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


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DEPARTMENT OF ENERGY

10 CFR Part 609

RIN 1901-AB21


Loan Guarantees for Projects that Employ Innovative Technologies

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

ACTION: Notice of proposed rulemaking and opportunity for comment.

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

[[Page 27472]]


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

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

FOR FURTHER INFORMATION CONTACT: The DOE Loan Guarantee Program Office, 
1000 Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-
8336, e-mail: [email protected]; or Warren Belmar, Deputy General 
Counsel for Energy Policy, Office of the General Counsel, 1000 
Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-6758, e-
mail: [email protected]; or Lawrence R. Oliver, Assistant 
General Counsel for Fossil Energy and Energy Efficiency, Office of the 
General Counsel, 1000 Independence Avenue, SW., Washington, DC 20585-
0121, (202) 586-9521, e-mail: [email protected].

SUPPLEMENTARY INFORMATION:

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

I. Introduction and Background

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

[[Page 27473]]

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

II. Discussion of Proposed Rule

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

A. Technologies

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

[[Page 27474]]

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

B. Project Costs

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

C. Solicitation

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

[[Page 27475]]

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

D. Payment of the Credit Subsidy Cost

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

E. Assessment of Fees

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

[[Page 27476]]

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

F. Financial Structure

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

[[Page 27477]]

G. Eligible Lenders

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

H. FCRA

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

I. Default and Audit Provisions

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

J. Tax Exempt Debt

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

K. Full Faith and Credit

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

III. Public Comment Procedures

A. Written Comments

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

B. Public Meeting

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

[[Page 27478]]

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

IV. Regulatory Review

A. Executive Order 12866

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

B. National Environmental Policy Act

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

C. Regulatory Flexibility Act

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

D. Paperwork Reduction Act

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

E. Unfunded Mandates Reform Act of 1995

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

[[Page 27479]]

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

F. Treasury and General Government Appropriations Act, 1999

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

G. Executive Order 13132

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

H. Executive Order 12988

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

I. Treasury and General Government Appropriations Act, 2001

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

J. Executive Order 13211

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

List of Subjects in 10 CFR Part 609

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

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

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

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

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


Sec.  609.1  Purpose and Scope.

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

[[Page 27480]]

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


Sec.  609.2  Definitions.

    Act means Title XVII of the Energy Policy Act of 2005 (42 U.S.C. 
16511-16514).
    Administrative Cost of Issuing a Loan Guarantee means the total of 
all administrative expenses that DOE incurs during:
    (1) The evaluation of a Pre-Application and an Application for a 
loan guarantee;
    (2) The offering of a Term Sheet, executing the Conditional 
Commitment, negotiation, and closing of a Loan Guarantee Agreement; and
    (3) The servicing and monitoring of a Loan Guarantee Agreement, 
including during the construction, startup, commissioning, shakedown, 
and operational phases of an Eligible Project, and the potentially 
higher costs of servicing and monitoring trouble loans.
    Applicant means any person, firm, corporation, company, 
partnership, association, society, trust, joint venture, joint stock 
company, or other business entity or governmental non-Federal entity 
that has submitted an Application to DOE and has the authority to enter 
into a Loan Guarantee Agreement with DOE under the Act.
    Application means a comprehensive written submission in response to 
a solicitation or a written invitation from DOE to apply for a loan 
guarantee.
    Borrower means any Applicant who enters into a Loan Guarantee 
Agreement with DOE and issues Guaranteed Obligations.
    Commercial Technology means a technology in general use in the 
commercial marketplace in the United States, but does not include a 
technology solely by use of such technology in a demonstration project 
funded by DOE. A technology is in general use if it: [Alternative 1: 
Has been ordered for, installed in, or used in five or more projects in 
the United States] [Alternative 2: Has been in operation in a 
commercial project in the United States for a period of five years, as 
measured beginning on the date the technology was commission on a 
project.]
    Conditional Commitment means a Term Sheet offered by DOE and 
accepted by the Applicant, with the understanding of the parties that 
the Applicant thereafter satisfies all specified and precedent funding 
obligations, and all other contractual, statutory, regulatory or other 
requirements. A Conditional Commitment imposes no obligation on the 
Secretary to execute the Loan Guarantee Agreement.
    Contracting Officer means the Secretary of Energy or a DOE official 
authorized by the Secretary to enter into, administer and/or terminate 
contracts on behalf of DOE.
    Credit Subsidy Cost has the same meaning as ``cost of a loan 
guarantee'' in section 502(5)(C) of the Federal Credit Reform Act of 
1990 (2 U.S.C. 661a(5)(C)), which is the net present value, at the time 
the Loan Guarantee Agreement is executed, of the following estimated 
cash flows:
    (1) Payments by the Government to cover 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 Fees paid to DOE pursuant to Section 1702(h) to 
cover the applicable administrative expenses for the loan guarantee are 
excluded from the calculation.
    DOE means the United States Department of Energy.
    Eligible Lender means:
    (1) Any person or legal entity formed for the purpose of, or 
engaged in the business of, lending money, including, but not limited 
to, commercial banks, savings and loan institutions, insurance 
companies, factoring companies, investment banks, institutional 
investors, venture capital investment companies, trusts, or other 
entities designated as trustees or agents acting on behalf of 
bondholders or other lenders; and
    (2) Any person or legal entity that meets the requirements of Sec.  
609.11 of this part, as determined by DOE.
    Eligible Project means a project located in the United States that 
employs a New or Significantly Improved Technology that is not a 
commercial technology, and that meets all applicable requirements of 
section 1703 of the Act (42 U.S.C. 16513), the applicable solicitation 
and this part.
    Guaranteed Obligation means any loan or other debt obligation of 
the Borrower for an Eligible Project for which DOE guarantees any part 
of the payment of principal and interest under a Loan Guarantee 
Agreement entered into pursuant to the Act.
    Holder means any person or legal entity that owns a Guaranteed 
Obligation or has lawfully succeeded in due course to all or part of 
the rights, title, and interest in a Guaranteed Obligation, including 
any nominee or trustee empowered to act for the Holder or Holders.
    Loan Agreement means a written agreement between a Borrower and an 
Eligible Lender or other Holder containing the terms and conditions 
under which the Eligible Lender or other Holder will make loans to the 
Borrower to start and complete an Eligible Project.
    Loan Guarantee Agreement means a written agreement that, when 
entered into by DOE and a Borrower, an Eligible Lender or other Holder, 
pursuant to the Act, establishes the obligation of DOE to guarantee the 
payment of principal and interest on specified Guaranteed Obligations 
of a Borrower to Eligible Lenders or other Holders subject to the terms 
and conditions specified in the Loan Guarantee Agreement.
    New or Significantly Improved Technology means a technology 
concerned with the production, consumption or transportation of energy, 
and that has either only recently been discovered or learned, or that 
involves or constitutes one or more meaningful and important 
improvements in the productivity or value of the technology.
    Pre-Application means a written submission in response to a DOE 
solicitation that broadly describes the project proposal, including the 
proposed role of a DOE loan guarantee in the project, and the 
eligibility of the project to receive a loan guarantee under the Act 
and this part.
    Project Costs means those costs, including escalation and 
contingencies, that are to be expended or accrued by

