Loan Guarantees for Projects That Employ Innovative Technologies, 67924-67937 [2016-23268]

Download as PDF 67924 Proposed Rules Federal Register Vol. 81, No. 191 Monday, October 3, 2016 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. DEPARTMENT OF ENERGY 10 CFR Part 609 RIN 1901–AB38 Loan Guarantees for Projects That Employ Innovative Technologies Loan Programs Office, Department of Energy. ACTION: Notice of proposed rulemaking. AGENCY: The Department of Energy (DOE) proposes to amend the regulations implementing the loan guarantee provisions in Title XVII of the Energy Policy Act of 2005 (Title XVII or the Act). The proposal is intended to increase clarity and transparency, reduce paperwork, and provide a more workable interpretation of certain statutory provisions in light of DOE’s experience with the Title XVII program. DATES: Comments on this proposed rule must be postmarked no later than November 2, 2016. ADDRESSES: You may submit comments, identified by RIN 1901–AB38, using any of the following methods: • Federal eRulemaking Portal: https:// www.regulations.gov. Follow the instructions for submitting comments. • Email: LPO.ProposedRuleComments@ hq.doe.gov. Include RIN 1901–AB38 in the subject line of the email. Please include the full body of your comments in the text of the message or as an attachment. • Postal Mail: Mark A. McCall, Executive Director, Loan Programs Office, 1000 Independence Avenue SW., Washington, DC 20585–0121. Please submit one signed original paper copy. Due to potential delays in DOE’s receipt and processing of mail sent through the U.S. Postal Service, we encourage respondents to submit comments electronically to ensure timely receipt. • Hand Delivery/Courier: Mark A. McCall, Executive Director, Loan Programs Office, 1000 Independence Avenue SW., Washington, DC 20585– rmajette on DSK2TPTVN1PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 0121. Please submit one signed original paper copy. This notice of proposed rulemaking and any comments that DOE receives will be made available on the regulations.gov Web site at: https:// www.regulations.gov. You also may obtain copies of comments by contacting Mr. Westergard using the information below. FOR FURTHER INFORMATION CONTACT: Mark S. Westergard, Loan Programs Office, 1000 Independence Avenue SW., Washington, DC 20585–0121, (202) 287– 5621, email: LPO.ProposedRuleComments@ hq.doe.gov. SUPPLEMENTARY INFORMATION: I. Introduction and Background II. Discussion of Proposed Rule III. Public Comment Procedures IV. Regulatory Review V. Approval of the Office of the Secretary I. Introduction and Background Section 1703 (section 1703) authorizes the Secretary of Energy (Secretary) to make loan guarantees for projects that avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases. Such projects must also employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued. The two principal goals of section 1703 are to encourage commercial use in the United States of new or significantly improved energy related technologies and to achieve substantial environmental benefits. Section 1703 also identifies ten categories of technologies and projects that are potentially eligible for loan guarantees. Commercial use of these technologies is expected to help sustain and promote economic growth, produce a more stable and secure energy supply and economy for the United States, and improve the environment. As a result of experience gained implementing the loan guarantee program authorized by section 1703, and information received from program participants, including applicants, borrowers, sponsors, and lenders, as well as various energy industry groups, DOE proposes to amend the existing regulations as described in Section II of this proposed rule. The proposal is intended to provide increased clarity and transparency, reduce paperwork, PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 and provide a more workable interpretation of certain statutory provisions in light of DOE’s experience with operation of the Title XVII program. II. Discussion of Proposed Rule Section 1702(a) of Title XVII directs the Secretary to make guarantees on the terms and conditions determined by the Secretary, after consultation with the Secretary of the Treasury, and in accordance with the prescriptions set forth in section 1702. This provision authorizes the Secretary to establish the loan guarantee program and to determine the terms and conditions of individual loan guarantees, after consultation with the Secretary of Treasury, subject to the limitations in paragraphs (b) through (k) of section 1702. Pursuant to direction provided in Public Law 110–5 (Feb. 15, 2007) DOE promulgated regulations to implement Title XVII which are currently found at 10 CFR part 609 (the ‘‘Title XVII Rule’’). See 74 FR 63544 (Dec. 4, 2009). (The proposed rule was issued on Aug 7, 2009 (74 FR 39569).) The Title XVII Rule addresses matters such as (1) the manner in which proposed projects are vetted, (2) precisely which project costs are eligible for financing, (3) the adequacy and character of equity capital required from sponsors, and (4) what types of co-financing and subordination arrangements would be acceptable to DOE. Similarly, in implementing the Secretary’s general authority under section 1702(a) and the Title XVII Rule, the Loan Programs Office has adopted extensive credit, loan monitoring and risk monitoring policies and procedures, detailed conditional commitment letters and term sheets, and loan guarantee agreements to carry out the purposes of Title XVII. In this rulemaking, DOE proposes amendments to the regulations at 10 CFR part 609 based on its experience in implementing the loan guarantee program. The proposed changes address topics such as the exchange of information with potential applicants and the solicitation process, the preapplication process, the restriction of a project to a single location, and the imposition of a risk-based fee. These issues are described in the paragraphs that follow. For the past several years, the DOE Loan Programs Office has increased E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules communication with interested members of the public regarding the Office, its programs, and solicitations. DOE has prepared and distributed a number of presentations explaining the application process and the types of projects that may be eligible under its solicitations. The Executive Director of the Loan Programs Office has participated in numerous public discussions regarding the program. DOE has also increased communication by regular, broadly distributed email communications to thousands of recipients that have expressed an interest in keeping up with developments in the Loan Programs Office. Contacts by potential applicants regarding the program have significantly increased as a result of these efforts. Nevertheless, the proposed rule includes changes intended to clarify the circumstances under which potential applicants may communicate with DOE prior to submitting an application. DOE expects that the proposed changes would increase transparency and result in more applications by qualified applicants with respect to potential eligible projects. The provisions of the existing rule relating to Pre-Applications have caused considerable confusion among potential applicants and applicants. In this proposed rule, DOE proposes to eliminate the existing pre-application process and codify procedures that divide the application into two parts. The Part I submission would provide DOE with a description of the project or facility, technical information, background information on management, financing strategy, and progress to date of critical path schedules. These schedules would include items such as obtaining licenses or regulatory permits and approvals, site preparation and long lead-time procurements, and would be used as a basis for determining the eligibility of the project and the project’s readiness to proceed. Applicants whose Part I application is sufficient to indicate, on a preliminary basis, the eligibility of the project and that it is ready to proceed would be invited to submit Part II of the application. The Part II submission would involve substantially more, and substantially more detailed, information than is required for the Part I submission. The proposed process of requiring a two-part application is designed, in part, to enable DOE to screen interested projects and provide an early indication of projects’ eligibility for a loan guarantee under this program. The two-part application process would additionally allow DOE VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 to charge the required fee in two parts, making it more economical for smaller businesses to apply. By allowing DOE to engage in an initial review of project proposals, the two-part application process would reduce the paperwork burden for applicants whose projects are not ready to move forward into Part II. Although there is no statutory requirement that all parts of a project be located at a single location, DOE’s solicitations have provided that generally, a Project is restricted to one location within the United States but that DOE, in its discretion, could consider an application for a project using a particular technology that is proposed to be situated in more than one location in the United States if multiple locations are integral components of a unitary plan, necessary to the viability of the Project, and at least one of the locations is identified in the application. Applicants and potential applicants found this requirement of DOE’s solicitations difficult to understand. Additionally, this requirement inhibits an applicant’s ability to propose certain types of distributed energy facilities. DOE reconsidered the need for such a requirement and proposes a revised definition of Eligible Project that would explicitly state that a project may be located at two or more locations in the United States if the project is comprised of installations or facilities employing a single New or Significantly Improved Technology that is deployed pursuant to an integrated and comprehensive business plan. DOE also proposes to include in the rule provisions for the use of Risk-Based Charges. DOE, working in conjunction with the Federal Financing Bank (‘‘FFB’’), has developed a program under which borrowers for certain types of transactions pay a ‘‘credit-based interest rate spread’’ in addition to interest otherwise payable on loans that are issued by FFB. Use of interest rate spreads or other charges based upon the creditworthiness or specific risks arising from individual transactions are commonplace in private-sector commercial loan transactions, including private-sector project finance loan transactions. Such spreads or other charges are also used by other federal credit programs comparable to the Title XVII loan guarantee program, such as those administered by the Overseas Private Investment Corporation and the Export-Import Bank of the United States. Use of Risk-Based Charges is permitted pursuant to the grant of authority to the Secretary in Section 1702(a) to determine the terms and PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 67925 conditions of the Title XVII loan guarantee program. A number of other changes have been included to increase clarity and transparency. Among those changes are: Definitions have been clarified, shortened where possible, and added; specific references to the Cargo Preference Act and the Davis Bacon Act have been added; an introductory section on how the rule is to be interpreted has been added; and various provisions of the existing rule have been re-organized to more-appropriate places in the rule. In a number of places, references to the statutory requirement that DOE consult with the Secretary of the Treasury previously included in Title XVII Rule have been removed. Those references were removed solely because they were unnecessary for consideration by applicants and potential applicants. DOE’s statutory obligation to consult with the Secretary of the Treasury under Section 1702(a) of Title XVII remains unchanged, and no change is intended in the existing consultation arrangements between the Secretary of Energy and the Secretary of the Treasury. III. Public Comment Procedures Interested persons are invited to participate in this proceeding by submitting data, views, or arguments. Written comments should be submitted to the address, and in the form, indicated in the ADDRESSES section of this notice of proposed rulemaking. To help DOE review the comments, interested persons are asked to refer to specific proposed rule provisions, if possible. If you submit information that you believe to be exempt by law from public disclosure, you should submit one complete copy, as well as one copy from which the information claimed to be exempt by law from public disclosure has been deleted. DOE is responsible for the final determination with regard to disclosure or nondisclosure of the information and for treating it accordingly under the DOE Freedom of Information Act regulations at 10 CFR 1004.11. IV. Regulatory Review A. Executive Order 12866 This proposed rule has been determined to be a significant regulatory action under Executive Order 12866, ‘‘Regulatory Planning and Review,’’ 58 FR 51735 (October 4, 1993). Accordingly, this action was subject to review under that Executive Order by the Office of Information and Regulatory E:\FR\FM\03OCP1.SGM 03OCP1 67926 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules Affairs (OIRA) of the Office of Management and Budget (OMB). B. National Environmental Policy Act DOE has determined that this proposed rule is covered under the Categorical Exclusion found in the DOE’s National Environmental Policy Act regulations at paragraph A.5 of appendix A to subpart D, 10 CFR part 1021, which applies to rulemaking that amends an existing rule or regulation which does not change the environmental effect of the rule or regulation being amended. rmajette on DSK2TPTVN1PROD with PROPOSALS C. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of an initial regulatory flexibility analysis for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, ‘‘Proper Consideration of Small Entities in Agency Rulemaking,’’ 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process (68 FR 7990). DOE has made its procedures and policies available on the Office of General Counsel’s Web site: https:// www.energy.gov/gc/downloads/ executive-order-13272-considerationsmall-entities-agency-rulemaking. DOE is not obliged to prepare a regulatory flexibility analysis for this rulemaking because there is not a requirement to publish a general notice of proposed rulemaking for rules related to loans under the Administrative Procedure Act (5 U.S.C. 553(a)(2)). D. Paperwork Reduction Act Information collection requirements for the DOE regulations at 10 CFR part 609 were previously approved by OMB pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the procedure implementing that Act (5 CFR 1320.1 et seq.) under OMB Control Number 1910–5134. This proposed rule contains revised information collection requirements subject to approval by OMB. DOE has submitted the proposed revised collection of information to OMB for approval. Public reporting burden for the revised requirements in this proposed rule is estimated to average 130 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 data needed, and completing and reviewing the collection of information. All responses are expected to be collected electronically. DOE invites public comment on: (1) Whether the proposed information collection requirements are necessary for the performance of DOE’s functions, including whether the information will have practical utility; (2) the accuracy of DOE’s estimates of the burden of the proposed information collection requirements; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the information collection requirements on respondents. Comments should be addressed to the Department of Energy Desk Officer, Office of Information and Regulatory Affairs, OMB, 725 17th Street NW., Washington, DC 20503. Persons submitting comments to OMB also are requested to send a copy to the contact person at the address given in the ADDRESSES section of this notice of proposed rulemaking. Interested persons may obtain a copy of the DOE’s Paperwork Reduction Act Submission to OMB from the contact person named in this notice of proposed rulemaking. Notwithstanding any other provision of law, a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. E. Unfunded Mandates Reform Act of 1995 The Unfunded Mandates Reform Act of 1995 (Act) (Pub. L. 104–4) generally requires Federal agencies to examine closely the impacts of regulatory actions on State, local, and tribal governments. The term ‘‘Federal mandate’’ is defined in the Act to mean a Federal intergovernmental mandate or a Federal private sector mandate. Although the proposed rule would impose certain requirements on non-Federal governmental and private sector applicants for loan guarantees, the Act’s definitions of the terms ‘‘Federal intergovernmental mandate’’ and ‘‘Federal private sector mandate’’ exclude among other things, any provision in legislation, statute, or regulation that is a condition of Federal assistance or a duty arising from participation in a voluntary program. The proposed rule would establish requirements that persons voluntarily seeking loan guarantees for projects that would use certain new and improved energy technologies must satisfy as a condition of a Federal loan guarantee. Thus, the proposed rule falls under the exceptions in the definitions of ‘‘Federal intergovernmental mandate’’ and PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 ‘‘Federal private sector mandate’’ for requirements that are a condition of Federal assistance or a duty arising from participation in a voluntary program. The Act does not apply to this rulemaking. F. Treasury and General Government Appropriations Act, 1999 Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105–277) requires Federal agencies to issue a Family Policymaking Assessment for any proposed rule that may affect family well-being. The proposed rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment. G. Executive Order 13132 Executive Order 13132, ‘‘Federalism,’’ 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. DOE has examined this proposed rule and has determined that it would not preempt State law and would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. No further action is required by Executive Order 13132. H. Executive Order 12988 With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, ‘‘Civil Justice Reform,’’ 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification and burden reduction. With regard to the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on E:\FR\FM\03OCP1.SGM 03OCP1 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the proposed rule meets the relevant standards of Executive Order 12988. rmajette on DSK2TPTVN1PROD with PROPOSALS I. Treasury and General Government Appropriations Act, 2001 The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB’s guidelines were published at 67 FR 8452 (February 22, 2002), and DOE’s guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed this proposed rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines. J. Executive Order 13211 Executive Order 13211, ‘‘Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,’’ 66 FR 28355 (May 22, 2001) requires Federal agencies to prepare and submit to the OMB, a Statement of Energy Effects for any proposed significant energy action. A ‘‘significant energy action’’ is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 This regulatory action would not have a significant adverse effect on the supply, distribution, or use of energy and has not been designated by OIRA as a significant energy action, and is therefore not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects. K. Executive Order 12630 The Department has determined, under Executive Order 12630, ‘‘Governmental Actions and Interference with Constitutionally Protected Property Rights,’’ 53 FR 8859 (March 18, 1988), that this rulemaking would not result in any takings which might require compensation under the Fifth Amendment to the United States Constitution. V. Approval of the Office of the Secretary The Secretary of Energy has approved publication of this notice of proposed rulemaking. List of Subjects in 10 CFR Part 609 Administrative practice and procedure, Energy, Loan programs, and Reporting and recordkeeping requirements. Issued in Washington, DC, on September 21, 2016. Mark A. McCall, Executive Director, Loan Programs Office. For the reasons stated in the preamble, DOE proposes to revise part 609 of chapter II of title 10 of the Code of Federal Regulations to read as follows: PART 609—LOAN GUARANTEES FOR PROJECTS THAT EMPLOY INNOVATIVE TECHNOLOGIES Sec. 609.1 Purpose and scope. 609.2 Definitions and interpretation. 609.3 Solicitations. 609.4 Submission of applications. 609.5 Programmatic, technical and financial evaluation of applications. 609.6 Term sheets and conditional commitments. 609.7 Closing on the loan guarantee agreement. 609.8 Loan guarantee agreement. 609.9 Lender servicing requirements. 609.10 Project costs. 609.11 Fees and charges. 609.12 Full faith and credit and incontestability. 609.13 Default, demand, payment, and foreclosure on collateral. 609.14 Preservation of collateral. 609.15 Audits and access to records. 