Biorefinery Assistance Guaranteed Loans, 20044-20073 [2010-8274]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service

[Federal Register Volume 75, Number 73 (Friday, April 16, 2010)]
[Proposed Rules]
[Pages 20044-20073]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-8274]



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Part II





Department of Agriculture





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Rural Business-Cooperative Service



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7 CFR Parts 4279, 4287 and 4288



Biorefinery Assistance Guaranteed Loans; Repowering Assistance Payments 
to Eligible Biorefineries; Subpart B--Advanced Biofuel Payment Program; 
Proposed Rules

Federal Register / Vol. 75 , No. 73 / Friday, April 16, 2010 / 
Proposed Rules

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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

7 CFR Parts 4279 and 4287

RIN 0570-AA73


Biorefinery Assistance Guaranteed Loans

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Proposed rule.

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SUMMARY: Rural Business-Cooperative Service, a mission area within the 
U.S. Department of Agriculture, is proposing a guaranteed loan program 
for biorefineries. The proposed rule will establish guaranteed loan 
regulations for the development and construction of commercial-scale 
biorefineries and for the retrofitting of existing facilities using 
eligible technology for the development of advanced biofuels.

DATES: Comments on the proposed rule must be received on or before June 
15, 2010. The comment period for the information collection under the 
Paperwork Reduction Act of 1995 continues through June 15, 2010.

ADDRESSES: You may submit comments to this rule by any of the following 
methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Energy Branch, Biorefinery Assistance 
Program, U.S. Department of Agriculture, 1400 Independence Avenue, SW., 
Stop 3225, Washington, DC 20250-3201; telephone (202) 720-1400.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been reviewed under Executive Order (EO) 
12866 and has been determined to be economically significant by the 
Office of Management and Budget. The EO defines a ``significant 
regulatory action'' as one that is likely to result in a rule that may: 
(1) Have an annual effect on the economy of $100 million or more or 
adversely affect, in a material way, the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
Raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in this EO.
    The Agency conducted a benefit-cost analysis to fulfill the 
requirements of Executive Order 12866. In this analysis, the Agency 
identifies potential benefits and costs of the Section 9003 program to 
lenders, borrowers, and the Agency. The analysis contains both 
quantitative estimates and qualitative descriptions of the expected 
benefits and costs of the Biorefinery Assistance guaranteed loan 
program. The environmental and energy impacts associated with the 
Section 9003 program were qualitatively assessed.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public 
Law 104-4 establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and Tribal 
governments and the private sector. Under section 202 of the UMRA, 
Rural Development generally must prepare a written statement, including 
a cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or Tribal 
governments, in the aggregate, or to the private sector of $100 million 
or more in any one year. When such a statement is needed for a rule, 
section 205 of UMRA generally requires Rural Development to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective, or least burdensome alternative 
that achieves the objectives of the rule.
    This proposed rule contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, and 
Tribal governments or the private sector. Thus, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

    This renewable energy program under Title IX of the 2008 Farm Bill 
has been operated on an interim basis through the issuance of a Notice 
of Funds Availability (NOFA). During this initial round of 
applications, the Agency conducted National Environmental Policy Act 
(NEPA) reviews on each individual application for funding. No 
significant environmental impacts were reported, and Findings of No 
Significant Impact (FONSI) were issued for each approved application. 
Taken collectively, the applications show no potential for significant 
adverse cumulative effects.
    The Agency is preparing a programmatic environmental assessment 
(PEA), pursuant to 7 CFR subpart 1940-G, to analyze the environmental 
effects to air, water, and biotic resources; land use; historic and 
cultural resources, and greenhouse gas emissions affected by the 
Section 9003 proposed rule. The purpose of the PEA is to assess the 
overall environmental impacts of the programs related to the goals of 
the Administration for advancing biofuels production for the purposes 
of energy independence and greenhouse gas emission reductions. The 
environmental analyses will be national in scope and will be supported 
by site by site analysis per each application to the program. Site-
specific NEPA documents prepared for those facilities funded under 
Sections 9003 and 9004 in FY 2008 and/or 2009 will be utilized, to 
forecast likely environmental impacts under the proposed rules. The 
draft PEA will be made available to the public for comment on the USDA 
Rural Business Service's Web site by May 3, 2010, and all comments will 
be addressed as part of any revision of the PEA, or prior to the 
publication of any Finding of No Significant Impact (FONSI).

Executive Order 12988, Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) All State and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given this rule; and (3) 
administrative proceedings in accordance with the regulations of the 
Department of Agriculture's National Appeals Division (7 CFR part 11) 
must be exhausted before bringing suit in court challenging action 
taken under this rule unless those regulations specifically allow 
bringing suit at an earlier time.

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Executive Order 13132, Federalism

    It has been determined, under Executive Order 13132, Federalism, 
that this proposed rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in the proposed rule will not have a substantial 
direct effect on States or their political subdivisions or on the 
distribution of power and responsibilities among the various government 
levels.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute unless the agency 
certifies that the rule will not have an economically significant 
impact on a substantial number of small entities. Small entities 
include small businesses, small organizations, and small governmental 
jurisdictions.
    In compliance with the RFA, Rural Development has determined that 
this action will not have an economically significant impact on a 
substantial number of small entities. The burden for applying for a 
Biorefinery Assistance Guaranteed loan to any one borrower is estimated 
to be less than 0.1 percent of the estimated cost of the average 
reconstruction project funded under this program. Further, this 
regulation only impacts those who choose to participate in the program.

Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    The regulatory impact analysis conducted for this proposed rule 
meets the requirements for Actions Concerning Regulations That 
Significantly Affect Energy Supply Distribution and Use, Executive 
Order No. 13211, which states that an agency undertaking regulatory 
actions related to energy supply, distribution, or use is to prepare a 
Statement of Energy Effects. This analysis does not find that this 
proposed rule will have any adverse impacts on energy supply, 
distribution or use.

Executive Order 12372, Intergovernmental Review of Federal Programs

    Rural Development guaranteed loans are subject to the Provisions of 
Executive Order 12372, which require intergovernmental consultation 
with State and local officials. Rural Development will conduct 
intergovernmental consultation in the manner delineated in RD 
Instruction 1940-J, ``Intergovernmental Review of Rural Development 
Programs and Activities,'' available in any Rural Development office, 
on the Internet at https://www.rurdev.usda.gov/regs, and in 7 CFR part 
3015, subpart V.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have Tribal implications or 
preempt Tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
Tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and the Indian 
Tribes. Thus, the proposed rule is not subject to the requirements of 
Executive Order 13175.

