[Federal Register Volume 70, Number 102 (Friday, May 27, 2005)]
[Notices]
[Pages 30707-30708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-10629]


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DEPARTMENT OF ENERGY


Alaska Natural Gas Pipeline Loan Guarantee

AGENCY: Department of Energy.

ACTION: Notice of inquiry.

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SUMMARY: The Department of Energy (DOE) is seeking comments and 
information from the public to assist DOE in developing a possible 
advance notice of proposed rulemaking or notice of proposed rulemaking 
concerning the loan guarantee provisions of the ``Alaska Natural Gas 
Pipeline Act.'' The Act authorizes the Secretary of Energy (Secretary) 
to issue Federal loan guarantees to facilitate the construction of a 
pipeline or liquefied natural gas project to bring natural gas from the 
Alaska North Slope to the continental United States.

DATES: Interested persons must submit written comments by July 26, 
2005. Comments may be mailed to the address given in the ADDRESSES 
section below. Comments also may be submitted electronically by e-
mailing them to: [email protected]. We note that e-mail 
submissions will avoid delay currently associated with security 
screening of U.S. Postal Service mail.

ADDRESSES: Office of the General Counsel, GC-72, Attention: Lawrence R. 
Oliver, U.S. Department of Energy, Forrestal Building, Room 6B-256, 
1000 Independence Avenue, SW., Washington, DC 20585. DOE requires, in 
hard copy, a signed original and three copies of all comments.

FOR FURTHER INFORMATION CONTACT: Lawrence R. Oliver, Esq., Assistant 
General Counsel, U.S. Department of Energy, Office of the General 
Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 20585, 
(202) 586-9507, [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On October 13, 2004, the ``Alaska Natural Gas Pipeline Act,'' 
Division C of Pub. L. 108-324 (the ``Act''), was enacted as part of the 
Military Construction Appropriations and Emergency Hurricane 
Supplemental Appropriations Act, 2005. The Act, as amended, generally 
is intended to expedite regulatory consideration, approval and 
construction of a pipeline or liquefied natural gas (LNG) project that 
would be used to transport Alaska North Slope natural gas to the 
continental United States, and provide financial incentives in the form 
of Federal loan guarantees for construction of such a pipeline or 
project.
    Section 116 of the Act authorizes the Secretary to enter into 
Federal loan guarantee agreements (LGAs) for a ``Qualified 
Infrastructure Project'' (1) with one or more holders of a final 
certificate issued by the Federal Energy Regulatory Commission (FERC) 
under either section 103(b) of the Act or section 9 of the Alaska 
Natural Gas Transportation Act of 1976 (15 U.S.C. 719g), and (2) with 
one or more owners of the Canadian portion of a ``Qualified 
Infrastructure Project,'' for up to $18 billion total, but no more than 
80 percent of the capital costs of a project. Section 114 of Title I of 
Division J of the Consolidated Appropriations Act, 2005 (Pub. L. 108-
447) amended section 116 of the Act to add authority for the Secretary 
to enter into LGAs with an entity the Secretary determines is qualified 
to construct and operate an LNG project to transport LNG from 
``Southcentral Alaska to West Coast States.'' The Act also authorizes 
the Secretary to issue loan guarantee regulations. The definition of 
``qualified lender'' in the Act does not include the Federal Financing 
Bank.

Questions for Public Comment

    DOE may issue regulations implementing the Act's loan guarantee 
authority and is currently analyzing this authority in the context of 
the Act's other provisions. Since the Act is silent on many of the 
customary loan guarantee requirements, DOE is considering the 
development and issuance of regulations that would establish certain 
minimum requirements or terms for such LGAs. In an effort to identify 
issues potentially affecting implementation of the loan guarantee 
authority, DOE invites interested members of the public, including 
lending and other financial institutions, potential project sponsors, 
and individuals to comment, in writing, on the following questions and 
to provide DOE with other information or analyses potentially relevant 
to the development of loan guarantee regulations and the implementation 
of the loan guarantee provisions in the Act.
    1. Conditional Commitment. Section 116(a)(3) of the Act provides 
that ``[t]he authority of the Secretary to issue Federal guarantee 
instruments under this section for a qualified infrastructure project 
shall expire on the date that is 2 years after the date on which the 
final certificate of public convenience and necessity (including any 
Canadian certificates of public convenience and necessity) is issued 
for the project.'' Section 116(b)(1) of the Act provides that ``[t]he 
Secretary may issue a Federal guarantee instrument for a qualified 
infrastructure project only after a certificate of public convenience 
and necessity * * * has been issued for the project, or after the 
Secretary certifies there exists a qualified entity to construct and 
operate a liquefied natural gas project to transport liquefied natural 
gas from Southcentral Alaska to West Coast States.''
    Under these provisions the Secretary may not enter into an LGA (a 
negotiated document which sets forth in writing