609.16 Deviations. Authority: 42 U.S.C. 7254, 16511–16514. PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 § 609.1 67927 Purpose and scope. (a) This part sets forth the policies and procedures that DOE uses for receiving, evaluating, and approving applications for loan guarantees to support Eligible Projects under section 1703 of the Energy Policy Act of 2005 (Act). (b) This part applies to all Applications, Conditional Commitments, and Loan Guarantee Agreements. (c) Part 1024 of chapter X of title 10 of the Code of Federal Regulations (PROCEDURES FOR FINANCIAL ASSISTANCE APPEALS) shall not apply to actions taken under this part. § 609.2 Definitions and interpretation. (a) Definitions. When used in this part the following words have the following meanings. Act means Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 16511– 16514), as amended. Administrative cost of issuing a loan guarantee means the total of all administrative expenses that DOE incurs during: (1) The evaluation of an Application for a loan guarantee; (2) The negotiation and offer of a Term Sheet; (3) The negotiation of a Loan Guarantee Agreement and related documents, including the issuance of a Guarantee; and (4) The servicing and monitoring of a Loan Guarantee Agreement, including during the construction, startup, commissioning, shakedown, and operational phases of an Eligible Project. Applicant means a Person, including a prospective Borrower or Project Sponsor, that submits an Application to DOE. Application means a written submission of materials responsive to a Solicitation that satisfies § 609.4 of this part. Application fee means the fee or fees required to be paid by an Applicant in connection with submission of an Application and specified in a Solicitation. The Application Fee does not include the Credit Subsidy Cost. Attorney General means the Attorney General of the United States. Borrower means any Person that enters into a Loan Guarantee Agreement with DOE and issues Guaranteed Obligations. Cargo preference act means the Cargo Preference Act of 1954, 46 U.S.C 55305, as amended. Commercial technology means a technology in general use in the commercial marketplace in the United States at the time the Term Sheet is E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS 67928 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules offered by DOE. A technology is in general use if it is being used in three or more facilities that are in commercial operation in the United States for the same general purpose as the proposed project, and has been used in each such facility for a period of at least five years. The five-year period for each facility shall start on the in-service date of the facility employing that particular technology or, in the case of a retrofit of a facility to employ a particular technology, the date the facility resumes commercial operation following completion and testing of the retrofit. For purposes of this section, facilities that are in commercial operation include projects that have been the recipients of a loan guarantee from DOE under this part. Conditional commitment means a Term Sheet offered by DOE and accepted by the offeree of the Term Sheet, all in accordance with § 609.6(c) of this part; provided, that the Secretary may terminate a Conditional Commitment for any reason at any time prior to the execution of the Loan Guarantee Agreement; and provided, further, that the Secretary may not delegate this authority to terminate a Conditional Commitment. Contracting officer means the Secretary of Energy or a DOE official authorized by the Secretary to enter into, administer or terminate DOE Loan Guarantee Agreements and related contracts on behalf of DOE. Credit subsidy cost has the same meaning as ‘‘cost of a loan guarantee’’ in section 502(5)(C) of the Federal Credit Reform Act of 1990, which is the net present value, at the time the Loan Guarantee Agreement is executed, of the following estimated cash flows, discounted to the point of disbursement: (1) Payments by the Government to cover defaults and delinquencies, interest subsidies, or other payments; less (2) Payments to the Government including origination and other fees, penalties, and recoveries; including the effects of changes in loan or debt terms resulting from the exercise by the Borrower, Eligible Lender or other Holder of an option included in the Loan Guarantee Agreement. Davis-Bacon act means the statute referenced in section 1702(k) of the Act. DOE means the United States Department of Energy. Eligible lender means either: (1) Any Person formed for the purpose of, or engaged in the business of, lending money that, as determined by DOE in each case, is: (i) Not debarred or suspended from participation in a Federal government VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 contract or participation in a nonprocurement activity (under a set of uniform regulations implemented for numerous agencies, such as DOE, at 2 CFR part 180); (ii) Not delinquent on any Federal debt or loan; (iii) Legally authorized and empowered to enter into loan guarantee transactions authorized by the Act and these regulations; (iv) Able to demonstrate experience in originating and servicing loans for commercial projects similar in size and scope to the Eligible Project, or able to procure such experience through contracts acceptable to DOE; and (v) Able to demonstrate experience as the lead lender or underwriter by presenting evidence of its participation in large commercial projects or energyrelated projects or other relevant experience, or able to procure such experience through contracts acceptable to DOE; or (2) The Federal Financing Bank. Eligible project means a project that: (1) Is located in the United States at one location, except that the project may be located at two or more locations in the United States if the project is comprised of installations or facilities employing a single New or Significantly Improved Technology that is deployed pursuant to an integrated and comprehensive business plan. An Eligible Project in more than one location is a single Eligible Project; (2) Deploys a New or Significantly Improved Technology; and (3) Satisfies all applicable requirements of section 1703 of the Act, the applicable Solicitation, and this part. Equity means cash contributed to the permanent capital stock (or equivalent) of the Borrower or the Eligible Project by the shareholders or other owners of the Borrower or the Eligible Project. Equity does not include proceeds from the non-guaranteed portion of a Guaranteed Obligation, proceeds from any other non-guaranteed loan or obligation, or the value of any government assistance or support. Facility fee means the fee, to be paid in the amount and in the manner provided in the Term Sheet, to cover the Administrative Cost of Issuing a Loan Guarantee for the period from the Borrower’s acceptance of the Term Sheet through issuance of the Guarantee. Federal financing bank means an instrumentality of the United States government created by the Federal Financing Bank Act of 1973, under the general supervision of the Secretary of the Treasury. PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 Guarantee means the undertaking of the United States of America, acting through the Secretary pursuant to Title XVII of the Energy Policy Act of 2005, to pay in accordance with the terms thereof, principal and interest of a Guaranteed Obligation. Guaranteed obligation means any loan or other debt obligation of the Borrower for an Eligible Project for which DOE guarantees all or any part of the payment of principal and interest under a Loan Guarantee Agreement entered into pursuant to the Act. Holder means any Person that holds a promissory made by the Borrower evidencing the Guaranteed Obligation (or his designee or agent). Intercreditor agreement means any agreement or instrument (or amendment or modification thereof) among DOE and one or more other Persons providing financing or other credit arrangements to the Borrower or an Eligible Project) or that otherwise provides for rights of DOE in respect of a Borrower or in respect of an Eligible Project, in each case in form and substance satisfactory to DOE. Loan agreement means a written agreement between a Borrower and an Eligible Lender containing the terms and conditions under which the Eligible Lender will make a loan or loans to the Borrower for an Eligible Project. Loan guarantee agreement means a written agreement that, when entered into by DOE and a Borrower, and, if applicable, an Eligible Lender, establishes the obligation of DOE to guarantee the payment of all or a portion of the principal of, and interest on, specified Guaranteed Obligations, subject to the terms and conditions specified in the Loan Guarantee Agreement. New or significantly improved technology means a technology, or a defined suite of technologies, concerned with the production, consumption, or transportation of energy and that is not a Commercial Technology, and that has either: (1) Only recently been developed, discovered, or learned; or (2) Involves or constitutes one or more meaningful and important improvements in productivity or value, in comparison to Commercial Technologies in use in the United States at the time the Term Sheet is issued. OMB means the Office of Management and Budget in the Executive Office of the President. Person means any natural person or any legally constituted entity, including a state or local government, tribe, corporation, company, voluntary association, partnership, limited E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules liability company, joint venture, and trust. Project costs mean those costs, including escalation and contingencies, that are to be expended or accrued by a Borrower and are necessary, reasonable, customary and directly related to the design, engineering, financing, construction, startup, commissioning and shakedown of an Eligible Project, as specified in § 609.10(a) of this part. Project Costs do not include costs for the items set forth in § 609.10(b) of this part. Project sponsor means any Person that assumes substantial responsibility for the development, financing, and structuring of an Eligible Project and, if not the Applicant, owns or controls, by itself and/or through individuals in common or affiliated business entities, a five percent or greater interest in the proposed Eligible Project, the Borrower or the Applicant. Risk-based charge means a charge that, together with the principal and interest on the guaranteed loan, or at such other times as DOE may determine, is payable on specified dates during the term of a Guaranteed Obligation. Secretary means the Secretary of Energy or a duly authorized designee or successor in interest. Solicitation means an announcement that DOE is accepting Applications that is widely disseminated to the public on the DOE Web site or otherwise, and which satisfies the requirements of § 609.3(b) of this part. Term sheet means a written offer for the issuance of a loan guarantee, executed by the Secretary (or a DOE official authorized by the Secretary to execute such offer), delivered to the offeree, that sets forth the detailed terms and conditions under which DOE and the Applicant will execute a Loan Guarantee Agreement. United States means the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa and any territory or possession of the United States of America. (b) Interpretations. This part shall be interpreted using the following guidelines. (1) The word ‘‘discretion’’ when used with reference to DOE, including the Secretary, means ‘‘sole discretion.’’ (2) Defined terms in the singular shall include the plural and vice versa, and the masculine, feminine or neuter gender shall include all genders. (3) The word ‘‘or’’ is not exclusive. (4) References to laws by name or popular name are references to the version of such law appearing in the United States Code and include any VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 amendment, supplement or modification of such law, and all regulations, rulings, and other laws promulgated thereunder. (5) References to information or documents required or allowed to be submitted to DOE mean information or documents that are marked as provided in 10 CFR 600.15(b). A document or information that is not marked as provided in 10 CFR 600.15(b) will not be considered as having been submitted to or received by DOE. (6) A reference to a Person includes such Person’s successors and permitted assigns. (7) The words ‘‘include,’’ ‘‘includes’’ and ‘‘including’’ are not limiting and mean include, includes and including ‘‘without limitation’’ and ‘‘without limitation by specification.’’ (8) The words ‘‘hereof,’’ ‘‘herein’’ and ‘‘hereunder’’ and words of similar import refer this part as a whole and not to any particular provision of this part. § 609.3 Solicitations. (a) DOE may invite the submission of Applications for loan guarantees for Eligible Projects pursuant to a Solicitation. (b) Each Solicitation must include, at a minimum, the following information: (1) The dollar amount of loan guarantee authority potentially being made available by DOE in that Solicitation; (2) The place and deadline for submission of Applications; (3) The name and address of the DOE representative whom a potential Applicant may contact to receive further information and a copy of the Solicitation; (4) The form, format, and page limits applicable to the Application; (5) The amount of the Application Fee and any other fees that will be required; (6) The programmatic, technical, financial and other factors that DOE will use to evaluate response submissions, and their relative weightings in that evaluation; and (7) Such other information as DOE may deem appropriate. (c) Using procedures as may be announced by DOE a potential Applicant may request a meeting with DOE to discuss its potential Application. At its discretion, DOE may meet with a potential Applicant, either in person or electronically, to discuss its potential Application. DOE may provide a potential Applicant with a preliminary response regarding whether its proposed Application may constitute an Eligible Project. DOE is not permitted to design an Eligible Project for an Applicant, but may respond, in its discretion, in PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 67929 general terms to specific proposals. DOE’s responses to questions from potential Applicants and DOE’s statements to potential Applicants are pre-decisional and preliminary in nature. Any such responses and statements are subject in their entirety to any final action by DOE with respect to an Application submitted in accordance with § 609.4 of this part. § 609.4 Submission of applications. (a) In response to a Solicitation, an Applicant must meet all requirements and provide all information specified in this part and the Solicitation in the manner and on or before the date specified therein. DOE may direct that Applications be submitted in more than one part; provided, that the parts of such Application, taken as a whole, satisfy the requirements of § 609.4(c) and this part. In such event, subsequent parts of an Application may be filed only after DOE invites an Applicant to make an additional submission. The initial part of an Application may be used by DOE to determine the likelihood that the project proposed by an Applicant will be an Eligible Project, and to evaluate such project’s readiness to proceed. If there have been any material amendments, modifications or additions made to the information previously submitted by an Applicant, the Applicant shall provide a detailed description thereof, including any changes in the proposed project’s financing structure or other terms, promptly upon request by DOE. Where DOE has directed that an Application be submitted in parts, DOE may provide for payment of the Application Fee in parts. (b) An Applicant may submit only one Application for one proposed project using a particular technology. An Applicant may not submit an Application or Applications for multiple Eligible Projects using the same technology. An Applicant may submit Applications for multiple proposed projects using different technologies. For purposes of this paragraph, the term Applicant shall include the Project Sponsor and any subsidiaries or affiliates of the Project Sponsor. (c) An Application must include, at a minimum, the following information and materials: (1) A completed Application form signed by an individual with full authority to bind the Applicant, including the commitments and representations made in each part of the Application; (2) The applicable Application Fee; (3) A description of how and to what measurable extent the proposed project E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS 67930 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules avoids, reduces, or sequesters air pollutants and/or anthropogenic emissions of greenhouse gases, including how to measure and verify those effects; (4) A description of the nature and scope of the proposed project, including: (i) Key project milestones; (ii) Location or locations of the proposed project; (iii) Identification and commercial feasibility of the New or Significantly Improved Technology to be deployed; (iv) How the Applicant intends to deploy such New or Significantly Improved Technology in the proposed project; and (v) How the Applicant intends to assure, to the extent possible, the further commercial availability of the New or Significantly Improved Technology in the United States. (5) An explanation of how the proposed project qualifies as a project within the category or categories of projects referred to in the Solicitation; (6) A detailed estimate of the total Project Costs together with a description of the methodology and assumptions used; (7) A detailed description of the engineering and design contractor(s), construction contractor(s), and equipment supplier(s); (8) The construction schedules for the proposed project, including major activity and cost milestones; (9) A description of the material terms and conditions of the development and construction contracts to include the performance guarantees, performance bonds, liquidated damages provisions, and equipment warranties; (10) A detailed description of the operations and maintenance provider(s), the plant operating plan, estimated staffing requirements, parts inventory, major maintenance schedule, estimated annual downtime, and performance guarantees and related liquidated damage provisions, if any; (11) A description of the management plan of operations to be employed in carrying out the proposed project, and information concerning the management experience of each officer or key person associated with the proposed project; (12) A detailed description of the proposed project decommissioning, deconstruction, and disposal plan, and the anticipated costs associated therewith; (13) An analysis of the market for any product (including but not limited to electricity and chemicals) to be produced by, or services to be provided by, the proposed project, including VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 relevant economics justifying the analysis, and copies of (i) Any contracts for the sale of such products or the provision of such services, or (ii) Any other assurance of the revenues to be generated from sale of such products or provision of such services; (14) A detailed description of the overall financial plan for the proposed project, including all sources and uses of funding, equity and debt, and the liability of parties associated with the proposed project over the term of the Loan Guarantee Agreement; (15) A copy of all material agreements, whether entered into or proposed, relevant to the investment, design, engineering, financing, construction, startup commissioning, shakedown, operations and maintenance of the proposed project; (16) A copy of the financial closing checklist for the equity and debt to the extent available; (17) The Applicant’s business plan on which the proposed project is based and Applicant’s financial model with respect to the proposed project for the proposed term of the Guaranteed Obligations, including, as applicable, pro forma income statements, balance sheets, and cash flows. All such information and data must include assumptions made in their preparation and the range of revenue, operating cost, and credit assumptions considered; (18) Financial statements for the three immediately preceding fiscal years of the Applicant (or such shorter period as the Applicant has been in existence) that have been audited by an independent certified public accounting firm, including all associated certifications, notes and letters to management, as well as interim financial statements and notes for the current fiscal year for the Applicant and all other Persons the credit of which is material to the success of the transactions described in the Application; (19) A copy of all legal opinions, and other material reports, analyses, and reviews related to the proposed project that have been delivered prior to submission of any part of the Application; (20) An independent engineering report prepared by an engineer with experience in the industry and familiarity with similar projects. The report should address the proposed project’s siting and permitting arrangements, engineering and design, contractual requirements, environmental compliance, testing, PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 commissioning and operations, and maintenance; (21) A credit history of the Applicant and each Project Sponsor; (22) A preliminary credit assessment for the proposed project without a loan guarantee from a nationally recognized rating agency for projects where the estimated total Project Costs exceed $25 million. For proposed projects where the total estimated Project Costs are $25 million or less and where conditions justify, in the sole discretion of the Secretary, DOE may require such an assessment; (23) A list showing the status of and estimated completion date of Applicant’s required applications for federal, state, and local permits, authorizations or approvals to site, construct, and operate the proposed project; (24) A report containing an analysis of the potential environmental impacts of the proposed project that will enable DOE to— (i) Assess whether the proposed project will comply with all applicable environmental requirements; and (ii) Undertake and complete any necessary reviews under the National Environmental Policy Act of 1969; (25) A listing and description of the assets of or to be utilized for the benefit of the proposed project, and of any other asset that will serve as collateral pledged in respect of the Guaranteed Obligations, including appropriate data as to the value of such assets and the useful life of any physical assets. With respect to real property assets listed, an appraisal that is consistent with the ‘‘Uniform Standards of Professional Appraisal Practice,’’ promulgated by the Appraisal Standards Board of the Appraisal Foundation, and performed by licensed or certified appraisers, is required; (26) An analysis demonstrating that, at the time of the Application, there is a reasonable prospect that Borrower will be able to repay the Guaranteed Obligations (including interest) according to their terms, and a complete description of the operational and financial assumptions and methodologies on which this demonstration is based; and (27) If proposed project assets or facilities are or will be jointly owned by the Applicant and one or more other Persons or entities, each of which owns an undivided ownership interest in such proposed project assets or facilities, a description of the Applicant’s rights and obligations in respect of its undivided ownership interest in such proposed project assets or facilities. E:\FR\FM\03OCP1.SGM 03OCP1 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules (d) During the Application evaluation process pursuant to § 609.5 of this part, DOE may request additional information, potentially including a preliminary credit rating or credit assessment, with respect to the proposed project. (e) DOE will not consider any part of any Application or the Application as a whole complete unless the Application Fee (or the required portion of the Application Fee related to a particular part of the Application) has been paid. An Application Fee paid in connection with one Application is not transferable to another Application. Except in the discretion of DOE, no portion of the Application Fee is refundable; (f) DOE has no obligation to evaluate an Application that is not complete, and may proceed with such evaluation, or a partial evaluation, only in its discretion. (g) Unless an Applicant requests an extension and such an extension is granted by DOE in its discretion, an Application may be rejected if it is not complete within four years from the date of submission (or date of submission of the first part thereof, in the case of Applications made in more than one part). (h) Upon making a determination to engage independent consultants or outside counsel with respect to an Application, DOE will proceed to evaluate and process such Application only following execution by an Applicant or Project Sponsor, as appropriate, of an agreement satisfactory to DOE to pay the fees and expenses charged by the independent consultants and outside legal counsel. rmajette on DSK2TPTVN1PROD with PROPOSALS § 609.5 Programmatic, technical and financial evaluation of applications. (a) In reviewing completed Applications, and in prioritizing and selecting those as to which a Term Sheet should be offered, DOE will apply the criteria set forth in the Act, any applicable Solicitation, and this part. Applications will be considered in a competitive process, i.e. each Application will be evaluated against other Applications responsive to the Solicitation. .DOE may compare an Application to Applications related to other projects that DOE reasonably believes may become the subject of an