Programs Affected

    The Catalog of Federal Domestic Assistance Program numbers assigned 
to affected program is: 10.865, Biorefinery Assistance Program.

Paperwork Reduction Act

    The collection of information requirements contained in the notice 
have received temporary emergency clearance by the Office of Management 
and Budget (OMB) under control Number 0570-0055. However, in accordance 
with the Paperwork Reduction Act of 1995, USDA Rural Development will 
seek OMB approval of the reporting and recordkeeping requirements 
contained in this Notice and hereby opens a 60-day public comment 
period.
    Title: Biorefinery Assistance Guaranteed Loans.
    Type of Request: New collection.
    Abstract: Rural Development is providing guaranteed loans to assist 
in the development and construction of commercial-scale biorefineries 
and the retrofitting of existing facilities using eligible technology 
for the development of advanced biofuels. Consistent with Congressional 
intent, preference will be given to projects where first-of-a-kind 
technology will be deployed at the commercial scale. To that end, the 
program will promote the development of the first commercial scale 
biorefineries that do not rely on corn kernel starch as the feedstock 
or standard biodiesel technology.
    The collection of information is vital to Rural Development to make 
wise decisions regarding the eligibility of projects and borrowers in 
order to ensure compliance with the regulations and to ensure that the 
funds obtained from the Government are used appropriately (i.e., being 
used for the purposes for which the guaranteed loans were awarded). 
Persons seeking loan guarantees under this program will have to submit 
applications that include specified information including, but not 
limited to, the lender's analysis and credit evaluation, financial 
statements on the borrower, a feasibility study, a business plan, a 
technical assessment, an economic analysis, and a description of the 
borrower's bioenergy experience. The information included in 
applications for loan guarantee will be used to determine applicant and 
project eligibility and to ensure that funds are used for projects that 
are likely to be financially sound.
    Once a project has been approved and the loan has been guaranteed, 
lenders must submit certain reports. Some of these reports are 
associated with the performance of the lender's loan portfolio and 
include both periodic reports on the status of that portfolio and, when 
applicable monthly default reports. Other reports are associated with 
individual projects and include quarterly construction reports and, 
once a project has been completed, annual reports through the life of 
the guaranteed loan. In addition, lenders are required to conduct 
annual inspections of each completed project.
    The following estimates are based on the average over the first 
three years the program is in place.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 4.6 hours per response.
    Respondents: Individuals, entities, Indian Tribes, units of State 
or local government, corporations, farm cooperatives, farmer 
cooperative organizations, associations of agricultural producers, 
National Laboratories, institutions of higher education, rural electric 
cooperatives, public power entities, and consortia of any of these 
entities.
    Estimated Number of Respondents: 23.
    Estimated Number of Responses per Respondent: 27.4.
    Estimated Number of Responses: 630.
    Estimated Total Annual Burden (hours) on Respondents: 2,920.
    Copies of this information collection may be obtained from Cheryl 
Thompson, Regulations and Paperwork Management Branch, Support Services

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Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 
1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling 
(202) 692-0043.

Comments

    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
Rural Development, including whether the information will have 
practical utility; (b) the accuracy of the new Rural Development 
estimate of the burden of the proposed collection of information, 
including the validity of the methodology and assumptions used; (c) 
ways to enhance the quality, utility, and clarity of the information to 
be collected; and (d) ways to minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology. 
Comments may be sent to Cheryl Thompson, Regulations and Paperwork 
Management Branch, U.S. Department of Agriculture, Rural Development, 
STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All 
responses to this proposed rule will be summarized and included in the 
request for OMB approval. All comments will also become a matter of 
public record.

E-Government Act Compliance

    Rural Development is committed to complying with the E-Government 
Act, to promote the use of the Internet and other information 
technologies to provide increased opportunities for citizen access to 
Government information and services, and for other purposes.