[[Page 27481]]

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.  609.12 of this part. Project costs do not include costs for the 
items set forth in Sec.  609.12(c) of this part.
    Project Sponsor means any person, firm, corporation, company, 
partnership, association, society, trust, joint venture, joint stock 
company or other business entity that assumes substantial 
responsibility for the development, financing, and structuring of a 
project eligible for a loan guarantee 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, or the Applicant.
    Secretary means the Secretary of Energy or a duly authorized 
designee or successor in interest.
    Term Sheet means an offering document issued by DOE that specifies 
the general terms and conditions under which DOE anticipates that it 
may guarantee payment of principal and accrued interest on specified 
loans or other debt obligations of a Borrower in connection with an 
Eligible Project. A Term Sheet is not a loan Guarantee Agreement and 
imposes no obligation on the Secretary to 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 or any territory or possession of the United States of America.


Sec.  609.3  Solicitations.

    (a) DOE may issue solicitations to invite the submission of Pre-
Applications or Applications for loan guarantees for Eligible Projects. 
DOE must issue a solicitation before proceeding with other steps in the 
loan guarantee process including issuance of a loan guarantee.
    (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 time for response submission;
    (3) The name and address of the DOE representative whom a potential 
Project Sponsor may contact to receive further information and a copy 
of the solicitation;
    (4) The form, format, and page limits applicable to the response 
submission;
    (5) The amount of the application fee (First Fee), if any, that 
will be required;
    (6) The programmatic, technical, financial and other factors the 
Secretary will use to evaluate response submissions, and the relative 
weightings that DOE will use when evaluating those factors; and
    (7) Such other information as DOE may deem appropriate.


Sec.  609.4  Submission of Pre-Applications.

    In response to a solicitation requesting the submission of Pre-
Applications, either Project Sponsors or Applicants may submit Pre-
Applications to DOE. Pre-Applications must meet all requirements 
specified in the solicitation and this part. Only one Pre-Application 
may be submitted per project. At a minimum, each Pre-Application must 
contain all of the following:
    (a) A cover page signed by an individual with full authority to 
bind the Project Sponsor or Applicant that attests to the accuracy of 
the information in the Pre-Application, and that binds the Project 
Sponsor(s) or Applicant to the commitments made in the Pre-Application;
    (b) An executive summary briefly encapsulating the key project 
features and attributes of the proposed project;
    (c) A business plan which includes an overview of the proposed 
project, including:
    (1) A description of the Project Sponsor, including all entities 
involved, and its experience in project investment, development, 
construction, operation and maintenance;
    (2) A description of the new or significantly improved technology 
to be employed in the project, including:
    (i) A report detailing its successes and failures during the pilot 
and demonstration phases;
    (ii) The technology's commercial applications;
    (iii) The significance of the technology to energy use or emission 
control;
    (iv) How and why the technology is ``new'' or ``significantly 
improved'' compared to technology already in general use in the 
commercial marketplace in the United States;
    (v) The owners or controllers of the intellectual property 
incorporated in and utilized by such technologies; and
    (vi) The manufacturer(s) and licensee(s), if any, authorized to 
make the technology available in the United States, the potential for 
replication of commercial use of the technology in the United States, 
and whether and how the technology is or will be made available in the 
United States for further commercial use.
    (3) The estimated amount, in reasonable detail, of the total 
Project Costs;
    (4) The timeframe required for construction and commissioning of 
the project; and
    (5) A description of any primary off-take or other revenue-
generating agreements that will provide the primary sources of revenues 
for the project, including repayment of the debt obligations for which 
loan a guarantee is sought.
    (d) A financing plan overview describing:
    (1) The amount of equity to be invested and the sources of such 
equity;
    (2) The amount of the total debt obligations to be incurred and the 
funding sources of all such debt:
    (3) The amount of the Guaranteed Obligation as a percentage of 
total project debt; and as a percentage of that total project cost; and
    (4) A financial model detailing the investments in and the cash 
flows generated and anticipated from the project over the project's 
expected life-cycle, including a complete explanation of the facts, 
assumptions, and methodologies in the financial model.
    (e) An explanation of what estimated impact the loan guarantee will 
have on the interest rate, debt term, and overall financial structure 
of the project;
    (f) A copy of a commitment letter from an Eligible Lender or other 
Holder expressing its commitment to provide the required debt financing 
necessary to construct and fully commission the project;
    (g) A copy of the equity commitment letter(s) from each of the 
Project Sponsors and a description of the sources for such equity;
    (h) An overview of how the project complies with the eligibility 
requirements in section 1703 of the Act (42 U.S.C. 16513);
    (i) An outline of the potential environmental impacts of the 
project and how these impacts will be mitigated;
    (j) A description of the anticipated air pollution and/or 
anthropogenic greenhouse gas reduction benefits and how these benefits 
will be measured and validated;
    (k) A list of all of the requirements contained in this part and 
the solicitation and where in the Pre-Application these requirements 
are addressed; and
    (l) A commitment to pay the Application fee (First Fee), if invited 
to submit an Application.


Sec.  609.5  Evaluation of Pre-Applications.