Application. Applications will be denied if: (1) The proposed project is not an Eligible Project; (2) The applicable technology is not ready to be deployed commercially in the United States, cannot yield a commercially viable product or service in the use proposed in the Application, does not have the potential to be VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 deployed in other commercial projects in the United States, or is not or will not be available for further commercial use in the United States; (3) The Person proposed to issue the loan or purchase other debt obligations constituting the Guaranteed Obligations is not an Eligible Lender; (4) The proposed project is for demonstration, research, or development; (5) Significant Equity for the proposed project will not be provided by the date of issuance of the Guaranteed Obligations, or such later time as DOE in its discretion may determine; or (6) The proposed project does not present a reasonable prospect of repayment of the Guaranteed Obligations. (b) If an Application has not been denied pursuant to § 609.5(a), DOE will evaluate the proposed Project based on the criteria set forth in the Act, any applicable Solicitation and the following: (1) To what measurable extent the proposed project avoids, reduces, or sequesters air pollutants or anthropogenic emissions of greenhouses gases, or contributes to the avoidance, reduction or sequestration of air pollutants or anthropogenic emissions of greenhouse gases; (2) To what extent the technology to be deployed in the proposed project— (i) Is ready to be deployed commercially in the United States, can be replicated, yields a commercially viable product or service in the use proposed in the proposed project, has potential to be deployed in other commercial projects in the United States, and is or will be available for further commercial use in the United States; and (ii) Constitutes an important improvement in technology, as compared to available Commercial Technologies, used to avoid, reduce or sequester air pollutants or anthropogenic emissions of greenhouse gases; (3) To what extent the Applicant has a plan to advance or assist in the advancement of that technology into the commercial marketplace in the United States; (4) The extent to which the level of proposed support in the Application is consistent with a reasonable prospect of repayment of the Guaranteed Obligations by considering, among other factors: (i) The extent to which the requested amount of the loan guarantee, the requested amount of Guaranteed Obligations and, if applicable, the expected amount of any other financing PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 67931 or credit arrangements, are reasonable relative to the nature and scope of the proposed project; (ii) The total amount and nature of the Project Costs and the extent to which Project Costs are to be funded by Guaranteed Obligations; and (iii) The feasibility of the proposed project and likelihood that it will produce sufficient revenues to service its debt obligations over the life of the loan guarantee and assure timely repayment of Guaranteed Obligations; (5) The likelihood that the proposed project will be ready for full commercial operations in the time frame stated in the Application; (6) The amount of Equity committed and to be committed to the proposed project by the Borrower, the Project Sponsor, and other Persons; (7) Whether there is sufficient evidence that the Borrower will diligently implement the proposed project, including initiating and completing the proposed project in a timely manner; (8) Whether and to what extent the Applicant will rely upon other Federal and non-Federal Government assistance such as grants, tax credits, or other loan guarantees to support the financing, construction, and operation of the proposed project and how such assistance will impact the proposed project; (9) The levels of safeguards provided to the Federal Government in the event of default through collateral, warranties, and other assurance of repayment described in the Application, including the nature of any anticipated intercreditor arrangements; (10) The Applicant’s, or the relevant contractor’s, capacity and expertise to operate the proposed project successfully, based on factors such as financial soundness, management organization, and the nature and extent of corporate and individual experience; (11) The ability of the proposed Borrower to ensure that the proposed project will comply with all applicable laws and regulations, including all applicable environmental statutes and regulations; (12) The levels of market, regulatory, legal, financial, technological, and other risks associated with the proposed project and their appropriateness for a loan guarantee provided by DOE; (13) Whether the Application contains sufficient information, including a detailed description of the nature and scope of the proposed project and the nature, scope, and risk coverage of the loan guarantee sought to enable DOE to perform a thorough assessment of the proposed project; and E:\FR\FM\03OCP1.SGM 03OCP1 67932 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules (14) Such other criteria that DOE deems relevant in evaluating the merits of an Application. (c) After DOE completes its review and evaluation of a proposed project pursuant to § 609.5(b) and this part, DOE will notify the Applicant in writing of its determination whether to proceed with due diligence and negotiation of a Term Sheet in accordance with § 609.6 of this part. DOE will proceed only if it determines that the proposed project is highly qualified and suitable for a Guarantee. Upon written confirmation from the Applicant that it desires to proceed, DOE and the Applicant will commence negotiations. (d) A determination by DOE not to proceed with a proposed project following evaluation pursuant to § 609.5(b) shall be final and nonappealable, but shall not prejudice the Applicant or other affected Persons from applying for a Guarantee in respect of a different proposed project pursuant to another, separate Application. rmajette on DSK2TPTVN1PROD with PROPOSALS § 609.6 Term sheets and conditional commitments. (a) DOE, after negotiation of a Term Sheet with an Applicant, may offer such Term Sheet to an Applicant or such other Person that is an affiliate of the Applicant and that is acceptable to DOE. DOE’s offer of a Term Sheet shall be in writing and signed by the Contracting Officer. DOE’s negotiation of a Term Sheet imposes no obligation on the Secretary to offer a Term Sheet to the Applicant. (b) DOE shall terminate its negotiations of a Term Sheet if it has not offered a Term Sheet in respect of an Eligible Project within four years after the date of the written notification set forth in § 609.5(c) of this part, unless extended in writing in the discretion of the Contracting Officer. (c) If and when the offeree specified in a Term Sheet satisfies all terms and conditions for acceptance of the Term Sheet, including written acceptance thereof and payment of all fees specified in § 609.11(f) and therein to be paid at or prior to acceptance of the Term Sheet, the Term Sheet shall become a Conditional Commitment. Each Conditional Commitment shall include an expiration date no more than two years from the date it is issued, unless extended in writing in the discretion of the Contracting Officer. When and if all of the terms and conditions specified in the Conditional Commitment have been met, DOE and the Applicant may enter into a Loan Guarantee Agreement. (d) If, subsequent to execution of a Conditional Commitment, the financing arrangements of the Borrower, or in VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 respect of an Eligible Project, change from those described in the Conditional Commitment, the Applicant shall promptly provide updated financing information in writing to DOE. All such updated information shall be deemed to be information submitted in connection with an Application and shall be subject to § 609.4(b). Based on such updated information, DOE may take one or more of the following actions: (1) Determine that such changes are not material to the Borrower, the Eligible Project or DOE; (2) Amend the Conditional Commitment accordingly; (3) Postpone the expected closing date of the associated Loan Guarantee Agreement; or (4) Terminate the Conditional Commitment. § 609.7 Closing on the loan guarantee agreement. (a) Subsequent to entering into a Conditional Commitment with an Applicant, DOE, after consultation with the Applicant, will set a closing date for execution of a Loan Guarantee Agreement. (b) Prior to or on the closing date of a Loan Guarantee Agreement, DOE will ensure that: (1) One of the following has occurred: (i) An appropriation for the Credit Subsidy Cost has been made; (ii) The Secretary has received from the Borrower payment in full for the Credit Subsidy Cost and deposited the payment into the Treasury; or (iii) A combination of one or more appropriations under paragraph (b)(1)(i) of this section and one or more payments from the Borrower under paragraph (b)(1)(ii) of this section has been made that is equal to the Credit Subsidy Cost; (2) Pursuant to section 1702(h) of the Act, DOE has received from the Applicant the remainder of the Facility Fee referred to in § 609.11(b) of this part; (3) OMB has reviewed and approved DOE’s calculation of the Credit Subsidy Cost of the Guarantee; (4) The Department of the Treasury has been consulted as to the terms and conditions of the Loan Guarantee Agreement; (5) The Loan Guarantee Agreement and related documents contain all terms and conditions DOE deems reasonable and necessary to protect the interest of the United States; (6) Each holder of the Guaranteed Obligations is an Eligible Lender, and the servicer of the Guaranteed Obligations meets the servicing performance requirements of § 609.9(b) of this part; PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 (7) DOE has determined the principal amount of the Guaranteed Obligations expected to be issued in respect of the Eligible Project, as estimated at the time of issuance, will not exceed 80 percent of the Project Costs of the Eligible Project; (8) All conditions precedent specified in the Conditional Commitment are either satisfied or waived by the Contracting Officer and all other applicable contractual, statutory, and regulatory requirements have been satisfied or waived by the Contracting Officer. If the counterparty to the Conditional Commitment has not satisfied all such terms and conditions on or prior to the closing date of the Loan Guarantee Agreement, the Secretary may, in his discretion, set a new closing date, or terminate the Conditional Commitment; and (9) Where the total Project Costs for an Eligible Project are projected to exceed $25 million, the Applicant must provide a credit rating from a nationally recognized rating agency reflecting the revised Conditional Commitment for the project without a Federal guarantee. Where total Project Costs are projected to be $25 million or less, the Secretary may, on a case-by-case basis, require a credit rating. If a credit rating is required, an updated rating must be provided to the Secretary not later than 30 days prior to closing. § 609.8 Loan guarantee agreement. (a) Only a Loan Guarantee Agreement executed by the Contracting Officer can obligate DOE to issue a Guarantee in respect of Guaranteed Obligations. (b) DOE is not bound by oral representations. (c) Each Loan Guarantee Agreement shall contain the following requirements and conditions, and shall not be executed until the Contracting Officer determines that the following requirements and conditions are satisfied: (1) The Federal Financing Bank shall be the only Eligible Lender in transactions where DOE guarantees 100 percent (but not less than 100 percent) of the principal and interest of the Guaranteed Obligations issued under a Loan Guarantee Agreement. (i) Where DOE guarantees more than 90 percent of the Guaranteed Obligation, the guaranteed portion cannot be separated from or ‘‘stripped’’ from the non-guaranteed portion of the Guaranteed Obligation if the loan is participated, syndicated or otherwise resold in the secondary market; and (ii) Where DOE guarantees 90 percent or less of the Guaranteed Obligation, the guaranteed portion may be separated E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules from or ‘‘stripped’’ from the nonguaranteed portion of the Guaranteed Obligation, if the loan is participated, syndicated or otherwise resold in the secondary debt market; (2) The Borrower shall be obligated to make full repayment of the principal and interest on the Guaranteed Obligations and other debt of a Borrower over a period of up to the lesser of 30 years or 90 percent of the projected useful life of the Eligible Project’s major physical assets, as calculated in accordance with U.S. generally accepted accounting principles and practices. The nonguaranteed portion (if any) of any Guaranteed Obligations must be repaid pro rata, and on the same amortization schedule, with the guaranteed portion. (3) If any financing or credit arrangement of the Borrower or relating to the Eligible Project, other than the Guaranteed Obligations, has an amortization period shorter than that of the Guaranteed Obligations, DOE shall have determined that the resulting financing structure allocates to DOE a reasonably proportionate share of the default risk, in light of: (i) DOE’s share of the total debt financing of the Borrower, (ii) Risk allocation among the credit providers to the Borrower, and (iii) Internal and external credit enhancements. (4) Consistent with the requirements of section 149(b) of the Internal Revenue Code, the Guaranteed Obligations shall not finance, directly, indirectly, or through effective subordination within the meaning of section II.A of OMB Circular No. A–129 (January 2013), taxexempt debt obligations. Guaranteed Obligations and any tax-exempt debt obligations payable directly or indirectly from the revenues of the Borrower or other resources of the Borrower must be repaid using separate, dedicated revenue streams or other separate sources of repayment, and must be separately collateralized. The terms of the Guaranteed Obligations, such as, for example, grace periods, repayment schedules, and availability of deferrals, must not create effective subordination. The Guaranteed Obligations shall not be used as collateral to secure tax-exempt debt obligations or guarantee loans funded by tax-exempt debt obligations; (5) The principal amount of the Guaranteed Obligations, when combined with funds from other sources committed and available to the Borrower, shall be sufficient to pay for expected Project Costs (including adequate contingency amounts), the applicable items specified in § 609.10(b) VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 of this part, and otherwise to carry out the Eligible Project; (6) There shall be a reasonable prospect of repayment by the Borrower of the principal of and interest on the Guaranteed Obligations and all of its other debt obligations; (7) The Borrower shall pledge collateral or surety determined by DOE to be necessary to secure the repayment of the Guaranteed Obligations. Such collateral or security may include Eligible Project assets and assets not related to the Eligible Project; (8) The Loan Guarantee Agreement and related documents shall include detailed terms and conditions that DOE deems necessary and appropriate to protect the interests of the United States in the case of default, including ensuring availability of all relevant intellectual property rights, technical data including software, and technology necessary for DOE or any Person or entity selected by DOE, to complete, operate, convey, and dispose of the defaulted Borrower or the Eligible Project; (9) The Guaranteed Obligations shall not be subordinate to other financing. Guaranteed Obligations are not subordinate to other financing if the lien on property securing the Guaranteed Obligations, together with liens that are pari passu with such lien, if any, take priority or precedence over other charges or encumbrances upon the same property and must be satisfied before such other charges are entitled to participate in proceeds of the property’s sale. In DOE’s discretion, Guaranteed Obligations may share a lien position with other financing; (10) There is satisfactory evidence that the Borrower will diligently pursue the Eligible Project and is willing, competent, and capable of performing its obligations under the Loan Guarantee Agreement and the loan documentation relating to its other debt obligations; (11) The Borrower shall have paid all fees and expenses due to DOE or the U.S. Government, including such amount of the Credit Subsidy Cost as may be due and payable from the Borrower pursuant to the Conditional Commitment, upon execution of the Loan Guarantee Agreement; (12) The Borrower, any Eligible Lender, and each other relevant party shall take, and be obligated to continue to take, those actions necessary to perfect and maintain liens on collateral pledged in respect of the Guaranteed Obligations; (13) DOE or its representatives shall have access to the offices of the Borrower and the Eligible Project site at all reasonable times in order to— PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 67933 (i) Monitor the performance by the Borrower of its obligations under the Loan Guarantee Agreement, and (ii) Performance of the Eligible Project; (14) DOE and Borrower have reached an agreement regarding the information that will be made available to DOE and the information that will be made publicly available; (15) The Borrower shall have filed applications for or obtained any required regulatory approvals for the Eligible Project and is in compliance, or promptly will be in compliance, where appropriate, with all Federal, state, and local regulatory requirements; (16) The Borrower shall have no delinquent Federal debt; (17) The Project Sponsors have made or will make a significant Equity investment in the Borrower or the Eligible Project, and will maintain control of the Borrower or the Eligible Project as agreed in the LGA; and (18) The Loan Guarantee Agreement and related agreements shall include such other terms and conditions as DOE deems necessary or appropriate to protect the interests of the United States. (d) The Loan Guarantee Agreement shall provide that, in the event of a default by the Borrower: (1) Interest on the Guaranteed Obligations shall accrue at the rate stated in the Loan Guarantee Agreement or the Loan Agreement, until DOE makes full payment of the defaulted Guaranteed Obligations and, except when such Guaranteed Obligations are funded through the Federal Financing Bank, DOE shall not be required to pay any premium, default penalties, or prepayment penalties; and (2) The holder of collateral pledged in respect of the Guaranteed Obligations shall be obligated to take such actions as DOE may reasonably require to provide for the care, preservation, protection, and maintenance of such collateral so as to enable the United States to achieve maximum recovery. (e)(1) An Eligible Lender or other Holder may sell, assign or transfer a Guaranteed Obligation to another Eligible Lender that meets the requirements of § 609.9 of this part. Such latter Eligible Lender shall be required to assume all servicing, monitoring and reporting requirements as provided in the Loan Guarantee Agreement. Any transfer of the servicing, monitoring, and reporting functions shall be subject to the prior written approval of DOE. (2) The Secretary, or the Secretary’s designee or contractual agent, for the purpose of identifying Holders with the E:\FR\FM\03OCP1.SGM 03OCP1 67934 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules right to receive payment under the Guaranteed Obligations, shall include in the Loan Guarantee Agreement or related documents a procedure for tracking and identifying Holders of Guaranteed Obligations. Any contractual agent approved by the Secretary to perform this function may transfer or assign this responsibility only with the Secretary’s prior written approval. (f) Each Loan Guarantee Agreement shall require the Borrower to make representations and warranties, agree to covenants, and satisfy conditions precedent to closing and to each disbursement that, in each case, relate to its compliance with the Davis-Bacon Act and the Cargo Preference Act. (g) The Applicant, the Borrower or the Project Sponsor must estimate, calculate, record, and provide to DOE any time DOE requests such information and at the times provided in the Loan Guarantee Agreement all costs incurred in the design, engineering, financing, construction, startup, commissioning and shakedown of the Eligible Project in accordance with generally accepted accounting principles and practices. rmajette on DSK2TPTVN1PROD with PROPOSALS § 609.9 Lender servicing requirements. (a) When reviewing and evaluating a proposed Eligible Project, all Eligible Lenders (other than the Federal Financing Bank) shall at all times exercise the level of care and diligence that a reasonable and prudent lender would exercise when reviewing, evaluating and disbursing a loan made by it without a Federal guarantee. (b) Loan servicing duties shall be performed by an Eligible Lender, DOE, or another qualified loan servicer approved by DOE. When performing its servicing duties, the loan servicer shall at all times exercise the level of care and diligence that a reasonable and prudent lender would exercise when servicing a loan made without a Federal guarantee, including: (1) During the construction period, monitoring the satisfaction of all of the conditions precedent to all loan disbursements, as provided in the Loan Guarantee Agreement, Loan Agreement or related documents; (2) During the operational phase, monitoring and servicing the Guaranteed Obligations and collection of the outstanding principal and accrued interest as well as undertaking to ensure that the collateral package securing the Guaranteed Obligations remains uncompromised; and (3) Until the Guaranteed Obligation has been repaid, providing annual or more frequent financial and other reports on the status and condition of VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 the Guaranteed Obligations and the Eligible Project, and promptly notifying DOE if it becomes aware of any problems or irregularities concerning the Eligible Project or the ability of the Borrower to make payment on the Guaranteed Obligations or its other debt obligations. § 609.10 Project costs. (a) Project Costs include: (1) Costs of acquisition, lease, or rental of real property, including engineering fees, surveys, title insurance, recording fees, and legal fees incurred in connection with land acquisition, lease or rental, site improvements, site restoration, access roads, and fencing; (2) Costs of engineering, architectural, legal and bond fees, and insurance paid in connection with construction of the facility; (3) Costs of equipment purchases, including a reasonable reserve of spare parts to the extent required; (4) Costs to provide facilities and services related to safety and environmental protection; (5) Costs of financial, legal, and other professional services, including services necessary to obtain required licenses and permits and to prepare environmental reports and data; (6) Costs of issuing Eligible Project debt, such as fees, transaction, and costs referred to in § 609.10(a)(5), and other customary charges imposed by Eligible Lenders; (7) Costs of necessary and appropriate insurance and bonds of all types including letters of credit and any collateral required therefor; (8) Costs of design, engineering, startup, commissioning and shakedown; (9) Costs