[[Page 30708]]

the terms and conditions that must be met before the Secretary will 
issue the loan guarantees) until a certificate of public convenience 
and necessity has been issued by FERC or the Secretary has issued an 
appropriate certification in the case of an LNG project. DOE is 
considering whether it can or should negotiate a conditional commitment 
with one or more potential project sponsors prior to the time that a 
final certificate is issued by FERC or the Secretary issues the 
required certifications with respect to an LNG project. A conditional 
commitment would, after the terms and conditions specified therein have 
been satisfied, lead to the execution of an LGA after the required 
subsequent conditions occur. DOE is requesting comments on potential 
advantages and disadvantages of this approach including whether it 
would expedite the loan guarantee application process and at what point 
in the certificate application and/or project consideration process the 
loan guarantee application and/or negotiation process with DOE should 
begin.
    2. Determinations and Findings by the Secretary. DOE is considering 
the desirability of requiring by rule the following findings and 
determinations as conditions for approval of an application for loan 
guarantees for a ``Qualified Infrastructure Project'': (A) That the 
applicant has received a final certificate from FERC or, with respect 
to an LNG project, that the Secretary has made a determination that the 
entity applying for loan guarantees is qualified to construct and 
operate a liquefied natural gas project ``to transport liquefied 
natural gas from Southcentral Alaska to West Coast States''; (B) That 
the project submitted for approval is a ``Qualified Infrastructure 
Project'' as defined in section 116(g)(4) of the Act; (C) That there is 
a reasonable assurance of repayment of the guaranteed debt; (D) That 
the guaranteed loan funds and the equity contribution of the project 
sponsors will be sufficient to complete the construction and start-up 
of the ``Qualified Infrastructure Project'' and fund any cost overruns; 
and (E) That the terms and conditions of the LGA provide adequate terms 
and security to appropriately protect the financial interests of the 
United States Government. DOE is requesting comments on what 
determinations and/or findings the Secretary should make prior to 
approving an LGA for one or more parts of a ``Qualified Infrastructure 
Project.''
    3. Special Terms and Conditions. DOE is also requesting comments on 
what other terms and conditions, other than the usual project financing 
requirements, that are unique to construction of a natural gas pipeline 
or LNG facility, should be included in the regulations and whether the 
regulations should include requirements for such unique terms and 
conditions in the LGAs.
    4. Lender Risk. Section 116(g)(3) of the Act provides that ``the 
term `Federal guarantee instrument' means any guarantee or other pledge 
by the Secretary to pledge the full faith and credit of the United 
States to pay all of the principal and interest on any loan or other 
debt obligation entered into by a holder of a certificate of public 
convenience and necessity.'' DOE requests comments on whether this 
provision precludes any ``lender risk'' on the project debt that 
receives a Federal guarantee and also the potential impact of 100 
percent guaranteed debt on project evaluation and servicing 
requirements.
    5. Guarantee Fee. DOE is considering the imposition of a loan 
guarantee fee on the portion of the loan that is guaranteed by DOE. DOE 
requests comments on how the amount of any loan guarantee fee should be 
determined and whether the fee should be an origination or an annual 
fee.
    6. Equity Funding Commitment. Section 116(c)(1) provides that 
``[t]he amount of loans and other debt obligations guaranteed under 
this section for a qualified infrastructure project shall not exceed 80 
percent of the total capital costs of the project, including interest 
during construction.'' Section 116(b)(3) provides that ``[t]he 
Secretary shall not require as a condition of issuing a Federal 
guarantee instrument under this section any contractual commitment or 
other form of credit support of the sponsors (other than equity 
contribution commitments and completion guarantees).'' These provisions 
may be interpreted as in effect requiring the project sponsor to make 
at least a twenty (20) percent equity contribution to the project. At 
the time of the execution of the LGA and related documents DOE must be 
satisfied that necessary equity contributions can and will be made 
during the construction and startup phase of the project consistent 
with an established equity contribution schedule. DOE requests comments 
as to what type and form of assurance DOE should require from the 
project sponsors to assure that the scheduled equity contributions to 
the project will be available and will be made when needed.
    7. Thirty year loan guarantee term. Section 116(d)(1) of the Act 
provides, in part, that ``[t]he term of any loan guarantee under this 
section shall not exceed 30 years.'' DOE requests comments on whether 
the calculation of the maximum loan guarantee ``term'', for purposes of 
this provision, should commence with the first construction loan 
borrowing and include the sum of both the construction period and long-
term debt period.
    8. Collateral/Recourse/Default. The Act is silent with regard to 
requirements and procedures relating to collateral for the Federally 
guaranteed debt. What recourse or options should the Secretary have in 
the event of a default. For instance, should security other than the 
project assets be pledged to secure the guarantee, credit and related 
agreements and should DOE have a first lien on all project assets? DOE 
requests comments on what should be included in any regulations, should 
DOE decide to promulgate regulations, regarding collateral 
requirements, recourse and default procedures.
    9. Cost Overruns. The Act is silent on how LGAs might address cost 
overruns on a Qualified Infrastructure Project, or how a debt 
instrument guaranteed pursuant to an LGA might be used to fund cost 
overruns. The Act, therefore, provides no guidance on whether cost 
overruns can or should be funded through the authorized guaranteed 
debt, other debt, equity or some combination. DOE is requesting 
comments on how cost overruns can or should be funded and the 
appropriate mechanism or formula for addressing cost overruns in the 
LGAs and any appropriate regulations.
    10. Monitoring and Reporting Requirements. DOE is requesting 
comments on appropriate required reporting to DOE to assist DOE in its 
monitoring responsibilities including the content and timing of such 
reporting generally, whether reports should address the status of loan 
disbursement requests, whether loan repayment status reports should be 
required, and the timing and content of construction status reports and 
other appropriate information submissions from the project sponsors.

    Dated: May 23, 2005.
Mark R. Maddox,
Principal Deputy Assistant Secretary for Fossil Energy.
[FR Doc. 05-10629 Filed 5-26-05; 8:45 am]
BILLING CODE 6450-01-P