[Federal Register Volume 70, Number 136 (Monday, July 18, 2005)]
[Rules and Regulations]
[Pages 41264-41338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13685]
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Part II
Department of Agriculture
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Rural Business-Cooperative Service
Rural Utilities Service
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7 CFR Part 4280
Renewable Energy Systems and Energy Efficiency Improvements Grant,
Guaranteed Loan, and Direct Loan Program; Final Rule
Federal Register / Vol. 70, No. 136 / Monday, July 18, 2005 / Rules
and Regulations
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DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4280
RIN 0570-AA50
Renewable Energy Systems and Energy Efficiency Improvements
Grant, Guaranteed Loan, and Direct Loan Program
AGENCY: Rural Business-Cooperative Services, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Business-Cooperative Service (RBS) is establishing a
program for making grants, loan guarantees, and direct loans to farmers
and ranchers (agricultural producers) or rural small businesses to
purchase renewable energy systems and make energy efficiency
improvements. The Farm Security and Rural Investment Act of 2002 (2002
Act) established the Renewable Energy Systems and Energy Efficiency
Improvements Program under Title IX, Section 9006. This program will
help farmers, ranchers, and rural small businesses to reduce energy
costs and consumption.
EFFECTIVE DATE: This rule is effective July 18, 2005.
FOR FURTHER INFORMATION CONTACT: Georg A. Shultz, Special Advisor for
Renewable Energy Policy and Programs, Office of the Deputy
Administrator Business Programs, U.S. Department of Agriculture, Mail
Stop 3220, 1400 Independence Ave., SW., Washington, DC 20250-3220,
Telephone: (202) 720-2976.
SUPPLEMENTARY INFORMATION: The information presented in this preamble
is organized as follows:
I. Authority
II. Background
III. Summary of Changes Since Proposal
A. Applicant Eligibility
B. Project Eligibility
C. Funding, Matching Funds, and Terms of Loan
D. Eligible Project Costs
E. Application
F. Documentation
G. Evaluation of Applications
H. Guaranteed Loan Processing and Servicing
I. Construction Planning and Development
J. Definitions
K. Insurance
L. Feasibility Studies
M. Energy Audits
N. Project Requirements After Construction
IV. Discussion of Comments
A. Definitions
B. Demonstrated Financial Need
C. Applicant Eligibility
D. Project Eligibility
E. Application and Documentation
F. Funding
G. Evaluation/Scoring of Applications
H. Guaranteed Loans
I. Direct Loans
J. Laws That Contain Other Compliance Requirements
K. Construction Funding and Management
L. Miscellaneous
V. Regulatory Information
A. Paperwork Reduction Act
B. Intergovernmental Review
C. Regulatory Flexibility Act
D. Civil Justice Reform
E. National Environmental Policy Act
F. Unfunded Mandates Reform Act
G. Executive Order 13132, Federalism
H. Executive Order 12866, Regulatory Planning and Review
I. Authority
The Farm Security and Rural Investment Act of 2002 (Pub. L. 107-
171) (2002 Act) established the Renewable Energy Systems and Energy
Efficiency Improvements Program under Title IX, Section 9006 (7 U.S.C.
8106). The 2002 Act mandates that the Secretary of Agriculture create a
program to make loans, loan guarantees, and grants to ``a farmer,
rancher, or rural small business'' to purchase renewable energy systems
and make energy efficiency improvements. This program implements this
mandate.
II. Background
On October 5, 2004, USDA proposed a loan and grant program for
renewable energy systems and energy efficiency improvements under
Section 9006 of the 2002 Farm Bill.
In response to the Nation's immediate need for a reduction in
reliance on foreign oil, and to address the increasing demand for
readily available energy, the Agency is waiving the 30-day waiting
period between publication of the rule and when it will take effect.
Since publication of the proposed rule, energy prices have continued to
rise at an aggressive rate, affecting the Nation at every level, due to
international events, increasing demand, and low domestic inventories
and refinery capacities. Allowing the earliest possible investment in
renewable energy production systems and energy efficiency improvements
will help the Nation address the current situation. Effecting the rule
without the 30-day waiting period will provide maximum application time
prior to the end of the fiscal year to ensure the greatest level of
investment possible.
The 9006 Grant Program has been operational since the 2003 fiscal
year and the final rule makes only minor changes to the proposed rule
and how the 9006 Grant Program has been operated before. As a result,
grant applications are not expected to be disadvantaged by this rule's
earlier implementation. Likewise, because the 9006 Guaranteed Loan
Program is substantially modeled after the Business and Industry
Guaranteed Loan Program and because the Final Rule makes only minor
changes to the Proposed Rule, guaranteed loan applications are not
expected to be disadvantaged by this rule's earlier implementation.
For these reasons, the Agency finds that good cause exists for this
rule's immediate implementation.
III. Summary of Changes Since Proposal
The following paragraphs summarize the major changes in the final
rule from the rule proposed on October 5, 2004.
A. Applicant Eligibility
Under the final rule, a provision has been added that an applicant
must have made satisfactory progress, as determined by the Agency,
towards the completion of a previously funded project before it will be
considered for subsequent funding.
Small business headquarters may be in either a rural or non-rural
area at the time of application and at the time of grant disbursement.
Because the headquarters may be in either location, the proposed rule
does not need to address this.
B. Project Eligibility
A condition has been added to project eligibility that sites must
be controlled by the agricultural producer or small business for the
proposed financing term of any associated Federal loans or loan
guarantees. This concept was in the proposed rule as part of the
technical report requirements. The language has been modified
concerning control of the system and the role of third parties for
clarification, and concerning satisfactory sources of revenues.
For guaranteed loans only, we have added capital improvements to an
existing renewable energy system as an eligible project.
C. Funding, Matching Funds, and Terms of Loan
Minimum Funding Levels. Under the final rule, minimum funding level
for grants for energy efficiency improvement projects only has been
reduced from $2,500 to $1,500. For guaranteed loans, the minimum
funding level for all projects has been increased from $2,500 to $5,000
(less any program grant amounts).
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Maximum Funding Levels. For grants, the final rule clarifies that
the $750,000 maximum applied on a per Federal fiscal year basis.
Matching funds. Under the final rule, passive third-party
contributions are acceptable matching funds for renewable energy system
projects eligible for Federal production tax credits, provided the
applicant meets the applicant eligibility requirements. The proposed
rule did not address passive third-party contributions.
Terms of Loan. The maximum term of a loan for equipment has been
increased from 15 years to 20 years.
The conditions used to determine whether a loan is sound have been
modified to add renewable energy subsidies, incentives, tax credits,
etc., and the borrower's overall credit quality.
A principal plus interest repayment schedule is now permissible.
D. Eligible Project Costs
The final rule includes the Technical Reports as an eligible cost.
Modifications were made concerning the construction of a new facility.
E. Application
Simplified Application Procedures. Under the final rule, for grants
and direct loans, projects with total eligible project costs of
$200,000 or less are eligible to submit simplified applications. The
final rule provides specific criteria to determine if a project is
eligible and certain conditions that must be agreed to by the
applicant.
For guaranteed loans, the final rule adopts the ``short form''
(Form RD 4279-1A) used in the Business and Industry Guaranteed Loan
(B&I) Program. This form can be used by lenders for projects with total
eligible project costs equal to or less than $600,000.
Self-Scoring. Applicants are now required to conduct a self-
evaluation of their project using the same evaluation criteria that the
Agency will use.
F. Documentation
Technical Reports. The final rule incorporates a new set of
technical reports for projects that qualify for simplified applications
(see paragraph III E). These technical reports require less information
than the technical reports presented in the proposed rule. For projects
that do not qualify for simplified applications, the more detailed
technical reports are required.
Financial Information. For projects that qualify for and use
simplified applications, there is much less financial information being
requested.
Interconnection Agreements. Applicants are not required to submit
interconnection agreements with their applications, but instead are
required to discuss the interconnection agreements, if applicable to
their project.
G. Evaluation of Applications
Significant changes were made to the evaluation of applications.
These changes can be categorized as changes in the evaluation criteria
and changes in the points awarded. The overall scoring was also
modified to allow all projects the opportunity to score the same total
number of points. The following summarizes most of the changes to the
criteria between proposal and promulgation (changes in points are not
presented for most criteria).
1. The addition of a scoring criterion for the technical merit of
proposed projects.
2. The deletion of the management criterion.
3. The addition of a scoring criterion for very small businesses.
4. Modification of the criterion for small agricultural producers
by reducing the gross market values at which points can be awarded.
5. The addition of a scoring criterion for submitting simplified
applications.
6. Modification of the environmental benefits criterion by
replacing ``health and sanitation'' with ``environmental goals'' as the
basis for this criterion.
7. The deletion of the cost-effectiveness criterion, which was
incorporated into the new technical merit criterion.
8. Awarding points for energy replacement, energy savings, or
energy generation (at proposal, only energy replacement and energy
generation were included) and by reducing the points available for
energy generation projects from 20 to 10.
9. Modifying the interest rate criterion to be consistent with the
B&I program by reducing the rate from 1.75 percent to 1.5 percent above
the prime rate.
10. The addition of a scoring criterion that awards 5 points to an
applicant's overall score if the applicant has not been approved to
receive funds in the 2 previous Federal fiscal years.
11. The replacement of the ``matching funds'' criterion for grants
with a ``readiness'' criterion, which looks at the commitments an
applicant has received for the matching funds from other sources
instead of the amount of the matching funds already received from other
sources.
H. Guaranteed Loan Processing and Servicing
For guaranteed loans, the final rule tracks the B&I program more
closely. The most important aspects that have changed are: (1)
Expanding the universe of eligible lenders and (2) authorizing the use
of multi-notes. Other changes included:
Credit Quality. A provision has been added that guaranteed loans
made under 7 CFR part 4280, subpart B must have at least parity with
guaranteed loans made under the B&I program.
In addition, a provision has been added that the current status of
the appropriate renewable energy industry will be considered.
Personal and Corporate Guarantees. Under the final rule, personal
and corporate guarantees are not required from passive investors.
I. Construction Planning and Development
In the final rule, 7 CFR 1924, subpart A has been replaced with 7
CFR 1780, subpart C. Similarly, for equipment procurement, 7 CFR 1924,
subpart A has been replaced with 7 CFR 3015.
J. Definitions
Small Business. Several changes and modifications were made to this
definition to be consistent with the Small Business Administration's
(SBA's) definition, deleting the 500 or fewer employees and $20 million
or less in total annual receipts cap, and including certain electric
utilities. Nonprofit entities that meet SBA's definition of ``small
business'' are now allowed.
Demonstrated Financial Need. The major change to this definition
was the addition of a ``cashflow'' test.
New Definitions. The final rule adds definitions for each of the
renewable technologies and the following terms:
Design/build project development method.
Energy assessment.
Energy assessor.
Energy auditor.
Feasibility study.
Necessary capital improvement.
Passive investor.
Post application.
Qualified consultant.
Qualified party.
Simplified application.
Used equipment.
Very small business.
Modified Definitions. The definitions of some terms were modified
slightly to be consistent with the definition for those terms in the
B&I program. Definitions that were modified include:
Applicant.
Commercially available.
Energy efficiency improvement.
Interim financing.
Renewable energy.
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Renewable energy system.
Deleted Definitions. Several definitions that were identical to the
definitions in the B&I program were deleted and are incorporated by
reference.
K. Insurance
Projects with total eligible project costs of $200,000 or less are
not required to carry business insurance.
L. Feasibility Studies
Under the proposed rule, business-level feasibility studies
(referred to as project-specific feasibility studies in the proposed
rule) were required for all renewable energy projects exceeding
$100,000 in costs. Under the final rule, business-level feasibility
studies for renewable energy projects will be required for those
projects whose total eligible project costs are greater than $200,000.
M. Energy Audits
Under the proposed rule, energy audits were required for energy
efficiency improvement projects with costs greater than $100,000. Under
the final rule, energy audits are required for energy efficiency
improvement projects with total eligible energy costs greater than
$50,000.
IV. Discussion of Comments
Over 60 comment letters were received from a variety of commenters.
The most comment letters were received from various trade organizations
and industry groups (over 15 letters) and from State agencies and
organizations (over 15 letters). Various public interest groups
submitted approximately 11 letters, while financial institutions
(credit bureaus and banks) submitted 8 letters. Letters were also
received from private individuals, towns and cities, and one
Congressman.