of obtaining licenses to intellectual property necessary to design, construct, and operate the Eligible Project; (10) To the extent (i) Required by the Loan Guarantee Agreement and (ii) Not intended or available for any cost referred to in § 609.10(b), costs of funding any reserve fund, including without limitation, a debt service reserve, a maintenance reserve, and a contingency reserve for cost overruns during construction; provided that proceeds of a Guaranteed Loan deposited to any reserve fund shall not be removed from such fund except to pay Project Costs, to pay principal of the Guaranteed Loan, or otherwise to be used as provided in the Loan Guarantee Agreement; (11) Capitalized interest necessary to meet market requirements and other carrying costs during construction; and PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 (12) Other necessary and reasonable costs. (b) Project Costs do not include: (1) Fees and commissions charged to Borrower, including finder’s fees, for obtaining Federal or other funds; (2) Parent corporation or other affiliated entity’s general and administrative expenses, and nonEligible Project related parent corporation or affiliated entity assessments, including organizational expenses; (3) Goodwill, franchise, trade, or brand name costs; (4) Dividends and profit sharing to stockholders, employees, and officers; (5) Research, development, and demonstration costs of readying an innovative technology for employment in a commercial project; (6) Costs that are excessive or are not directly required to carry out the Eligible Project, as determined by DOE; (7) Expenses incurred after startup, commissioning, and shakedown before the facility, or, in DOE’s discretion, any portion of the facility, has been placed in service; (8) Borrower-paid Credit Subsidy Costs, the Administrative Cost of Issuing a Loan Guarantee, and any other fee collected by DOE; and (9) Operating costs. § 609.11 Fees and charges. (a) Unless explicitly authorized by statute, no funds obtained from the Federal Government, or from a loan or other instrument guaranteed by the Federal Government, may be used to pay for the Credit Subsidy Cost, the Application Fee, the Facility Fee, the Guarantee Fee, the maintenance fee and any other fees charged by or paid to DOE relating to the Act or any Guarantee thereunder. (b) DOE may charge Applicants a nonrefundable Facility Fee, with a portion being payable on or prior to the date on which the Applicant executes the Commitment Letter and the remainder being payable on or prior to the closing date for the Loan Guarantee Agreement. (c) In order to encourage and supplement private lending activity DOE may collect from Borrowers for deposit in the United States Treasury a non-refundable Risk-Based Charge which, together with the interest rate on the Guaranteed Obligation that LPO determines to be appropriate, will take into account the prevailing rate of interest in the private sector for similar loans and risks. The Risk-Based Charge shall be paid at such times and in such manner as may be determined by DOE, but no less frequently than once each year, commencing with payment of a E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules pro-rated payment on the date the Guarantee is issued. The amount of the Risk-Based Charge will be specified in the Loan Guarantee Agreement. (d) DOE may collect a maintenance fee to cover DOE’s administrative expenses, other than extraordinary expenses, incurred in servicing and monitoring a Loan Guarantee Agreement. The maintenance fee shall accrue from the date of execution of the Loan Guarantee Agreement through the date of payment in full of the related Guaranteed Obligations. If DOE determines to collect a maintenance fee, it shall be paid by the Borrower each year (or portion thereof) in advance in the amount specified in the applicable Loan Guarantee Agreement. (e) In the event a Borrower or an Eligible Project experiences difficulty relating to technical, financial, or legal matters or other events (e.g., engineering failure or financial workouts), the Borrower shall be liable as follows: (1) If such difficulty requires DOE to incur time or expenses beyond those customarily expended to monitor and administer performing loans, DOE may collect an extraordinary expenses fee from the Borrower that will reimburse DOE for such time and expenses, as determined by DOE; and (2) For all fees and expenses of DOE’s independent consultants and outside counsel, to the extent that such fees and expenses are elected to be paid by DOE notwithstanding the provisions of paragraphs (f) and (g) of this section. (f) Each Applicant, Borrower or Project Sponsor, as applicable, shall be responsible for the payment of all fees and expenses charged by DOE’s independent consultants and outside legal counsel in connection with an Application, Conditional Commitment or Loan Guarantee Agreement, as applicable. Upon making a determination to engage independent consultants or outside counsel with respect to an Application, DOE will proceed to evaluate and process such Application only following execution by an Applicant or Project Sponsor, as appropriate, of an agreement satisfactory to DOE to pay the fees and expenses charged by the independent consultants and outside legal counsel. Appropriate provisions regarding payment of such fees and expenses shall also be included in each Term Sheet and Loan Guaranty Agreement or, upon a determination by DOE, in other appropriate agreements. (g) Notwithstanding payment by Applicant, Borrower or Project Sponsor, all services rendered by an independent consultant or outside legal counsel to DOE in connection with an Application, Conditional Commitment or Loan VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 Guarantee Agreement shall be solely for the benefit of DOE (and such other creditors as DOE may agree in writing). DOE may require, in its discretion, the payment of an advance retainer to such independent consultants or outside legal counsel as security for the collection of the fees and expenses charged by the independent consultants and outside legal counsel. In the event an Applicant, Borrower or Project Sponsor fails to comply with the provisions of such payment agreement, DOE in its discretion, may stop work on or terminate an Application, a Conditional Commitment or a Loan Guarantee Agreement, or may take such other remedial measures in its discretion as it deems appropriate. (h) DOE shall not be financially liable under any circumstances to any independent consultant or outside counsel for services rendered in connection with an Application, Conditional Commitment or Loan Guarantee Agreement except to the extent DOE has previously entered into an express written agreement to pay for such services. § 609.12 Full faith and credit and incontestability. The full faith and credit of the United States is pledged to the payment of principal and interest of Guaranteed Obligations pursuant to Guarantees issued in accordance with the Act and this Part. The issuance by DOE of a Guarantee shall be conclusive evidence that it has been properly obtained; that the underlying loan qualified for such Guarantee; and that, but for fraud or material misrepresentation by the Holder, such Guarantee shall be legal, valid, binding and enforceable against DOE in accordance with its terms. § 609.13 Default, demand, payment, and foreclosure on collateral. (a) If a Borrower defaults in making a required payment of principal or interest on a Guaranteed Obligation and such default has not been cured within the applicable grace period, the Holder may make written demand for payment upon the Secretary in accordance with the terms of the applicable Guarantee. If a Borrower defaults in making a required payment of principal or interest on a Guaranteed Obligation and such default has not been cured within the applicable grace period, the Secretary shall notify the Attorney General. (b) Subject to the terms of the applicable Guarantee, the Secretary shall make payment within 60 days after receipt of written demand for payment from the Holder, provided that the PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 67935 demand for payment complies in all respects with the terms of the applicable Guarantee. Interest shall accrue to the Holder at the rate stated in the promissory note evidencing the Guaranteed Obligation, without giving effect to the Borrower’s default in making a required payment of principal or interest on the applicable Guarantee Obligation or any other default by the Borrower, until the Guaranteed Obligation has been fully paid by DOE. Payment by the Secretary on the applicable Guarantee does not change Borrower’s obligations under the promissory note evidencing the Guaranteed Obligation, Loan Guarantee Agreement, Loan Agreement or related documents, including an obligation to pay default interest. (c) Following payment by the Secretary pursuant to the applicable Guarantee, upon demand by DOE, the Holder shall transfer and assign to the Secretary (or his designee or agent) the promissory note evidencing the Guaranteed Obligation, all rights and interests of the Holder in the Guaranteed Obligation, and all rights and interests of the Holder in respect of the Guaranteed Obligation, except to the extent that the Secretary determines that such promissory note or any of such rights and interests shall not be transferred and assigned to the Secretary. Such transfer and assignment shall include, without limitation, all of the liens, security and collateral rights of the Holder (or his designee or agent) in respect of the Guaranteed Obligation. (d) Following payment by the Secretary pursuant to a Guarantee or other default of a Guaranteed Obligation, the Secretary is authorized to protect and foreclose on the collateral, take action to recover costs incurred by, and all amounts owed to, the United States as a result of the defaulted Guarantee Obligation, and take such other action necessary or appropriate to protect the interests of the United States. In respect of any such authorized actions that involve a judicial proceeding or other judicial action, the Secretary shall act through the Attorney General. The foregoing provisions of this paragraph shall not relieve the Secretary from its obligations pursuant to any applicable Intercreditor Agreement. Nothing in this paragraph shall limit the Secretary from exercising any rights or remedies pursuant to the terms of the Loan Guarantee Agreement. (e) The cash proceeds received as a result of any foreclosure on the collateral or other action, shall be distributed in accordance with the Loan Guarantee Agreement (subject to any applicable Intercreditor Agreement). E:\FR\FM\03OCP1.SGM 03OCP1 rmajette on DSK2TPTVN1PROD with PROPOSALS 67936 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules (f) The Loan Guarantee Agreement shall provide that cash proceeds received by the Secretary (or his designee or agent) as a result of any foreclosure on the collateral or other action shall be applied in the following order of priority: (1) Toward the pro rata payment of any costs and expenses (including unpaid fees, fees and expenses of counsel, contractors and agents, and liabilities and advances made or incurred) of the Secretary, the Attorney General, the Holder, a collateral agent or other responsible person of any of them (solely in their individual capacities as such and not on behalf of or for the benefit of their principals), incurred in connection with any authorized action following payment by the Secretary pursuant to a Guarantee or other default of a Guaranteed Obligation, or as otherwise permitted under the Loan Agreement or Loan Guarantee Agreement. (2) To pay all accrued and unpaid fees due and payable to the Secretary, the Attorney General, the Holder, a collateral agent or other responsible person of any of them on a pro rata basis in respect of the Guaranteed Obligation; (3) To pay all accrued and unpaid interest due and payable to the Secretary, the Attorney General, the Holder, a collateral agent or other responsible person of any of them on a pro rata basis in respect of the Guaranteed Obligation; (4) To pay all unpaid principal of the Guaranteed Obligation; (5) To pay all other obligations of the Borrower under the Loan Guarantee Agreement, the Loan Agreement and related documents that are remaining after giving effect to the preceding provisions and are then due and payable; and (6) To pay to the Borrower, or its successors and assigns, or as a court of competent jurisdiction may direct, any cash proceeds then remaining following the application of all payment described above. (g) No action taken by the Holder or its agent or designee in respect of any collateral will affect the rights of any person, including the Secretary, having an interest in the Guaranteed Obligations or other debt obligations, to pursue, jointly or severally, legal action against the Borrower or other liable persons, for any amounts owing in respect of the Guaranteed Obligation or other applicable debt obligations. (h) In the event that the Secretary considers it necessary or desirable to protect or further the interest of the United States in connection exercise of rights as a lien holder or recovery of VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 deficiencies due under the Guaranteed Obligation, the Secretary may take such action as he determines to be appropriate under the circumstances. (i) Nothing in this part precludes, nor shall any provision of this part be construed to preclude, the Secretary from purchasing any collateral or Holder’s or other person’s interest in the Eligible Project upon foreclosure of the collateral. (j) Nothing in this part precludes, nor shall any provision of this part be construed to preclude, forbearance by any Holder with the consent of the Secretary for the benefit of the Borrower and the United States. (k) The Holder and the Secretary may agree to a formal or informal plan of reorganization in respect of the Borrower, to include a restructuring of the Guaranteed Obligation and other applicable debt of the Borrower on such terms and conditions as the Secretary determines are in the best interest of the United States. § 609.14 Preservation of collateral. (a) If the Secretary exercises his right under the Loan Guarantee Agreement to require the holder of pledged collateral to take such actions as the Secretary (subject to any applicable Intercreditor Agreement) may reasonably require to provide for the care, preservation, protection, and maintenance of such collateral so as to enable the United States to achieve maximum recovery from the collateral, the Secretary shall, subject to compliance with the Antideficiency Act, 31 U.S.C. 1341 et seq., reimburse the holder of such collateral for reasonable and appropriate expenses incurred in taking actions required by the Secretary (unless otherwise provided in applicable agreements). Except as provided in § 609.13, no party may waive or relinquish, without the consent of the Secretary, any such collateral to which the United States would be subrogated upon payment under the Loan Guarantee Agreement. (b) In the event of a default, the Secretary may enter into such contracts as he determines are required or appropriate, taking into account the term of any applicable Intercreditor Agreement, to care for, preserve, protect or maintain collateral pledged in respect of Guaranteed Obligations. The cost of such contracts may be charged to the Borrower. § 609.15 Audits and access to records. Each Loan Guarantee Agreement and related documents shall provide that: (a) The Eligible Lender, or DOE in conjunction with the Federal Financing PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 Bank where loans are funded by the Federal Financing Bank or other Holder or other party servicing the Guaranteed Obligations, as applicable, and the Borrower, shall keep such records concerning the Eligible Project as are necessary, including the Application, Term Sheet, Conditional Commitment, Loan Guarantee Agreement, Credit Agreement, mortgage, note, disbursement requests and supporting documentation, financial statements, audit reports of independent accounting firms, lists of all Eligible Project assets and non-Eligible Project assets pledged in respect of the Guaranteed Obligations, all off-take and other revenue producing agreements, documentation for all Eligible Project indebtedness, income tax returns, technology agreements, documentation for all permits and regulatory approvals and all other documents and records relating to the Borrower or the Eligible Project, as determined by the Secretary, to facilitate an effective audit and performance evaluation of the Eligible Project; and (b) The Secretary and the Comptroller General, or their duly authorized representatives, shall have access, for the purpose of audit and examination, to any pertinent books, documents, papers and records of the Borrower, Eligible Lender or DOE or other Holder or other party servicing the Guaranteed Obligation, as applicable. Such inspection may be made during regular office hours of the Borrower, Eligible Lender or DOE or other Holder, or other party servicing the Eligible Project and the Guaranteed Obligations, as applicable, or at any other time mutually convenient. § 609.16 Deviations. (a) To the extent that the requirements under this part are not specified by the Act or other applicable statutes, DOE may authorize deviations from the requirements of this part upon: (1) Either (A) receipt from the Applicant, Borrower or Project Sponsor, as applicable, of— (i) A written request that the Secretary deviate from one or more requirements, and (ii) A supporting statement briefly describing one or more justifications for such deviation, or (iii)(B) a determination by the Secretary in his discretion to undertake a deviation; (2) A finding by the Secretary that such deviation supports program objectives and the special circumstances stated in the request make such deviation clearly in the best interest of the Government; and E:\FR\FM\03OCP1.SGM 03OCP1 Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / Proposed Rules (3) If the waiver would constitute a substantial change in the financial terms of the Loan Guarantee Agreement and related documents, consultation by DOE with OMB and the Secretary of the Treasury. (b) If a deviation under this section results in an increase in the applicable Credit Subsidy Cost, such increase shall be funded either by additional fees paid by or on behalf of the Borrower or, if an appropriation is available by means of an appropriations act. The Secretary has discretion to determine how the cost of a deviation is funded. [FR Doc. 2016–23268 Filed 9–30–16; 8:45 am] BILLING CODE 6450–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2016–9117; Directorate Identifier 2016–NM–095–AD] RIN 2120–AA64 Airworthiness Directives; Airbus Airplanes Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: We propose to adopt a new airworthiness directive (AD) for certain A330–200 Freighter, –200 and –300 series airplanes; and Airbus Model A340–200, –300, –500, and –600 series airplanes. This proposed AD was prompted by reports of certain hydraulic reservoirs (HRs) becoming depressurized due to air leakage from the HR pressure relief valve (PRV). This proposed AD would require repetitive inspections of the hydraulic fluid levels and nitrogen gas pressure in the HR for each hydraulic circuit, and if necessary, adjustment of the fluid level(s) and nitrogen pressure in affected HRs. We are proposing this AD to detect and correct air leakage from the HR PRV, which could lead to the loss of one or more hydraulic systems, with the possible result of loss of control of the airplane. DATES: We must receive comments on this proposed AD by November 17, 2016. ADDRESSES: You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: • Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments. rmajette on DSK2TPTVN1PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 14:35 Sep 30, 2016 Jkt 241001 • Fax: 202–493–2251. • Mail: U.S. Department of Transportation, Docket Operations, M– 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590. • Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this NPRM, contact Airbus SAS, Airworthiness Office—EAL, 1 Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France; telephone: +33 5 61 93 36 96; fax: +33 5 61 93 45 80; email: airworthiness.A330-A340@airbus.com; Internet: https://www.airbus.com. Examining the AD Docket You may examine the AD docket on the Internet at https:// www.regulations.gov by searching for and locating Docket No. FAA–2016– 9117; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this proposed AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone: 800–647–5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Vladimir Ulyanov, Aerospace Engineer, International Branch, ANM–116, Transport Airplane Directorate, FAA, 1601 Lind Avenue SW., Renton, WA 98057–3356; telephone: 425–227–1138; fax: 425–227–1149. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include ‘‘Docket No. FAA–2016–9117; Directorate Identifier 2016–NM–095–AD’’ at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD based on those comments. We will post all comments we receive, without change, to https:// www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD. PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 67937 Discussion The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2016–0107, dated June 7, 2016, to correct an unsafe condition for certain Airbus Model A330–200 Freighter, –200 and –300 series airplanes; and Airbus Model A340–200, –300, –500, and –600 series airplanes. The MCAI states: Some events of depressurisation of hydraulic reservoirs have been reported, due to air leakage from the HR PRV [hydraulic reservoir pressure relief valve]. The results of the investigations revealed that the air leakage was due to the extrusion of the Oring seal from the HR PRV. This may have happened during HR maintenance, testing or during flight, if HR over-filling was performed, as a result of which hydraulic fluid could pass through the PRV, causing [the] PRV seal to migrate from its nominal position, leading to loss of HR pressurisation. This condition, if not detected and corrected, could lead to the loss of one or more hydraulic systems, possibly resulting in loss of control of the aeroplane. Prompted by these findings, Airbus issued Alert Operators Transmission (AOT) A29L005–16 [dated January 28, 2016] to provide inspection instructions. For the reasons described above, this [EASA] AD requires repetitive inspections of the HR fluid level of each hydraulic circuit and, depending on findings, accomplishment of applicable corrective action(s). This [EASA] AD also requires actions when maintenance action is accomplished on hydraulic reservoirs. This [EASA] AD is considered as interim action and further [EASA] AD action may follow. Required actions include repetitive inspection of the hydraulic fluid levels and nitrogen gas pressure in the HR for each hydraulic circuit, and if necessary, adjustment of the fluid level(s) and nitrogen pressure in affected HRs. You may examine the MCAI in the AD docket on the Internet at https:// www.regulations.gov by searching for and locating Docket No. FAA–2016– 9117. Related Service Information Under 1 CFR Part 51 We reviewed Airbus Alert Operators Transmission (AOT) A29L005–16, Revision 01, dated June 28, 2016. This service information describes procedures for inspecting hydraulic fluid levels and nitrogen gas pressure in certain HRs, and adjustment of the fluid level(s) and nitrogen pressure in affected HRs. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. E:\FR\FM\03OCP1.SGM 03OCP1