    (a) Where Pre-Applications are requested in a solicitation, DOE 
will

[[Page 27482]]

conduct an initial review of the Pre-Application to determine whether:
    (1) The proposal is for an Eligible Project;
    (2) The submission contains the information required by Sec.  609.4 
of this part; and
    (3) The submission meets all other requirements of the applicable 
solicitation.
    (b) If a Pre-Application fails to meet the requirements of 
paragraph (a) of this section, DOE may deem it non-responsive and 
eliminate it from further review. DOE will notify any Project Sponsor 
whose Pre-Application has been eliminated from further review under 
this subsection.
    (c) If DOE deems a Pre-Application responsive, DOE will evaluate 
the commercial viability of the proposed project, the technology to be 
employed in the project, relevant experience of the principal(s) and 
the financial capability of the Project Sponsor (including personal 
and/or business credit information of the principal(s)) to determine if 
there is sufficient information in the Pre-Application to assess the 
technical and commercial viability of the proposed project and/or the 
financial capability of the Project Sponsor and to assess other aspects 
of the Pre-Application. DOE may ask for additional information from the 
Project Sponsor during the review process and may request one or more 
meetings with the Project Sponsor.
    (d) After reviewing a Pre-Application and other information 
acquired under paragraph (c) of this section, DOE may provide a written 
response to the Project Sponsor or Applicant either inviting the 
Applicant to submit an Application for a loan guarantee and specifying 
the amount of the Application filing fee or advising the Project 
Sponsor that the project proposal will not receive further 
consideration. Neither the Pre-Application nor any written or other 
feedback that DOE may provide in response to the Pre-Application 
eliminates the requirement for an Application.
    (e) No response by DOE to, or communication by DOE with, a Project 
Sponsor, or an Applicant submitting a Pre-Application or subsequent 
Application shall impose any obligation on DOE to issue a loan 
guarantee for a project.


Sec.  609.6  Submission of Applications.

    (a) In response to a solicitation or written invitation to submit 
an Application, an Applicant submitting an Application must meet all 
requirements and provide all information specified in the solicitation 
and/or invitation and this part. There may be only one Applicant per 
project.
    (b) 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 and the Project Sponsors;
    (2) Payment of the Application filing fee (First Fee) for the Pre-
Application, if any, and Application phase;
    (3) A detailed description of all material amendments, 
modifications, and additions made to the information and documentation 
provided in the Pre-Application, if a Pre-Application was requested in 
the solicitation, including any changes in the proposed project's 
financing structure or terms;
    (4) A description of how and to what measurable extent the project 
avoids, reduces, or sequesters air pollutants and/or anthropogenic 
emissions of greenhouse gases, including how to measure and verify 
those benefits;
    (5) A description of the nature and scope of the proposed project, 
including:
    (i) Key milestones;
    (ii) Location of the project;
    (iii) Identification and commercial feasibility of the new or 
significantly improved technology(ies) to be employed in the project;
    (iv) How the Applicant intends to employ such technology(ies) in 
the project; and
    (v) How the Applicant intends to assure the further commercial 
availability of the technology(ies) in the United States.
    (6) A detailed explanation of how the proposed project qualifies as 
an Eligible Project;
    (7) A detailed estimate of the estimated total Project Costs 
together with a description of the methodology and assumptions used;
    (8) A detailed description of the engineering and design 
contractor(s), construction contractor(s), equipment supplier(s), and 
construction schedules for the project, including major activity and 
cost milestones as well as the performance guarantees, performance 
bonds, liquidated damages provisions, and equipment warranties to be 
provided;
    (9) 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;
    (10) A description of the management plan of operations to be 
employed in carrying out the project, and information concerning the 
management experience of each officer or key person associated with the 
project;
    (11) A detailed description of the project decommissioning, 
deconstruction, and disposal plan, and the anticipated costs associated 
therewith;
    (12) An analysis of the market for any product to be produced by 
the project, including relevant economics justifying the analysis, and 
copies of any contractual agreements for the sale of these products or 
assurance of the revenues to be generated from sale of these products;
    (13) 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 project over 
the term of the Loan Guarantee Agreement;
    (14) 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 project;
    (15) A copy of the financial closing checklist for the equity and 
debt;
    (16) Applicant's business plan on which the project is based and 
Applicant's financial model presenting project pro forma statements for 
the proposed term of the Guaranteed Obligations including 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;
    (17) Financial statements for the past three years, or less if the 
Applicant has been in operation less than three years, that have been 
audited by an independent certified public accountant, including all 
associated notes, as well as interim financial statements and notes for 
the current fiscal year, of Applicant and parties providing Applicant's 
financial backing, together with business and financial interests of 
controlling or commonly controlled organizations or persons, including 
parent, subsidiary and other affiliated corporations or partners of the 
Applicant;
    (18) A copy of all legal opinions, and other material reports, 
analyses, and reviews related to the project;
    (19) An independent engineering report prepared by an engineer with 
experience in the industry and familiarity with similar projects. The 
report should address: The project's

[[Page 27483]]

siting and permitting, engineering and design, contractual 
requirements, environmental compliance, testing and commissioning and 
operations and maintenance.
    (20) Credit history of the Applicant and, if appropriate, any party 
who owns or controls, by itself and/or through individuals in common or 
affiliated business entities, a five percent or greater interest in the 
project or the Applicant;
    (21) A credit assessment, for the project without a loan guarantee 
from a nationally recognized rating agency, where the size and 
estimated cost of the project justify such an assessment;
    (22) A list showing the status of and estimated completion date of 
Applicant's required project-related applications or approvals for 
Federal, state, and local permits and authorizations to site, 
construct, and operate the project;
    (23) A report containing an analysis of the potential environmental 
impacts of the project that will enable DOE to assess whether the 
project will comply with all applicable environmental requirements, and 
that will enable DOE to undertake and complete any necessary reviews 
under the National Environmental Policy Act of 1969;
    (24) A listing and description of assets associated, or to be 
associated, with the project and any other asset that will serve as 
collateral for the Guarantee Obligations, including appropriate data as 
to the value of the 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;
    (25) An analysis demonstrating that, at the time of the 
Application, there is a reasonable prospect that Borrower will be able 
to repay the Guarantee 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;
    (26) Written affirmation from an officer of the Eligible Lender or 
other Holder confirming that it is in good standing with DOE's and 
other Federal agencies' loan guarantee programs;
    (27) A list of all of the requirements contained in this part and 
the solicitation and where in the Application these requirements are 
addressed;
    (28) A statement from the Applicant that it believes that there is 
``reasonable prospect'' that the Guaranteed Obligations will be fully 
paid from project revenue; and
    (29) Any other information requested in the invitation to submit an 
Application or requests from DOE in order to clarify an Application;
    (c) DOE will not consider any Application complete unless the 
Applicant has paid the First Fee and the Application is signed by the 
appropriate entity or entities with the authority to bind the Applicant 
to the commitments and representations made in the Application.


Sec.  609.7  Programmatic, Technical and Financial Evaluation of 
Applications.