The following paragraphs summarize the comments and our responses
to those comments. Twenty-one responses do not require a response under
5 U.S.C. 553. These responses involve various nonregulatory matters
such as expressing support for the program or requesting additional
information. Several responses were outside the scope of the regulation
and made suggestions that would require changes to other USDA and non-
USDA regulations or internal agency administrative matters. For these
and similar reasons, these responses are not addressed in this section.
A. Definitions
Applicant
Comment: One commenter stated that the definition of applicant does
not include a reference to direct loan applicants and suggested that
the definition be amended to include such a reference.
Response: USDA agrees with the commenter and has revised the
definition to include reference to direct loan applicants.
In addition, we have revised the term ``applicant'' to apply to
agricultural producers and rural small businesses seeking a guaranteed
loan rather than to the lender that is actually submitting the loan
application to USDA. We did this in order to simplify the terminology
throughout the rule. Thus, wherever the term ``applicant'' is used, it
is referring to the agricultural producer or rural small business. When
the rule applies to the lender, the term ``lender'' is used.
Biomass
Comment: One commenter stated that the definition of biomass needs
to be clarified. The commenter pointed out that the biomass definition
refers to ``other waste materials.'' The commenter notes that,
traditionally, municipal waste for landfill waste has been included in
biomass definitions. The commenter believes that, if tires are allowed
to be placed in a landfill, they may be deemed municipal waste,
biomass, and inevitably renewable. This theory, according to the
commenter, appears to be reinforced in the Resource Conservation and
Recovery Act of 1976. In addition, the commenter points out that the
State of Nevada, Nevada Revised Statute Chapter 704, has classified
tires reduced using microwave technology, a very clean process, as
renewable because they are part of the municipal waste stream and also
because one of the components of all tires is natural rubber coming
from trees. The commenter suggests that an administrative bulletin to
staff, clarifying the intent of the biomass definition, is needed.
Response: USDA agrees that ``other waste materials'' could lead to
confusion. However, due to the nature, scope, and complexity of
renewable energy systems using ``other waste materials,'' USDA cannot
anticipate all types of ``other waste materials.'' Therefore, new
materials and technologies will be considered on a case-by-case basis.
Comment: One commenter requested that clarification be provided as
to the interpretation of ``paper that is not commonly recycled.'' The
commenter stated that, while they want all paper to be recycled that
can be recycled, in many rural settings transportation distances to
paper recycling purchase points are simply too distant to allow
affordable recycling once transportation costs are figured into the
equation. The commenter stated that they have evidence in Missouri of
how paper pellets can be beneficially utilized as fuel at Northwest
Missouri State University but cannot be affordably recycled due to the
distance to any buying center. The commenter asked that USDA clarify
that if transportation economics preclude affordable recycling of waste
paper that this meets the criteria of ``not commonly recycled.''
Response: USDA agrees that the situation posed by the commenter
should meet the criterion of ``not commonly recycled.'' The situation
described arises, at least in part, out of the fact that the paper
recycling is occurring in a rural area. USDA will consider this issue
on a case-by-case basis.
Capacity
Comment: One commenter stated the definition of capacity is
technically incorrect (load implies use not production of energy e.g.,
the electric motor is a three kilowatt load on the system). Capacity
should describe energy output in a standard measurement (e.g., British
thermal units (BTU's), kilowatt-hours (kWh), Megawatts). The commenter
suggested that it be defined as follows:
``The sustainable energy output of a generation or heating unit as
rated by the manufacturer or qualified independent energy organization
or individual using commonly accepted standard units of measurement.''
Response: The commenter makes three suggestions for revising the
definition of ``capacity'' as follows:
First, the commenter suggests that capacity be described as
``energy output'' and not as ``load.'' USDA disagrees with this
suggestion. Load is equally applicable as ``energy output.'' Thus, this
term has not been changed.
Second, the commenter suggests that the definition should require
capacity to express using ``commonly accepted standard units of
measurement.'' USDA disagrees with the need to insert this language
into the definition. USDA believes that manufacturer ratings will be in
the same units of measurement for similar technologies. If not,
conversions can be applied.
Third, the commenter suggests that the energy output can also be
rated by a ``qualified independent energy organization or individual.''
USDA
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disagrees with the third suggestion. The ratings assigned by a
manufacturer are based on standards and provide a standardized,
consistent baseline for comparisons. Some units eligible for this
program could be modified by an individual after purchase to change its
rating. In such instances, an individual would likely hire a third
party to assign a new rating to the unit. USDA does not believe this is
a desirable situation, possibly resulting in subjective assessments of
the rating.
Default
Comment: Two commenters pointed out that there is no reference made
to grants being in default, and one of the commenters (Flanders 11-04)
suggested that ``or grant conditions'' be inserted after ``* * * or
more loan covenants * * *'' in the third line of the definition.
Response: USDA agrees with the commenter and has revised the
definition of default as suggested.
Demonstrated Financial Need
Comment: One commenter suggested that the definition of
demonstrated financial need might benefit from a more specific
definition or an example--for example, ``if the project is otherwise
unable to achieve at least a 1.20 debt coverage ratio when a loan for
the long term liability portion is amortized over the life expectancy
of the project.''
Response: USDA disagrees that a more specific definition is needed
within the rule. The example offered by the commenter is one way for
demonstrating financial need as defined by the regulation.
Energy Efficiency Improvement
Comment: One commenter pointed out that in the definitions section
of the proposed rule, ``energy efficiency improvement'' is defined as
``Improvement to a facility or process that reduces energy
consumption.'' The commenter then points out that under proposed Sec.
4280.111(d)(10), the definition is expanded to include, ``or reduced
amount of energy required per unit of production are regarded as energy
efficiency projects.'' The commenter suggested that the definition
under proposed Sec. 4280.103 be expanded to include this concept found
in proposed Sec. 4280.111(d)(10).
Response: USDA has not revised the definition as requested by the
commenter. We have retained the phrase ``that reduces energy
consumption,'' which allows an applicant to express the reduction in
energy consumption in a number of ways, including, but not necessarily
limited to total reduction in energy consumption, energy saved per
square foot or energy saved per unit of production.
Comment: One commenter stated that the definition of energy
efficiency improvement is not explicit enough and recommended that USDA
add language to the existing definition that clarifies that the primary
benefit for the improvement must be a reduction in energy consumption.
According to the commenter, some applications in 2004 relied on
nonenergy benefits, such as increased product quality, as the
justification for the project. For some projects, the energy efficiency
savings were clearly a secondary benefit and would not have had
sufficient payback to pursue on their own. While these additional
benefits are valuable and should be factored into the project finances,
when nonenergy benefits are the primary benefit of a proposed project,
the commenter believes that such projects should not be considered an
energy efficiency improvement.
Response: USDA believes that no change is necessary; this issue is
addressed in the scoring criteria. Projects saving the most energy will
score higher. Therefore, USDA expects the primary benefit of the energy
efficiency improvement program will be energy reduction.
Existing Lender Debt
Comment: One commenter asked: What if the same lender had an
existing debt to the borrower with a B&I loan guarantee? The commenter
suggested striking ``not guaranteed by the Agency'' from the definition
of ``existing lender debt.''
Response: The definition of ``existing lender debt'' was removed
from this rule because it was not used.
Holder
Comment: One commenter asked: What about in the case where more
than the guaranteed portion of the loan is sold to a holder? The
commenter suggested striking ``all or'' leave the word part and strike
``of the guaranteed portion.''
Response: As proposed, ``holder'' was defined as ``A person or
entity, other than the lender, who owns all or part of the guaranteed
portion of the loan, with no servicing responsibilities.'' USDA
disagrees that the definition of ``holder'' needs to be revised because
only the guaranteed portion of the loan can be sold to a holder; that
is, one cannot sell ``more than the guaranteed portion of the loan'' to
a holder.
``In-Kind Contributions''
Comment: One commenter suggested that use of existing towers, such
as cell phone relay towers, to support wind generators be allowed if
the towers are certified to be safe and sturdy enough to support the
chosen generator by a professional engineer. The commenter suggested
that this could be a standard and specification detail rather than a
rule component, but that it needs to be allowed.
Response: USDA does not believe any change is needed to the rule to
address the situation posed by the commenter. As written, the rule
allows the use of existing towers as an in-kind contribution if they
``directly benefit the project.''
Interim Financing
Comment: One commenter stated that the words ``clear intent'' in
the definition of ``interim financing'' in the proposed rule are vague
and suggested striking ``clear intent'' and substituting the words
``commitment from a lender that.''
Response: USDA disagrees with the commenter's suggestion and has
not revised the definition as suggested by the commenter. USDA believes
applicants need flexibility in showing they have permanent financing,
and applicants should not be limited to lender commitments. Further,
USDA does not wish to limit the concept of interim financing to
``lenders.''
Loan-to-Value
Comment: One commenter stated that the definition of loan-to-value
is not consistent with standard industry language and recommended that
the term be changed to be consistent. The commenter suggested
substituting the term ``Loan-to-value'' with ``Loan to discounted
value'' and then revising the content of the proposed rule to
substitute ``Loan-to-value'' with ``Loan to discounted value.''
Response: The Agency agrees with the commenter that the rule needs
to refer to ``discounted value'' and has incorporated this change by
revising the definition of ``loan-to-value'' accordingly. However, the
Agency disagrees that the term should be ``Loan to discounted value,''
and has retained the term ``loan to value.''
Renewable Energy
Comment: One commenter suggested adding the word ``biomass'' into
the second clause so that it reads ``* * * or hydrogen derived from
biomass or water using wind, solar, biomass, or geothermal energy
sources.''
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Response: USDA agrees with the commenter that the word ``biomass''
needs to be added and has revised the definition for renewable energy
as suggested. The lack of the word in the proposed rule was an
oversight.
Comment: One commenter asked if the Agency would recognize as
``renewable energy'' that generated from conversion of a renewable fuel
into heat, electricity, and/or mechanical power.
Response: Yes, USDA would recognize as ``renewable'' energy
generated from the conversion of a renewable fuel into heat,
electricity, or mechanical power. USDA revised the definition of
``renewable energy system'' to read as follows: A system that produces
or produces and delivers usable energy from a renewable energy source.
We believe this revision specifically addresses the commenter's
question.
Comment: One commenter asked if a project that manufactures
biofuels (biodiesel, ethanol, etc.) from various forms of biomass is
eligible, or must that project include energy generation from that
renewable fuel to qualify. This commenter also asked if existing on-
site energy generation technologies are converted to biofuel usage from
diesel or other nonrenewable fuel use, either in part or completely,
would this conversion be considered an acceptable ``renewable energy
project?''
Response: A project that solely manufactures biofuels from various
forms of biomass is eligible under this program. The project does not
need to generate energy.
The conversion of existing on-site energy generation technologies
to biofuel from diesel or other non-renewable fuel qualifies as a
renewable energy project for the purposes of the 9006 program. USDA
points out that for purposes of determining the amount of funds
available for such conversion, total eligible project costs would be
based on the cost of performing the conversion alone, not on the cost
of an equivalent replacement unit.
Comment: One commenter asked if a project that qualifies at the
State level as ``renewable'', would automatically be acceptable, based
on the state-level determination, for meeting minimum eligibility
requirements for Agency support. Conversely, the commenter asked, if
mandated compliance with State and local permitting (as a nonrenewable
project) would obviate Agency funding if a project is not considered
renewable under State guidelines but that project satisfies the
criteria in this program.
Response: A State-level determination alone would not be acceptable
to qualify a project as ``renewable'' under this program. To be judged
renewable under this program, the project must meet the requirements of
this program.
Any project that is deemed a renewable project under this program
is eligible to receive funding under this program regardless of how a
State defines the project (i.e., as a nonrenewable project), but the
project still must be in compliance with all applicable State and local
permitting requirements for that project regardless of how it is
defined.
Comment: One commenter noted that State rules permit various
maximum percentages (usually around 25 percent) of nonrenewable fuel
that can be used to augment and ``firm'' energy generation from
renewable sources and asked how this would impact Agency assessment of
a proposal. The commenter then asked how a prospective applicant or
borrower can ascertain this status prior to commitment of resources.