Agencies

[Federal Register Volume 81, Number 191 (Monday, October 3, 2016)]
[Proposed Rules]
[Pages 67924-67937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23268]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 81, No. 191 / Monday, October 3, 2016 / 
Proposed Rules

[[Page 67924]]



DEPARTMENT OF ENERGY

10 CFR Part 609

RIN 1901-AB38


Loan Guarantees for Projects That Employ Innovative Technologies

AGENCY: Loan Programs Office, Department of Energy.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Department of Energy (DOE) proposes to amend the 
regulations implementing the loan guarantee provisions in Title XVII of 
the Energy Policy Act of 2005 (Title XVII or the Act). The proposal is 
intended to increase clarity and transparency, reduce paperwork, and 
provide a more workable interpretation of certain statutory provisions 
in light of DOE's experience with the Title XVII program.

DATES: Comments on this proposed rule must be postmarked no later than 
November 2, 2016.

ADDRESSES: You may submit comments, identified by RIN 1901-AB38, using 
any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: LPO.ProposedRuleComments@hq.doe.gov. Include RIN 
1901-AB38 in the subject line of the email. Please include the full 
body of your comments in the text of the message or as an attachment.
     Postal Mail: Mark A. McCall, Executive Director, Loan 
Programs Office, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Please submit one signed original paper copy. Due to potential 
delays in DOE's receipt and processing of mail sent through the U.S. 
Postal Service, we encourage respondents to submit comments 
electronically to ensure timely receipt.
     Hand Delivery/Courier: Mark A. McCall, Executive Director, 
Loan Programs Office, 1000 Independence Avenue SW., Washington, DC 
20585- 0121. Please submit one signed original paper copy.
    This notice of proposed rulemaking and any comments that DOE 
receives will be made available on the regulations.gov Web site at: 
https://www.regulations.gov. You also may obtain copies of comments by 
contacting Mr. Westergard using the information below.

FOR FURTHER INFORMATION CONTACT: Mark S. Westergard, Loan Programs 
Office, 1000 Independence Avenue SW., Washington, DC 20585-0121, (202) 
287-5621, email: LPO.ProposedRuleComments@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background
II. Discussion of Proposed Rule
III. Public Comment Procedures
IV. Regulatory Review
V. Approval of the Office of the Secretary

I. Introduction and Background

    Section 1703 (section 1703) authorizes the Secretary of Energy 
(Secretary) to make loan guarantees for projects that avoid, reduce, or 
sequester air pollutants or anthropogenic emissions of greenhouse 
gases. Such projects must also employ new or significantly improved 
technologies as compared to commercial technologies in service in the 
United States at the time the guarantee is issued. The two principal 
goals of section 1703 are to encourage commercial use in the United 
States of new or significantly improved energy related technologies and 
to achieve substantial environmental benefits. Section 1703 also 
identifies ten categories of technologies and projects that are 
potentially eligible for loan guarantees. Commercial use of these 
technologies is expected to help sustain and promote economic growth, 
produce a more stable and secure energy supply and economy for the 
United States, and improve the environment.
    As a result of experience gained implementing the loan guarantee 
program authorized by section 1703, and information received from 
program participants, including applicants, borrowers, sponsors, and 
lenders, as well as various energy industry groups, DOE proposes to 
amend the existing regulations as described in Section II of this 
proposed rule. The proposal is intended to provide increased clarity 
and transparency, reduce paperwork, and provide a more workable 
interpretation of certain statutory provisions in light of DOE's 
experience with operation of the Title XVII program.

II. Discussion of Proposed Rule

    Section 1702(a) of Title XVII directs the Secretary to make 
guarantees on the terms and conditions determined by the Secretary, 
after consultation with the Secretary of the Treasury, and in 
accordance with the prescriptions set forth in section 1702. This 
provision authorizes the Secretary to establish the loan guarantee 
program and to determine the terms and conditions of individual loan 
guarantees, after consultation with the Secretary of Treasury, subject 
to the limitations in paragraphs (b) through (k) of section 1702. 
Pursuant to direction provided in Public Law 110-5 (Feb. 15, 2007) DOE 
promulgated regulations to implement Title XVII which are currently 
found at 10 CFR part 609 (the ``Title XVII Rule''). See 74 FR 63544 
(Dec. 4, 2009). (The proposed rule was issued on Aug 7, 2009 (74 FR 
39569).) The Title XVII Rule addresses matters such as (1) the manner 
in which proposed projects are vetted, (2) precisely which project 
costs are eligible for financing, (3) the adequacy and character of 
equity capital required from sponsors, and (4) what types of co-
financing and subordination arrangements would be acceptable to DOE. 
Similarly, in implementing the Secretary's general authority under 
section 1702(a) and the Title XVII Rule, the Loan Programs Office has 
adopted extensive credit, loan monitoring and risk monitoring policies 
and procedures, detailed conditional commitment letters and term 
sheets, and loan guarantee agreements to carry out the purposes of 
Title XVII.
    In this rulemaking, DOE proposes amendments to the regulations at 
10 CFR part 609 based on its experience in implementing the loan 
guarantee program. The proposed changes address topics such as the 
exchange of information with potential applicants and the solicitation 
process, the pre-application process, the restriction of a project to a 
single location, and the imposition of a risk-based fee. These issues 
are described in the paragraphs that follow.
    For the past several years, the DOE Loan Programs Office has 
increased

[[Page 67925]]

communication with interested members of the public regarding the 
Office, its programs, and solicitations. DOE has prepared and 
distributed a number of presentations explaining the application 
process and the types of projects that may be eligible under its 
solicitations. The Executive Director of the Loan Programs Office has 
participated in numerous public discussions regarding the program. DOE 
has also increased communication by regular, broadly distributed email 
communications to thousands of recipients that have expressed an 
interest in keeping up with developments in the Loan Programs Office. 
Contacts by potential applicants regarding the program have 
significantly increased as a result of these efforts. Nevertheless, the 
proposed rule includes changes intended to clarify the circumstances 
under which potential applicants may communicate with DOE prior to 
submitting an application. DOE expects that the proposed changes would 
increase transparency and result in more applications by qualified 
applicants with respect to potential eligible projects.
    The provisions of the existing rule relating to Pre-Applications 
have caused considerable confusion among potential applicants and 
applicants. In this proposed rule, DOE proposes to eliminate the 
existing pre-application process and codify procedures that divide the 
application into two parts. The Part I submission would provide DOE 
with a description of the project or facility, technical information, 
background information on management, financing strategy, and progress 
to date of critical path schedules. These schedules would include items 
such as obtaining licenses or regulatory permits and approvals, site 
preparation and long lead-time procurements, and would be used as a 
basis for determining the eligibility of the project and the project's 
readiness to proceed. Applicants whose Part I application is sufficient 
to indicate, on a preliminary basis, the eligibility of the project and 
that it is ready to proceed would be invited to submit Part II of the 
application. The Part II submission would involve substantially more, 
and substantially more detailed, information than is required for the 
Part I submission. The proposed process of requiring a two-part 
application is designed, in part, to enable DOE to screen interested 
projects and provide an early indication of projects' eligibility for a 
loan guarantee under this program. The two-part application process 
would additionally allow DOE to charge the required fee in two parts, 
making it more economical for smaller businesses to apply. By allowing 
DOE to engage in an initial review of project proposals, the two-part 
application process would reduce the paperwork burden for applicants 
whose projects are not ready to move forward into Part II.
    Although there is no statutory requirement that all parts of a 
project be located at a single location, DOE's solicitations have 
provided that generally, a Project is restricted to one location within 
the United States but that DOE, in its discretion, could consider an 
application for a project using a particular technology that is 
proposed to be situated in more than one location in the United States 
if multiple locations are integral components of a unitary plan, 
necessary to the viability of the Project, and at least one of the 
locations is identified in the application. Applicants and potential 
applicants found this requirement of DOE's solicitations difficult to 
understand. Additionally, this requirement inhibits an applicant's 
ability to propose certain types of distributed energy facilities. DOE 
reconsidered the need for such a requirement and proposes a revised 
definition of Eligible Project that would explicitly state that a 
project may be located at two or more locations in the United States if 
the project is comprised of installations or facilities employing a 
single New or Significantly Improved Technology that is deployed 
pursuant to an integrated and comprehensive business plan.
    DOE also proposes to include in the rule provisions for the use of 
Risk-Based Charges. DOE, working in conjunction with the Federal 
Financing Bank (``FFB''), has developed a program under which borrowers 
for certain types of transactions pay a ``credit-based interest rate 
spread'' in addition to interest otherwise payable on loans that are 
issued by FFB. Use of interest rate spreads or other charges based upon 
the creditworthiness or specific risks arising from individual 
transactions are commonplace in private-sector commercial loan 
transactions, including private-sector project finance loan 
transactions. Such spreads or other charges are also used by other 
federal credit programs comparable to the Title XVII loan guarantee 
program, such as those administered by the Overseas Private Investment 
Corporation and the Export-Import Bank of the United States. Use of 
Risk-Based Charges is permitted pursuant to the grant of authority to 
the Secretary in Section 1702(a) to determine the terms and conditions 
of the Title XVII loan guarantee program.
    A number of other changes have been included to increase clarity 
and transparency. Among those changes are: Definitions have been 
clarified, shortened where possible, and added; specific references to 
the Cargo Preference Act and the Davis Bacon Act have been added; an 
introductory section on how the rule is to be interpreted has been 
added; and various provisions of the existing rule have been re-
organized to more-appropriate places in the rule. In a number of 
places, references to the statutory requirement that DOE consult with 
the Secretary of the Treasury previously included in Title XVII Rule 
have been removed. Those references were removed solely because they 
were unnecessary for consideration by applicants and potential 
applicants. DOE's statutory obligation to consult with the Secretary of 
the Treasury under Section 1702(a) of Title XVII remains unchanged, and 
no change is intended in the existing consultation arrangements between 
the Secretary of Energy and the Secretary of the Treasury.

III. Public Comment Procedures

    Interested persons are invited to participate in this proceeding by 
submitting data, views, or arguments. Written comments should be 
submitted to the address, and in the form, indicated in the ADDRESSES 
section of this notice of proposed rulemaking. To help DOE review the 
comments, interested persons are asked to refer to specific proposed 
rule provisions, if possible.
    If you submit information that you believe to be exempt by law from 
public disclosure, you should submit one complete copy, as well as one 
copy from which the information claimed to be exempt by law from public 
disclosure has been deleted. DOE is responsible for the final 
determination with regard to disclosure or nondisclosure of the 
information and for treating it accordingly under the DOE Freedom of 
Information Act regulations at 10 CFR 1004.11.

IV. Regulatory Review

A. Executive Order 12866

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

[[Page 67926]]

Affairs (OIRA) of the Office of Management and Budget (OMB).

B. National Environmental Policy Act

    DOE has determined that this proposed rule is covered under the 
Categorical Exclusion found in the DOE's National Environmental Policy 
Act regulations at paragraph A.5 of appendix A to subpart D, 10 CFR 
part 1021, which applies to rulemaking that amends an existing rule or 
regulation which does not change the environmental effect of the rule 
or regulation being amended.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by Executive Order 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published 
procedures and policies on February 19, 2003, to ensure that the 
potential impacts of its rules on small entities are properly 
considered during the rulemaking process (68 FR 7990). DOE has made its 
procedures and policies available on the Office of General Counsel's 
Web site: https://www.energy.gov/gc/downloads/executive-order-13272-consideration-small-entities-agency-rulemaking.
    DOE is not obliged to prepare a regulatory flexibility analysis for 
this rulemaking because there is not a requirement to publish a general 
notice of proposed rulemaking for rules related to loans under the 
Administrative Procedure Act (5 U.S.C. 553(a)(2)).

D. Paperwork Reduction Act

    Information collection requirements for the DOE regulations at 10 
CFR part 609 were previously approved by OMB pursuant to the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.) and the procedure 
implementing that Act (5 CFR 1320.1 et seq.) under OMB Control Number 
1910-5134. This proposed rule contains revised information collection 
requirements subject to approval by OMB. DOE has submitted the proposed 
revised collection of information to OMB for approval. Public reporting 
burden for the revised requirements in this proposed rule is estimated 
to average 130 hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. All responses are expected to be collected 
electronically.
    DOE invites public comment on: (1) Whether the proposed information 
collection requirements are necessary for the performance of DOE's 
functions, including whether the information will have practical 
utility; (2) the accuracy of DOE's estimates of the burden of the 
proposed information collection requirements; (3) ways to enhance the 
quality, utility, and clarity of the information to be collected; and 
(4) ways to minimize the burden of the information collection 
requirements on respondents. Comments should be addressed to the 
Department of Energy Desk Officer, Office of Information and Regulatory 
Affairs, OMB, 725 17th Street NW., Washington, DC 20503. Persons 
submitting comments to OMB also are requested to send a copy to the 
contact person at the address given in the ADDRESSES section of this 
notice of proposed rulemaking. Interested persons may obtain a copy of 
the DOE's Paperwork Reduction Act Submission to OMB from the contact 
person named in this notice of proposed rulemaking. Notwithstanding any 
other provision of law, a person is not required to respond to a 
collection of information unless it displays a currently valid OMB 
control number.

E. Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (Act) (Pub. L. 104-4) 
generally requires Federal agencies to examine closely the impacts of 
regulatory actions on State, local, and tribal governments.
    The term ``Federal mandate'' is defined in the Act to mean a 
Federal intergovernmental mandate or a Federal private sector mandate. 
Although the proposed rule would impose certain requirements on non-
Federal governmental and private sector applicants for loan guarantees, 
the Act's definitions of the terms ``Federal intergovernmental 
mandate'' and ``Federal private sector mandate'' exclude among other 
things, any provision in legislation, statute, or regulation that is a 
condition of Federal assistance or a duty arising from participation in 
a voluntary program. The proposed rule would establish requirements 
that persons voluntarily seeking loan guarantees for projects that 
would use certain new and improved energy technologies must satisfy as 
a condition of a Federal loan guarantee. Thus, the proposed rule falls 
under the exceptions in the definitions of ``Federal intergovernmental 
mandate'' and ``Federal private sector mandate'' for requirements that 
are a condition of Federal assistance or a duty arising from 
participation in a voluntary program. The Act does not apply to this 
rulemaking.

F. Treasury and General Government Appropriations Act, 1999

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

G. Executive Order 13132

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

H. Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) Clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on

[[Page 67927]]

existing Federal law or regulation; (3) provides a clear legal standard 
for affected conduct while promoting simplification and burden 
reduction; (4) specifies the retroactive effect, if any; (5) adequately 
defines key terms; and (6) addresses other important issues affecting 
clarity and general draftsmanship under any guidelines issued by the 
Attorney General. Section 3(c) of Executive Order 12988 requires 
Executive agencies to review regulations in light of applicable 
standards in section 3(a) and section 3(b) to determine whether they 
are met or it is unreasonable to meet one or more of them. DOE has 
completed the required review and determined that, to the extent 
permitted by law, the proposed rule meets the relevant standards of 
Executive Order 12988.

I. Treasury and General Government Appropriations Act, 2001

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

J. Executive Order 13211

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

K. Executive Order 12630

    The Department has determined, under Executive Order 12630, 
``Governmental Actions and Interference with Constitutionally Protected 
Property Rights,'' 53 FR 8859 (March 18, 1988), that this rulemaking 
would not result in any takings which might require compensation under 
the Fifth Amendment to the United States Constitution.

V. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking.

List of Subjects in 10 CFR Part 609

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

    Issued in Washington, DC, on September 21, 2016.
Mark A. McCall,
Executive Director, Loan Programs Office.

    For the reasons stated in the preamble, DOE proposes to revise part 
609 of chapter II of title 10 of the Code of Federal Regulations to 
read as follows:

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

Sec.
609.1 Purpose and scope.
609.2 Definitions and interpretation.
609.3 Solicitations.
609.4 Submission of applications.
609.5 Programmatic, technical and financial evaluation of 
applications.
609.6 Term sheets and conditional commitments.
609.7 Closing on the loan guarantee agreement.
609.8 Loan guarantee agreement.
609.9 Lender servicing requirements.
609.10 Project costs.
609.11 Fees and charges.
609.12 Full faith and credit and incontestability.
609.13 Default, demand, payment, and foreclosure on collateral.
609.14 Preservation of collateral.
609.15 Audits and access to records.
609.16 Deviations.

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


Sec.  609.1  Purpose and scope.

    (a) This part sets forth the policies and procedures that DOE uses 
for receiving, evaluating, and approving applications for loan 
guarantees to support Eligible Projects under section 1703 of the 
Energy Policy Act of 2005 (Act).
    (b) This part applies to all Applications, Conditional Commitments, 
and Loan Guarantee Agreements.
    (c) Part 1024 of chapter X of title 10 of the Code of Federal 
Regulations (PROCEDURES FOR FINANCIAL ASSISTANCE APPEALS) shall not 
apply to actions taken under this part.


Sec.  609.2  Definitions and interpretation.