I. Background

    Rural Development administers a multitude of Federal programs for 
the benefit of rural America, ranging from housing and community 
facilities to infrastructure and business development. Its mission is 
to increase economic opportunity and improve the quality of life in 
rural communities by providing the leadership, infrastructure, venture 
capital, and technical support that enables rural communities to 
prosper.
    To achieve its mission, Rural Development provides financial 
support (including direct loans, grants, and loan guarantees) and 
technical assistance to help enhance the quality of life and provide 
the foundation for economic development in rural areas. Section 9003 of 
the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) 
provides financial assistance in the form of grants and guaranteed 
loans to assist in the development of new and emerging technologies for 
the development of advanced biofuels.
    The following types of financial assistance under section 9003 are 
authorized:
     Grants for the development and construction of 
demonstration-scale biorefineries to demonstrate the commercial 
availability of one or more processes for converting renewable biomass 
to advanced biofuels.
     Guaranteed loans for the development, construction or the 
retrofitting of commercial biorefineries using eligible technology, 
where eligible technology is defined as:
    (a) Any technology that is being adopted in a viable commercial-
scale operation of a biorefinery that produces an advanced biofuel, and
    (b) Any technology not described in paragraph (a) above that has 
been demonstrated to have technical and economic potential for 
commercial application in a biorefinery that produces an advanced 
biofuel.
    Overview of Section 9003. Section 9003 of the Farm Security and 
Rural Investment Act of 2002 as added by the Food Conservation and 
Energy Act of 2008, authorizes the Secretary of Agriculture to 
establish the Biorefineries Assistance Loan Guarantee Program to 
provide loan guarantees for the construction of biorefineries to 
``assist in the development of new and emerging technologies for the 
development of advanced biofuels''.
    Under the proposed rule, the Agency will establish a rolling 
process for the consideration of loan guarantee requests for the 
development and construction of commercial-scale biorefineries or for 
the retrofitting of existing facilities using eligible technology for 
the development of advanced biofuels. Consistent with the authorizing 
legislation, the proposed rule defines the term ``advanced biofuel'' as 
a ``fuel derived from renewable biomass, other than corn kernel 
starch.'' The Agency is proposing that the maximum percentage of the 
loan guarantee be 80 percent of loan and the maximum amount of the loan 
guarantee be $250 million.
    Consistent with the authorizing legislation, the goal of this 
program is to encourage the development of commercial scale 
biorefineries that produce advanced biofuels. To help meet this goal, 
the program proposes to be open to all feasible technologies. At this 
stage in the development of biofuels industry, it is impossible to know 
what technologies will become the most effective. Further, the Agency 
believes that unlike other Rural Development renewable energy programs, 
this program should be conducted on a rolling application acceptance 
basis. The Agency's experiences with its Business and Industry Loan 
Guarantee Program has taught the Agency that the development of 
financing arrangements between lenders and borrowers frequently do not 
fit within pre-prescribed application windows. Once these arrangements 
are agreed upon, the Agency needs to be able to make a decision within 
a relatively short period of time or the deal will likely collapse. 
With respect to all of these points, the Agency welcomes feedback from 
the public during the comment period.
    The Agency views this program in conjunction with its other 
renewable energy programs in the context of an overall Federal 
renewable energy strategy. The goal of this strategy is to foster the 
development of a strong, expanding, and economically sustainable group 
of renewable energy industries in the United States to supply an 
increasing share of the country's energy needs. The success of these 
industries will depend on their ability to produce energy sources that 
meet the demands of the country's energy markets. These markets are 
driven by a number of factors including the price of oil and other 
fossil fuels, developments in technologies, the acceptance of the 
public, the capacity of distribution systems, and the impact of 
government regulation such as the renewable fuels standard.
    The Biorefinery Assistance Loan Guarantee Program is one part of 
Rural Development's contribution to the Department of Agriculture's 
renewable energy efforts that support the overall Federal renewable 
energy strategy. This program provides critical assistance to the 
development of biorefineries in the United States by facilitating the 
financing of a number of biorefineries through the leveraging of 
Federal government biorefinery assistance loan guarantees and private 
capital sources.
    Over time, the Agency believes that these private capital sources 
will look at the Federal government investments in biorefineries under 
this program more generally as a sign that these facilities are worth 
financing, even without the Federal government, which will further 
support the development of the renewable energy industries of in the 
U.S. The Agency believes that this program will provide examples of how 
private capital can successfully invest in biorefineries that adopt new 
and more effective technologies that will enable energy from renewable 
sources to

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supply an increasing share of the energy needs of the country.
    Notice of Funds Availability. Rural Development published a Notice 
of Funds Availability (NOFA) for the section 9003 guaranteed loan 
program on November 20, 2008 [73 FR 70544] (referred to in this notice 
as the Section 9003 NOFA) and an Advanced Notice of Proposed Rulemaking 
(ANPRM) on the same day [73 FR 70542]. The ANPRM requested comments in 
several areas including definitions and terms (established a market, 
by-products, co-products, area, local market); oversight and monitoring 
(reporting requirements once the project is established and stabilized; 
evaluation of project performance); eligible borrowers (National 
laboratories); loan applications (technical reports, private sector 
credit rating); evaluation of guaranteed loan applications (scoring 
criteria); origination responsibilities (credit evaluation and equity); 
and basic guarantee and loan provisions (project costs and issuance of 
the loan note guarantee). The Agency received nine comment letters in 
response to the ANPRM, and has considered the comments in developing 
this proposed rule.
    The following section describes the proposed Biorefinery Assistance 
program.

II. Discussion of Proposed Rule for Biorefinery Assistance Guaranteed 
Loans

    In this section of the Notice, the proposed rule for Biorefinery 
Assistance Guaranteed loans is described. The Agency is adding a new 
subpart to 7 CFR part 4279, Guaranteed Loanmaking, and a new subpart to 
7 CFR part 4287, Servicing, which taken together represent the 
regulatory provisions for the Biorefinery Assistance program. This 
approach is consistent with the Agency's intent to use the structure of 
its B&I program when the Agency withdrew 7 CFR part 5001 on September 
21, 2009 (74 FR 48005).

A. Background

    In developing the Biorefinery Assistance program, the Agency 
considered two primary factors:
     Statutory requirements. The authorizing statute requires 
the Agency to include certain provisions when implementing the 
Biorefinery Assistance program.
     The nature of the program. The Biorefinery Assistance 
program is a new program for the Agency. With the exception of the 
Rural Energy for America Program, the type of technologies associated 
with biorefineries will be very different than those associated with 
other Business Programs currently being run by Rural Development. This 
led the Agency to consider whether new and more detailed requirements 
than found in the B&I regulation were needed for biorefinery guaranteed 
loans. Furthermore, the size of the loans that will be involved (up to 
$250 million) is substantially larger than under other Business 
programs, including the Rural Energy for America Program. This also 
results in the Agency's consideration for additional requirements for 
Biorefinery Assistance Guaranteed loans.
    A third factor considered by the Agency is comments submitted in 
response to the ANPRM. In the ANPRM, the Agency requested comments 
specific to several areas for consideration in developing the 
guaranteed loan program for biorefinery assistance. The Agency received 
nine public comment letters. The Agency reviewed each comment letter 
and, where the Agency determined it appropriate, incorporated 
recommendations into the proposed rule.
    As noted above, the Agency is proposing to add new subparts to 7 
CFR part 4279, Guaranteed Loanmaking, and 7 CFR part 4287, Servicing, 
as discussed in Section II.B of this preamble.

