan.....................................................             n/a            26.2            32.7
Small Wagon.....................................................             n/a            32.7            40.8
Mid-Size and Large Wagons.......................................             n/a            26.7            33.4
Small and Standard Pickup.......................................             n/a            19.7            24.6
Minivan.........................................................             n/a            24.3            30.4
Passenger Van...................................................             n/a            19.0            23.8
Cargo Van.......................................................             n/a            24.2            30.2
Sport Utility Vehicle...........................................             n/a            21.8            27.2
----------------------------------------------------------------------------------------------------------------
\1\ Peak horsepower (hp).
\2\ Curb weight (lbs).
\3\ Harmonic production weighted average of combined fuel economy.

    A project eligible for a grant or loan under section 136 may 
include a project for ``reequipping, expanding, or establishing a 
manufacturing facility in the United States to produce'' a ``qualifying 
component.'' (42 U.S.C. 17031(b)(1)) Section 136 defines ``qualifying 
component'' as a component that

    [T]he Secretary determines to be--
    (A) designed for advanced technology vehicles; and
    (B) installed for the purpose of meeting the performance 
requirements of advanced technology vehicles.

(42 U.S.C. 17013(a)(4))
    Although a component needs to be designed for an advanced 
technology vehicle and installed to assist meeting performance 
requirements of an advanced technology vehicle, DOE does not interpret 
the statutory definition to mean that the use of these components in 
either other conventional vehicles or in aftermarket sales is 
precluded. In making a determination on component eligibility, the 
Secretary will consider factors such as the overall impact of the 
component and extent to which the component contributes to the 
efficiency of advanced technology vehicles.
    Eligible costs for facilities that manufacture qualified components 
may include the costs of ``engineering integration performed in the 
United States of qualifying vehicles and qualifying components.'' (42 
U.S.C. 17013(b)(2)) ``Engineering integration'' is defined to include--

    [T]he cost of engineering tasks relating to--
    (A) incorporating qualifying components into the design of 
advanced technology vehicles; and
    (B) designing tooling and equipment and developing manufacturing 
processes and material suppliers for production facilities that 
produce qualifying components or advanced technology vehicles.

(49 U.S.C. 17013(a)(3))
    In both the specification of eligible activities and the definition 
of ``engineering integration,'' eligible engineering integration costs 
relate to those costs associated with advanced technology vehicles and 
qualifying components. Subsection (b) of section 136 states that 
facility funding awards are for the cost of engineering integration 
performed in the United States for qualifying vehicles and qualifying 
components. (42 U.S.C. 17013(b)(2)) ``Engineering integration'' is 
statutorily defined to include the cost of incorporating qualifying 
components into the design of an advanced technology vehicle and the 
costs of design and development for production facilities producing 
qualifying components or advanced technology vehicles. Engineering 
costs not associated with the production of an advanced technology 
vehicle or the production of a qualifying component, are not eligible 
costs under section 136.

D. Terms for Direct Loans

    Section 136 prescribes certain specific terms for loan documents. 
First, the statute establishes that the loans will have an interest 
rate that, ``as of the date on which the loan is made, is equal to the 
cost of funds to the Department of the Treasury for obligations of 
comparable maturity[.]'' In determining the date upon which the 
interest rate will be calculated, the Department of the Treasury will 
set the loan rate at the time the loan funds are disbursed. 
Additionally, the statute prescribes that the loans shall have a term 
``equal to the lesser of--(i) the projected life, in years, of the 
eligible project to be carried out using funds from the loan, as 
determined by the Secretary; and (ii) 25 years[.]''
    The statute also states that loans may be subject to a deferral in 
repayment for ``not more than 5 years after the date on which the 
eligible project carried out using funds from the loan first begins 
operations, as determined by the Secretary[.]'' Section 136 is silent 
as to whether a deferral is available for interest on the loan. In 
today's interim final rule, the Department interprets the deferral of 
repayment option to apply to only loan principal, not interest. 
Allowing a deferral of interest would have the effect of increasing the 
principal amount of the loan, perhaps beyond the authority provided by 
Congress for this program. Moreover, the statute allows only for 
deferral of ``repayment'' of a loan. The principal amount of a loan is 
the amount that is actually being ``repaid'' to the Government. 
Finally, the statute requires that all loans be made by the Federal 
Financing Bank.
    In addition to the minimum terms prescribed in section 136, today's 
interim final rule sets forth other parameters for loan terms intended 
to protect the significant taxpayer costs for this program. 
Accordingly, the rule states that the Secretary must have a first lien 
or security interest in all property acquired with loan funds. This 
requirement may be waived only by the Secretary on a non-delegable 
basis. Additionally, DOE must also have a lien on any other property of 
the applicant pledged to secure the loan.

E. Application Process for Direct Loan Program

    Section 136 states that applicants for direct loans shall submit 
applications ``at such time, in such manner, and containing such 
information as the Secretary may require[.]'' To further the statutory 
purpose of providing funding to assist in the development and 
production of advanced technology vehicles and qualifying components, 
applications for the first tranche of direct loans will be due on the 
date the interim final rule becomes effective. The deadline for loan 
applications for subsequent tranches of loans will be every 90 days 
thereafter as funds and available loan authority permit. The Department 
will evaluate and make decisions on a tranche of loan applications 
before proceeding to evaluate and make decisions on a subsequent 
tranche of loan applications. Application requirements are set forth in 
section 611.101. These application

[[Page 66729]]

materials are intended to provide adequate information for the 
Department to comply with the requirements and goals of section 136 and 
other applicable legal and regulatory requirements. One such 
requirement, written assurance that all laborers and mechanics are paid 
prevailing wages, explicitly appears in section 136(d)(2) and appears 
in today's interim final rule. Other requirements in section 136 relate 
to Secretarial determinations of applicant eligibility such as: (i) 
Financial viability absent receipt of additional Federal funding 
associated with the proposed project and (ii) the efficient and 
effective expenditure of loan proceeds. Today's interim final rule 
specifies the information to be submitted by an applicant in order for 
the Secretary to be able to make such determinations.