Response: USDA understands the commenter's position and is amenable
to considering such projects for funding under this program. However,
the Agency has decided not to revise the rule, but instead will
evaluate each proposed project on a case-by-case basis. This will
maximize the number of eligible projects the Agency can consider. USDA
will rely on the expertise of the technical experts who review the
applications to make the determination as to whether the project
qualifies as ``renewable'' under this program. This review will
evaluate the actual renewable energy usage, energy displacement, and
energy saving, as applicable.
Small Business
Comment: A number of commenters suggested making several revisions
to the definition of small business. Four commenters suggested that the
definition be changed so that the cap of $20 million in annual receipts
is removed and a small business is defined only by the number of
employees of 500 or less. Two of these commenters believe the $20
million maximum in annual receipts disqualifies and discourages many
grain elevators, ethanol producers, biodiesel producers, and other
possible business ventures in rural America.
The third commenter stated that the definition of small business
provided in the rule was duplicative with SBA guidelines and offered a
one-size-fits-all dimension to the program. According to this
commenter, this penalizes certain small businesses that meet SBA
definitions, but not the specific limits outlined in this definition.
The commenter was particularly concerned that Rural Electric
Cooperatives would be excluded from participation in the program.
Finally, the fourth commenter stated that capping the annual
revenues at $20 million would eliminate the eligibility of a
significant number of companies who could benefit and provide
substantial value to the renewable energy program, in particular the
ethanol industry. The commenter states that the ethanol industry
provides benefits on many fronts and should be allowed to participate
in the 9006 program, but the cap would exclude this industry because
the majority of plants are in excess of this sales limitation.
A fifth commenter recommended that USDA expand eligibility to allow
all rural electric utilities to host applications. This commenter
pointed out that many rural electric cooperatives and public utility
districts fail to meet eligibility requirements because of large annual
receipts, even though their profit margins are small and stated that
rural utilities are important partners and should be eligible
applicants.
Two commenters suggested that more explanation as to the definition
of an eligible cooperative is needed. One of these commenters stated
that referring to the IRS code is not quick helpful information when
prospective applicants are trying to figure out whether they are
eligible or not. The other commenter requested more description of what
type of cooperative is eligible `` perhaps in the definition portion of
the proposed regulations.
Response: USDA agrees that the definition of ``small business''
needs to be revised. USDA believes that the definition needs to be
consistent with SBA's definition and by doing so, the revised
definition simplifies the application process and eligibility
determination, provides for greater consistency in eligibility
determinations, and increases program access. Therefore, USDA has
revised the definition to remove the caps on annual receipts and on the
number of employees.
In addition, USDA has revised the definition to specifically
include electric utilities, including Tribal or governmental electric
utilities, that provide services to rural consumers on a cost-of-
service basis, without support from public funds or subsidy from the
Government authority establishing the district, provided that such
utilities meet SBA's definition of small business.
Also, the purpose of the parenthetical reference to the IRS code
was to minimize the number of questions as to
[[Page 41269]]
whether cooperatives qualified under section 501(c)(12) (of the
Internal Revenue Code) were eligible for this program (which they are),
not to limit this program to only those cooperatives qualified under
section 501(c)(12). USDA does not believe that it is necessary to
remove the reference to the IRS code, because a cooperative would know
if the referenced IRS code applied to it or not. Therefore, we have
elected not to remove reference to the IRS code.
Lastly, USDA disagrees that more description of the type of
cooperative is needed, especially in light of the revision to the
definition of small business, which allows any cooperative to be
eligible as long as it meets the definition of a small business.
Comment: One commenter recommended that the receipt and employee
``size'' threshold be applied only to the location being served by the
project.
Response: As discussed in the response to the previous comment,
USDA has revised the definition of small business to remove the
``size'' threshold. Thus, this comment is now moot.
Qualified Consultant
Comment: One commenter noted that there is no definition for
``qualified consultant.'' The commenter recommended that a ``qualified
consultant'' should be established as a party that has demonstrated
with past efforts the ability to compile not only a project assessment
but also a comprehensive business model and plan for execution.
Response: USDA agrees that a definition of ``qualified consultant''
is needed and has added it to the definitions section.
B. Demonstrated Financial Need
Funding From Other Sources
Comment: A number of commenters were concerned that including the
phrase ``other funding sources'' in the definition of ``demonstrated
financial need'' would disqualify applicants who can obtain funding
elsewhere. One of the commenters recommended that the definition of
demonstrated financial need be altered to make clear that State
financial assistance for renewable energy systems or energy efficiency
improvements will not affect an applicant's eligibility for the 9006
program.
Another commenter stated that the proposed definition appears to
disqualify applicants who would combine funding from the 9006 program
with private and public loan programs.
One commenter recommended that State program co-funding, such as
State Clean Energy Trust Funds, should be encouraged by USDA, and not
disallowed.
Response: While USDA does not disagree with the commenters'
concerns, we have retained essentially the same concept in the final
rule. Specifically, we have replaced the phrase ``or other funding
sources'' with ``and commercially available resources.'' The final
definition adopted in the rule is in alignment with other Rural
Development programs, which have a ``credit elsewhere'' test. Section
9006(b) requires a demonstration of financial need.
Comment: One commenter stated that, although requirements for in-
kind contributions were reasonable, strictures against any other
Federal co-funding could restrict applications. The commenter observed
that an applicant could receive funding from Federal sources other than
USDA. Rather than impose a blanket ban on other Federal funding, the
commenter recommended that USDA develop a specific list of programmatic
funding exclusions. Four other commenters suggested that co-funding
from State rebate programs be fully allowed. Another commenter stated
that USDA should allow full co-funding from State public benefit rebate
programs.
Response: USDA made an administrative determination that the 25
percent limit for grant funding of a project is applicable to funds
received under the 9006 program and all other Federal grants, unless
there is statutory authorization permitting the other Federal funding
to be used for the grantee's match. No changes have been made in the
final program.
Financial Need
Comment: One commenter stated that the requirement to demonstrate
financial need creates a possible catch-22 for applicants. On the one
hand, USDA is seeking to safeguard the public's money by requesting
significant assurances that every grant project will be financially
viable, yet also requires the applicant to prove financial need. When
the grant amount is capped at 25 percent (by law), this creates a
rather thin margin to work within. The commenter stated that the grant
program should be looked at as analogous to soil conservation cost-
share programs where the grant amount is a public provision of
assistance to a participant for assuming the risk inherent in adopting
a new, and in some cases, early commercial and site specific
technology. For this reason, the proof of demonstrated financial need
should be understood to include the credibility that government support
of a new business investment provides to lenders who would not
otherwise provide needed gap financing.
Response: USDA in general concurs with the commenter. It is our
hope that by our willingness to fund projects that have undergone and
passed the technical review under the 9006 program would, in turn,
encourage lenders to see these projects as worthwhile projects, as well
and extend funding to them. Further, the change made to the definition
of ``demonstrated financial need'' that focuses on the need of the
project should help address the concerns raised in this comment.
Comment: One commenter stated that the demonstration of a financial
need should not be a threshold factor for applicant eligibility to
participate in this program. According to the commenter, this provision
anticipates an applicant that cannot afford the project without the
assistance, yet it requires a highly engineered project. If an
applicant must demonstrate a financial need as defined, the possibility
of assembling the highly technical application diminishes.
Response: USDA does not have the discretion to remove the
demonstration of financial need as a requirement for receiving a grant
under the 9006 program; this is a statutory requirement in section
9006(b). However, USDA has significantly lowered the application
requirements for projects with total eligible project costs of $200,000
or less, which significantly reduces the amount of financial
information that would be required and by developing less detailed
requirements for the Technical Report (see Appendix A). Further, the
Agency has added a second component to the definition of ``demonstrated
financial need'' that focuses on the need of the project. Therefore, we
have addressed this commenter's concerns as much as possible.
Project Versus Applicant Financial Need
Comment: One commenter observed that the proposed rule defines
financial need as an applicant's need rather than a project's need, and
felt that this wording would penalize applicants with good credit or
assets. The commenter recommended that USDA redefine ``demonstrated
financial need'' to something like the following: ``The demonstration
that the project is not economic or would not occur without the grant
assistance.''
Another commenter stated that there is confusion as to whether
``financial need'' refers to the proposed project or
[[Page 41270]]
to the actual assets of the applicant. The commenter recommended that
this eligibility criteria be clarified and suggested that financial
need be determined by looking at the project itself. According to the
commenter, the relevant question is whether a grant is necessary to
make this project financially feasible and/or successful. In the
current language, the commenter asserts that it is unclear whether
applicants with sound personal credit and financial portfolios will be
penalized or deemed ineligible. The commenter believes that projects
where the participants have sound financial histories are more likely
to succeed and should not be put at a disadvantage.
Response: The Agency has adopted this suggestion by modifying the
definition of ``demonstrated financial need.''
Comment: Five commenters suggested that USDA base financial need
criteria on project payback, not the applicant's financial resources
and liquidity. If the 9006 grant will materially reduce the project
payback period and similar projects are not commonplace in the
applicant's area, the commenter believes there is a de facto financial
need. One commenter stated that this seems inconsistent with the
overall intent of the program, and favors larger scale projects.
Response: USDA disagrees that project payback is a proper criterion
for determining financial need. The definition, as proposed, was
consistent with USDA policy for a ``credit elsewhere'' test.
Maintaining the same definition across its programs simplifies cross-
program requirements easing the burden for program participants and end
users and establishes a clear, consistent, and objective standard for
demonstrating a financial need for Rural Development grant assistance.
Therefore, USDA has not incorporated the commenters' suggestion.
In addition, USDA has revised the definition of ``demonstrated
financial need'' to include ``that the project proposed by the
applicant cannot achieve the income and cashflows to sustain it
financially over the long term without grant assistance.'' This was
added because the large upfront investment often prevents projects from
producing sufficient cash flow at current energy prices without outside
support. In addition, the scale of many small projects creates
diseconomies of scale that further exacerbate this condition.
Demonstration of Financial Need
Comment: One commenter stated that the subsection 9006(b) of the
statute states that a farmer, rancher, or small business shall
demonstrate financial need as determined by the Secretary. This
provision was included to ensure that assistance is directed to the
country's smaller producers and rural small businesses that typically
lack the financial resources necessary to purchase renewable energy
systems or make energy efficiency improvements.
Section 4280.103 of the proposed rule defines ``demonstrated
financial need'' as ``(t)he demonstration by an applicant that the
applicant is unable to finance the project from its own resources or
other funding sources without grant assistance.'' This definition is
vague. Nowhere does the proposed rule describe how the Secretary
assesses the applicant's ability or inability to finance the project
without grant assistance.
An applicant is required to submit a tremendous amount of financial
documentation and, under proposed Sec. 4280.111(a)(3), to describe how
it meets the requirement of demonstrated financial need but is given no
indication of how need is determined.
The proposed rule must be amended to specify precisely how
financial need--and thus eligibility under proposed Sec. 4280.107(f)--
shall be demonstrated.
In the absence of a clearly defined system for assessing financial
need, USDA should consider establishing an income or revenue limit for
grant eligibility. Only those applicants below a certain income or
revenue threshold would be eligible to participate in the grant
program. A revenue limit for financial need eligibility has the benefit
of clarity and would reduce the burdensome volume of financial
documentation required of grant applicants, thereby streamlining the
application process. Consistent with the statute, all applicants must
remain eligible for loans and loan guarantees.
Response: The definition of ``demonstrated financial need'' has
been revised to include two tests under which all applicants will be
evaluated as to a demonstration of financial need. The first test is a
``creditworthiness'' test--the applicant is unable to finance the
project from its own and commercially available resources. The second
test is the ``cashflow'' test--the project proposed by the applicant
cannot achieve the income and cashflows to sustain it financially over
the long term without grant assistance.
Under the creditworthiness test, the applicant must certify that
they cannot obtain credit elsewhere and provide sufficient information
or documentation to permit the Agency to make an independent
determination. The Agency has not limited the information or
documentation that can be provided to support the applicant's need in
order to give the applicant the greatest degree of flexibility in
demonstrating this requirement. If the applicant fails to provide
sufficient information to meet this requirement, the Agency will
contact them for additional information until it can make its own
independent determination. In order to provide uniform Agency
determinations, the Agency expects to issue additional guidance to its
field offices on what has been approved as acceptable evidence of
financial need, which will also be made available to the public.