B. The Biorefinery Assistance Program

    The following paragraphs discuss the proposed Biorefinery 
Assistance program. Conceptually, the Agency is proposing to add a new 
subpart C to 7 CFR part 4279 and a new subpart D to 7 CFR part 4287, 
with extensive incorporation of many of the B&I guaranteed loan 
provisions.
    The new 7 CFR part 4279, subpart C, identifies the purpose and 
scope of the Biorefinery Assistance program, identifies the 
relationship of this program to the general B&I provisions found in 7 
CFR part 4279, subpart A, and identifies the loan processing 
requirements for Biorefinery Assistance guaranteed loans. While many of 
the loan processing requirements are the same as for B&I guaranteed 
loans, there are significant loan processing provisions being proposed 
that are specific to Biorefinery Assistance Guaranteed loans.
    The new 7 CFR part 4287, subpart D, identifies the servicing 
requirements for Biorefinery Assistance Guaranteed loans. Most of the 
servicing requirements being proposed are the same as found in the 
servicing regulation (7 CFR part 4287) for the B&I guaranteed loans.
Purpose and Scope (Sec.  4279.201)
    This section describes the purpose and scope of the Biorefinery 
Assistance program.
Compliance With Sec. Sec.  4279.1 Through 4279.99 (Sec.  4279.202)
    In general, the B&I provisions found in Sec. Sec.  4279.1 through 
4279.99 will be applicable to Biorefinery Assistance Guaranteed loans. 
There are several areas where there are exceptions or additions. These 
areas are:
    1. Definitions. This paragraph presents the definitions applicable 
to the Biorefinery Assistance program. Many of the applicable 
definitions are incorporated by reference from the B&I regulations 
(Sec.  4279.2). Other definitions are specific to the Biorefinery 
Assistance program. The following paragraphs present many of the 
definitions required for the implementation of the Biorefinery 
Assistance program. Two of these definitions are statutorily driven, 
while the others are being proposed by the Agency in order to implement 
the program more clearly.
    Statutorily-driven terms. The 2008 Farm Bill defines ``advanced 
biofuel'' and ``eligible technology.'' Because these two terms are 
statutorily defined, the Agency must use them as defined in the 2008 
Farm Bill.
    Other terms. The Agency identified a number of terms that are 
needed in order to implement the Biorefinery Assistance program. These 
terms are:
     Biofuel;
     Biorefinery;
     By-product;
     Farm cooperative;
     Farmer Cooperative Organization;
     Immediate family;
     Indian Tribe;
     Institution of higher education;
     Local owner;
     Offtake agreement;
     Regulated or supervised lender;
     Renewable biomass; and
     Total project costs.
    The 2008 Farm Bill provides a definition for biorefinery, which is 
included in the proposed rule. With the exception of renewable energy 
and renewable energy system, these terms are being defined because they 
are associated with implementing the Biorefinery Assistance program.
    With the exception of farm cooperative, farm cooperative 
organization, by-product, and local owner these terms and their 
definitions are the same, or essentially the same, as found in the 
Section 9003 NOFA. With regard to farm cooperative, the definition is 
being revised to reflect the

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structure of the farm cooperative, rather than its operational aspects. 
Therefore, the Agency revised the definition to track the one used in 
the Value Added Producer Grant program, which requires the applicant to 
be incorporated as a cooperative. As a result, the program will require 
the cooperative to comply with State law. The NOFA did not state that 
the cooperative had to be incorporated as a cooperative.
    With regard to farm cooperative organization, the definition is 
being revised to make it clearer as to what constitutes a farm 
cooperative organization.
    With regard to by-product, a definition for by-product is being 
added in response to comments received on the ANPRM. The Section 9003 
NOFA did not have a definition for by-product. The term biorefinery is 
defined in the statute, and includes language concerning products other 
than the biofuel. By-products are an important revenue source for many 
biorefineries. The definition requires that they be typical to the 
operation, and measurable. The Agency wanted to ensure for the 
technical and financial analysis, that a standard for a byproduct is 
established and that the applicant can document the same.
    With regard to local owner, the Agency is proposing the method for 
determining local ownership under the scoring criteria by looking at 
the percent of local owners whose primary residence is within 20 miles 
of the area supplying feedstock to the biorefinery (see 
4279.265(d)(9)). Thus, it is necessary to define ``local owner.''
    The Agency also identified a number of terms associated with the 
definition of ``eligible technology'', with project eligibility, or 
with lender eligibility:
     Retrofitting;
     Semi-work scale;
     Technical and economic potential;
     Tier 1 capital;
     Tier 2 capital;
     Tier 1 leverage capital ratio;
     Tier 1 risk-based capital ratio;
     Total qualifying capital;
     Total risk-based capital ratio; and
     Viable commercial-scale operation.
    The proposed definition for retrofitting is the same as found in 
the Section 9003 NOFA.
    The definition of technical and economic potential is essentially 
the same as found in the Section 9003 NOFA, but has been modified, in 
paragraph (ii), to refer to the demonstration of the ``potential 
success of the project'' rather than to the demonstration of the 
``success of the project.'' In addition, to clarify paragraph (iii) of 
this definition, the Agency is adding a definition for ``semi-work 
scale.''
    The Section 9003 NOFA provided a definition for ``viable 
commercial-scale.'' The Agency believes that it is clearer to define 
``viable commercial-scale operation'' and, thus, has revised the term 
being defined. The definition is the same as found in the Section 9003 
NOFA for ``viable commercial-scale,'' but with minor editing.
    Two of the other terms are agricultural producer and association of 
agricultural producers. The definition of association of agricultural 
producer is very similar to the definition of the term as found in the 
Section 9003 NOFA. The Agency is adding the definition of 
``agricultural producer'' to further clarify the term ``association of 
agricultural producers.''
    Lastly, the Agency also identified a number of terms used in making 
guaranteed loans that have not been previously defined for the B&I 
Guaranteed Loan program and that will be applicable to the Biorefinery 
Assistance program. These terms are:
     Business plan;
     Default;
     Eligible project costs;
     Existing business;
     Feasibility study;
     Future recovery;
     Loan classification;
     Market value;
     Material adverse change;
     Negligent loan origination;
     Project;
     Protective advance;
     Startup business;
     Surety;
     Tangible net worth; and
     Working capital.
    The Agency believes that providing definitions for these terms will 
be beneficial to the Section 9003 guaranteed loan program. 
Approximately one-half of these terms are based on the definitions 
found in the Section 9003 NOFA. Most of the other terms are based on 
the definitions found in the withdrawn Rural Development Guaranteed 
Loans rule.
    2. Exception authority (Sec.  4279.202(b)). This section identifies 
those conditions under which the Administrator may make, on a case-by-
case basis, exceptions to any requirement or provision of this subpart. 
The proposed provisions are the same as found in 7 CFR part 4280, 
subpart B, for the renewable energy systems and energy efficiency 
improvements program. These provisions are very similar to those 
currently found in Sec.  4279.15.
    3. Lender eligibility requirements (Sec.  4279.202(c)). This 
paragraph presents the requirements for lenders to participate in the 
Biorefinery Assistance program. Consistent with the Section 9003 NOFA, 
only lenders that are regulated or supervised will be eligible to 
originate and service Biorefinery Assistance Guaranteed loans. The 
Agency is not allowing lending entities that are not regulated or 
supervised to participate in order to manage Agency risk associated 
with this program.
    Although the lenders eligible for participation in the Biorefinery 
Assistance program are regulated or supervised, the Agency is proposing 
additional requirements associated with minimum acceptable level of 
capital requirements that are not being required for lenders 
participating in other Rural Development guaranteed loan programs. The 
additional level of capital requirements, which are the same as found 
in the Section 9003 NOFA, are being proposed because of the size of 
projects under the Biorefinery Assistance program. The Agency believes 
these additional requirements are necessary to limit Agency risk.
    Lastly, under this section, the Agency will approve loan guarantees 
under this subpart only for lenders with adequate experience (as 
determined by the Agency) with similar projects and the expertise to 
make, secure, service, and collect loans approved under this subpart. 
The Agency believes this provision is necessary to further limit Agency 
risk.
    4. Independent credit risk analysis (Sec.  4279.202(d)). Under this 
paragraph, the Agency will require an independent credit risk analysis 
from a nationally-recognized rating agency for loans of $100 million or 
more. The threshold level for the independent credit risk analysis is 
less than found in the Section 9003 NOFA.
    5. Environmental responsibilities (Sec.  4279.202(e)). The Agency 
is proposing that lenders comply with the environmental 
responsibilities in proposed Sec.  4279.202(e) rather than with those 
requirements specified in Sec.  4279.30(c) of the B&I regulation. The 
proposed provisions are very similar to those found in the Section 9003 
NOFA.
    6. Additional lender functions and responsibilities Sec.  
4279.202(f)). The Agency is proposing to add three new paragraphs to 
Sec.  4279.30, Lenders' functions and responsibilities. These three 
paragraphs, which were part of the Section 9003 NOFA, address:
     Agency action or inaction. Any action or inaction on the 
part of the Agency does not relieve the lender of its responsibilities 
to originate and service the loan guaranteed under this subpart.
     Lender files. The lender must compile and maintain in its 
files a