    (a) Definitions. When used in this part the following words have 
the following meanings.
    Act means Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 
16511-16514), as amended.
    Administrative cost of issuing a loan guarantee means the total of 
all administrative expenses that DOE incurs during:
    (1) The evaluation of an Application for a loan guarantee;
    (2) The negotiation and offer of a Term Sheet;
    (3) The negotiation of a Loan Guarantee Agreement and related 
documents, including the issuance of a Guarantee; and
    (4) The servicing and monitoring of a Loan Guarantee Agreement, 
including during the construction, startup, commissioning, shakedown, 
and operational phases of an Eligible Project.
    Applicant means a Person, including a prospective Borrower or 
Project Sponsor, that submits an Application to DOE.
    Application means a written submission of materials responsive to a 
Solicitation that satisfies Sec.  609.4 of this part.
    Application fee means the fee or fees required to be paid by an 
Applicant in connection with submission of an Application and specified 
in a Solicitation. The Application Fee does not include the Credit 
Subsidy Cost.
    Attorney General means the Attorney General of the United States.
    Borrower means any Person that enters into a Loan Guarantee 
Agreement with DOE and issues Guaranteed Obligations.
    Cargo preference act means the Cargo Preference Act of 1954, 46 
U.S.C 55305, as amended.
    Commercial technology means a technology in general use in the 
commercial marketplace in the United States at the time the Term Sheet 
is

[[Page 67928]]

offered by DOE. A technology is in general use if it is being used in 
three or more facilities that are in commercial operation in the United 
States for the same general purpose as the proposed project, and has 
been used in each such facility for a period of at least five years. 
The five-year period for each facility shall start on the in-service 
date of the facility employing that particular technology or, in the 
case of a retrofit of a facility to employ a particular technology, the 
date the facility resumes commercial operation following completion and 
testing of the retrofit. For purposes of this section, facilities that 
are in commercial operation include projects that have been the 
recipients of a loan guarantee from DOE under this part.
    Conditional commitment means a Term Sheet offered by DOE and 
accepted by the offeree of the Term Sheet, all in accordance with Sec.  
609.6(c) of this part; provided, that the Secretary may terminate a 
Conditional Commitment for any reason at any time prior to the 
execution of the Loan Guarantee Agreement; and provided, further, that 
the Secretary may not delegate this authority to terminate a 
Conditional Commitment.
    Contracting officer means the Secretary of Energy or a DOE official 
authorized by the Secretary to enter into, administer or terminate DOE 
Loan Guarantee Agreements and related contracts on behalf of DOE.
    Credit subsidy cost has the same meaning as ``cost of a loan 
guarantee'' in section 502(5)(C) of the Federal Credit Reform Act of 
1990, which is the net present value, at the time the Loan Guarantee 
Agreement is executed, of the following estimated cash flows, 
discounted to the point of disbursement:
    (1) Payments by the Government to cover defaults and delinquencies, 
interest subsidies, or other payments; less
    (2) Payments to the Government including origination and other 
fees, penalties, and recoveries; including the effects of changes in 
loan or debt terms resulting from the exercise by the Borrower, 
Eligible Lender or other Holder of an option included in the Loan 
Guarantee Agreement.
    Davis-Bacon act means the statute referenced in section 1702(k) of 
the Act.
    DOE means the United States Department of Energy.
    Eligible lender means either:
    (1) Any Person formed for the purpose of, or engaged in the 
business of, lending money that, as determined by DOE in each case, is:
    (i) Not debarred or suspended from participation in a Federal 
government contract or participation in a non-procurement activity 
(under a set of uniform regulations implemented for numerous agencies, 
such as DOE, at 2 CFR part 180);
    (ii) Not delinquent on any Federal debt or loan;
    (iii) Legally authorized and empowered to enter into loan guarantee 
transactions authorized by the Act and these regulations;
    (iv) Able to demonstrate experience in originating and servicing 
loans for commercial projects similar in size and scope to the Eligible 
Project, or able to procure such experience through contracts 
acceptable to DOE; and
    (v) Able to demonstrate experience as the lead lender or 
underwriter by presenting evidence of its participation in large 
commercial projects or energy-related projects or other relevant 
experience, or able to procure such experience through contracts 
acceptable to DOE; or
    (2) The Federal Financing Bank.
    Eligible project means a project that:
    (1) Is located in the United States at one location, except that 
the project may be located at two or more locations in the United 
States if the project is comprised of installations or facilities 
employing a single New or Significantly Improved Technology that is 
deployed pursuant to an integrated and comprehensive business plan. An 
Eligible Project in more than one location is a single Eligible 
Project;
    (2) Deploys a New or Significantly Improved Technology; and
    (3) Satisfies all applicable requirements of section 1703 of the 
Act, the applicable Solicitation, and this part.
    Equity means cash contributed to the permanent capital stock (or 
equivalent) of the Borrower or the Eligible Project by the shareholders 
or other owners of the Borrower or the Eligible Project. Equity does 
not include proceeds from the non-guaranteed portion of a Guaranteed 
Obligation, proceeds from any other non-guaranteed loan or obligation, 
or the value of any government assistance or support.
    Facility fee means the fee, to be paid in the amount and in the 
manner provided in the Term Sheet, to cover the Administrative Cost of 
Issuing a Loan Guarantee for the period from the Borrower's acceptance 
of the Term Sheet through issuance of the Guarantee.
    Federal financing bank means an instrumentality of the United 
States government created by the Federal Financing Bank Act of 1973, 
under the general supervision of the Secretary of the Treasury.
    Guarantee means the undertaking of the United States of America, 
acting through the Secretary pursuant to Title XVII of the Energy 
Policy Act of 2005, to pay in accordance with the terms thereof, 
principal and interest of a Guaranteed Obligation.
    Guaranteed obligation means any loan or other debt obligation of 
the Borrower for an Eligible Project for which DOE guarantees all or 
any part of the payment of principal and interest under a Loan 
Guarantee Agreement entered into pursuant to the Act.
    Holder means any Person that holds a promissory made by the 
Borrower evidencing the Guaranteed Obligation (or his designee or 
agent).
    Intercreditor agreement means any agreement or instrument (or 
amendment or modification thereof) among DOE and one or more other 
Persons providing financing or other credit arrangements to the 
Borrower or an Eligible Project) or that otherwise provides for rights 
of DOE in respect of a Borrower or in respect of an Eligible Project, 
in each case in form and substance satisfactory to DOE.
    Loan agreement means a written agreement between a Borrower and an 
Eligible Lender containing the terms and conditions under which the 
Eligible Lender will make a loan or loans to the Borrower for an 
Eligible Project.
    Loan guarantee agreement means a written agreement that, when 
entered into by DOE and a Borrower, and, if applicable, an Eligible 
Lender, establishes the obligation of DOE to guarantee the payment of 
all or a portion of the principal of, and interest on, specified 
Guaranteed Obligations, subject to the terms and conditions specified 
in the Loan Guarantee Agreement.
    New or significantly improved technology means a technology, or a 
defined suite of technologies, concerned with the production, 
consumption, or transportation of energy and that is not a Commercial 
Technology, and that has either:
    (1) Only recently been developed, discovered, or learned; or
    (2) Involves or constitutes one or more meaningful and important 
improvements in productivity or value, in comparison to Commercial 
Technologies in use in the United States at the time the Term Sheet is 
issued.
    OMB means the Office of Management and Budget in the Executive 
Office of the President.
    Person means any natural person or any legally constituted entity, 
including a state or local government, tribe, corporation, company, 
voluntary association, partnership, limited

[[Page 67929]]

liability company, joint venture, and trust.
    Project costs mean those costs, including escalation and 
contingencies, that are to be expended or accrued by a Borrower and are 
necessary, reasonable, customary and directly related to the design, 
engineering, financing, construction, startup, commissioning and 
shakedown of an Eligible Project, as specified in Sec.  609.10(a) of 
this part. Project Costs do not include costs for the items set forth 
in Sec.  609.10(b) of this part.
    Project sponsor means any Person that assumes substantial 
responsibility for the development, financing, and structuring of an 
Eligible Project and, if not the Applicant, owns or controls, by itself 
and/or through individuals in common or affiliated business entities, a 
five percent or greater interest in the proposed Eligible Project, the 
Borrower or the Applicant.
    Risk-based charge means a charge that, together with the principal 
and interest on the guaranteed loan, or at such other times as DOE may 
determine, is payable on specified dates during the term of a 
Guaranteed Obligation.
    Secretary means the Secretary of Energy or a duly authorized 
designee or successor in interest.
    Solicitation means an announcement that DOE is accepting 
Applications that is widely disseminated to the public on the DOE Web 
site or otherwise, and which satisfies the requirements of Sec.  
609.3(b) of this part.
    Term sheet means a written offer for the issuance of a loan 
guarantee, executed by the Secretary (or a DOE official authorized by 
the Secretary to execute such offer), delivered to the offeree, that 
sets forth the detailed terms and conditions under which DOE and the 
Applicant will execute a Loan Guarantee Agreement.
    United States means the several States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American 
Samoa and any territory or possession of the United States of America.
    (b) Interpretations. This part shall be interpreted using the 
following guidelines.
    (1) The word ``discretion'' when used with reference to DOE, 
including the Secretary, means ``sole discretion.''
    (2) Defined terms in the singular shall include the plural and vice 
versa, and the masculine, feminine or neuter gender shall include all 
genders.
    (3) The word ``or'' is not exclusive.
    (4) References to laws by name or popular name are references to 
the version of such law appearing in the United States Code and include 
any amendment, supplement or modification of such law, and all 
regulations, rulings, and other laws promulgated thereunder.
    (5) References to information or documents required or allowed to 
be submitted to DOE mean information or documents that are marked as 
provided in 10 CFR 600.15(b). A document or information that is not 
marked as provided in 10 CFR 600.15(b) will not be considered as having 
been submitted to or received by DOE.
    (6) A reference to a Person includes such Person's successors and 
permitted assigns.
    (7) The words ``include,'' ``includes'' and ``including'' are not 
limiting and mean include, includes and including ``without 
limitation'' and ``without limitation by specification.''
    (8) The words ``hereof,'' ``herein'' and ``hereunder'' and words of 
similar import refer this part as a whole and not to any particular 
provision of this part.


Sec.  609.3  Solicitations.

    (a) DOE may invite the submission of Applications for loan 
guarantees for Eligible Projects pursuant to a Solicitation.
    (b) Each Solicitation must include, at a minimum, the following 
information:
    (1) The dollar amount of loan guarantee authority potentially being 
made available by DOE in that Solicitation;
    (2) The place and deadline for submission of Applications;
    (3) The name and address of the DOE representative whom a potential 
Applicant may contact to receive further information and a copy of the 
Solicitation;
    (4) The form, format, and page limits applicable to the 
Application;
    (5) The amount of the Application Fee and any other fees that will 
be required;
    (6) The programmatic, technical, financial and other factors that 
DOE will use to evaluate response submissions, and their relative 
weightings in that evaluation; and
    (7) Such other information as DOE may deem appropriate.
    (c) Using procedures as may be announced by DOE a potential 
Applicant may request a meeting with DOE to discuss its potential 
Application. At its discretion, DOE may meet with a potential 
Applicant, either in person or electronically, to discuss its potential 
Application. DOE may provide a potential Applicant with a preliminary 
response regarding whether its proposed Application may constitute an 
Eligible Project. DOE is not permitted to design an Eligible Project 
for an Applicant, but may respond, in its discretion, in general terms 
to specific proposals. DOE's responses to questions from potential 
Applicants and DOE's statements to potential Applicants are pre-
decisional and preliminary in nature. Any such responses and statements 
are subject in their entirety to any final action by DOE with respect 
to an Application submitted in accordance with Sec.  609.4 of this 
part.


Sec.  609.4  Submission of applications.

    (a) In response to a Solicitation, an Applicant must meet all 
requirements and provide all information specified in this part and the 
Solicitation in the manner and on or before the date specified therein. 
DOE may direct that Applications be submitted in more than one part; 
provided, that the parts of such Application, taken as a whole, satisfy 
the requirements of Sec.  609.4(c) and this part. In such event, 
subsequent parts of an Application may be filed only after DOE invites 
an Applicant to make an additional submission. The initial part of an 
Application may be used by DOE to determine the likelihood that the 
project proposed by an Applicant will be an Eligible Project, and to 
evaluate such project's readiness to proceed. If there have been any 
material amendments, modifications or additions made to the information 
previously submitted by an Applicant, the Applicant shall provide a 
detailed description thereof, including any changes in the proposed 
project's financing structure or other terms, promptly upon request by 
DOE. Where DOE has directed that an Application be submitted in parts, 
DOE may provide for payment of the Application Fee in parts.
    (b) An Applicant may submit only one Application for one proposed 
project using a particular technology. An Applicant may not submit an 
Application or Applications for multiple Eligible Projects using the 
same technology. An Applicant may submit Applications for multiple 
proposed projects using different technologies. For purposes of this 
paragraph, the term Applicant shall include the Project Sponsor and any 
subsidiaries or affiliates of the Project Sponsor.
    (c) An Application must include, at a minimum, the following 
information and materials:
    (1) A completed Application form signed by an individual with full 
authority to bind the Applicant, including the commitments and 
representations made in each part of the Application;
    (2) The applicable Application Fee;
    (3) A description of how and to what measurable extent the proposed 
project

[[Page 67930]]

avoids, reduces, or sequesters air pollutants and/or anthropogenic 
emissions of greenhouse gases, including how to measure and verify 
those effects;
    (4) A description of the nature and scope of the proposed project, 
including:
    (i) Key project milestones;
    (ii) Location or locations of the proposed project;
    (iii) Identification and commercial feasibility of the New or 
Significantly Improved Technology to be deployed;
    (iv) How the Applicant intends to deploy such New or Significantly 
Improved Technology in the proposed project; and
    (v) How the Applicant intends to assure, to the extent possible, 
the further commercial availability of the New or Significantly 
Improved Technology in the United States.
    (5) An explanation of how the proposed project qualifies as a 
project within the category or categories of projects referred to in 
the Solicitation;
    (6) A detailed estimate of the total Project Costs together with a 
description of the methodology and assumptions used;
    (7) A detailed description of the engineering and design 
contractor(s), construction contractor(s), and equipment supplier(s);
    (8) The construction schedules for the proposed project, including 
major activity and cost milestones;
    (9) A description of the material terms and conditions of the 
development and construction contracts to include the performance 
guarantees, performance bonds, liquidated damages provisions, and 
equipment warranties;
    (10) A detailed description of the operations and maintenance 
provider(s), the plant operating plan, estimated staffing requirements, 
parts inventory, major maintenance schedule, estimated annual downtime, 
and performance guarantees and related liquidated damage provisions, if 
any;
    (11) A description of the management plan of operations to be 
employed in carrying out the proposed project, and information 
concerning the management experience of each officer or key person 
associated with the proposed project;
    (12) A detailed description of the proposed project 
decommissioning, deconstruction, and disposal plan, and the anticipated 
costs associated therewith;
    (13) An analysis of the market for any product (including but not 
limited to electricity and chemicals) to be produced by, or services to 
be provided by, the proposed project, including relevant economics 
justifying the analysis, and copies of
    (i) Any contracts for the sale of such products or the provision of 
such services, or
    (ii) Any other assurance of the revenues to be generated from sale 
of such products or provision of such services;
    (14) A detailed description of the overall financial plan for the 
proposed project, including all sources and uses of funding, equity and 
debt, and the liability of parties associated with the proposed project 
over the term of the Loan Guarantee Agreement;
    (15) A copy of all material agreements, whether entered into or 
proposed, relevant to the investment, design, engineering, financing, 
construction, startup commissioning, shakedown, operations and 
maintenance of the proposed project;
    (16) A copy of the financial closing checklist for the equity and 
debt to the extent available;
    (17) The Applicant's business plan on which the proposed project is 
based and Applicant's financial model with respect to the proposed 
project for the proposed term of the Guaranteed Obligations, including, 
as applicable, pro forma income statements, balance sheets, and cash 
flows. All such information and data must include assumptions made in 
their preparation and the range of revenue, operating cost, and credit 
assumptions considered;
    (18) Financial statements for the three immediately preceding 
fiscal years of the Applicant (or such shorter period as the Applicant 
has been in existence) that have been audited by an independent 
certified public accounting firm, including all associated 
certifications, notes and letters to management, as well as interim 
financial statements and notes for the current fiscal year for the 
Applicant and all other Persons the credit of which is material to the 
success of the transactions described in the Application;
    (19) A copy of all legal opinions, and other material reports, 
analyses, and reviews related to the proposed project that have been 
delivered prior to submission of any part of the Application;
    (20) An independent engineering report prepared by an engineer with 
experience in the industry and familiarity with similar projects. The 
report should address the proposed project's siting and permitting 
arrangements, engineering and design, contractual requirements, 
environmental compliance, testing, commissioning and operations, and 
maintenance;
    (21) A credit history of the Applicant and each Project Sponsor;
    (22) A preliminary credit assessment for the proposed project 
without a loan guarantee from a nationally recognized rating agency for 
projects where the estimated total Project Costs exceed $25 million. 
For proposed projects where the total estimated Project Costs are $25 
million or less and where conditions justify, in the sole discretion of 
the Secretary, DOE may require such an assessment;
    (23) A list showing the status of and estimated completion date of 
Applicant's required applications for federal, state, and local 
permits, authorizations or approvals to site, construct, and operate 
the proposed project;
    (24) A report containing an analysis of the potential environmental 
impacts of the proposed project that will enable DOE to--
    (i) Assess whether the proposed project will comply with all 
applicable environmental requirements; and
    (ii) Undertake and complete any necessary reviews under the 
National Environmental Policy Act of 1969;
    (25) A listing and description of the assets of or to be utilized 
for the benefit of the proposed project, and of any other asset that 
will serve as collateral pledged in respect of the Guaranteed 
Obligations, including appropriate data as to the value of such assets 
and the useful life of any physical assets. With respect to real 
property assets listed, an appraisal that is consistent with the 
``Uniform Standards of Professional Appraisal Practice,'' promulgated 
by the Appraisal Standards Board of the Appraisal Foundation, and 
performed by licensed or certified appraisers, is required;
    (26) An analysis demonstrating that, at the time of the 
Application, there is a reasonable prospect that Borrower will be able 
to repay the Guaranteed Obligations (including interest) according to 
their terms, and a complete description of the operational and 
financial assumptions and methodologies on which this demonstration is 
based; and
    (27) If proposed project assets or facilities are or will be 
jointly owned by the Applicant and one or more other Persons or 
entities, each of which owns an undivided ownership interest in such 
proposed project assets or facilities, a description of the Applicant's 
rights and obligations in respect of its undivided ownership interest 
in such proposed project assets or facilities.

[[Page 67931]]

    (d) During the Application evaluation process pursuant to Sec.  
609.5 of this part, DOE may request additional information, potentially 
including a preliminary credit rating or credit assessment, with 
respect to the proposed project.
    (e) DOE will not consider any part of any Application or the 
Application as a whole complete unless the Application Fee (or the 
required portion of the Application Fee related to a particular part of 
the Application) has been paid. An Application Fee paid in connection 
with one Application is not transferable to another Application. Except 
in the discretion of DOE, no portion of the Application Fee is 
refundable;
    (f) DOE has no obligation to evaluate an Application that is not 
complete, and may proceed with such evaluation, or a partial 
evaluation, only in its discretion.
    (g) Unless an Applicant requests an extension and such an extension 
is granted by DOE in its discretion, an Application may be rejected if 
it is not complete within four years from the date of submission (or 
date of submission of the first part thereof, in the case of 
Applications made in more than one part).
    (h) Upon making a determination to engage independent consultants 
or outside counsel with respect to an Application, DOE will proceed to 
evaluate and process such Application only following execution by an 
Applicant or Project Sponsor, as appropriate, of an agreement 
satisfactory to DOE to pay the fees and expenses charged by the 
independent consultants and outside legal counsel.


Sec.  609.5  Programmatic, technical and financial evaluation of 
applications.