Financial Need Criterion
Comment: One commenter recommended that applicants for grants not
have to demonstrate financial need. According to the commenter,
approving and funding a grant application should rest on the quality of
the proposal and the scoring criteria and not necessarily on the
financial need of the applicant. According to the commenter, it is
difficult for applicants to prove that they have enough finances to
match 75 percent of the project, but that they financially need the
last 25 percent from USDA to get the project off the ground.
Response: The 2002 Farm Bill, Section 9006(b), requires a farmer,
rancher, or rural small business to demonstrate financial need in order
to be eligible for a grant under this program. Thus, USDA does not have
the discretion to eliminate this requirement and has not done so in the
final rule.
Comment: Two commenters stated that the authorizing language for
Section 9006 makes clear that financial need is a primary condition for
any applicant to receive funding under the program. According to the
commenters' interpretation of the law, financial need is the only
eligibility requirement, and all other conditions in the program are
secondary to it. The commenters believe that the proposed rule does not
reflect the primacy of financial need as required by statute.
These commenters also expressed the concern that the proposal does
not clearly define the extent of the required explanation or its
relevance to the application process. The commenters recommended that
USDA make it explicit in the rule that demonstrated financial need is
an eligibility requirement of the program and create a system by which
all applications will be reviewed to confirm that they meet the
financial need condition in the statute. The commenters offered
examples of possible requirements, including: Requiring all applicants
to
[[Page 41271]]
demonstrate that they otherwise would not be able to pay for or finance
the proposed project; an automatic presumption that there is no
demonstrable financial need in projects with a payback of 2 years or
less by virtue of the sheer profitability of such a project, or in
projects which are requesting funding for less than 10 percent of the
project cost; or a presumption of demonstrated financial need when the
applicant is a small agricultural producer.
Response: The commenters made three specific recommendations. The
first recommendation was to require all applicants to demonstrate
financial need. As provided in the statute, financial need is required
only of grant applicants. This eligibility criterion was stated in
proposed Sec. 4280.107(f). USDA believes this is explicit. USDA does
not believe that this grant eligibility requirement needs to be or
should be part of the loan program.
The second recommendation was to implement an automatic presumption
of no demonstrable financial need for projects with a payback of 2
years or less, or for projects requesting funding of less than 10
percent. As noted in a previous response, USDA does not consider
payback to be an adequate measure of financial need. Financial need
speaks to having the resources available to put a project in place, not
to its projected revenue stream. Therefore, USDA does not consider it
appropriate to implement a presumption of financial need on the basis
of payback. USDA also does not believe that the amount of a funding
request (10 percent or other) is also an adequate measure on which to
base a presumption of financial need. Therefore, USDA rejected this
suggestion as well.
The third suggestion was to base a presumption of financial need
when the applicant is a small agricultural producer. Again, USDA does
not believe that this is an appropriate measure.
C. Applicant Eligibility
Comment: One commenter recommended that public-private partnerships
be allowed to apply for funds under the 9006 program.
Response: The target of this program is private entities (i.e.,
farmers, ranchers, and small businesses), as stated in the statute
authorizing the 9006 program. USDA cannot expand the statutory scope of
applicants to include public entities, including those in public-
private partnerships. Therefore, USDA has not revised this criterion of
applicant eligibility.
Comment: One commenter stated that the eligibility of some
nonprofits for this program is still not clear. The commenter stated
that they have had nonprofits apply which were organized for
charitable, educational, and scientific purposes. Technically,
according to the proposed definition of a small business, they are
eligible because they are not formed solely for charitable purposes.
Two other commenters requested that nonprofit organizations be
allowed to apply for grants and loans under the 9006 program.
Response: USDA agrees that clarification is required, but disagrees
that nonprofits, in general, should be allowed. We have revised the
definition of small business to allow any of the entities specifically
identified in the definition (e.g., electric utilities) to participate
in the 9006 program if they also happen to be nonprofit entities.
Otherwise, nonprofit entities remain excluded.
Comment: One commenter encouraged the broadening of the scope of an
eligible applicant for loans and guaranteed loans to include a business
supplying a service to an agricultural enterprise, such as manure
management in the form of an anaerobic digester and power generation
plant. Another commenter made a similar comment, recommending that USDA
expand eligibility to allow Renewable Energy/Energy Efficiency experts
to aggregate projects without ownership requirements.
Response: USDA is authorized by the language in the 2002 Farm Bill
to provide grants to farmers, ranchers, and rural small businesses for
the purchase of renewable energy systems and energy efficiency
improvements. If the new, nonagricultural enterprise as presented by
the first commenter meets the definition of a small business, then it
would be eligible to apply for a grant.
As to the second comment, the role of an aggregator is more
equivalent to a professional service provider who brings together
eligible applicants to assist in project development and
implementation. The role of an aggregator is anticipated by the Agency,
but the aggregator itself is not an eligible entity. The Agency sees no
reason to change the ownership requirements just because an aggregator
is being used.
Comment: Three commenters requested that USDA consider modifying
the rule to allow small business owners who have their headquarters in
larger cities to also apply for the program. According to one
commenter, the policy of limiting access to renewable energy grants to
existing rural companies tends to discourage small businesses that are
start-ups or happen to reside outside of a rural area, from using this
program to invest, promote renewable energy projects, and create jobs
in rural areas. The commenter stated that it is not unreasonable for a
company to want to know that it is about to receive a grant before it
takes all of the necessary steps to secure its rural location. The
commenter requested that, if USDA does not change the rural residency
requirement for the applicant, the requirements and the consequences of
not meeting it are made clearer in the Notice of Funds Availability
(NOFA), which did not clearly require the business headquarters to be
in a rural area at the time of application.
Response: USDA agrees with the commenter that the proposed
requirement for eligible applicant businesses to be located and have
their headquarters in a rural area may limit access to start-up
companies that are located in a non-rural area from investing in
renewable energy systems or energy efficiency improvements. In the
final rule, both the rural small business and the project must be
located in a rural area. The business headquarters, however, may be
located in either a rural or non-rural area. Thus, we do not believe it
is necessary to address the location of the rural small business'
headquarters in the rule.
D. Project Eligibility
Comment: Three commenters expressed concern about large commercial
wind projects. The commenters provided numerous reasons for their
opposition of the use of the proposed program to support large-scale,
commercial-wind projects. The comments focused on the commenter's
claims of adverse social, environmental, and ecological impacts and the
high costs and low economic benefits of wind energy projects.
Response: USDA is bound by the statute to include wind projects in
the program and does not see the need to differentiate between wind
projects based on size or commercialization.
Comment: One commenter requested that fuel cells that utilize non-
renewable fuels be eligible for funds under the proposed program for
the short-term. The commenter believes that labeling fuel cells as
renewable energy sources will help speed commercialization and will
hasten the process by which the industry can achieve further cost
reductions in manufacturing. Like many emerging technologies, cost
constraints stand in the way of implementing fuel cell technologies. If
USDA allows fuel
[[Page 41272]]
cell adopters to tap readily existing fuels, farmers will have the
ability to demonstrate this technology at a more affordable price,
while realizing the tremendous advantages this technology offers.
Response: The statute requires eligible projects to utilize
renewable energy. USDA cannot expand this requirement to fuel cells
that utilize only nonrenewable fuels. As noted in a previous response,
USDA is amendable to considering projects that use nonrenewable fuel to
some extent.
Comment: One commenter suggested that hydropower be added to the
list of approved technologies associated with this rule. The commenter
requested the addition of small hydroelectric power generating
facilities (i.e. less than 5,000 kW) to the program, perhaps in a
manner similar to that included in the proposed HR 6 Energy Policy Act.
Response: The statute authorizing the 9006 program does not include
hydropower in the definition of ``renewable energy,'' and, therefore,
hydropower projects are not eligible for funds under this program.
Comment: One commenter noted that, as proposed, eligible projects
for biomass and bioenergy specifically exclude livestock waste. The
commenter points out that there are emerging technologies involving
thermochemical conversion of animal waste (for example, from livestock
processing facilities) to synthetic oil. The commenter believes that
these projects should be eligible for funding.
Response: USDA agrees with the commenter that all animal waste
projects fall into the anaerobic digester category. USDA also agrees
that the emerging technology described by the commenter would be
eligible for funds under the 9006 program. As these emerging
technologies become more mainstream (i.e., become pre-commercial or
commercial), USDA intends to expand the technical guidance to address
new technologies. The final rule incorporates provisions to allow new
technologies to apply for funding even if the technology is not
addressed in either appendix to the regulation.
Comment: One commenter suggested that the projects for solar water
pumping and use of solar for hydrogen fuels for farm-based engine
generator sets, and photovoltaics to drive farm and food processing
compressors, refrigeration, and motors should be allowed as eligible
projects.
Response: Each of the specific applications identified by the
commenter is an eligible project under the 9006 program.
Comment: One commenter suggested that for both large and small
solar projects, the rule includes as eligible projects those that
provide solar air heating and water heating with no active storage. The
commenter provided suggested language.
Response: USDA agrees with the commenter that projects that provide
solar air heating and water heating with no active storage are eligible
under the 9006 program. We have revised the definitions of solar
projects such that such technologies are implicitly eligible by not
addressing the type of heat transfer mechanism.
Comment: One commenter believes that the proposed program only
gives token support for alternative energy developments and that by
restricting most grant and loan support for existing commercial
alternative energy systems, no real competition with the petroleum
industry is offered. The commenter then goes on to claim that the most
promising alternative energy programs are not supported or they are
sabotaged as in the case of hydrogen fuels development under the
proposed program. While there are many cost-effective sources of
hydrogen, Federal programs are requiring the use of petroleum for
hydrogen fuels.
Response: USDA appreciates the need for alternative energy
developments. However, the responsibility for developing and funding
such alternative energy systems, including the development of hydrogen-
based technologies, does not reside in USDA. The Department of Energy
is responsible for bringing research and development opportunities to
fruition; that is, to the pre-commercial and commercial stages. Once
such technologies reach these phases, there is a high probability of
their successful implementation. USDA will use the 9006 programs to
fund only those projects for which there is the high probability of
success. We believe that this is an appropriate and responsible
approach for the distribution of grants and loans under this program.
Wind Projects
Comment: One commenter found the requirements in the small wind
section to be overly burdensome for the applicant, as specifically
discussed below:
The rules for wind turbines under 100 kW capacity are not clear in
regards to the need for use of professional engineers--the proposed
rule explicitly states that only projects over $100,000 will require
that the services of a professional engineer to be used, yet the
description for design and engineering in the proposed rule states:
``Small wind systems must be engineered by either the wind turbine
manufacture or other qualified party. Systems must be offered as a
complete, integrated system with matched components. The engineering
must be comprehensive including turbine design and selection, tower
design and selection, specification of guy wire anchors and tower
foundation, inverter/controller design and selection, energy storage
requirements as applicable, and selection of cabling, disconnects and
interconnection equipment as well as the engineering data needed to
match the wind system output to the application load if applicable.''
The commenter expressed concern that this language can easily be
interpreted to mean that unless a complete component package including
the components required by utility rules for interconnection is
purchased from a turbine manufacturer, or the applicant or the system
dealer must hire their own professional engineer to certify the system,
in fact these rules may require hiring two engineers as there are
electrical components, as well as civil or mechanical engineering
components. Many components, such as the batteries, inverters, and
cabling for small projects can be purchased off-the-shelf from a
variety of vendors. Individuals with the necessary technical skills and
experience (as documented in the project team section) can safely
select these standard components. Signoff by utility staff as to the
adequacy of interconnection equipment should also be sufficient for
approving those components. The commenter is also concerned that the
rule language as written will be interpreted to mean that each project
requires a professional engineer to sign off on the entire project.
Such requirements could certainly add undo costs to projects.
The commenter recommended the following:
``Small wind systems must be designed and engineered to assure
safety and reliability of the project. For small wind systems, either
the wind turbine manufacturer or other qualified party must design and
engineer the turbine, tower and tower foundation (including guy wire
anchor specification) as a complete and integrated system. As outlined
in the proposed Sec. 4280.111(d)(8)(iv), interconnection design and
equipment must be approved by the local utility if the turbine is to be
interconnected to the electric power distribution grid. Finally, all
other components, including energy storage, must be selected and
matched
[[Page 41273]]
by a qualified technician as part of a comprehensive system design.''