[[Page 20049]]

complete application for each guaranteed loan for at least 3 years 
after the final loss has been paid.
     Conflicts of interest. The lender must report to the 
Agency all conflicts of interest and appearances of conflicts of 
interest.
    7. Certified lender program (Sec.  4279.202(g)). The Agency is not 
including either a preferred or certified lender program because the 
Agency does not believe a preferred lender program, or a certified 
lender program as provided in Sec.  4279.43, is appropriate for the 
biorefinery assistance program.
    8. Oversight and monitoring (Sec.  4279.202(h)). This paragraph 
addresses the recording keeping, oversight, and monitoring requirements 
with which lenders would have to comply. These provisions are the same 
as found in the Section 9003 NOFA.
    9. Conditions of guarantee (Sec.  4279.202(i)). The Agency is 
proposing that the guarantee for a biorefinery assistance loan will 
have to be secured by a first lien on all collateral necessary to run 
the project in the event of the borrower's default. The Agency is 
adding this requirement because of the size of the guaranteed loans 
under this section. The Section 9003 NOFA also required a first lien on 
all collateral.
    The Agency is also proposing to include two other provisions, which 
are found in the Section 9003 NOFA: the rights of the holder of the 
guaranteed portion and the requirement to show the lender as an 
additional insured on insurance policies.
    Lastly, the Agency is proposing that if a lender does not 
satisfactorily comply with the changes and cost overrun provisions 
found in Sec.  4279.256(c) and such failure leads to losses, then such 
losses may not be recoverable under the guarantee. This provision was 
not found in the Section 9003 NOFA, but is being added to protect the 
Agency's interests.
    10. Sale or assignment of guaranteed loan Sec.  4279.202(j)). The 
Agency is proposing to supplement Sec.  4279.75 by requiring the 
guaranteed portion of the loan to be fully transferable to any 
accredited investor and allowing the Agency to not guarantee a loan 
funded with the net proceeds of a bond described in section 142(a) of 
the Internal Revenue Code of 1986. These two provisions were part of 
the Section 9003 NOFA.
    11. Minimum retention (Sec.  4279.202(k)). The Agency is proposing 
the same provisions for minimum retention as found in the Section 9003 
NOFA. The Agency believes that these minimum retention provisions are 
better suited to the size of the loans that will be guaranteed under 
the Section 9003 program than those found in the corresponding B&I 
provisions for minimum retention at Sec.  4279.77.
    12. Replacement of document 4279.202(l)). The Agency is proposing 
to supplement Sec.  4279.84(b)(1)(v) by identifying additional 
circumstances (defacement or mutilation) under which documents will be 
replaced.
Loan Processing (Sec.  4279.225)
    This section states that Biorefinery Assistance Guaranteed loans 
will be processed in accordance with the B&I provisions found in 
Sec. Sec.  4279.107 through 4279.199, subject to a number of important 
exceptions. These exceptions are identified in the proposed rule in 
Sec. Sec.  4279.226 through 4279.299 and are discussed below.
Fees (Sec.  4279.226)
    This section addresses guarantee fees and renewal fees. The B&I 
provisions for the guarantee and renewal fees, which are found at Sec.  
4279.107, apply to this program. The following paragraphs summarize 
differences from these B&I provisions.
    Guarantee Fee. The guarantee fee rates, which are based on the size 
of the loan relative to total project costs, are the same as found in 
the Section 9003 NOFA.
    Renewal Fee. As found in the Section 9003 NOFA, the annual renewal 
fee must be paid to the Agency for as long as the guaranteed loan is 
outstanding and is payable during the construction period. The renewal 
fee rates are also the same as found in the Section 9003 NOFA. The 
Agency notes that the Section 9003 NOFA allowed the guarantee fee to be 
passed on to the borrower, but did not address whether the renewal fee 
could be passed on to the borrower. Under the proposed rule, the 
renewal fee can be passed on to the borrower.
Borrower Eligibility (Sec.  4279.227)
    This section identifies the eligible borrowers for a guaranteed 
loan under the Biorefinery Assistance program; the borrower eligibility 
requirements in Sec.  4279.108 will not apply to this subpart. Instead, 
eligible borrowers, which are defined in the 2008 Farm Bill, must be 
one of the following:
     An individual;
     An entity;
     An Indian Tribe;
     A unit of State or local government;
     A corporation;
     A farm cooperative;
     A farmer cooperative organization;
     An association of agricultural producers;
     A National Laboratory;
     An institution of higher education;
     A rural electric cooperative;
     A public power entity; or
     A consortium of any of the above entities.
    Because these entities, including units of State and local 
governments, National laboratories, and institutions of higher 
education, are statutorily defined, the Agency cannot make changes to 
this list. The Agency has defined several of the entities to clarify 
who will be eligible. Lastly, the Agency notes that ``entity'' was not 
included in the Section 9003 NOFA; this was an oversight.
    In addition to being an eligible type of borrower, borrowers must 
also meet citizenship requirements and must possess the legal authority 
and responsibility necessary to construct, operate, and maintain the 
proposed facility and services and to obtain, give security for, and 
repay the proposed loan. The proposed citizenship requirements are very 
similar to those found in the Section 9003 NOFA, but with the following 
three additions:
     When an entity owns an interest in the borrower, its 
citizenship will be determined by the citizenship of the individuals 
who own an interest in the entity or any sub-entity based on their 
ownership interest;
     If an entity is composed solely of members of an immediate 
family, that entity is eligible to participate provided that at least 
one of the immediate family members meets the citizenship requirement 
for an individual; and
     Corporate borrowers traded on major United States stock 
exchanges will be presumed to have more than 51 percent of their owners 
as United States citizens.
    This section also identifies conditions under which the borrower 
will be considered ineligible for a guarantee. Further, if an applicant 
does not meet the citizenship requirement, the applicant is not 
eligible for this program. While this citizenship requirement is not 
required by statute, it is consistent with the Agency's other programs. 
As found in Section III of this preamble, the Agency is seeking comment 
on this requirement.
Project Eligibility (Sec.  4279.228)
    This section presents the requirements for a project to be eligible 
for a Biorefinery Assistance Guaranteed loan; the project eligibility 
requirements in Sec.  4279.113 will not apply to this subpart. Instead, 
the Agency is proposing five specific project eligibility requirements, 
as discussed below.
    The Agency is proposing that the project must be located in a rural 
area