    (a) In reviewing completed Applications, and in prioritizing and 
selecting those as to which a Term Sheet should be offered, DOE will 
apply the criteria set forth in the Act, any applicable Solicitation, 
and this part. Applications will be considered in a competitive 
process, i.e. each Application will be evaluated against other 
Applications responsive to the Solicitation. .DOE may compare an 
Application to Applications related to other projects that DOE 
reasonably believes may become the subject of an Application. 
Applications will be denied if:
    (1) The proposed project is not an Eligible Project;
    (2) The applicable technology is not ready to be deployed 
commercially in the United States, cannot yield a commercially viable 
product or service in the use proposed in the Application, does not 
have the potential to be deployed in other commercial projects in the 
United States, or is not or will not be available for further 
commercial use in the United States;
    (3) The Person proposed to issue the loan or purchase other debt 
obligations constituting the Guaranteed Obligations is not an Eligible 
Lender;
    (4) The proposed project is for demonstration, research, or 
development;
    (5) Significant Equity for the proposed project will not be 
provided by the date of issuance of the Guaranteed Obligations, or such 
later time as DOE in its discretion may determine; or
    (6) The proposed project does not present a reasonable prospect of 
repayment of the Guaranteed Obligations.
    (b) If an Application has not been denied pursuant to Sec.  
609.5(a), DOE will evaluate the proposed Project based on the criteria 
set forth in the Act, any applicable Solicitation and the following:
    (1) To what measurable extent the proposed project avoids, reduces, 
or sequesters air pollutants or anthropogenic emissions of greenhouses 
gases, or contributes to the avoidance, reduction or sequestration of 
air pollutants or anthropogenic emissions of greenhouse gases;
    (2) To what extent the technology to be deployed in the proposed 
project--
    (i) Is ready to be deployed commercially in the United States, can 
be replicated, yields a commercially viable product or service in the 
use proposed in the proposed project, has potential to be deployed in 
other commercial projects in the United States, and is or will be 
available for further commercial use in the United States; and
    (ii) Constitutes an important improvement in technology, as 
compared to available Commercial Technologies, used to avoid, reduce or 
sequester air pollutants or anthropogenic emissions of greenhouse 
gases;
    (3) To what extent the Applicant has a plan to advance or assist in 
the advancement of that technology into the commercial marketplace in 
the United States;
    (4) The extent to which the level of proposed support in the 
Application is consistent with a reasonable prospect of repayment of 
the Guaranteed Obligations by considering, among other factors:
    (i) The extent to which the requested amount of the loan guarantee, 
the requested amount of Guaranteed Obligations and, if applicable, the 
expected amount of any other financing or credit arrangements, are 
reasonable relative to the nature and scope of the proposed project;
    (ii) The total amount and nature of the Project Costs and the 
extent to which Project Costs are to be funded by Guaranteed 
Obligations; and
    (iii) The feasibility of the proposed project and likelihood that 
it will produce sufficient revenues to service its debt obligations 
over the life of the loan guarantee and assure timely repayment of 
Guaranteed Obligations;
    (5) The likelihood that the proposed project will be ready for full 
commercial operations in the time frame stated in the Application;
    (6) The amount of Equity committed and to be committed to the 
proposed project by the Borrower, the Project Sponsor, and other 
Persons;
    (7) Whether there is sufficient evidence that the Borrower will 
diligently implement the proposed project, including initiating and 
completing the proposed project in a timely manner;
    (8) Whether and to what extent the Applicant will rely upon other 
Federal and non-Federal Government assistance such as grants, tax 
credits, or other loan guarantees to support the financing, 
construction, and operation of the proposed project and how such 
assistance will impact the proposed project;
    (9) The levels of safeguards provided to the Federal Government in 
the event of default through collateral, warranties, and other 
assurance of repayment described in the Application, including the 
nature of any anticipated intercreditor arrangements;
    (10) The Applicant's, or the relevant contractor's, capacity and 
expertise to operate the proposed project successfully, based on 
factors such as financial soundness, management organization, and the 
nature and extent of corporate and individual experience;
    (11) The ability of the proposed Borrower to ensure that the 
proposed project will comply with all applicable laws and regulations, 
including all applicable environmental statutes and regulations;
    (12) The levels of market, regulatory, legal, financial, 
technological, and other risks associated with the proposed project and 
their appropriateness for a loan guarantee provided by DOE;
    (13) Whether the Application contains sufficient information, 
including a detailed description of the nature and scope of the 
proposed project and the nature, scope, and risk coverage of the loan 
guarantee sought to enable DOE to perform a thorough assessment of the 
proposed project; and

[[Page 67932]]

    (14) Such other criteria that DOE deems relevant in evaluating the 
merits of an Application.
    (c) After DOE completes its review and evaluation of a proposed 
project pursuant to Sec.  609.5(b) and this part, DOE will notify the 
Applicant in writing of its determination whether to proceed with due 
diligence and negotiation of a Term Sheet in accordance with Sec.  
609.6 of this part. DOE will proceed only if it determines that the 
proposed project is highly qualified and suitable for a Guarantee. Upon 
written confirmation from the Applicant that it desires to proceed, DOE 
and the Applicant will commence negotiations.
    (d) A determination by DOE not to proceed with a proposed project 
following evaluation pursuant to Sec.  609.5(b) shall be final and non-
appealable, but shall not prejudice the Applicant or other affected 
Persons from applying for a Guarantee in respect of a different 
proposed project pursuant to another, separate Application.


Sec.  609.6  Term sheets and conditional commitments.

    (a) DOE, after negotiation of a Term Sheet with an Applicant, may 
offer such Term Sheet to an Applicant or such other Person that is an 
affiliate of the Applicant and that is acceptable to DOE. DOE's offer 
of a Term Sheet shall be in writing and signed by the Contracting 
Officer. DOE's negotiation of a Term Sheet imposes no obligation on the 
Secretary to offer a Term Sheet to the Applicant.
    (b) DOE shall terminate its negotiations of a Term Sheet if it has 
not offered a Term Sheet in respect of an Eligible Project within four 
years after the date of the written notification set forth in Sec.  
609.5(c) of this part, unless extended in writing in the discretion of 
the Contracting Officer.
    (c) If and when the offeree specified in a Term Sheet satisfies all 
terms and conditions for acceptance of the Term Sheet, including 
written acceptance thereof and payment of all fees specified in Sec.  
609.11(f) and therein to be paid at or prior to acceptance of the Term 
Sheet, the Term Sheet shall become a Conditional Commitment. Each 
Conditional Commitment shall include an expiration date no more than 
two years from the date it is issued, unless extended in writing in the 
discretion of the Contracting Officer. When and if all of the terms and 
conditions specified in the Conditional Commitment have been met, DOE 
and the Applicant may enter into a Loan Guarantee Agreement.
    (d) If, subsequent to execution of a Conditional Commitment, the 
financing arrangements of the Borrower, or in respect of an Eligible 
Project, change from those described in the Conditional Commitment, the 
Applicant shall promptly provide updated financing information in 
writing to DOE. All such updated information shall be deemed to be 
information submitted in connection with an Application and shall be 
subject to Sec.  609.4(b). Based on such updated information, DOE may 
take one or more of the following actions:
    (1) Determine that such changes are not material to the Borrower, 
the Eligible Project or DOE;
    (2) Amend the Conditional Commitment accordingly;
    (3) Postpone the expected closing date of the associated Loan 
Guarantee Agreement; or
    (4) Terminate the Conditional Commitment.


Sec.  609.7  Closing on the loan guarantee agreement.

    (a) Subsequent to entering into a Conditional Commitment with an 
Applicant, DOE, after consultation with the Applicant, will set a 
closing date for execution of a Loan Guarantee Agreement.
    (b) Prior to or on the closing date of a Loan Guarantee Agreement, 
DOE will ensure that:
    (1) One of the following has occurred:
    (i) An appropriation for the Credit Subsidy Cost has been made;
    (ii) The Secretary has received from the Borrower payment in full 
for the Credit Subsidy Cost and deposited the payment into the 
Treasury; or
    (iii) A combination of one or more appropriations under paragraph 
(b)(1)(i) of this section and one or more payments from the Borrower 
under paragraph (b)(1)(ii) of this section has been made that is equal 
to the Credit Subsidy Cost;
    (2) Pursuant to section 1702(h) of the Act, DOE has received from 
the Applicant the remainder of the Facility Fee referred to in Sec.  
609.11(b) of this part;
    (3) OMB has reviewed and approved DOE's calculation of the Credit 
Subsidy Cost of the Guarantee;
    (4) The Department of the Treasury has been consulted as to the 
terms and conditions of the Loan Guarantee Agreement;
    (5) The Loan Guarantee Agreement and related documents contain all 
terms and conditions DOE deems reasonable and necessary to protect the 
interest of the United States;
    (6) Each holder of the Guaranteed Obligations is an Eligible 
Lender, and the servicer of the Guaranteed Obligations meets the 
servicing performance requirements of Sec.  609.9(b) of this part;
    (7) DOE has determined the principal amount of the Guaranteed 
Obligations expected to be issued in respect of the Eligible Project, 
as estimated at the time of issuance, will not exceed 80 percent of the 
Project Costs of the Eligible Project;
    (8) All conditions precedent specified in the Conditional 
Commitment are either satisfied or waived by the Contracting Officer 
and all other applicable contractual, statutory, and regulatory 
requirements have been satisfied or waived by the Contracting Officer. 
If the counterparty to the Conditional Commitment has not satisfied all 
such terms and conditions on or prior to the closing date of the Loan 
Guarantee Agreement, the Secretary may, in his discretion, set a new 
closing date, or terminate the Conditional Commitment; and
    (9) Where the total Project Costs for an Eligible Project are 
projected to exceed $25 million, the Applicant must provide a credit 
rating from a nationally recognized rating agency reflecting the 
revised Conditional Commitment for the project without a Federal 
guarantee. Where total Project Costs are projected to be $25 million or 
less, the Secretary may, on a case-by-case basis, require a credit 
rating. If a credit rating is required, an updated rating must be 
provided to the Secretary not later than 30 days prior to closing.


Sec.  609.8  Loan guarantee agreement.

    (a) Only a Loan Guarantee Agreement executed by the Contracting 
Officer can obligate DOE to issue a Guarantee in respect of Guaranteed 
Obligations.
    (b) DOE is not bound by oral representations.
    (c) Each Loan Guarantee Agreement shall contain the following 
requirements and conditions, and shall not be executed until the 
Contracting Officer determines that the following requirements and 
conditions are satisfied:
    (1) The Federal Financing Bank shall be the only Eligible Lender in 
transactions where DOE guarantees 100 percent (but not less than 100 
percent) of the principal and interest of the Guaranteed Obligations 
issued under a Loan Guarantee Agreement.
    (i) Where DOE guarantees more than 90 percent of the Guaranteed 
Obligation, the guaranteed portion cannot be separated from or 
``stripped'' from the non-guaranteed portion of the Guaranteed 
Obligation if the loan is participated, syndicated or otherwise resold 
in the secondary market; and
    (ii) Where DOE guarantees 90 percent or less of the Guaranteed 
Obligation, the guaranteed portion may be separated

[[Page 67933]]

from or ``stripped'' from the non-guaranteed portion of the Guaranteed 
Obligation, if the loan is participated, syndicated or otherwise resold 
in the secondary debt market;
    (2) The Borrower shall be obligated to make full repayment of the 
principal and interest on the Guaranteed Obligations and other debt of 
a Borrower over a period of up to the lesser of 30 years or 90 percent 
of the projected useful life of the Eligible Project's major physical 
assets, as calculated in accordance with U.S. generally accepted 
accounting principles and practices. The non-guaranteed portion (if 
any) of any Guaranteed Obligations must be repaid pro rata, and on the 
same amortization schedule, with the guaranteed portion.
    (3) If any financing or credit arrangement of the Borrower or 
relating to the Eligible Project, other than the Guaranteed 
Obligations, has an amortization period shorter than that of the 
Guaranteed Obligations, DOE shall have determined that the resulting 
financing structure allocates to DOE a reasonably proportionate share 
of the default risk, in light of:
    (i) DOE's share of the total debt financing of the Borrower,
    (ii) Risk allocation among the credit providers to the Borrower, 
and
    (iii) Internal and external credit enhancements.
    (4) Consistent with the requirements of section 149(b) of the 
Internal Revenue Code, the Guaranteed Obligations shall not finance, 
directly, indirectly, or through effective subordination within the 
meaning of section II.A of OMB Circular No. A-129 (January 2013), tax-
exempt debt obligations. Guaranteed Obligations and any tax-exempt debt 
obligations payable directly or indirectly from the revenues of the 
Borrower or other resources of the Borrower must be repaid using 
separate, dedicated revenue streams or other separate sources of 
repayment, and must be separately collateralized. The terms of the 
Guaranteed Obligations, such as, for example, grace periods, repayment 
schedules, and availability of deferrals, must not create effective 
subordination. The Guaranteed Obligations shall not be used as 
collateral to secure tax-exempt debt obligations or guarantee loans 
funded by tax-exempt debt obligations;
    (5) The principal amount of the Guaranteed Obligations, when 
combined with funds from other sources committed and available to the 
Borrower, shall be sufficient to pay for expected Project Costs 
(including adequate contingency amounts), the applicable items 
specified in Sec.  609.10(b) of this part, and otherwise to carry out 
the Eligible Project;
    (6) There shall be a reasonable prospect of repayment by the 
Borrower of the principal of and interest on the Guaranteed Obligations 
and all of its other debt obligations;
    (7) The Borrower shall pledge collateral or surety determined by 
DOE to be necessary to secure the repayment of the Guaranteed 
Obligations. Such collateral or security may include Eligible Project 
assets and assets not related to the Eligible Project;
    (8) The Loan Guarantee Agreement and related documents shall 
include detailed terms and conditions that DOE deems necessary and 
appropriate to protect the interests of the United States in the case 
of default, including ensuring availability of all relevant 
intellectual property rights, technical data including software, and 
technology necessary for DOE or any Person or entity selected by DOE, 
to complete, operate, convey, and dispose of the defaulted Borrower or 
the Eligible Project;
    (9) The Guaranteed Obligations shall not be subordinate to other 
financing. Guaranteed Obligations are not subordinate to other 
financing if the lien on property securing the Guaranteed Obligations, 
together with liens that are pari passu with such lien, if any, take 
priority or precedence over other charges or encumbrances upon the same 
property and must be satisfied before such other charges are entitled 
to participate in proceeds of the property's sale. In DOE's discretion, 
Guaranteed Obligations may share a lien position with other financing;
    (10) There is satisfactory evidence that the Borrower will 
diligently pursue the Eligible Project and is willing, competent, and 
capable of performing its obligations under the Loan Guarantee 
Agreement and the loan documentation relating to its other debt 
obligations;
    (11) The Borrower shall have paid all fees and expenses due to DOE 
or the U.S. Government, including such amount of the Credit Subsidy 
Cost as may be due and payable from the Borrower pursuant to the 
Conditional Commitment, upon execution of the Loan Guarantee Agreement;
    (12) The Borrower, any Eligible Lender, and each other relevant 
party shall take, and be obligated to continue to take, those actions 
necessary to perfect and maintain liens on collateral pledged in 
respect of the Guaranteed Obligations;
    (13) DOE or its representatives shall have access to the offices of 
the Borrower and the Eligible Project site at all reasonable times in 
order to--
    (i) Monitor the performance by the Borrower of its obligations 
under the Loan Guarantee Agreement, and
    (ii) Performance of the Eligible Project;
    (14) DOE and Borrower have reached an agreement regarding the 
information that will be made available to DOE and the information that 
will be made publicly available;
    (15) The Borrower shall have filed applications for or obtained any 
required regulatory approvals for the Eligible Project and is in 
compliance, or promptly will be in compliance, where appropriate, with 
all Federal, state, and local regulatory requirements;
    (16) The Borrower shall have no delinquent Federal debt;
    (17) The Project Sponsors have made or will make a significant 
Equity investment in the Borrower or the Eligible Project, and will 
maintain control of the Borrower or the Eligible Project as agreed in 
the LGA; and
    (18) The Loan Guarantee Agreement and related agreements shall 
include such other terms and conditions as DOE deems necessary or 
appropriate to protect the interests of the United States.
    (d) The Loan Guarantee Agreement shall provide that, in the event 
of a default by the Borrower:
    (1) Interest on the Guaranteed Obligations shall accrue at the rate 
stated in the Loan Guarantee Agreement or the Loan Agreement, until DOE 
makes full payment of the defaulted Guaranteed Obligations and, except 
when such Guaranteed Obligations are funded through the Federal 
Financing Bank, DOE shall not be required to pay any premium, default 
penalties, or prepayment penalties; and
    (2) The holder of collateral pledged in respect of the Guaranteed 
Obligations shall be obligated to take such actions as DOE may 
reasonably require to provide for the care, preservation, protection, 
and maintenance of such collateral so as to enable the United States to 
achieve maximum recovery.
    (e)(1) An Eligible Lender or other Holder may sell, assign or 
transfer a Guaranteed Obligation to another Eligible Lender that meets 
the requirements of Sec.  609.9 of this part. Such latter Eligible 
Lender shall be required to assume all servicing, monitoring and 
reporting requirements as provided in the Loan Guarantee Agreement. Any 
transfer of the servicing, monitoring, and reporting functions shall be 
subject to the prior written approval of DOE.
    (2) The Secretary, or the Secretary's designee or contractual 
agent, for the purpose of identifying Holders with the

[[Page 67934]]

right to receive payment under the Guaranteed Obligations, shall 
include in the Loan Guarantee Agreement or related documents a 
procedure for tracking and identifying Holders of Guaranteed 
Obligations. Any contractual agent approved by the Secretary to perform 
this function may transfer or assign this responsibility only with the 
Secretary's prior written approval.
    (f) Each Loan Guarantee Agreement shall require the Borrower to 
make representations and warranties, agree to covenants, and satisfy 
conditions precedent to closing and to each disbursement that, in each 
case, relate to its compliance with the Davis-Bacon Act and the Cargo 
Preference Act.
    (g) The Applicant, the Borrower or the Project Sponsor must 
estimate, calculate, record, and provide to DOE any time DOE requests 
such information and at the times provided in the Loan Guarantee 
Agreement all costs incurred in the design, engineering, financing, 
construction, startup, commissioning and shakedown of the Eligible 
Project in accordance with generally accepted accounting principles and 
practices.


Sec.  609.9  Lender servicing requirements.