Response: We agree that for the smaller wind systems, an applicant
may purchase certain components off-the-shelf from various vendors. For
small wind systems with total eligible project costs equal of $200,000
or less, the rule requires the applicant, in part, to ``certify that
their project will be designed and engineered so as to meet the
intended purpose'' and to provide authoritative evidence that the
system will be designed and engineered so as to meet its intended
purpose. We believe this addresses the commenter's concern.
For small wind systems with total eligible project costs greater
than $200,000, however, we have retained the same language as in the
proposed rule. These larger small wind projects are more likely to
require complete packages, and applicants are less likely to ``piece
together'' such a system.
Finally, under the final rule, for renewable energy projects with
total eligible project costs greater than $400,000, the services of a
professional engineer are required. We believe this requirement is more
in line with the level of complexity associated with the larger
renewable energy projects and appropriate for small wind projects that
should exceed this level of cost.
Comment: One commenter suggested that, for wind projects, the
applicant should also describe whether or not sources of income will
include--in addition to annual revenue from electricity sales--the
value of Federal or State incentives, such as production tax credits.
For methane digesters on dairy farms, the applicant should also state
whether or not sources of income will include--in addition to income
from sale of electricity--noncash savings from bedding costs, excess
bedding sales, carbon and tax credits, heating energy savings (e.g.
water), or any other farming efficiencies.
Response: For large wind projects, the proposed rule required a
description of ``annual project revenues including, but not limited to,
electricity sales, production tax credits, revenues from green tags,
and any other production incentive programs throughout the life of the
project.'' For small wind projects, the proposed rule required a
description of ``applicable investment incentives, productivity
incentives, loans, and grants.'' For anaerobic digesters, the proposed
rule required a description of ``annual project revenues and expenses''
and of ``applicable investment incentives, productivity incentives,
loan, and grants.''
The Agency believes that this language adequately addresses the
question of tax credits and production incentive credits. While we have
not specifically identified noncash savings from bedding costs, excess
bedding sales, heating energy savings, or other farming efficiencies in
the final rule, USDA agrees that they can be legitimate ``other sources
of revenues'' provided they are directly related to the project and
their value is sufficiently documented.
Comment: One commenter referred to the recent General Accounting
Office (GAO) report on wind energy (GAO 04-756, Renewable Energy--Wind
Power's Contribution to Electric Power Generation and Impact on Farms
and Rural Communities, September, 2004), which, according to the
commenter, showed that wind energy was not benefiting either the rural
economy or farmers in general.
The GAO report described the problems that currently exist but did
not define a mechanism to deal with the problems other than to call for
an implementation of the authorized Section 9006 program and to
establish better coordination between government agencies.
The commenter provided information related to several issues
related to wind energy and also provided the following specific
recommendations to address the known issues:
An alternative to large, utility-scale systems that could
provide a better strategy would be the use of smaller turbines in
``windsheds'' that could be structured around cooperative ownership.
Smaller turbines require less capital per unit and allow greater
distribution and more access points on the transmission grid because of
lower output. In partnership with or as a subset of traditional rural
electric cooperatives and the private utilities serving rural areas,
farmers could own and manage the system, offset individual electrical
use, and provide power to the grid.
This approach creates two separate opportunities for
diffuse rural networks where the turbine is sized to complement
existing grid infrastructure.
(a) Farm-scale horizontal axis turbines mounted on tall, self-
erecting towers that do not require special roads or large cranes.
Here, smaller swept areas can be more effective because blade forces
are reduced, particularly in severe events, making for lower costs and
simplifying installation/service.
(b) Farm-scale vertical axis turbines designed to work efficiently
at the lower wind speed and more turbulent flow seen at lower
altitudes.
Technical and financial support for these farm-scale
systems should be a high priority for a variety of reasons:
(a) Diffuse systems are robust, and definitely not susceptible to
terrorist attack.
(b) Boost farm income and utilize a renewable resource.
(c) Enable rural economic development.
(d) Opportunity to symbiotically combine wind energy production
with other forms of alternative energy production such as methane
production.
Create an independent third-party evaluation program via a
dedicated grant to evaluate wind turbines that are suitable for on-farm
use and capable of producing significant electricity for the grid. No
single organization has the resources needed for this organization.
This program should be independent of existing government evaluation
programs focusing on certification and/or technical development.
Existing government programs (such as National Renewable Energy
Laboratory (NREL) and Sandia) have inherent conflicts-of-interest when
it comes to making specific product evaluations and recommendations.
This program should utilize existing government expertise and resources
whenever reasonable. The primary award should be made to a proactive
nonprofit organization with no technology conflicts. Sub-awards for the
comprehensive evaluation of specific components should be made to
organizations with existing resources and expertise. This program will
also conduct one or more random inspections of the production
factory(ies) to evaluate production quality control practices.
Evaluations will go beyond minimum specifications and safety issues to
include projected operating and maintenance costs, ease of
installation, installation costs, quality, etc. As part of the
demonstration program, this group should coordinate with the
Environmental Protection Agency's Office of Air and Radiation (OAR) to
link utilities interested in purchasing power from renewable sources
with farm-scale, farmshed cooperatives.
Fund a demonstration project via a dedicated grant which
documents the issues and feasibilities associated with actually
creating a diffuse, large-scale, regional, on-farm, integrated wind-
farm; and which integrates wind energy electricity production with the
production of electricity from another form of renewable energy which
can be used to offset the inherent variability of wind energy
production.
Response: USDA appreciates the findings of the GAO report. This
[[Page 41274]]
regulation considered those findings when promulgating this regulation.
The commenter then goes on to identify five specific recommendations,
which the Agency addresses below.
First, the Agency agrees that use of smaller turbines, rather than
large, utility-scale systems, is desirable and encourages applicants to
partner with others. Nothing in the proposed rule or in the final rule
prohibits the adoption of this type of system or partnership.
Second, the commenter identifies two types of turbines that could
be used to implement the smaller turbine approach in the first
recommendation. To the extent that such turbines have technical merit,
this would be determined during the evaluation of the application.
Otherwise, there is nothing that needs to be addressed in the final
rule with regard to this second recommendation.
Third, the commenter recommended that the rule give high priority
to these farm-scale systems. In the final rule, there are two
mechanisms that are likely to give preference to farm-scale systems
because such systems are likely to be lower-cost systems (i.e., total
eligible project costs of $200,000 or less). First, the effort required
to prepare a grant application for such systems has been reduced.
Second, more points are now awarded to the smallest agricultural
producers and to very small businesses. To the extent that such farm-
scale systems are proposed by these applicants, they would be awarded
more points than larger-scale systems.
Fourth, the commenter recommended creating an independent third-
party evaluation program via a dedicated grant to evaluate wind
turbines. The purpose of the 9006 program is to provide funds for the
purchase of renewable energy systems and energy efficiency improvement
projects. The funding of an independent evaluation program is not part
of the scope of the authorizing statute. USDA notes that we are
currently working with EPA's OAR to develop assistance in working with
utilities on interconnection and power agreements.
Fifth and last, the commenter recommended funding a demonstration
project via a dedicated grant. As noted in the previous paragraph, the
purpose of the 9006 program is to provide funds for the purchase of
renewable energy systems and energy efficiency improvement projects.
The funding of demonstration projects for any renewable energy system
is not part of the scope of the authorizing statute.
Miscellaneous
Comment: One commenter recommended that specific grants be
established to permit the applicant to evaluate local, State, and
national regulations and permits and licenses pertaining to the
location and construction of facilities producing biofuels, biopower,
and biobased products.
Response: As stated in the authorizing statute, the 9006 program is
for the purchase of renewable energy systems and energy efficiency
improvements. The program was not designed to provide funds to stand-
alone studies of requisite permits and licenses or evaluations of
applicable regulations. However, USDA recognizes that obtaining such
permits and licenses are inherent costs to implementing a renewable
energy system or an energy efficiency improvement project. Therefore,
USDA included such costs as part of the eligible project costs for
which funds can be obtained.
Comment: One commenter noted an apparent contradiction between
eligible project costs in proposed Sec. 4280.109(a)(1)(ii) and (ix)
and stated that banks would not finance the item specified in proposed
Sec. 4280.109(a)(1)(iii) and (vii).
Response: With regard to items specified in proposed Sec.
4280.109(a)(1)(ii) and (ix), the first item refers to construction and
project improvement costs that occur after the application has been
received by the Agency. The second item refers to costs associated with
the construction of a new facility. Projects will incur one or the
other of these two costs, not both. This section does not imply that a
project would be expected to incur both of the costs or that a project
would be expected to incur all of the listed eligible project costs.
For example, renewable energy projects would not be expected to incur
energy audit or assessment costs. Therefore, we disagree that there is
a contradiction.
With regard to the items specified in proposed Sec.
4280.109(a)(1)(iii) and (vii), all of these items can be capitalized
and are financeable as part of the project. These items are not
``stand-alone'' items to be individually or collectively financed apart
from the project. A lack of interest, on the part of some potential
lenders, in financing these costs does not persuade USDA to remove them
for the lenders that may be interested.
Comment: One commenter recommended that the rule be clarified that
``remanufactured'' equipment can only qualify where a demonstrated and
consistent remanufacturing process is performed on the equipment. The
commenter was concerned that USDA not award funding to ``refurbished''
generators that are likely to fail in several years and cease to
operate due to lack of parts and expertise. According to the commenter,
this is a small but real problem in the used wind turbine market that
USDA should be mindful of in determining which projects are eligible
for funding.
Response: Under the 9006 program, an applicant may propose to use
new, remanufactured, or refurbished parts in their project. Where
remanufactured or refurbished parts are proposed to be used, they must
be reliable and meet the requirements of their intended application for
the project's design life or as would a new piece of equipment. It is
USDA's intent that sufficient information is submitted with the
Technical Report to allow a thorough evaluation of the project to occur
during the technical review to allow the reviewers to assess the
likelihood of success for all projects, including those proposing to
use refurbished or remanufactured parts. Applicants proposing to use
such parts are advised that they may need to provide more information
in their Technical Report to justify and support the use of such
refurbished or remanufactured parts.
Comment: Several commenters inquired as to whether equipment used
for wind projects should be restricted to new and unused equipment
only, or whether remanufactured or refurbished equipment could also be
used. One commenter specifically noted that used equipment not be
allowed.
Response: As noted in the previous response, remanufactured or
refurbished equipment is allowed under the 9006 program. However, USDA
does not believe that used equipment should be allowed because the
quality of used equipment cannot be determined. Therefore, we have
added a definition of ``used equipment'' to the rule to distinguish
``used equipment'' from refurbished or remanufactured equipment, which
is allowed if such equipment is essentially equivalent to new and
unused equipment.
Comment: One commenter requested clarification on the role of
third-party operators. The commenter notes that the proposed rule
specifies that the applicant must be the owner of the project and
control the operation and maintenance of the proposed project, and that
a qualified third-party operator may be used to manage the operation
and/or maintenance of the project. The commenter stated that, as they
understood the section, large wind projects using business models that
utilize equity investors to take advantage of the Federal production
tax credit are eligible. In this case, the applicant remains the
``general partner''
[[Page 41275]]
in the limited liability corporation, while the equity partner is a
``limited partner.'' Some form of this business model is used by most
successful farmer-owner large turbine wind projects. As such, the
commenter recommends that USDA not limit an applicant's ability to
bring in equity partners to take advantage of tax credits. It appears
that the current language is sufficient for this purpose, but the
commenter believes it is an issue that merits some scrutiny.
Second, some definition or clarification of what constitutes a
qualified third-party operator is needed. Clarification of this
definition is important because State USDA officials have made
different interpretations on what a ``qualified third-party operator''
is.
Response: USDA agrees that the rule should not limit an applicant's
ability to bring in equity partners as described by the commenter and
has revised the final rule to allow ``passive investors'' to
participate in the 9006 program.
The commenter also requested some definition or clarification as to
what constitutes a qualified third-party operator, because of the
potential for many different interpretations being made by Agency
employees. The Agency has included a definition of ``qualified party,''
which provides general guidance.