[[Page 20050]]

in order to be eligible for this program. If the project is not located 
in a rural area, it is not eligible for this program. While not 
statutorily required, the Agency is proposing this rural area 
requirement for consistency with its other programs and its mission to 
improve the economic conditions of rural America. Lastly, as found in 
Section III of this preamble, the Agency is seeking comment on this 
requirement.
    The second requirement (that the project must be for either the 
development and construction of commercial-scale biorefineries using 
eligible technology or the retrofitting of existing facilities) is 
statutorily-driven. Both of the first and second requirements are the 
same as found in the Section 9003 NOFA.
    The third requirement, use of an eligible feedstock, is being 
proposed in response to comments on the ANPRM. These comments requested 
that the Agency clarify the various types of feedstocks that 
biorefineries could use to make advanced biofuels and still be eligible 
for funding under this program. The commenters referred to both the 
statutory language and the Manager's Report on the statute, pointing 
out that certain types of feedstocks were considered, but not clearly 
identified, as potential feedstocks for biorefineries. The Agency 
believes that the statute clearly defines eligible feedstock and no 
further clarification is needed in the proposed rule.
    The Agency received a comment on the ANPRM that requested the 
Agency to consider excluding paper that is commonly recycled from the 
definition of ``waste,'' thus excluding it as an eligible feedstock. 
The Agency has adopted this position in this rule and is seeking 
specific comments on this request and on any other feedstocks that 
should not be considered eligible under this program.
    The fourth requirement, more than 70 percent of revenues from the 
sale of advanced biofuel, attempts to address the Agency's concern that 
loans guaranteed under this program go to projects at biorefineries 
whose primary purpose is the production of advanced biofuel. This 
provision was not included in the Section 9003 NOFA.
    The fifth requirement is that the project must have cash equity 
injection of not less than 20 percent of eligible project costs not 
attributed to other Federal grant or loan programs such as the 
Department of Energy. By limiting the maximum loan guaranteed to 80 
percent of eligible project costs, the statute requires that at least 
20 percent of the project's costs come from sources other than loan 
proceeds. The Agency requested comment in the ANPRM as to:
     What should the equity requirements be?
     Should there be minimum equity requirements that may vary 
depending on the size of the project?
     Will it differ between construction and development versus 
retrofitting?
    After considering the responses to these questions, the Agency 
believes that equity should be cash equity, because cash equity 
represents the best commitment of the borrower to the project and it 
can help reduce project risk by making cash available during 
construction and project startup. The Agency is proposing the same cash 
equity requirement for all biorefinery assistance projects.
    Lastly, this section identifies what areas qualify as rural. The 
definition being proposed is the same as in the Section 9003 NOFA with 
the addition that projects that are located in areas determined to be 
``rural in character'' will be eligible. When making a ``rural in 
character'' determination under the Section 9003 program, the Agency 
will do so in a manner that is consistent with making similar 
determinations under its Business and Industry Guaranteed Loan program.
Guaranteed Loan Funding (Sec.  4279.229)
    Instead of complying with the B&I provisions for guaranteed loan 
funding found at Sec.  4279.119, the Agency is proposing a separate set 
of provisions for Biorefinery Assistance Guaranteed loans. These 
provisions, which are the same as those found in the Section 9003 NOFA, 
address:
     Distribution of budget authority each fiscal year;
     Maximum amount of the loan;
     Maximum principal amount to one borrower;
     Maximum guarantee; and
     Eligible project costs.
    As required by the 2008 Farm Bill, of the funds made available for 
loan guarantees for a fiscal year, 50 percent of the funds must be 
reserved for obligation during the second half of the fiscal year. To 
implement this provision, the Agency will allocate up to, but no more, 
than 50 percent of its budgetary authority to fund applications 
received by the end of the first application window. If any of this 
budgetary authority is not obligated by the end of the first 
application window, the Agency will carry it over into the second 
application window. Thus, the Agency will have at a minimum 50 percent 
of its budgetary authority available for the second application window.
    As required by the 2008 Farm Bill, the amount of a guaranteed loan 
for a project under this section cannot exceed 80 percent of total 
eligible project costs, which are identified later in this preamble. In 
addition, total Federal participation for a biorefinery project will 
not exceed 80 percent of total eligible project costs. The project is 
the biorefinery or portion of the biorefinery that is producing 
eligible advanced biofuels and any eligible biobased by-products 
receiving funds under this program.
    The Agency is proposing to limit the maximum principal amount of a 
loan guaranteed under this section to one borrower to $250 million; the 
Agency is not proposing a minimum amount. This is the same as found in 
the Section 9003 NOFA. The Agency notes that the 2008 Farm Bill 
provides for a maximum principal amount of a loan guaranteed under the 
Biorefinery Assistance program to $250 million on a loan basis. The 
Agency is proposing to apply the $250 million limit on a borrower basis 
in order to make funds available to more entities.
    In addition, and as required by the 2008 Farm Bill, the amount of a 
loan guaranteed under this section will be reduced by the amount of 
other direct Federal funding (i.e., direct loans and grants) that the 
eligible borrower receives for the same project. For example, an 
eligible borrower is applying for a loan guarantee on a $1 million 
project. The borrower provides the minimum matching requirement of 20 
percent, or $200,000. This leaves $800,000 in other funding needed to 
implement the project. If the borrower receives no other direct Federal 
funding for this project and requests a guarantee for the $800,000, the 
Agency will consider a guarantee on the $800,000. However, if this 
borrower receives $100,000 in other direct Federal funding for this 
project, the Agency will only consider a guarantee on $700,000. These 
provisions are the same as those found in the Section 9003 NOFA.
    This section also establishes the maximum percent guarantees for 
loans under this subpart, which are the same as found in the Section 
9003 NOFA. The last paragraph in this section contains the list of 
items the Agency is proposing as eligible project costs, provided the 
items are an integral and necessary part of the total project. The list 
of eligible project costs are the same as found in the Section 9003 
NOFA, except that professional service fees, feasibility studies, and 
business plans have been removed from this list. The Agency is deleting 
these three items because these are expenses that the applicant will