F. Credit Subsidy Cost for Direct Loans

    To date, Congress has appropriated $7,500,000,000 to cover the 
subsidy cost of the direct loans issued under section 136, and provided 
an overall cap of $25,000,000,000 on the principal amount of the loans 
that may be issued. Under the Federal Credit Reform Act of 1990, the 
subsidy cost reflects ``the estimated long-term cost to the Government 
of the direct loan, calculated on a net present value basis, excluding 
administrative costs and any incidental effects on governmental 
receipts or outlays.'' 2 U.S.C. 661a(5)(A). This amount will be unique 
for each loan issued under section 136, and is dependent on the 
particular circumstances of the borrower and the project for which the 
loan will be issued. While Congress has appropriated funds at 
approximately a 30 percent subsidy rate, the subsidy cost for 
individual borrowers and projects may be valued at more or less than 30 
percent. If the subsidy costs are estimated to be higher than 30 
percent the Department will only be able to issue loans which may be 
covered by the actual amount appropriated for use as the subsidy, an 
amount which will not reach the $25,000,000,000 cap. Thus, while there 
is a limit on the total amount of loans the Department is able to make, 
the value of the loans the Department is able to make with the credit 
subsidy amount appropriated may be less than $25,000,000,000.

G. Project Costs

    Section 136 states that awards under the grant program for eligible 
projects shall pay ``not more than 30 percent'' of project cost. On the 
other hand, section 136 does not impose a maximum percentage of funding 
associated with a particular project for the direct loan program. In 
accordance with Federal credit policies under OMB Circular A-129, the 
Department will adhere to requirements for a significant borrower 
stake. Under the interim final rule, the Federal loan may only 
constitute up to 80% of a project's cost. Section 611.102 sets forth 
the types of costs the Department will consider to be eligible project 
costs--i.e., costs for which grant or loan proceeds may be expended. 
Eligible costs are: (a) Those costs that are reasonably related to the 
reequipping, expanding, or establishing a manufacturing facility in the 
United States to produce qualifying advanced technology vehicles or 
qualifying components; (b) costs of engineering integration performed 
in the United States for qualifying vehicles or qualifying components. 
Costs eligible for payment with loan proceeds are costs incurred, but 
not yet paid by the borrower, after a substantially complete 
application has been submitted to DOE and costs incurred after the 
closing of the loan. In determining the overall total cost of an 
Eligible Project, DOE and the applicant may include significant costs 
already incurred and capitalized by the applicant in accordance with 
Generally Accepted Accounting Principles and these costs may be 
considered by DOE in determining the Borrower's contribution to total 
project costs.

H. Assessment of Fees for Direct Loans

    Section 136(f) states that administrative costs ``shall be no more 
than $100,000 or 10 basis points of the loan.'' The Department 
interprets this subsection as authorizing DOE to charge borrowers an 
administrative fee, which shall be deposited into the U.S. Treasury, 
and as providing DOE with the flexibility to choose either monetary 
option set forth in the statute. DOE has decided that administrative 
costs for a particular loan will be 10 basis points of the loan to be 
paid by the borrower on the closing date of the loan. No application 
fee will be charged, and therefore applicants that do not receive a 
loan will pay no administrative fee. The Department bases its decision 
on the need for fairness among applicants and the belief that 
administrative costs for a loan will be in excess of 10 basis points. 
By including a fee provision in section 136, Congress demonstrated an 
intent that applicants should pay a fee in connection with a loan. By 
selecting 10 basis points as the fee for all loans, the Department 
assures that applicants for smaller loans will pay smaller fees.

I. Assessment of Applications and Priorities

    All applications received will be reviewed to determine whether the 
applicant is eligible and that the application contains all information 
required of an applicant by section 136, this interim final rule and 
other applicable law. Applications that are determined to be eligible 
and substantially complete will undergo a substantive review by DOE 
based upon certain evaluation factors. These factors include, but are 
not limited to, the technical merit of the proposed advanced technology 
vehicles or qualifying components, with greater weight given for 
improved vehicle fuel economy above the minimum required for an 
advanced technology vehicle, potential contributions to improved fuel 
economy of the U.S. light-duty vehicle fleet, promotion of the use of 
advanced fuel (e.g., E85, ultra-low sulfur diesel), and potential 
reductions in petroleum use by the U.S. light-duty fleet. DOE will also 
assess the adequacy of the proposed provisions to protect the 
Government, including offers of participation in project gains, 
sufficiency of Security, the priority of the lien position in the 
Security, and the percentage of the project to be financed with the 
loan.

III. Application Submission

    Section 611.101 of this interim final rule sets forth the 
information DOE will need an applicant to submit in order to make the 
determinations required in section 136 and this interim final rule for 
issuance of a loan or award. Applicants may submit loan requests for 
multiple eligible projects in a single application provided that the 
application provides a way to segregate each proposed eligible project 
in such a way that permits DOE to evaluate each project in the 
application. Applications for the first tranche of loans may be 
submitted or hand delivered to the Postal Mail address listed in 
ADDRESSES. DOE will consider and evaluate substantially complete 
applications as and when they are submitted during the first tranche 
period, which will close December 31, 2008. DOE may make decisions on 
such applications and close loans with