    (a) In reviewing completed Applications, and in prioritizing and 
selecting those to whom a Term Sheet should be offered, DOE will apply 
the criteria set forth in the Act, the applicable solicitation, and 
this part. Concurrent with its review process, DOE will consult with 
the Secretary of the Treasury regarding the terms and conditions of the 
potential loan guarantee. Applications will be denied if:
    (1) The project will be built or operated outside the United 
States;
    (2) The project does not avoid, reduce, or sequester air pollutants 
or anthropogenics emissions of greenhouse gases;
    (3) The project is not ready to be employed commercially in the 
United States, cannot be replicated, cannot yield a commercially viable 
product or service in the use proposed in the project, does not have 
the potential to be employed in other commercial projects in the United 
States, and is not or will not be available for further commercial use 
in the United States;
    (4) The entity or person issuing the loan or other debt obligations 
subject to the loan guarantee is not an Eligible Lender or other 
Holder, as defined in Section 609.11 of this part;
    (5) The project is for demonstration, research, or development; or
    (6) The applicant will not provide a significant equity 
contribution.
    (b) In evaluating Applications, DOE will consider the following 
factors:
    (1) To what measurable extent the project avoids, reduces, or 
sequesters air pollutants or anthropogenic emissions of greenhouses 
gases;
    (2) To what extent the new or significantly improved technology to 
be employed in the project, as compared to commercial technology in 
general service in the United States, is ready to be employed 
commercially in the United States, can be replicated, yields a 
commercial viable project or service in the use proposed in the 
project, has potential to be employed in other commercial projects in 
the United States, and is or will be available for further commercial 
use in the United States;
    (3) To the extent that the new or significantly improved technology 
used in the project constitutes an important improvement in technology 
used to avoid, reduce or sequester air pollutants or anthropogenic 
emissions of greenhouse gases, and the Applicant has a plan to advance, 
or assist in the advancement, of that technology into the commercial 
marketplace;
    (4) The extent to which the requested amount of the loan guarantee, 
and requested amount of Guaranteed Obligations are reasonable relative 
to the nature and scope of the project;
    (5) The total amount and nature of the Eligible Project Costs and 
the extent to which Project Costs are funded by Guaranteed Obligations;
    (6) The likelihood that the project will be ready for full 
commercial operations in the timeframe stated in the Applications;
    (7) The amount of equity commitment to the project by the Applicant 
and other principals involved in the project;
    (8) Whether there is sufficient evidence that Applicant will 
diligently pursue the project, including initiating and completing the 
project in a timely manner;
    (9) Whether and to what extent the Applicant will rely upon other 
Federal and non-Federal governmental assistance such as grants, tax 
credits, or other loan guarantees to support the financing, 
construction, and operation of the project and how such assistance will 
impact the project;
    (10) The feasibility of the project and likelihood that the project 
will produce sufficient revenues to service the project's debt 
obligations over the life of the loan guarantee and assure timely 
repayment of Guaranteed Obligations;
    (11) 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;
    (12) The Applicant's capacity and expertise to successfully operate 
the project, based on factors such as financial soundness, management 
organization, and the nature and extent of corporate and personal 
experience;
    (13) The ability of the applicant to ensure that the project will 
comply with all applicable laws and regulations, including all 
applicable environmental statutes and regulations;

[[Page 27484]]

    (14) The levels of market, regulatory, legal, financial, 
technological, and other risks associated with the project and their 
appropriateness for a loan guarantee provided by DOE;
    (15) Whether the Application contains sufficient information, 
including a detailed description of the nature and scope of the project 
and the nature, scope, and risk coverage of the loan guarantee sought 
to enable DOE to perform a thorough assessment of the project; and
    (16) Such other criteria that DOE deems relevant in evaluating the 
merits of an Application.
    (c) During the Application review process DOE may raise issues or 
concerns that were not raised during the Pre-Application review process 
where a Pre-Application was requested in the applicable solicitation.
    (d) If DOE determines that a project may be suitable for a loan 
guarantee, DOE will notify the Applicant and Eligible Lender or other 
Holder in writing and provide them with a Term Sheet. If DOE reviews an 
Application and decides not to proceed further with the issuance of a 
Term Sheet, DOE will inform the Applicant in writing of the reason(s) 
for denial.


Sec.  609.8  Term Sheets and Conditional Commitments.

    (a) DOE may determine, after review and evaluation of the 
Application, additional information requested and received by DOE, and 
information obtained as the result of meeting with the Applicant and 
the Eligible Lender or other Holder, that it would be appropriate to 
offer detailed terms and conditions that must be met, including terms 
and conditions that must be met by the Applicant and the Eligible 
Lender or other Holder before DOE may enter into a Loan Guarantee 
Agreement.
    (b) The terms and conditions required by DOE will be expressed in a 
written Term Sheet signed by a Contracting Officer and addressed to the 
Applicant and the Eligible Lender or other Holder. The Term Sheet will 
request that the Project Sponsor and the Eligible Lender or other 
Holder express agreement with the terms and conditions contained in the 
Term Sheet by signing the Term Sheet in the designated place. Each 
person signing the Term Sheet must be a duly authorized official or 
officer of the Applicant and Eligible Lender or other Holder. The Term 
Sheet will include an expiration date on which the terms offered will 
expire unless the Contracting Officer agrees in writing to extend the 
expiration date.
    (c) The Applicant and/or the Eligible Lender or other Holder may 
respond to the Term Sheet offer in writing or may request discussions 
or meetings on the terms and conditions contained in the Term Sheet, 
including requests for clarifications or revisions. When DOE, the 
Applicant and the Eligible Lender or other Holder agree on all of the 
final terms and conditions and all parties sign the Term Sheet, the 
Term Sheet becomes a Conditional Commitment. 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, 
but neither party is legally obligated to do so.
    (d) The Applicant is required to pay fees to DOE to cover the 
Administrative Cost of Issuing a Loan Guarantee for the period of the 
Term Sheet through the closing of the Loan Guarantee Agreement (Second 
Fee).


Sec.  609.9  Closing On the Loan Guarantee Agreement.