While this definition has been added, it is USDA's intent that the
determination of who actually qualifies as a ``qualified party'' will
be made by the technical reviewers and not by State USDA staff. As the
pool of technical reviewers will be small (perhaps two or three per
technology), USDA anticipates that different interpretations will not
be an issue. In addition, what constitutes a qualified party will vary
depending on the specific technology being proposed. USDA believes the
best place to deal with this determination is at the technical review
stage and not in the regulations implementing the 9006 program.
Comment: One commenter suggested that USDA limit loan guarantees
(and direct loans, if made available) to farm-scale systems. The
commenter referred specifically to wind turbines, where scale should be
defined by the ability to provide significant electricity to the grid
to meet national needs. The commenter recommended that individual wind
turbines should be greater than 50 kW and less than 999kW, but that
tower heights should not be limited. According to the commenter, the
development of self-erecting towers, which do not require the use of
large cranes for installation and maintenance with their specialized
infrastructure, make it feasible for farm scale turbines to be deployed
on tall towers to efficiently capture the higher speed and less
turbulent winds at higher altitudes.
Response: USDA disagrees with the commenter. USDA believes that the
loan guarantee program should be available to all renewable energy
projects regardless of size if the project and the applicant meet the
eligibility criteria. Therefore, USDA has not revised the rule as
suggested by the commenter.
Comment: One commenter stated that by restricting grants and loans
to existing commercial energy systems, the proposal acts to impede real
progress in renewable energy. The commenter recommended that USDA fund
innovative/new types of renewable energy projects at the 75 percent
level. Referring to U.S. Code Title 18, Part I, Chapter 105, Sections
2151 and 2156, the commenter stated that it is illegal to interfere
with national defense preparations, and claimed that the proposed rule
acts to prevent the development of innovative renewable energy
technologies, helps to sustain the demand for U.S. petroleum imports
from the volatile Middle East, and sabotages efforts to reduce
dependence on petroleum imports, as well as homeland security efforts.
Response: By statute, USDA is limited to funding projects at the 25
percent level for grants and at the 50 percent level for loans. We
cannot increase this to 75 percent as requested. To the extent that the
commenter is suggesting that this program be used to fund renewable
energy technologies still in the research and development (R&D) stage,
as noted in a previous response to this commenter, it is DOE's
responsibility, not USDA's, for assisting in the development of
innovative and new types of renewable energy projects.
Comment: One commenter objected to provisions requiring the
applicant or borrower to be the owner of the system and also to control
the operation and maintenance of the project. The commenter felt that
this would exclude many energy installers and energy service providers.
The commenter recommends that USDA should ``adjust eligibility criteria
or modify the program to allow for rural small business with expertise
in renewable energy and energy efficiency installation to aggregate
projects and submit applications without ownership requirements.'' A
second commenter also recommended that rural small businesses with
expertise in renewable energy and energy efficiency installation be
allowed to aggregate projects and submit applications without being
required to retain ownership and control of all systems.
Response: USDA disagrees with the commenters. As noted in a
previous response, the 9006 program is for the purchase of renewable
energy systems and energy efficiency improvements. By purchasing
either, one becomes the owner. USDA, therefore, believes ownership
requirement is an inherent part of this program and has not revised the
rule as requested.
E. Application and Documentation
General
Comment: One commenter recommended that applicants be encouraged to
partner with intermediaries that provide ``full service'' energy
assistance, which would include (1) help in applying for Section 9006
awards; (2) conducting energy audits; and (3) project management.
Response: USDA concurs that it would be useful to applicants and
USDA if applicants partner with ``intermediaries'' to provide full
service energy assistance. However, the approach used by the applicant
in developing their application and obtaining other services is a
business decision and beyond the scope of the regulation. Therefore,
this comment has not been adopted.
Comment: Several commenters suggested that USDA allow applications
on-line or on a CD-ROM.
Two commenters recommended that USDA allow applicants to submit
proposals electronically, either on-line or on a CD-ROM. This will
enable complete technical review and scoring based on full
applications.
Three commenters suggested that an on-line application process
would reduce redundant and duplicative entries by allowing common
information to be populated on required forms. It also would guide
applicants through the process and thereby reduce the number of
incomplete applications, and it would standardize the final application
documents, thereby facilitating application review by Rural Development
and NREL staff(s). Rural Development has experience in developing such
an online application system for lenders in its B&I Loan Guarantee
program.
Another commenter discussed a possible online application process,
stating that while this is a great option to have, it should not be the
only means by which an applicant can apply for the program. High-speed
Internet access is not widely available in rural America and dial-up
access can make an on-line application process slow and
[[Page 41276]]
tumultuous. Rural America is in the process of transitioning to
computer-based records and applications. If USDA made applying for the
program an on-line only process, there is a serious risk that many
potential applicants would be inappropriately excluded from the
program. We would also suggest that USDA develop application forms and
templates that can be downloaded and completed off-line. The forms
should be available in formats that are accessible for a variety of
operating systems (i.e., Mac and Windows) and word processing software
(i.e., MS WordTM and WordPerfectTM).
Response: USDA policy is to provide electronic application
capabilities. This capability will be developed for this program after
promulgation of the final regulation. The standard government forms are
already available electronically. CD ROMS and faxed information is
acceptable at this time. Along with evaluating the possibility of on-
line applications, USDA will consider the security of such submittals.
Streamline and Simplify Application Process
Comment: Many commenters recommended that USDA adopt a less
burdensome application process for smaller projects. Some of these
commenters suggested the development of a short-form. Commenters felt,
for example, that the application process was too complex for energy
efficiency improvements, the effort to apply too extensive relative to
the benefit obtained, the burden was unreasonable for small producers,
and the entire application process was discouraging to potential
applicants.
Response: USDA agrees with the commenters that a more streamlined
approach is needed for smaller projects that will reduce the burden to
the applicant, but at the same time provide the Agency with sufficient
information to evaluate the merits of the proposed project. To this
end, USDA has implemented a simplified application procedure for grant
projects with total eligible project costs of $200,000 or less. The
simplified application procedure requires significantly less effort on
the part of the applicant by requiring less detailed Technical Reports.
In addition, the less detailed Technical Reports may also be submitted
for guaranteed loans for projects with total eligible project costs of
$200,000 or less.
Comment: One commenter recommended that USDA simplify the
application process for projects less than 200 kW.
Response: As noted previously, USDA has implemented a simplified
application process for grant projects with total eligible project
costs of $200,000 or less and for both grants and guaranteed loan
applications, a less detailed Technical Report for projects with total
eligible project costs of $200,000 or less. USDA elected to do this
based on cost rather than capacity because cost cuts across all
technologies (not all projects could be described in terms of
kilowatts).
Comment: One commenter stated that the burden analysis estimates
the annual cost over a 3-year period has been $1.9 million for an
estimated 388 applicants. This means an average of about $5,600 per
applicant is needed to participate in this program. If a farmer or
rancher is netting $25,000 per year, which is generous in many cases,
the program is demanding an outlay of 22 percent of annual profits to
participate. Also, if the grant received is fairly large, say $25,000
on a $100,000 project, the ``burden amount'' is still 22 percent of the
grant received since application costs are not allowable project
amounts. This defacto increases the participants match amount to
$80,600 or a 76 percent match ($80,600/$105,600 = 0.763). For medium to
smaller sized operations, the estimated burden costs are significant.
Response: As noted in an earlier response, USDA is implementing a
streamlined application process for projects with total eligible
project costs of $200,000 or less. This streamlined application process
will result in less burden to those who use it, including the smaller
sized operations. Also, USDA cannot accommodate the commenter's request
because the statute limits the matching funds for grants to 25 percent
and USDA does not have the authority to raise this limit.
Direct Rebate Program
Comment: Many commenters recommended adding a rebate program to the
9006 program to reduce the burden for commercially viable, proven, and
environmentally beneficial technologies to help streamline the
application process and reduce the administrative burden to USDA. One
commenter suggested that a rebate program be a fixed grant amount for
specific off-the-shelf technologies installed.
Response: USDA is not authorized to use rebates in implementing
this program. In lieu of such a program, USDA is implementing a
simplified application process for grants where funds are disbursed at
project completion. We believe the simplified application process
achieves many of the burden reductions that could be achieved under a
direct rebate program.
The simplified application process is only available to projects
with total eligible project costs of $200,000 or less. In selecting the
$200,000 value, USDA first considered the exposure the Agency would
incur if a project was approved, but never built--the higher the total
eligible costs, the greater the exposure. For example, if USDA selected
a value of $1 million to be funded at the maximum level of 25 percent,
the Agency could lose $250,000 if the project was never completed,
which USDA considers too high of an exposure. USDA then reviewed the
type of projects that were funded under the 2003 and 2004 NOFAs. USDA
assessed that projects with total eligible project costs of $200,000 or
less tended to be smaller projects with a smaller likelihood of not
being completed, thereby lowering the Agency's exposure. A $200,000
total eligible cost project at 25 percent would result in a $50,000
exposure by the Agency. While not an insignificant sum, the types of
projects that would be built and the desire to open the project to more
applicants led the Agency to select this value for the design build
program with reimbursement at completion.
Pre-Applications
Comment: Four commenters suggested that USDA add an optional pre-
proposal review step to the application process. They stated that some
official department prior review of a one- to three-page Proposal
Summary would give applicants an understanding of their eligibility and
better guidance, before all of the expenses for a feasibility study are
incurred. Pre-proposals are being used in some competitions to minimize
the burden on proposal preparer and increase the overall quality of the
submitted proposals that the reviewers must process. Pre-proposals are
intended to provide intermediate feedback as to whether the applicant
is on track in gathering and articulating some of the key information
required for a successful project and whether that project would be
appropriate for funding.
One commenter suggested that the pre-proposal be structured to
minimize inputs by the applicant, while providing evaluators and
reviewers key information in determining the approval of the
application. The pre-proposal could be structured in such a way to give
evaluators enough insight on the project design so that more specific
direction on the needs of a full proposal could be given to the
applicant. The
[[Page 41277]]
commenter provided specific guidelines on how the pre-proposal process
could be implemented.
Response: USDA has decided not to formalize a pre-application
process within the 9006 program because the Agency does not believe it
is the best way to achieve the goals sought by the commenters.
Applicants can obtain the same guidance that a pre-application process
would provide by contacting their State Offices. USDA advises
applicants to work with their State Offices as early in the application
process as possible to help assess whether they and their projects are
eligible prior to conducting other, more expensive application
procedures. USDA will provide implementation and training materials to
further help both the State Offices and prospective applicants. By
providing this information outside the rulemaking process, USDA
maintains greater flexibility in providing assistance to prospective
applicants.
Technical Review
Comment: One commenter suggested modifying and/or minimizing the
technical reviews by NREL. If an engineer or engineering firm approves
technical feasibility of the proposed project for the applicant, accept
the information from the engineer. If NREL must perform a technical
concurrence or refutation of the project, a system should be
established that allows feedback to the applicants. If there is a bias
against a particular technology or approach to renewable energy,
communicate that with the States so they can perform better outreach.
Response: USDA will review the technical feasibility of any project
seeking funds under the 9006 program, regardless of the qualifications
of the engineer or engineering firm hired by the applicant. Further,
USDA or its designated contractor(s) will conduct the technical reviews
in a manner that we deem fit and appropriate to the evaluation of the
technical merits of each project. This review will be conducted without
any bias on the type of project being proposed. If an applicant
believes that his or her project has been unfairly denied, the
applicant has the right to appeal that decision to USDA.
Application
Comment: One commenter stated that in the past, technical reviews
had been compromised due to missing portions of the application. The
commenter recommended that applicants submit two copies, one to the
National Office and one to the appropriate USDA State Office, thereby
ensuring that both offices have the complete data required to evaluate
the application.
Response: USDA agrees with the commenter that two applications
should be submitted, and the final rule has been revised to reflect
that. However, in the final rule, the two copies will be submitted to
the Rural Development State Office, which is the responsible office for
implementing the 9006 program, including the scoring of the
applications. The State Office will then forward a copy of the
application and its score to the National Office, whose role is to
establish the procedures for the 9006 program and to rank the
applications from all 50 States.
Application Content
Comment: One commenter stated that there is no mention of
submitting organizational documents. The proposal only asks for a
description of the business, farm, or ranch operation and ownership.
