Today, the Department of Energy (DOE) issued a notice of proposed rulemaking to amend 10 CFR Part 609, the rule regulating the loan guarantee program authorized by section 1703 of Title XVII of the Energy Policy Act of 2005. The two principal goals of section 1703 of Title XVII are to encourage commercial use of new or significantly improved energy-related technologies and to achieve substantial environmental benefits. (See these recent alerts regarding the DOE loan guarantee program and the related application process)
After reexamining Title XVII, the DOE has concluded that the statute does not require a first lien on all project assets. DOE has discovered that its current requirement that it be in lien position is in conflict with the financing structure of many energy projects. For example, many utility scale power plants are jointly owned by public power agencies, cooperative power systems and investor-owned utilities. In these cases, it may not be commercially feasible to obtain a lien on all project assets or the credit of a sponsor may be sufficient to support a more modest pledge of assets.
Furthermore, DOE has found that other parties are interested in participating as co-lenders, co-guarantors, or insurers of Title XVII loans. However, these other parties expect to share, on a pari passu basis, in any collateral securing such loans.
Consequently, DOE proposes two amendments to the current rules:
- Delete the requirement of a first priority lien on all project assets and leave to the Secretary (of DOE) the determination of an appropriate collateral package, as well as intercreditor arrangements; and
- Allow the Secretary (of DOE) to determine if pari passu lending is in the best interests of the United States
Interested parties have 30 days to provide comments to the proposed rule. Comments may be submitted in the following manner:
- Through the Federal Rulemaking Portal
- Email to firstname.lastname@example.org
- Postal Mail / Hand Delivery / Courier to:
David G. Franz, Director, Loan Guarantee Program Office
Office of the Chief Financial Officer
1000 Independence Ave., S.W.
Washington, D.C. 20585-0121
More information may be had by contacting David Franz at the above address or by calling 202-586-8336