    (a) Subsequent to entering into a Conditional Commitment with an 
Applicant, DOE will set a closing date for the Loan Guarantee 
Agreement.
    (b) By the closing date, the Applicant and the Eligible Lender or 
other Holder must have satisfied all of the detailed terms and 
conditions contained in the Conditional Commitment and other related 
documents and any other contractual, statutory, regulatory or other 
requirements have been met. If the Applicant and the Eligible Lender or 
other Holder has not satisfied all such terms and conditions by the 
closing date, the Secretary may, in his sole discretion, set a new 
closing date or terminate the Conditional Commitment.
    (c) In order to enter into a Loan Guarantee Agreement at closing:
    (1) DOE must have received authority in an appropriations act for 
the loan guarantee; and
    (2) All other applicable statutory, regulatory, or other 
requirements must be fulfilled.
    (d) Prior to, or on, the closing date, DOE will ensure that:
    (1) Pursuant to section 1702(b) of the Act, DOE has received 
payment of the Credit Subsidy Cost of the loan guarantee, as defined in 
Sec.  609.2 of this part from either (but not from a combination) of 
the following:
    (i) A Congressional appropriation of funds; or
    (ii) A payment from the Borrower;
    (2) Pursuant to section 1702(h) of the Act, DOE has received from 
the Borrower the First and Second Fees and, if applicable, the Third 
fee for the Administrative Cost of Issuing the Loan Guarantee, as 
specified in the Loan Guarantee Agreement;
    (3) OMB has reviewed and approved DOE's calculation of the Credit 
Subsidy Cost of the loan 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; and
    (6) All conditions precedent specified in the Conditional 
Commitment are either satisfied or waived by a Contracting Officer and 
all other applicable contractual, statutory, and regulatory 
requirements are satisfied.
    (e) Not later than the period approved in writing by the 
Contracting Officer, which may not be less than 30 days prior to the 
closing date, the Applicant must provide updated project financing 
information and a new final Term Sheet must be executed by DOE and the 
Applicant if the terms and conditions of the financing arrangements 
changed between execution of the Conditional Commitment and that date 
(Final Term Sheet).
    (f) Not later than 30 days prior to closing, the applicant must 
provide a credit rating from a nationally recognized rating agency 
reflecting the Final Term Sheet for the project without a Federal 
guarantee.
    (g) Changes in the terms and conditions of the financing 
arrangements will affect the credit subsidy cost for the loan guarantee 
agreement. DOE may postpone the expected closing date pursuant to any 
changes submitted under paragraph (e) of this section. In addition, DOE 
may choose to terminate the Conditional Commitment.


Sec.  609.10  Loan Guarantee Agreement.

    (a) Only a Loan Guarantee Agreement executed by a duly authorized 
DOE Contracting Officer can contractually obligate DOE to guarantee 
loans or other debt obligations.
    (b) DOE is not bound by oral representations made during the Pre-
Application, if Pre-Applications were solicited, or Application stage, 
or during any negotiation process.
    (c) Except if explicitly authorized by an Act of Congress, 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 
Credit Subsidy Costs, administrative fees, or other fees charged by or 
paid to DOE relating to the Title XVII program or any loan guarantee 
thereunder.

[[Page 27485]]

    (d) Prior to the execution by DOE of a Loan Guarantee Agreement, 
DOE must ensure that the following requirements and conditions, which 
must be specified in the Loan Guarantee Agreement, are satisfied:
    (1) The project qualifies as an Eligible Project under the Act and 
is not a research, development, or demonstration project or a project 
that employs commercial technologies that are in ``general use'' in the 
United States;
    (2) The project will be constructed and operated in the United 
States, the employment of the new or significantly improved technology 
in the project has the potential to be replicated in other commercial 
projects in the United States, and this technology is or is likely to 
be available in the United States for further commercial application;
    (3) The face value of the debt guaranteed by DOE is limited to no 
more than 80 percent of total Project Costs and the loan guarantee is 
limited to no more than 90 percent of the total face value of the 
loans(s) or other debt obligation(s);
    (4) The guaranteed portion of a loan, or any portion of the 
guaranteed portion of a loan, will not be separated from or 
``stripped'' from the non-guaranteed portion of the loan, if the loan 
is participated, syndicated or otherwise resold in the secondary debt 
market;
    (5) The Borrower and other principals involved in the project have 
made or will make a significant equity investment in the project;
    (6) The Borrower is obligated to make full repayment of the 
principal and interest on the Guaranteed Obligations and other project 
debt over a period of up to the lesser of 30 years or 90 percent of the 
projected useful life of the project's major physical assets, as 
calculated in accordance with generally accepted accounting principles 
and practices;
    (7) The loan guarantee does not finance, either directly or 
indirectly, tax-exempt debt obligations;
    (8) The amount of the loan guaranteed, when combined with other 
funds committed to the project, will be sufficient to carry out the 
project, including adequate contingency funds;
    (9) There is a reasonable prospect of repayment by Borrower of the 
principal of and interest on the, Guaranteed Obligations and other 
project debt;
    (10) The Borrower has pledged project assets and other collateral 
or surety, including non project-related assets, determined by DOE to 
be necessary to secure the repayment of the Guaranteed Obligations;
    (11) The Loan Guarantee Agreement and related documents include 
detailed terms and conditions necessary and appropriate to protect the 
interest of the United States in the case of default, including 
ensuring availability of all the intellectual property rights, 
technical data including software, and physical assets necessary for 
any person or entity, including DOE, to complete, operate, convey, and 
dispose of the defaulted project;
    (12) The interest rate on the guaranteed loan is determined by DOE, 
after consultation with the Treasury Department, to be reasonable, 
taking into account the range of interest rates prevailing in the 
private sector for similar obligations of comparable risk guaranteed by 
the Federal government;
    (13) The Guaranteed Obligation is not subordinate to any loan or 
other debt obligation and is in a first lien position on all assets of 
the project and all additional collateral pledged as security for the 
Guaranteed Obligations and other project debt;
    (14) There is satisfactory evidence that Borrower and Eligible 
Lenders are willing, competent, and capable of performing the terms and 
conditions of the Guaranteed Obligation and other debt obligation and 
the Loan Guarantee Agreement, and will diligently pursue the project;
    (15) The Borrower has made the initial (or total) payment of fees 
for the Administrative Cost of Issuing a Loan Guarantee for the 
construction and operational phases of the project (Third Fee), as 
specified in the Conditional Commitment.
    (16) The Eligible Lender, other Holder or servicer has taken and is 
obligated to continue to take those actions necessary to perfect and 
maintain liens on assets which are pledged as collateral for the 
Guaranteed Obligation.
    (17) If Borrower is to make payment in full for the Credit Subsidy 
Cost of the loan guarantee pursuant to section 1702(b)(2) of the Act, 
such payment must be received by DOE prior to, or at the time of, 
closing;
    (18) DOE or its representatives have access to the project site at 
all reasonable times in order to monitor the performance of the 
project;
    (19) DOE, the Eligible Lender and Borrower have reached an 
agreement as to the information that will be made available to DOE and 
the information that will be made publicly available;
    (20) The prospective Borrower has filed applications for or 
obtained any required regulatory approvals for the project and is in 
compliance, or promptly will be in compliance, where appropriate, with 
all Federal, state, and local regulatory requirements;
    (21) Borrower has no delinquent Federal debt, including tax 
liabilities, unless the delinquency has been resolved with the 
appropriate Federal agency in accordance with the standards of the Debt 
Collection Improvement Act of 1996;
    (22) The Loan Guarantee Agreement contains such other terms and 
conditions as DOE deems reasonable and necessary to protect the 
interest of the United States; and
    (23) The Lender is an Eligible Lender, as defined in Sec.  609.2 of 
this part, and meets DOE's lender eligibility, monitoring and 
performance criteria in Sec.  609.11 of this part.
    (e) The Loan Guarantee Agreement must provide that, in the event of 
a default by the Borrower:
    (1) Interest accrues on the Guaranteed Obligations at the rate 
stated in the Loan Guarantee Agreement or Loan Agreement until DOE 
makes full payment of the defaulted Guaranteed Obligations and DOE is 
not required to pay any premium, default penalties, or prepayment 
penalties;
    (2) Upon payment of the Guaranteed Obligations by DOE, DOE is 
subrogated to the rights of the Holders of the debt, including all 
related liens, security, and collateral rights and has superior rights 
in and to the property acquired from the recipient of the payment as 
provided in Sec.  609.15 of this part.
    (3) The Eligible Lender or other servicer acting on DOE's behalf is 
obligated to take those actions necessary to perfect and maintain liens 
on assets which are pledged as collateral for the Guaranteed 
Obligations.
    (4) The holder of pledged collateral is 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 upon default by 
Borrower on the Guaranteed Obligations.
    (f) The Loan Guarantee Agreement must contain audit provisions 
which provide, in substance, as follows:
    (1) The Eligible Lender or other Holder or other party servicing 
the Guaranteed Obligations, as applicable, and the Borrower, must keep 
such records concerning the project as are necessary to facilitate an 
effective and accurate audit and performance evaluation of the project 
as required in section 609.17 of this part.
    (2) DOE and the Comptroller General, or their duly authorized 
representatives, must have access, for the purpose of audit and 
examination, to any pertinent