The commenter stated that they had encountered applications stating
they had a partnership, but when the reviewer asked for a copy of the
partnership agreement--the applicants said it was a verbal agreement.
Is that acceptable? What assurance is there that the applicants are a
legally formed entity? Also, only by examining the Articles of
Incorporation can you determine whether nonprofits were organized
solely for charitable purposes.
Response: USDA agrees with the comment and the final rule requires
applicants, except for sole proprietors, to submit a copy of their
legal organizational documents.
Comment: One commenter, commenting on proposed Sec.
4280.111(a)(4)(iii)(A), stated that, because the demonstration of a
financial need is not an appropriate threshold factor, the explanation
of such a need should not be required in the application.
Response: Section 9006(b) requires a farmer, rancher, or rural
small business to demonstrate financial need in order to be eligible
for a grant under this program. Therefore, USDA must include this
requirement. In the final rule, all grant applicants must submit a
statement certifying that they have financial need. Those grant
applicants not using the simplified application process must also
submit sufficient information to allow the Agency to make its own
determination of the applicant's financial need. For those grant
applicants using the simplified application process, the Agency may
request the applicant to provide supplemental information that will
allow the Agency to make its own determination of the applicant's
financial need.
Comment: One commenter requested clarification on how USDA intends
to use the information provided in the application by agricultural
producers on the gross market value of their agricultural products for
the calendar year preceding the year in which they submit their
application. The commenter stated that if this information is to be
used to document a producer as a true agricultural producer for program
eligibility, this is fine. However, if a single year's crop gross
market value is used by USDA to determine financial need, the commenter
stated that this is inappropriate, noting that crop year 2004 is a rare
year in which farmers in many States are realizing record yields in
concert with steady crop prices. The commenter believes that this rare
year of plenty should not be used to restrict eligibility for grants
under the 9006 program.
Response: USDA will use this information to determine whether an
applicant qualifies as a ``small agricultural producer'' when it scores
applications. While it will not be used to determine if an applicant is
an agricultural producer, it will be supporting evidence that the
applicant is an agricultural producer. Finally, it will not be used to
determine an applicant's financial need. USDA does not believe the
final rule needs any modification or clarification.
Comment: One commenter asked whether applicants will be required to
have a Federal tax ID number at the time of application, along with the
DUNS number.
Response: Yes, both are required.
Comment: One commenter made the following points:
The Table of Contents is superfluous and has not been
helpful when it has been included.
Pro forma balance sheet--only the cashflow statement has
provided useful information when the application was for a grant only.
Business market information is not really needed for
renewable energy systems if the applicant has a power purchase
agreement or letter of intent to do so.
Response: In the final rule, the Agency has elected to keep the
Table of Contents. It assists the applicant in organizing its
application materials to its best advantage. It itemizes requested data
to ensure complete information at the outset. It acts as an organizer
of information for more efficient and timely review.
[[Page 41278]]
With regard to the pro forma balance sheet, we have elected not to
require it for projects with total eligible project costs equal of
$200,000 or less. For very small businesses, pro formas are not always
as accurate or helpful as they are for larger projects. Therefore, we
have eliminated the requirement for pro forma balance sheets for
smaller projects. However, we have retained it for larger projects
(i.e., those projects with total eligible project costs greater than
$200,000) due to the nature, scope and complexity, and financial risk.
Finally, the specific requirement for business market information
from the general application section has been removed, but is still
required in the Technical Reports for certain projects where such
information is important to the feasibility of the project. In
addition, such information would be provided in the business-level
feasibility study, if one is required.
Comment: One commenter referred to the credit reports required for
those owning more than 20 percent and suggested an exception for
nonlocal financial owners making use of Federal tax credits.
Response: USDA has revised the rule to make it easier for passive
investors, which would include nonlocal financial owners making use of
Federal tax credits, to participate in renewable energy projects. To
this end, we have revised the credit report requirement such that
credit reports are not required for passive investors (and for those
corporations listed on a major stock exchange).
Power Purchase Agreement (PPA) and Interconnection Agreements
Comment: Five commenters recommended that USDA exempt 100 kW or
less renewable energy projects from the requirement of having a PPA or
interconnection agreement. According to the commenters, renewable
generators up to 100 kW are guaranteed the right to interconnect under
Section 210 of Public Utilities Regulatory Policies Act (PURPA), 1978.
In most States the interconnection rules, including net metering
availability, are spelled out. No PPA or, according to one commenter, a
project-specific interconnection agreement, is required. One of the
commenters stated further that, in most States, the interconnection
rules, including net metering availability, are spelled out and that no
PPA or project-specific interconnect agreement, which can take
considerable time and expense to obtain, is required.
Response: USDA disagrees that projects funded under the 9006
program should not be required to obtain a PPA or an interconnection
agreement when the applicant intends to sell power generated by the
proposed project. For many of these projects, the ability to sell power
makes them financially feasible. If the project is interconnected with
an electric power system, it is inherent that an interconnection
agreement and a PPA must be made. These agreements and arrangements are
covered by different regulations and policies (State, Federal, public
utility) that are beyond the scope of the regulation. Agreements with
the utility buying the power will help ensure USDA that it is funding
projects that will come to fruition.
Comment: One commenter stated that requiring the applicant to
provide an interconnection agreement or a letter of intent for an
interconnection agreement should not be an application requirement for
any project pursuant to this program. The commenter stated that this
provision forces the applicant to rely upon the third-party utility to
provide assistance or information that may not be required of that
utility by law. While all utilities must interconnect in Iowa, the law
does not currently provide a time in which the utility must
interconnect, and the applicant may not be able to obtain such a letter
from the utility in order to meet the requirements of the application
process. Second, utilities do not often enter into interconnection
agreements until the engineering plans are submitted, potentially
amended, and approved by the utility, and the regional transmission
operator if necessary; and so unless a project is ready for the
installation and construction phase, it is unlikely that the applicant
would be able to obtain an interconnection agreement or even a letter
of intent.
Response: As noted in the previous response, USDA is still
requiring applicants to obtain the necessary PPA and/or interconnection
agreements prior to USDA obligating funds to a project. We concur with
the commenters that an agreement or letter of intent may be beyond the
applicant's ability to obtain at the time of application. Therefore,
USDA has revised what is required at the time an application is
submitted. Under the final rule, an applicant is required in the
application to demonstrate familiarity with the regulations and utility
policies. In order to do this, it is necessary that the applicant be
knowledgeable of the interconnection and power purchase arrangement
available to them, and that they demonstrate to USDA that they have a
working knowledge of these requirements for their project. In addition,
in the Technical Report, the applicant is required to describe the
utility system's interconnection, requirements, power purchase
agreements, or licenses where required. USDA advises applicants to
provide sufficient information in this regard because the
interconnection and PPA are critical elements in determining whether
the project has technical merit.
Because USDA considers these agreements to be critical, the scoring
of applications for those projects that are proposed for
interconnection will receive the maximum available points if the
necessary agreements or letters of intent to award these agreements are
submitted with the applications.
Comment: One commenter stated that applicants are required to
provide an economic impact analysis for their project. The commenter
feels this is an additional area to streamline, improve, and simplify
the application process by eliminating this requirement for
agricultural producers and small businesses.
Response: An economic impact study is part of the business-level
feasibility study. As noted in a later response, the business-level
feasibility study is mandatory for renewable energy projects with total
eligible project costs greater than $200,000 under the 9006 program.
When a business-level feasibility study is required, the economic
impact study is still a part of such a study.
Comment: One commenter requested that renewable energy systems that
the exemption for providing a feasibility study conducted by a
professional engineer (PE) be raised to more than $100,000. The
commenter observed that his organization had forgone project
applications because the feasibility study would have cost more than
$25,000.
Response: Business-level feasibility studies prepared by an
independent, qualified consultant, not necessarily a PE, will be
required for renewable energy projects with total eligible project
costs greater than $200,000.
Comment: Several commenters expressed concern regarding consistency
with the $100,000 threshold throughout the rule and the units
associated with it, as it related to the proposed feasibility studies
and other requirements.
One commenter stated that the proposed rule's requirements for a
feasibility study were inconsistent. In this section, a feasibility
study is required for projects with a total cost above $100,000, while
in the SUPPLEMENTARY INFORMATION section, a feasibility study is
defined as being required for grant requests over $100,000. Commenter
stated that these
[[Page 41279]]
inconsistencies would confuse the reader and recommended that the
wording be changed so that a feasibility study was required when the
total project cost was above $250,000.
Another commenter recommended that feasibility studies be required
only for projects over 100 kW.
A third commenter stated that the threshold for requiring a
feasibility study for renewable energy projects is not consistent
between the preamble discussion and the proposed regulation. In the
preamble, it refers to projects in excess of $100,000, and in the
regulations, it refers to requests in excess of $100,000. As the
request cannot exceed 50 percent of the total project, this is a
significant difference. The commenter recommended the threshold be
based on the size of the project and not the size of the request (this
is a more consistent value to base the requirement on); however, the
threshold should be increased to $500,000. The Rural Development Office
should have the ability to waive this requirement if the application is
for an existing business and the renewable energy system does not have
a significant impact on their operation (similar to the ability to
waive feasibility studies in the current B&I program).
A fourth commenter requested clarification of $100,000 threshold
for additional requirements. The multiple references to the $100,000
threshold for ``feasibility study for renewable energy systems,''
``services of professional engineer,'' and ``energy audits'' is unclear
in the proposed rule and needs clarification (i.e., either total
project request or total project cost). The commenter recommended a
return to the language and requirements as stated in the 2004 NOFA
published in the Federal Register (69 FR 25234-25259, May 5, 2004) for
``feasibility study for renewable energy systems.''
--Feasibility study for renewable energy systems. Each application for
a renewable energy system project, except for requests of $50,000 or
less, must include a project-specific feasibility study prepared by a
qualified independent consultant.''
If stating thresholds in terms of total project costs, it would
read:
--Each application for a renewable energy system project, except for
projects costing $200,000 or less, must include a project-specific
feasibility study prepared by a qualified independent consultant.''
For the use of the services of a PE, the proposed rules reads:
``Projects costing more than $100,000 require the services of a
professional engineer (PE).'' This requirement would no longer fit the
above statement on requirements for a feasibility study; thus, we
suggest a change of threshold for the requirement of a PE.
The commenter suggested the following language:
``Project requests of more than $50,000 will be required to employ
the services of a professional engineer (PE).''
If stating thresholds in terms of total project, costs, it would
read:
``Project costing more than $200,000 will be required to employ the
services of a professional engineer (PE)''
The energy audit requirement is a good requirement for any energy
efficiency project. The commenter suggested the following language if
all thresholds are stated in the amount requested:
``For energy efficiency improvement projects with a request in
excess of $25,000, an energy audit is required.''
A fifth commenter stated that using the word ``request'' is
unclear. A question remains as to whether feasibility studies are
required for projects with a total cost of $100,000 or if they are
required for those projects in which the Federal share or Federal
request will be $100,000. The latter would provide for feasibility
studies required for those projects that cost $400,000 or above.
Response: First, an explanation of the thresholds used by USDA is
discussed in other comments in this preamble.
Second, as noted previously, the requirement for a stand-alone,
business-level feasibility study will be required for renewable energy
projects with total eligible project costs greater than $200,000.
Third, in the final rule, with two exceptions, all levels at which
certain requirements are incurred (e.g., energy audits, use of a PE)
are now consistently expressed in terms of ``total eligible project
costs.'' The first exception is under the loan program, where certain
requirements are associated with ``loan requests.'' The second
exception is under Sec. 4280.115, where certain requirements are based
on the cost of the contract.
Business-Level Feasibility Study for Renewable Energy Systems
Comment: One commenter stated that according to the proposed rule,
``because of factors of cost and complexity for renewable energy system
projects of more than $100,000 a project-specific feasibility study
will be required.'' It is our understanding that feasibility studies
that are completed prior to the award are eligible for reimbursement
under this program. If feasibility studies completed prior to the award
are not eligible for reimbursement, the commenter recommended that two
phases of the program be implemented. One phase for the feasibility
study/business plan/planning phase and one phase for project
implementation. The commenter proposed that this could be similar to
the Value-Added Producer Grant program. By allowing applicants to
conduct a feasibility study with program funds before implementing
their project, USDA can ensure that the implemented projects are of
high quality and have a high probability for success.