[[Page 20051]]

otherwise incur in evaluating project capability and suitability prior 
to seeking financial assistance.
Subordination of Lien Position (Sec.  4279.230)
    In addition to complying with the provisions found in Sec.  
4279.123, a subordination must not extend the term of the guaranteed 
loan made under this subpart.
Interest Rates (Sec.  4279.231)
    This section identifies the requirements for interest rates for 
loans that are guaranteed under this program, which are the same as 
found in the Section 9003 NOFA.
Terms of Loan (Sec.  4279.232)
    As found in the Section 9003 NOFA, the repayment term for a loan 
guaranteed under this subpart will be for a maximum period of 20 years 
or 85 percent of the useful life of the project, whichever is less, as 
determined by the lender and confirmed by the Agency. In addition, the 
length of the loan term will be required to be the same for both the 
guaranteed and unguaranteed portion of the loan. Additional provisions, 
which are also found in the Section 9003 NOFA, address when guarantees 
can be provided and that all loans guaranteed must be financially sound 
and feasible with reasonable assurance of repayment.
    Lastly, repayment of the loan will be subject to the B&I provisions 
found at Sec.  4279.125(a) and Sec.  4279.126(b), (c), and (d).
Credit Evaluation (Sec.  4279.233)
    Instead of complying with the B&I provisions at Sec.  4279.131 
concerning credit quality, the Agency is proposing a separate set of 
provisions under this subpart.
    As proposed, lenders must conduct a credit evaluation for each 
application submitted. The proposed rule identifies what the Agency 
considers to be an acceptable credit evaluation. Specifically, the 
lender must use credit documentation procedures and an underwriting 
process that are consistent with generally accepted commercial lending 
practices, and the lender must include an analysis of all credit 
factors associated with each guarantee application to ensure loan 
repayment.
    In making this analysis, the proposed rule requires the lender to 
consider the following:
     Credit worthiness. This refers to those qualities that 
generally impel the prospective borrower to meet its obligations as 
demonstrated by its credit history.
     Cash flow. This refers to a prospective borrower's ability 
to produce sufficient cash to repay the loan as agreed.
     Capital. This refers to the financial resources that the 
prospective borrower currently has and those it is likely to have when 
payment is due. The prospective borrower must be adequately 
capitalized.
     Collateral. This refers to the assets, including the 
processing technology owned by the borrower, pledged by the prospective 
borrower in support of the loan.
     Conditions. This refers to the general business 
environment and status of the prospective borrower's industry.
    When determining the credit quality of the borrower, the lender 
must include the following:
     Borrowers must demonstrate evidence of cash equity 
injection in the project of not less than 20 percent of eligible 
project costs. The fair market value of equity in real property that is 
to be pledged as collateral for the loan may be substituted in whole or 
in part to meet the cash equity requirement. However, the appraisal 
completed to establish the fair market value of the real property must 
not be more than 1 year old unless a more recent appraisal is requested 
by the Agency in order to reflect market conditions. The appraisal used 
to establish fair market value of the real property must conform to the 
requirements of Sec.  4279.244. Otherwise, cash equity injection must 
be in the form of cash.
     The credit analysis must also include spreadsheets of the 
balance sheets and income statements of the borrower for the 3 previous 
years (for existing businesses), pro forma balance sheets at startup, 
and projected yearend balance sheets and income statements for a period 
of not less than 3 years of stabilized operation, with appropriate 
ratios and comparisons with industrial standards (such as Dun & 
Bradstreet or Robert Morris Associates) to the extent available.
     All data must be shown in total dollars and also in common 
size form, obtained by expressing all balance sheet items as a 
percentage of assets and all income and expense items as a percentage 
of sales.
    The Agency is including these additional details because of the 
size and complexity of the anticipated biorefinery assistance projects.
Financial Statements (Sec.  4279.237)
    Instead of complying with the B&I provisions for financial 
statements found at Sec.  4279.137, the Agency is proposing that 
biorefinery assistance projects comply with the financial statement 
provisions found at Sec.  4279.261(c), which are presented later in 
this preamble.
Appraisals (Sec.  4279.244)
    In addition to complying with the B&I provisions for appraisals at 
Sec.  4279.144, the appraisals for proposed biorefineries must be self-
contained appraisals. Further, lenders will be required to complete, 
for all applications, a Phase I Environmental Site Assessment (ESA) in 
accordance with ASTM International standards, which should be provided 
to the appraiser for completion of the self-contained appraisal.
    To conduct these appraisals, lenders are required to use 
specialized appraisers, unless a specialized appraiser does not exist, 
in which case the Agency may waive this requirement. This exception, 
that a specialized appraiser will not be required if such an appraiser 
does not exist for the technology required, is being proposed in 
recognition that one of the purposes of this program is to help push 
the technological envelop regarding the production of advanced biofuels 
and, as a result, specialized appraisers may not exist for all 
technologies under this program. Including this exception allows the 
Agency to avoid determining a project ineligible simply because the 
lender cannot find a specialized appraiser for a new technology.
Feasibility Studies (Sec.  4279.250)
    Because the Agency is proposing feasibility studies specific to 
biorefinery assistance projects, which are found at Sec.  4279.261(f), 
the B&I provisions for feasibility studies found at Sec.  4279.150 do 
not apply to this subpart.
Loan Priorities (Sec.  4279.255)
    Instead of complying with the B&I provisions for loan priorities 
found at Sec.  4279.155, the Agency is proposing scoring criteria 
specific to biorefinery assistance projects, which are found at Sec.  
4279.265(c) and which are presented later in this preamble.
Construction Planning and Performing (Sec.  4279.256)
    As proposed, the B&I provisions for construction planning and 
performing found at Sec.  4279.156(a) and (b) will apply to Biorefinery 
Assistance Guaranteed loans. In addition, the Agency is proposing 
several additional requirements specific to Biorefinery Assistance 
Guaranteed loans, as discussed below.
    Architectural and engineering practices. Similar to the Section 
9003 NOFA, lenders would also be required