[[Page 27486]]

books, documents, papers, and records of the Borrower, Eligible Lender 
or other Holder, or other party servicing the Guaranteed Obligations, 
as applicable. Examination of records may be made during the regular 
business hours of the Borrower, Eligible Lender or other Holder, or 
other party servicing the Guaranteed Obligations, or at any other time 
mutually convenient as required in section 609.17 of this part.
    (g) The Loan Guarantee Agreement must contain provisions related to 
the assignment or transfer of Guaranteed Obligations which provide 
that:
    (1) The Eligible Lender must provide written notification to DOE 
prior to any assignment or transfer of any portion of a Guaranteed 
Obligation, or any pledge or other use of a Guaranteed Obligation as 
security, including but not limited to any derivatives transaction.
    (2) An Eligible Lender or other Holder may assign or transfer a 
Guaranteed Obligation covered under the Loan Guarantee Agreement to 
another Eligible Lender that meets the requirements of Sec.  609.11 of 
this part. Such Eligible Lender to which a Guaranteed Obligation is 
assigned or transferred, is required to fulfill all servicing, 
requirements monitoring, and reporting contained in the Loan Guarantee 
Agreement and these regulations if the transferring Eligible Lender was 
forming these functions. Any assignment or transfer, however, of the 
servicing, monitoring, and reporting functions must be approved by DOE.


Sec.  609.11  Lender Eligibility, Monitoring and Performance 
Requirements.

    (a) An Eligible Lender shall meet the following requirements:
    (1) Be a ``qualified institutional buyer,'' as defined in 17 CFR 
230.144A(a), including a qualified retirement plan, or governmental 
plan;
    (2) Not be debarred or suspended from participation in a Federal 
government contract (under 48 CFR part 9.4) 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);
    (3) Not be delinquent on any Federal debt or loan;
    (4) Be legally authorized to enter into loan guarantee transactions 
authorized by the Act and these regulations and is in good standing 
with DOE and other Federal agency loan guarantee programs;
    (5) Be able to demonstrate, or has access to, experience in 
originating and servicing loans for commercial projects similar in size 
and scope to the project under consideration; and
    (6) Be able to demonstrate experience or capability as the lead 
lender or underwriter by presenting evidence of its participation in 
other energy-related projects.
    (b) When performing its duties to review and evaluate a proposed 
Eligible Project prior to the submission of a Pre-Application or 
Application, as appropriate, by the Project Sponsor through the 
execution of a Loan Guarantee Agreement, and subsequently when 
performing the loan servicing duties during the term of the Loan 
Guarantee Agreement, the Eligible Lender or other servicer shall 
exercise the level of care and diligence that a reasonable and prudent 
lender would exercise when reviewing, evaluating, disbursing and 
servicing a loan made by it without a Federal guarantee, including:
    (1) During the construction period, enforcing all of the conditions 
precedent to all loan disbursements, as provided in the Loan Guarantee 
Agreement, Loan Agreement and related documents;
    (2) During the operational phase, monitoring and servicing the Debt 
Obligations and collection of the outstanding principal and accrued 
interest as well as ensuring that the collateral package securing the 
Guaranteed Obligations remains uncompromised; and
    (3) As specified by DOE, 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 other debt obligations.
    (c) Even though DOE may rely on the Eligible Lender or other 
servicer to service and monitor the Guaranteed Obligation, DOE will 
also conduct its own monitoring and review of the Eligible Project.


Sec.  609.12  Project Costs.