    (a) When reviewing and evaluating a proposed Eligible Project, all 
Eligible Lenders (other than the Federal Financing Bank) shall at all 
times exercise the level of care and diligence that a reasonable and 
prudent lender would exercise when reviewing, evaluating and disbursing 
a loan made by it without a Federal guarantee.
    (b) Loan servicing duties shall be performed by an Eligible Lender, 
DOE, or another qualified loan servicer approved by DOE. When 
performing its servicing duties, the loan servicer shall at all times 
exercise the level of care and diligence that a reasonable and prudent 
lender would exercise when servicing a loan made without a Federal 
guarantee, including:
    (1) During the construction period, monitoring the satisfaction of 
all of the conditions precedent to all loan disbursements, as provided 
in the Loan Guarantee Agreement, Loan Agreement or related documents;
    (2) During the operational phase, monitoring and servicing the 
Guaranteed Obligations and collection of the outstanding principal and 
accrued interest as well as undertaking to ensure that the collateral 
package securing the Guaranteed Obligations remains uncompromised; and
    (3) Until the Guaranteed Obligation has been repaid, providing 
annual or more frequent financial and other reports on the status and 
condition of the Guaranteed Obligations and the Eligible Project, and 
promptly notifying DOE if it becomes aware of any problems or 
irregularities concerning the Eligible Project or the ability of the 
Borrower to make payment on the Guaranteed Obligations or its other 
debt obligations.


Sec.  609.10  Project costs.

    (a) Project Costs include:
    (1) Costs of acquisition, lease, or rental of real property, 
including engineering fees, surveys, title insurance, recording fees, 
and legal fees incurred in connection with land acquisition, lease or 
rental, site improvements, site restoration, access roads, and fencing;
    (2) Costs of engineering, architectural, legal and bond fees, and 
insurance paid in connection with construction of the facility;
    (3) Costs of equipment purchases, including a reasonable reserve of 
spare parts to the extent required;
    (4) Costs to provide facilities and services related to safety and 
environmental protection;
    (5) Costs of financial, legal, and other professional services, 
including services necessary to obtain required licenses and permits 
and to prepare environmental reports and data;
    (6) Costs of issuing Eligible Project debt, such as fees, 
transaction, and costs referred to in Sec.  609.10(a)(5), and other 
customary charges imposed by Eligible Lenders;
    (7) Costs of necessary and appropriate insurance and bonds of all 
types including letters of credit and any collateral required therefor;
    (8) Costs of design, engineering, startup, commissioning and 
shakedown;
    (9) Costs of obtaining licenses to intellectual property necessary 
to design, construct, and operate the Eligible Project;
    (10) To the extent
    (i) Required by the Loan Guarantee Agreement and
    (ii) Not intended or available for any cost referred to in Sec.  
609.10(b),

costs of funding any reserve fund, including without limitation, a debt 
service reserve, a maintenance reserve, and a contingency reserve for 
cost overruns during construction; provided that proceeds of a 
Guaranteed Loan deposited to any reserve fund shall not be removed from 
such fund except to pay Project Costs, to pay principal of the 
Guaranteed Loan, or otherwise to be used as provided in the Loan 
Guarantee Agreement;
    (11) Capitalized interest necessary to meet market requirements and 
other carrying costs during construction; and
    (12) Other necessary and reasonable costs.
    (b) Project Costs do not include:
    (1) Fees and commissions charged to Borrower, including finder's 
fees, for obtaining Federal or other funds;
    (2) Parent corporation or other affiliated entity's general and 
administrative expenses, and non-Eligible Project related parent 
corporation or affiliated entity assessments, including organizational 
expenses;
    (3) Goodwill, franchise, trade, or brand name costs;
    (4) Dividends and profit sharing to stockholders, employees, and 
officers;
    (5) Research, development, and demonstration costs of readying an 
innovative technology for employment in a commercial project;
    (6) Costs that are excessive or are not directly required to carry 
out the Eligible Project, as determined by DOE;
    (7) Expenses incurred after startup, commissioning, and shakedown 
before the facility, or, in DOE's discretion, any portion of the 
facility, has been placed in service;
    (8) Borrower-paid Credit Subsidy Costs, the Administrative Cost of 
Issuing a Loan Guarantee, and any other fee collected by DOE; and
    (9) Operating costs.


Sec.  609.11  Fees and charges.

    (a) Unless explicitly authorized by statute, no funds obtained from 
the Federal Government, or from a loan or other instrument guaranteed 
by the Federal Government, may be used to pay for the Credit Subsidy 
Cost, the Application Fee, the Facility Fee, the Guarantee Fee, the 
maintenance fee and any other fees charged by or paid to DOE relating 
to the Act or any Guarantee thereunder.
    (b) DOE may charge Applicants a non-refundable Facility Fee, with a 
portion being payable on or prior to the date on which the Applicant 
executes the Commitment Letter and the remainder being payable on or 
prior to the closing date for the Loan Guarantee Agreement.
    (c) In order to encourage and supplement private lending activity 
DOE may collect from Borrowers for deposit in the United States 
Treasury a non-refundable Risk-Based Charge which, together with the 
interest rate on the Guaranteed Obligation that LPO determines to be 
appropriate, will take into account the prevailing rate of interest in 
the private sector for similar loans and risks. The Risk-Based Charge 
shall be paid at such times and in such manner as may be determined by 
DOE, but no less frequently than once each year, commencing with 
payment of a

[[Page 67935]]

pro-rated payment on the date the Guarantee is issued. The amount of 
the Risk-Based Charge will be specified in the Loan Guarantee 
Agreement.
    (d) DOE may collect a maintenance fee to cover DOE's administrative 
expenses, other than extraordinary expenses, incurred in servicing and 
monitoring a Loan Guarantee Agreement. The maintenance fee shall accrue 
from the date of execution of the Loan Guarantee Agreement through the 
date of payment in full of the related Guaranteed Obligations. If DOE 
determines to collect a maintenance fee, it shall be paid by the 
Borrower each year (or portion thereof) in advance in the amount 
specified in the applicable Loan Guarantee Agreement.
    (e) In the event a Borrower or an Eligible Project experiences 
difficulty relating to technical, financial, or legal matters or other 
events (e.g., engineering failure or financial workouts), the Borrower 
shall be liable as follows:
    (1) If such difficulty requires DOE to incur time or expenses 
beyond those customarily expended to monitor and administer performing 
loans, DOE may collect an extraordinary expenses fee from the Borrower 
that will reimburse DOE for such time and expenses, as determined by 
DOE; and
    (2) For all fees and expenses of DOE's independent consultants and 
outside counsel, to the extent that such fees and expenses are elected 
to be paid by DOE notwithstanding the provisions of paragraphs (f) and 
(g) of this section.
    (f) Each Applicant, Borrower or Project Sponsor, as applicable, 
shall be responsible for the payment of all fees and expenses charged 
by DOE's independent consultants and outside legal counsel in 
connection with an Application, Conditional Commitment or Loan 
Guarantee Agreement, as applicable. Upon making a determination to 
engage independent consultants or outside counsel with respect to an 
Application, DOE will proceed to evaluate and process such Application 
only following execution by an Applicant or Project Sponsor, as 
appropriate, of an agreement satisfactory to DOE to pay the fees and 
expenses charged by the independent consultants and outside legal 
counsel. Appropriate provisions regarding payment of such fees and 
expenses shall also be included in each Term Sheet and Loan Guaranty 
Agreement or, upon a determination by DOE, in other appropriate 
agreements.
    (g) Notwithstanding payment by Applicant, Borrower or Project 
Sponsor, all services rendered by an independent consultant or outside 
legal counsel to DOE in connection with an Application, Conditional 
Commitment or Loan Guarantee Agreement shall be solely for the benefit 
of DOE (and such other creditors as DOE may agree in writing). DOE may 
require, in its discretion, the payment of an advance retainer to such 
independent consultants or outside legal counsel as security for the 
collection of the fees and expenses charged by the independent 
consultants and outside legal counsel. In the event an Applicant, 
Borrower or Project Sponsor fails to comply with the provisions of such 
payment agreement, DOE in its discretion, may stop work on or terminate 
an Application, a Conditional Commitment or a Loan Guarantee Agreement, 
or may take such other remedial measures in its discretion as it deems 
appropriate.
    (h) DOE shall not be financially liable under any circumstances to 
any independent consultant or outside counsel for services rendered in 
connection with an Application, Conditional Commitment or Loan 
Guarantee Agreement except to the extent DOE has previously entered 
into an express written agreement to pay for such services.


Sec.  609.12  Full faith and credit and incontestability.

    The full faith and credit of the United States is pledged to the 
payment of principal and interest of Guaranteed Obligations pursuant to 
Guarantees issued in accordance with the Act and this Part. The 
issuance by DOE of a Guarantee shall be conclusive evidence that it has 
been properly obtained; that the underlying loan qualified for such 
Guarantee; and that, but for fraud or material misrepresentation by the 
Holder, such Guarantee shall be legal, valid, binding and enforceable 
against DOE in accordance with its terms.


Sec.  609.13  Default, demand, payment, and foreclosure on collateral.

    (a) If a Borrower defaults in making a required payment of 
principal or interest on a Guaranteed Obligation and such default has 
not been cured within the applicable grace period, the Holder may make 
written demand for payment upon the Secretary in accordance with the 
terms of the applicable Guarantee. If a Borrower defaults in making a 
required payment of principal or interest on a Guaranteed Obligation 
and such default has not been cured within the applicable grace period, 
the Secretary shall notify the Attorney General.
    (b) Subject to the terms of the applicable Guarantee, the Secretary 
shall make payment within 60 days after receipt of written demand for 
payment from the Holder, provided that the demand for payment complies 
in all respects with the terms of the applicable Guarantee. Interest 
shall accrue to the Holder at the rate stated in the promissory note 
evidencing the Guaranteed Obligation, without giving effect to the 
Borrower's default in making a required payment of principal or 
interest on the applicable Guarantee Obligation or any other default by 
the Borrower, until the Guaranteed Obligation has been fully paid by 
DOE. Payment by the Secretary on the applicable Guarantee does not 
change Borrower's obligations under the promissory note evidencing the 
Guaranteed Obligation, Loan Guarantee Agreement, Loan Agreement or 
related documents, including an obligation to pay default interest.
    (c) Following payment by the Secretary pursuant to the applicable 
Guarantee, upon demand by DOE, the Holder shall transfer and assign to 
the Secretary (or his designee or agent) the promissory note evidencing 
the Guaranteed Obligation, all rights and interests of the Holder in 
the Guaranteed Obligation, and all rights and interests of the Holder 
in respect of the Guaranteed Obligation, except to the extent that the 
Secretary determines that such promissory note or any of such rights 
and interests shall not be transferred and assigned to the Secretary. 
Such transfer and assignment shall include, without limitation, all of 
the liens, security and collateral rights of the Holder (or his 
designee or agent) in respect of the Guaranteed Obligation.
    (d) Following payment by the Secretary pursuant to a Guarantee or 
other default of a Guaranteed Obligation, the Secretary is authorized 
to protect and foreclose on the collateral, take action to recover 
costs incurred by, and all amounts owed to, the United States as a 
result of the defaulted Guarantee Obligation, and take such other 
action necessary or appropriate to protect the interests of the United 
States. In respect of any such authorized actions that involve a 
judicial proceeding or other judicial action, the Secretary shall act 
through the Attorney General. The foregoing provisions of this 
paragraph shall not relieve the Secretary from its obligations pursuant 
to any applicable Intercreditor Agreement. Nothing in this paragraph 
shall limit the Secretary from exercising any rights or remedies 
pursuant to the terms of the Loan Guarantee Agreement.
    (e) The cash proceeds received as a result of any foreclosure on 
the collateral or other action, shall be distributed in accordance with 
the Loan Guarantee Agreement (subject to any applicable Intercreditor 
Agreement).

[[Page 67936]]

    (f) The Loan Guarantee Agreement shall provide that cash proceeds 
received by the Secretary (or his designee or agent) as a result of any 
foreclosure on the collateral or other action shall be applied in the 
following order of priority:
    (1) Toward the pro rata payment of any costs and expenses 
(including unpaid fees, fees and expenses of counsel, contractors and 
agents, and liabilities and advances made or incurred) of the 
Secretary, the Attorney General, the Holder, a collateral agent or 
other responsible person of any of them (solely in their individual 
capacities as such and not on behalf of or for the benefit of their 
principals), incurred in connection with any authorized action 
following payment by the Secretary pursuant to a Guarantee or other 
default of a Guaranteed Obligation, or as otherwise permitted under the 
Loan Agreement or Loan Guarantee Agreement.
    (2) To pay all accrued and unpaid fees due and payable to the 
Secretary, the Attorney General, the Holder, a collateral agent or 
other responsible person of any of them on a pro rata basis in respect 
of the Guaranteed Obligation;
    (3) To pay all accrued and unpaid interest due and payable to the 
Secretary, the Attorney General, the Holder, a collateral agent or 
other responsible person of any of them on a pro rata basis in respect 
of the Guaranteed Obligation;
    (4) To pay all unpaid principal of the Guaranteed Obligation;
    (5) To pay all other obligations of the Borrower under the Loan 
Guarantee Agreement, the Loan Agreement and related documents that are 
remaining after giving effect to the preceding provisions and are then 
due and payable; and
    (6) To pay to the Borrower, or its successors and assigns, or as a 
court of competent jurisdiction may direct, any cash proceeds then 
remaining following the application of all payment described above.
    (g) No action taken by the Holder or its agent or designee in 
respect of any collateral will affect the rights of any person, 
including the Secretary, having an interest in the Guaranteed 
Obligations or other debt obligations, to pursue, jointly or severally, 
legal action against the Borrower or other liable persons, for any 
amounts owing in respect of the Guaranteed Obligation or other 
applicable debt obligations.
    (h) In the event that the Secretary considers it necessary or 
desirable to protect or further the interest of the United States in 
connection exercise of rights as a lien holder or recovery of 
deficiencies due under the Guaranteed Obligation, the Secretary may 
take such action as he determines to be appropriate under the 
circumstances.
    (i) Nothing in this part precludes, nor shall any provision of this 
part be construed to preclude, the Secretary from purchasing any 
collateral or Holder's or other person's interest in the Eligible 
Project upon foreclosure of the collateral.
    (j) Nothing in this part precludes, nor shall any provision of this 
part be construed to preclude, forbearance by any Holder with the 
consent of the Secretary for the benefit of the Borrower and the United 
States.
    (k) The Holder and the Secretary may agree to a formal or informal 
plan of reorganization in respect of the Borrower, to include a 
restructuring of the Guaranteed Obligation and other applicable debt of 
the Borrower on such terms and conditions as the Secretary determines 
are in the best interest of the United States.


Sec.  609.14  Preservation of collateral.

    (a) If the Secretary exercises his right under the Loan Guarantee 
Agreement to require the holder of pledged collateral to take such 
actions as the Secretary (subject to any applicable Intercreditor 
Agreement) may reasonably require to provide for the care, 
preservation, protection, and maintenance of such collateral so as to 
enable the United States to achieve maximum recovery from the 
collateral, the Secretary shall, subject to compliance with the 
Antideficiency Act, 31 U.S.C. 1341 et seq., reimburse the holder of 
such collateral for reasonable and appropriate expenses incurred in 
taking actions required by the Secretary (unless otherwise provided in 
applicable agreements). Except as provided in Sec.  609.13, no party 
may waive or relinquish, without the consent of the Secretary, any such 
collateral to which the United States would be subrogated upon payment 
under the Loan Guarantee Agreement.
    (b) In the event of a default, the Secretary may enter into such 
contracts as he determines are required or appropriate, taking into 
account the term of any applicable Intercreditor Agreement, to care 
for, preserve, protect or maintain collateral pledged in respect of 
Guaranteed Obligations. The cost of such contracts may be charged to 
the Borrower.


Sec.  609.15  Audits and access to records.

    Each Loan Guarantee Agreement and related documents shall provide 
that:
    (a) The Eligible Lender, or DOE in conjunction with the Federal 
Financing Bank where loans are funded by the Federal Financing Bank or 
other Holder or other party servicing the Guaranteed Obligations, as 
applicable, and the Borrower, shall keep such records concerning the 
Eligible Project as are necessary, including the Application, Term 
Sheet, Conditional Commitment, Loan Guarantee Agreement, Credit 
Agreement, mortgage, note, disbursement requests and supporting 
documentation, financial statements, audit reports of independent 
accounting firms, lists of all Eligible Project assets and non-Eligible 
Project assets pledged in respect of the Guaranteed Obligations, all 
off-take and other revenue producing agreements, documentation for all 
Eligible Project indebtedness, income tax returns, technology 
agreements, documentation for all permits and regulatory approvals and 
all other documents and records relating to the Borrower or the 
Eligible Project, as determined by the Secretary, to facilitate an 
effective audit and performance evaluation of the Eligible Project; and
    (b) The Secretary and the Comptroller General, or their duly 
authorized representatives, shall have access, for the purpose of audit 
and examination, to any pertinent books, documents, papers and records 
of the Borrower, Eligible Lender or DOE or other Holder or other party 
servicing the Guaranteed Obligation, as applicable. Such inspection may 
be made during regular office hours of the Borrower, Eligible Lender or 
DOE or other Holder, or other party servicing the Eligible Project and 
the Guaranteed Obligations, as applicable, or at any other time 
mutually convenient.


Sec.  609.16  Deviations.

    (a) To the extent that the requirements under this part are not 
specified by the Act or other applicable statutes, DOE may authorize 
deviations from the requirements of this part upon:
    (1) Either (A) receipt from the Applicant, Borrower or Project 
Sponsor, as applicable, of--
    (i) A written request that the Secretary deviate from one or more 
requirements, and
    (ii) A supporting statement briefly describing one or more 
justifications for such deviation, or
    (iii)(B) a determination by the Secretary in his discretion to 
undertake a deviation;
    (2) A finding by the Secretary that such deviation supports program 
objectives and the special circumstances stated in the request make 
such deviation clearly in the best interest of the Government; and

[[Page 67937]]

    (3) If the waiver would constitute a substantial change in the 
financial terms of the Loan Guarantee Agreement and related documents, 
consultation by DOE with OMB and the Secretary of the Treasury.
    (b) If a deviation under this section results in an increase in the 
applicable Credit Subsidy Cost, such increase shall be funded either by 
additional fees paid by or on behalf of the Borrower or, if an 
appropriation is available by means of an appropriations act. The 
Secretary has discretion to determine how the cost of a deviation is 
funded.

[FR Doc. 2016-23268 Filed 9-30-16; 8:45 am]
BILLING CODE 6450-01-P
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