On December 16, 2009, the U.S. House of Representatives passed H.R. 2847, known as the Jobs Bill, which proposes a number of important changes to the Department of Energy’s (“DOE”) Loan Guarantee Program established under Title XVII of the Energy Policy Act of 2005, as amended by Section 406 of the American Recovery and Reinvestment Act of 2009. The United States Senate is not expected to take up this legislation until 2010.
The changes sought would revise both Sections 1702 and 1705 of Title XVII and would supersede certain regulations promulgated under the statute. Currently, loan guarantees are available under Section 1705 of Title XVII for three broad categories of “shovel ready” energy projects: (1) renewable energy systems and certain related manufacturing facilities, (2) electric power transmission systems, and (3) leading-edge biofuel projects. Projects eligible for a loan guarantee under Section 1705 benefit by having the credit subsidy cost related to such loan guarantee paid by the US government. Section 1702 outlines the general terms and conditions required by the DOE for all loan guarantee agreements. Please click here to see Nixon Peabody’s recent publications on the Loan Guarantee Program. These changes would, if passed into law, make the DOE loan guarantee program significantly easier and cheaper to access for many project developers and would make energy efficiency projects eligible for loan guarantees under Section 1705 of the program.
Restoration of $2 billion in appropriations. The Jobs Bill would restore $2 billion in funding to the Section 1705 program that had been used to support the popular “Cash for Clunkers” program this summer. Such funds would be used to pay the credit subsidy cost (or premium) associated with loan guarantees made under Section 1705.
Expansion of Section 1705 to include energy efficiency projects. The Bill also would extend the scope of the loan guarantee program, allowing “energy efficiency projects, including projects to retrofit residential, commercial, and industrial buildings, facilities, and equipment” to be eligible for DOE loan guarantees under Section 1705. If adopted, this change would greatly expand the applicability of the Section 1705 Loan Guarantee Program beyond traditional energy industry applicants to, among others, industrial companies and owners of commercial real estate.
Ratings requirement waiver possible for projects under $100 million. In addition, under the Jobs Bill an applicant would no longer be required to provide a third-party credit report if the project costs are not projected to exceed $100 million, the applicant agrees to the credit rating assigned by the DOE, and the DOE finds that a third-party credit rating is not relevant to the determination of the credit risk of a proposed project.
Multiple sites viewed as a single project. The Jobs Bill provides that a project guaranteed under the loan guarantee program may be located on two or more non-contiguous sites within the United States. This feature, together with the changes relating to the need for a rating with respect to projects of less than $100 million, could make the DOE Loan Guarantee Program an attractive finance option for developers of multiple related PV (photovoltaic) solar installations or small scale wind projects.
Applicants may propose multiple projects under Section 1705. The proposed changes would reverse existing regulations (see 10 C.F.R. 609.3(a)) which generally prohibit individual applicants from proposing several different eligible projects under the Section 1705 loan guarantee program.
Nixon Peabody will actively monitor and report on the progress of these exciting new developments as this Bill moves to the Senate early next year. In addition, our Government Relations & Public Policy team is available to advocate on your behalf with respect to this legislation.
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