    (a) Before entering into a Loan Guarantee Agreement, DOE shall 
determine the estimated Project Costs for the project that is the 
subject of the agreement. To assist the Department in making that 
determination, the Applicant must estimate, calculate and record all 
such costs incurred in the design, engineering, financing, 
construction, startup, commissioning and shakedown of the project in 
accordance with generally accepted accounting principles and practices. 
Among other things, the Applicant must calculate the sum of necessary, 
reasonable and customary costs that it has paid and expects to pay, 
which are directly related to the project, including costs for 
escalation and contingencies, to estimate the total Project Costs.
    (b) Project Costs include, but are not limited to:
    (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; and 
materials, labor, services, travel and transportation for facility 
design, construction, startup, commissioning and shakedown;
    (3) Costs of equipment purchases;
    (4) Costs to provide equipment, facilities, and services related to 
safety and environmental protection;
    (5) Financial and legal services costs, including other 
professional services and fees necessary to obtain required licenses 
and permits and to prepare environmental reports and data;
    (6) The cost of issuing project debt, such as fees, transaction and 
legal costs and other normal charges imposed by Lenders and other 
Holders;
    (7) Costs of necessary and appropriate insurance and bonds of all 
types;
    (8) Costs of design, engineering, startup, commissioning and 
shakedown;
    (9) Costs of obtaining licenses to intellectual property necessary 
to design, construct, and operate the project;
    (10) A reasonable contingency reserve to cover the possibility of 
cost increases during the processing of the application and during 
construction; and
    (11) Capitalized interest necessary to meet market requirements, 
reasonably required reserve funds and other carrying costs during 
construction.
    (12) Other necessary and reasonable costs approved by DOE; and
    (c) 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-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 the

[[Page 27487]]

innovative energy or environmental technology for employment in a 
commercial project;
    (6) Costs that are excessive or are not directly required to carry 
out the project, as determined by DOE; and
    (7) Borrower-paid Credit Subsidy Costs and the Administrative Cost 
of Issuing a Loan Guarantee; and
    (8) Expenses incurred after startup, commissioning, and shakedown 
before the facility has been placed in service.


Sec.  609.13  Principal and Interest Assistance Contract.

    With respect to the guaranteed portion of any Guaranteed 
Obligation, and subject to the availability of appropriations, DOE may 
enter into a contract to pay Holders, for and on behalf of Borrower, 
from funds appropriated for that purpose, the principal and interest 
charges that become due and payable on the unpaid balance of the 
guaranteed portion of the Guaranteed Obligation, if DOE finds that:
    (a) Borrower:
    (1) Is unable to meet the payments and is not in default; and
    (2) Will, and is financially able to, continue to make the 
scheduled payments on the remaining portion of the principal and 
interest due under the non-guaranteed portion of the debt obligation, 
if any, and other debt obligations of the project, or an agreement, 
approved by DOE, has otherwise been reached in order to avoid a payment 
default on non-guaranteed debt;
    (b) It is in the public interest to permit Borrower to continue to 
pursue the purposes of the project;
    (c) In paying the principal and interest, the Federal government 
expects a probable net benefit to the Government will be greater than 
that which would result in the event of a default;
    (d) The payment authorized is no greater than the amount of 
principal and interest that Borrower is obligated to pay under the 
terms of the Loan Guarantee Agreement; and
    (e) Borrower agrees to reimburse DOE for the payment (including 
interest) on terms and conditions that are satisfactory to DOE and 
executes all written contracts required by DOE for such purpose.


Sec.  609.14  Full Faith and Credit and Incontestability.

    The full faith and credit of the United States is pledged to the 
payment of all Guaranteed Obligations issued in accordance with this 
part with respect to principal and interest. Such guarantee will 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 will be 
presumed to be valid, legal, and enforceable.


Sec.  609.15  Default, Demand, Payment, and Collateral Liquidation.

    (a) In the event that the Borrower has defaulted in the making of 
required payments of principal or interest on any portion of a 
Guaranteed Obligation, and such default has not been cured within the 
period of grace provided in the Loan Guarantee Agreement and/or the 
Loan Agreement, the Eligible Lender or other Holder, or nominee or 
trustee empowered to act for the Eligible Lender or other Holder 
(referred to in this section collectively as ``Holder''), may make 
written demand upon the Secretary for payment pursuant to the 
provisions of the Loan Guarantee Agreement.
    (b) In the event that the Borrower is in default as a result of a 
breach of one or more of the terms and conditions of the Loan Guarantee 
Agreement, note, mortgage, Loan Agreement, or other contractual 
obligations related to the transaction, other than the Borrower's 
obligation to pay principal or interest on the Guaranteed Obligation, 
as provided in paragraph (a) of this section, the Holder will not be 
entitled to make demand for payment pursuant to the Loan Guarantee 
Agreement, unless the Secretary agrees in writing that such default has 
materially affected the rights of the parties, and finds that the 
Holder should be entitled to receive payment pursuant to the Loan 
Guarantee Agreement.
    (c) In the event that the Borrower has defaulted as described in 
paragraph (a) of this section and such default is not cured during the 
grace period provided in the Loan Guarantee Agreement, the Secretary 
shall notify the U.S. Attorney General and may cause the principal 
amount of all Guaranteed Obligations, together with accrued interest 
thereon, and all amounts owed to the United States by Borrower pursuant 
to the Loan Guarantee Agreement, to become immediately due and payable 
by giving the Borrower written notice to such effect (without the need 
for consent or other action on the part of the Holders of the 
Guaranteed Obligations). In the event the Borrower is in default as 
described in paragraph (b) of this section, where the Secretary 
determines in writing that such a default has materially affected the 
rights of the parties, the Borrower shall be given the period of grace 
provided in the Loan Guarantee Agreement to cure such default. If the 
default is not cured during the period of grace, the Secretary may 
cause the principal amount of all Guaranteed Obligations, together with 
accrued interest thereon, and all amounts owed to the United States by 
Borrower pursuant to the Loan Guarantee Agreement, to become 
immediately due and payable by giving the Borrower written notice to 
such effect (without any need for consent or other action on the part 
of the Holders of the Guaranteed Obligations).
    (d) No provision of this regulation shall be construed to preclude 
forbearance by the Holder with the consent of the Secretary for the 
benefit of the Borrower.
    (e) Upon the making of demand for payment as provided in paragraph 
(a) or (b) of this section, the Holder shall provide, in conjunction 
with such demand or immediately thereafter, at the request of the 
Secretary, such supporting documentation as may be reasonably required 
to justify such demand.
    (f) Payment as required by the Loan Guarantee Agreement of the 
Guaranteed Obligation shall be made 60 days after receipt by the 
Secretary of written demand for payment, provided that the demand 
complies with the terms of the Loan Guarantee Agreement, applicable 
law, the Act, and this part. The Loan Guarantee Agreement shall provide 
that interest shall accrue to the Holder at the rate stated in the Loan 
Guarantee Agreement until the Guaranteed Obligation has been fully paid 
by the Federal government.
    (g) The Loan Guarantee Agreement shall provide that, upon payment 
of the Guaranteed Obligations, the Secretary shall be subrogated to the 
rights of the Holders and shall have superior rights in and to the 
property acquired from the Holders. The Holder shall transfer and 
assign to the Secretary all rights held by the Holder of the Guaranteed 
Obligation. Such assignment shall include all related liens, security, 
and collateral rights.
    (h) Where the Loan Guarantee Agreement so provides, the Eligible 
Lender or other Holder, or other servicer, as appropriate, and the 
Secretary may jointly agree to a plan of liquidation of the assets 
pledged to secure the Guaranteed Obligation.
    (i) Where payment of the Guaranteed Obligation has been made and 
the Eligible Lender or other Holder or other servicer has not 
undertaken a plan of liquidation, the Secretary, in accordance with the 
rights received through subrogation and acting through the U.S.