[[Page 20052]]

to ensure that all project facilities are designed utilizing accepted 
architectural and engineering practices that conform to the 
requirements of the proposed subpart.
    Onsite inspectors. As proposed, lenders will be required to provide 
an onsite project inspector. Given the size and complexity of the 
anticipated biorefinery assistance projects, the Agency believes the 
presence of such inspectors is necessary to protect the interests of 
the lender and the Government.
    Changes and cost overruns. As proposed, borrowers will be 
responsible for any changes or cost overruns. If any such change or 
cost overrun occurs, then any change order must be approved by the 
Agency, and neither the lender nor borrower will be allowed to divert 
funds from purposes identified in the guaranteed loan application 
approved by the Agency to pay for any such change or cost overrun. In 
no event will the current loan be modified or a subsequent guaranteed 
loan be approved to cover any such changes or costs. In the event of 
any of the aforementioned increases in costs or expenses, the borrower 
will be required to provide for such increases in a manner that does 
not diminish the borrower's operating capital. Failure to comply with 
the terms of this paragraph will be considered a material adverse 
change in the borrower's financial condition, and the lender will have 
to address this matter, in writing, to the Agency's satisfaction. If a 
lender does not satisfactorily address the matter and such failure 
leads to losses, then such losses may not be recoverable under the 
guarantee.
    New draws. As proposed, the following three certifications will be 
required for each new draw:
     Certification by the project engineer to the lender that 
the work referred to in the draw has been successfully completed;
     Certification from the lender that all debts have been 
paid and all mechanics' liens have been waived; and
     Certification from the lender that the borrower is 
complying with the Davis-Bacon Act.
    The Agency is proposing these ``change or cost overruns'' and new 
draw provisions to protect its interests. These requirements are the 
same as found in the Section 9003 NOFA, with one exception--the Section 
9003 NOFA did not include the certification from the lender that the 
borrower is complying with the Davis-Bacon Act. The Agency believes 
such certification is appropriate to help ensure compliance with the 
statutory requirement for inclusion of the Davis-Bacon Act requirements 
in this program.
    Surety. The Agency is proposing that surety be required in cases 
when the guarantee will be issued prior to completion of construction 
unless the contractor will receive a lump sum payment at the end of 
work. In addition, surety is to be made a part of the contract, if the 
borrower requests it or if the contractor requests partial payments for 
construction work. Finally a latent defects bond may be required to 
cover the work in instances where no surety is provided and the project 
involves precommercial technology, first of its type in the U.S., or 
new designs without sufficient operating hours to prove their merit.
    Reporting during construction. As proposed, lenders will be 
required to submit quarterly construction reports during the 
construction of commercial-scale biorefineries or the retrofitting of 
existing facilities using eligible technology for the development of 
advanced biofuels. These reports must contain, at a minimum, planned 
and completed construction milestones, loan advances, and personnel 
hiring, training, and retention. The Agency believes that such reports 
are necessary to provide better oversight on these large projects.
Borrower Responsibilities (Sec.  4279.259)
    Under the proposed rule, the Agency has consolidated and simplified 
the responsibilities of borrowers under the Biorefinery Assistance 
program. These responsibilities, which are consistent with those 
associated with the B&I Guaranteed Loan program, address the following 
areas:
     Federal, State, and local regulations;
     Permits, agreements, and licenses;
     Insurance;
     Access to borrower's records; and
     Access to the project.
Guarantee Applications (Sec. Sec.  4279.260 and 4279.261)
    Instead of complying with the B&I provisions for applications found 
at Sec.  4279.161, the Agency is proposing a self-contained set of 
requirements for guaranteed loan applications for biorefinery 
assistance projects. These requirements are found in two sections of 
the proposed rule, as described below.
1. Guarantee Applications--General (Sec.  4279.260)
    This section of the proposed rule contains requirements associated 
with:
     Application submittal;
     Application deadline;
     Incomplete applications; and
     Application withdrawal.
    Application submittal. Because of the size and complexity of the 
anticipated biorefinery assistance projects, the Agency proposes to 
manage this program out of the National Office. Lenders will be 
required to submit applications (one original and two copies) to the 
Agency.
    Application deadline. As proposed, complete applications must be 
submitted to the Agency no later than June 1 of each fiscal year to be 
considered for funding in that fiscal year. If the Agency determines 
that a different application deadline is needed, it will publish a 
notice in the Federal Register identifying the new application deadline 
for that fiscal year. If the application deadline falls on a weekend or 
a federally-observed holiday, the deadline will be the next Federal 
business day.