[[Page 27488]]

Attorney General, may seek to foreclose on the collateral assets and/or 
take such other legal action as necessary for the protection of the 
Government.
    (j) If the Secretary is awarded title to collateral assets pursuant 
to a foreclosure proceeding, the Secretary may take action to complete, 
maintain, operate, or lease the project facilities, or otherwise 
dispose of any property acquired pursuant to the Loan Guarantee 
Agreement or take any other necessary action which the Secretary deems 
appropriate, in order that the original goals and objectives of the 
project will, to the extent possible, be realized.
    (k) In addition to foreclosure and sale of collateral pursuant 
thereto, the U.S. Attorney General shall take appropriate action in 
accordance with rights contained in the Loan Guarantee Agreement to 
recover costs incurred by the Government as a result of the defaulted 
loan or other defaulted obligation. Any recovery so received by the 
U.S. Attorney General on behalf of the Government shall be applied in 
the following manner: First to the expenses incurred by the U.S. 
Attorney General and DOE in effecting such recovery; second, to 
reimbursement of any amounts paid by DOE as a result of the defaulted 
obligation; third, to any amounts owed to DOE under related principal 
and interest assistance contracts; and fourth, to any other lawful 
claims held by the Government on such process. Any sums remaining after 
full payment of the foregoing shall be available for the benefit of 
other parties lawfully entitled to claim them.
    (l) No action taken by the Eligible Lender or other Holder or other 
servicer in the liquidation of any pledged assets will affect the 
rights of any party, including the Secretary, having an interest in the 
loan or other debt obligations, to pursue, jointly or severally, to the 
extent provided in the Loan Guarantee Agreement, legal action against 
the Borrower or other liable parties, for any deficiencies owing on the 
balance of the Guaranteed Obligations or other debt obligations after 
application of the proceeds received upon liquidation.
    (m) In the event that the Secretary considers it necessary or 
desirable to protect or further the interest of the United States in 
connection with the liquidation of collateral or recovery of 
deficiencies due under the loan, the Secretary will take such action as 
may be appropriate under the circumstances.
    (o) Nothing in this part precludes the Secretary from purchasing 
the Holder's interest in the project upon liquidation.


Sec.  609.16  Perfection of Liens and Preservation of Collateral

    (a) The Loan Guarantee Agreement and other documents related 
thereto shall provide that: The Eligible Lender or other Holder or 
other servicer will take those actions necessary to perfect and 
maintain liens, as applicable, on assets which are pledged as 
collateral for the guaranteed portion of the loan; and upon default by 
the Borrower, the holder of pledged collateral shall take such actions 
as the Secretary 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 pledged 
assets. The Secretary shall reimburse the holder of collateral for 
reasonable and appropriate expenses incurred in taking actions required 
by the Secretary. Except as provided in Sec.  609.15, no party may 
waive or relinquish, without the consent of the Secretary, any 
collateral securing the Guaranteed Obligation 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 the Secretary determines are required to preserve the 
collateral. The cost of such contracts may be charged to the Borrower.


Sec.  609.17  Audit and Access to Records

    (a) The Loan Guarantee Agreement and related documents shall 
provide that:
    (1) The Eligible Lender or other Holder or other party servicing 
the Guaranteed Obligations, as applicable, and the Borrower, shall keep 
such records concerning the project as is necessary, including the Pre-
Application, 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 project assets 
and non-project assets pledged as security for the Guaranteed 
Obligations, all off-take and other revenue producing agreements, 
documentation for all project indebtedness, income tax returns, 
technology agreements, documentation for all permits and regulatory 
approvals and all other documents and records relating to the Eligible 
Project, as determined by the Secretary, to facilitate an effective 
audit and performance evaluation of the project; and
    (2) 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 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 
other Holder, or other party servicing the Eligible Project and the 
Guaranteed Obligations, as applicable, or at any other time mutually 
convenient.
    (b) The Secretary may from time to time audit any or all items of 
costs included as Project Costs in statements or certificates submitted 
to the Secretary or the servicer or otherwise, and may exclude or 
reduce the amount of any item which the Secretary determines to be 
unnecessary or excessive, or otherwise not to be an item of Project 
Costs. The Borrower will make available to the Secretary all books and 
records and other data available to the Borrower in order to permit the 
Secretary to carry out such audits. The Borrower should represent that 
it has within its rights access to all financial and operational 
records and data relating to Project Costs, and agrees that it will, 
upon request by the Secretary, exercise such rights in order to make 
such financial and operational records and data available to the 
Secretary. In exercising its rights hereunder, the Secretary may 
utilize employees of other Federal agencies, independent accountants, 
or other persons.


Sec.  609.18  Deviations.

    To the extent that such requirements are not specified by the Act 
or other applicable statutes, DOE may authorize deviations on an 
individual request basis from the requirements of this part (except 
environmental considerations and requirements) upon a finding that such 
deviation is essential to program objectives and the special 
circumstances stated in the request make such deviation clearly in the 
best interest of the Government. Recommendation for any deviation shall 
be submitted in writing to DOE. Such recommendations must include a 
supporting statement, which indicates briefly the nature of the 
deviation requested and the reasons in support thereof. Any deviation, 
however, that was not captured in the Credit Subsidy Cost will require 
either additional fees or discretionary appropriations.

[FR Doc. E7-9297 Filed 5-15-07; 8:45 am]
BILLING CODE 6450-01-P