Response: In the proposed rule, the requirement for a project-
specific feasibility study (renamed as a business-level feasibility
study in the final rule to better characterize the type of study and to
distinguish from the Technical Report) was mandatory for renewable
energy projects of more than $100,000. In the final rule, the Agency
has revised this position to reflect that a business-level feasibility
study will be required for renewable energy projects with total
eligible project costs greater than $200,000.
As noted in a previous response, the 9006 program is for the
purchase of renewable energy systems and energy efficiency projects.
The preparation of the Technical Reports are legitimate project costs
and thus, are eligible costs for reimbursement provided the project is
awarded a grant or loan. USDA will not pay for the costs of a study
that are incurred for a project that is not successful or for ``stand
alone'' studies.
Technical Reports
Comment: Two commenters recommended streamlining the application
process for small projects by reducing the technical requirements or by
incorporating this information into the project narrative. One of the
commenters was specifically concerned about the requirements for small
wind and small solar projects.
Response: As noted in previous responses, USDA has provided a
simplified application process for grants for projects with total
eligible project costs of $200,000 or less. The Agency believes most
small solar and small wind projects will be eligible for this
simplified application process. Part of the simplified application
process is the development of a ``reduced'' technical report for these
smaller projects. The Agency believes that the reduced technical
reports will significantly streamline the application process and
reduce the burden to the applicant.
[[Page 41280]]
Comment: One commenter recommended including the general
requirements in the regulation while developing more specific
requirements in a guidance document that can be updated periodically.
Response: USDA, in general, agrees with the commenter on both
comments. First, the rule has been revised to include the general
requirements for the Technical Report in the body of the rule, but with
more specific requirements in the appendices to the regulation, not as
guidance documents.
Comment: One commenter suggested that identifying the schedule of
utilities and regional transmission operators, where necessary, is not
always possible. According to the commenter, the requirement for
applicants not interconnecting to identify the interconnection and PPAs
and schedules thereof is not necessary for those applicants not
interconnecting. The commenter pointed out that many utilities do not
require interconnection agreements for projects installed on the
customer side of the meter, but the utility may require some safety
equipment assurances and so simple proof of that investigation should
be appropriate.
Response: USDA agrees with the commenter that such agreements are
not applicable to applicants who are not interconnecting. The revised
rule language now uses these agreements as an illustration of one of
the types of agreements that may be necessary.
Comment: One commenter stated that the last sentence in proposed
Sec. 4280.111(d) should be removed or explained further. The proposed
rule does not clearly establish a threshold level, beyond those
projects that cost more than $100,000, at which projects will require a
professional engineer. The proposed rule does not establish who will
decide what level of engineering is required or what kind of public
safety issues will require the assistance of an engineer.
Response: The sentence the commenter is referring to says:
``Depending on the level of engineering required for the specific
project or if necessary to ensure public safety, the services of a PE
may be required for smaller projects.'' In general, the level of
engineering required for smaller projects can widely vary. It is not
practicable within this rulemaking to address each situation that may
arise. Each project will have its own specific circumstances--the
nature of the project itself, the site where the project is located,
and the State and local requirements (e.g., public safety issues) that
apply to the project.
It is the proper role of the applicant to ensure public safety. It
is the applicant's responsibility to determine what are the proper
measures to be put into place. These measures may require the services
of a PE. The language is included so as not to transfer the applicant's
responsibility to USDA. The Agency will evaluate the technical merit of
each project. Certain projects, especially those using pre-commercial
technologies or those not pre-engineered, may be determined by USDA to
need the services of a PE to assure technical viability.
USDA advises all applicants to work with their State Office and
other knowledgeable technical entities to determine whether their
project requires the use of a PE and the type of PE. For these reasons,
the Agency has not changed this language (although in the final rule
the level at which a PE is required has been raised to $200,000 total
eligible project costs).
Comment: One commenter also referred to the last sentence in
proposed Sec. 4280.111(d). This commenter noted that there could be
many engineers involved on one project that oversee many different
areas of the project that could hold responsibility for the design
(civil, structural, mechanical, process, and electrical).
The commenter believes that the requirement should state something
along the lines of: ``Projects costing more than $100,000 will be
required to employ the services of a professional engineer (PE), or a
team of Professional Engineers that will ensure that all aspects of the
project conform to National, State, and local codes.''
Response: USDA agrees that a team of professional engineers can be
used, and has revised the wording accordingly.
With regards to referencing national, State, and local codes,
compliance with these codes is addressed in the Technical Report
requirement and USDA does not believe it necessary to repeat it here.
We point out that, as installed, all projects have to meet all
applicable national, State, and local codes. If the project is not
compliant with applicable codes, it is not eligible for funds under the
9006 program.
Comment: One commenter asked about the use of foreign engineering.
Questions raised by the commenter were: What if the project is designed
by an engineer in Germany? Other countries do not have the same
licensing requirements for engineers as the United States does, so
there cannot be a ``PE'' certifying the technology. How are foreign
engineers going to be able to ensure their technology meets or exceeds
U.S. regulations when they are not even able to review documents
without the use of an interpreter?
Response: There is nothing in the rule that prohibits an applicant
from employing the services of a foreign engineer, as long as the
foreign engineer is licensed in the area in which the project will be
built. This is required of any engineer, American or foreign--the
engineer must be licensed in the jurisdiction in which the project is
located regardless of where the person resides or what country the
engineer is a citizen of. USDA notes, however, that an applicant does
not need a PE to certify the technology. If an applicant uses foreign
engineers who are not appropriately licensed, then someone who is
properly licensed will have to be employed. USDA expects that most
foreign engineers that an applicant would use for renewable
technologies have done business in the United States and are familiar
with the necessary licensing requirements. Thus, we do not expect the
use of foreign engineers on projects under this program will be a major
issue.
Comment: One commenter stated that applicants not planning to sell
the excess energy generated should not be required to provide data
identifying existing demand, supply, and the market niche for the
energy produced.
Response: USDA agrees with the commenter. Further, the Agency
believes that these data are not required of any applicant, except as
they would be needed when a business-level feasibility study is
required. The final rule has been revised accordingly.
Comment: One commenter, commenting on proposed Sec.
4280.111(d)(1)(i), suggested removing the first sentence completely or
providing some parameters as to how USDA will qualify project teams.
Response: The sentence referred to by the commenter states ``The
biomass project team will vary according to the complexity and scale of
the project.'' While USDA has removed this sentence in the main body of
the rule, we have retained it for the Technical Reports in Appendix B.
We point out that it is the applicant's responsibility to assemble a
qualified project team, the exact composition of which will vary from
project to project. If an applicant is unsure of what constitutes a
qualified project team, USDA advises the applicant to contact their
State Office, trade associations, and other knowledgeable persons in
the renewable technology field. It is our intent to ensure that
applicants adopt good engineering and business practices in developing
their projects; it is not our intent to define what those practices
are.
[[Page 41281]]
Once an application has been received, it will be reviewed by experts
in the technology for that project. These experts will be able to
assess the qualifications of the proposed project team.
Comment: One commenter, commenting on several sections of the rule
(e.g., proposed Sec. Sec. 4280.111(d)(1)(ii)(A), (C), and (F) and
(d)(2)(ii)(F)) suggested inserting the word ``anticipated'' before
``schedule.'' According to the commenter, identifying the schedule of
local zoning boards or other governing or adjudicatory councils is not
always possible.
Response: USDA agrees with the commenter that there are activities
outside the control of the applicant and that the addition of the word
``anticipated'' schedule is acceptable. Therefore, the change has been
made.
Comment: One commenter referred to proposed Sec.
4280.111(d)(2)(ii), which states: ``Anaerobic digesters must also be
designed and constructed in accordance with USDA anaerobic digester
standards.'' The commenter could not locate the standards being
referred to and recommended that the actual required USDA standards be
listed in the regulation so that the standards are clearly defined.
Response: The standards USDA is referring to are in the process of
being developed by USDA's Natural Resources Conservation Service (NRCS)
and are not yet available. Because of this, the Agency has elected to
remove this requirement from the rule. USDA may revisit this issue once
the NRCS standards are available.
Comment: One commenter recommended that applications identify all
the major equipment that is proprietary equipment and justify how this
unique equipment is needed to meet the requirements of the proposed
design. The reviewing team can then determine if the use of this
equipment is justified and therefore meets the test of free and open
competition prior to the award of grant or loan. In the case of limited
competition, the applicant would be required to provide information as
to the pre-selection process used to select the designer/manufacturer
for their proposal.
The commenter states that the application process addresses the
need to provide very specific and detailed information on equipment
(many times this involves proprietary equipment), technology,
availability of equipment, and vender servicing of equipment
information. As stated in proposed Sec. 4280.111(d)(1)(i)(A), ``The
applicant must also provide authoritative evidence that vendors of
proprietary components can provide necessary equipment and spare parts
for the system to operate over its design life.''
From a procurement side, this many times conflicts with the Federal
requirements to comply with ``maximum free and open competition.''
These free and open competition requirements have their roots in OMB
Circular A-110 and the Grants Management Common Rule and are passed
along to individual agencies via 7 CFR parts 3019 and 3016. One way to
minimize problems is to have the applicant pre-qualify equipment, such
as outlined in 40 CFR 33.230 (FR 3/28/83) or to utilize the RUS policy
statement dated March 28, 2002, as it related to the preselection of
equipment:
Sometimes the selection of a major equipment item can
significantly impact the remainder of the project. It is still
important to maintain an environment of free and open competition in
these circumstances. In cases like this, it may be best to conduct a
``preselection'' process. Two preselection methods can be used. The
first method is simply a pre-bid type of competitive negotiation in
which manufacturers are requested to submit proposals to the owner on
technical merit and prices. The owner and engineer analyze the pre-bids
and select the equipment based on price and other factors. The name and
price of the major equipment item is included in the construction
contract documents used for the competitive bidding of the general
contracts. The price of the pre-selected equipment is included in the
general contract bid documents to prevent this ``preselection'' process
from turning into a sole-source specification.''
The second preselection method is a phased-bid approach in
which the major equipment bid is conducted before the general contracts
are bid. The first phase would be a competitive bid for the major
equipment item based on technical requirements. One of the selection
criteria in this phase may include a pilot test to confirm the
equipment can perform as required. After the major equipment item
manufacturer is selected, the project design can be finalized, and the
remaining contracts bid competitively. Any first-phase contracts are
bid with a hold period sufficient to allow for completing design of the
remainder of the project and bidding the remaining contracts with the
understanding that the first-phase contract(s) will be assigned to a
general contractor when the second-phase contract is awarded. The owner
discloses the name and price of the first-phase preselected contractor
in the second-phase contract bidding documents.''
A proprietary specification is not consistent with free and open
competition and should be used only when project requirements are
unique, as documented by the design engineer and concurred in by Rural
Development, or needed for interchangeability of parts or equipment.
Response: USDA agrees that the application should identify all the
major equipment that is proprietary equipment and justify how this
unique equipment is needed to meet the requirements of the proposed
design. USDA has revised the rule to reflect this for Technical Reports
prepared in accordance with Appendix B. In addition, the Agency has
made it clear that applicants will use ``open and free'' competition
for the procurement of project components in a manner consistent with
the requirements of 7 CFR part 3015 of this title.
Energy Audits and Assessments
Comment: Four commenters requested that a minimum project size
requirement for an energy audit be $50,000. Commenters were in general
agreement that energy audits are valuable at projects at this level of
costs. One of the commenters suggested that USDA consider lowering the
project cost for which an energy audit is required to below $50,000.
Two commenters felt that the proposed rule did not clearly state when
an energy audit and an energy assessment were required.
Response: USDA agrees with the majority of commenters and is
requiring projects with total eligible project costs greater than
$50,000 to conduct an energy audit. In addition, these energy audits
must be conducted or reviewed by an energy auditor. This requirement is
being implemented for all applications. USDA is not lowering it further
under this program, but will encourage applicants to utilize an energy
audit on all such projects when implementing this program.
The energy audit is a useful tool regardless of the size of the
project. USDA believes that, given its cost, it should be required only
for projects with total eligible project costs greater than $50,000.
Energy audits on lower cost projects are still useful and USDA does not
want to discourage applicants of lower cost projects from conducting an
energy audit. Therefore, USDA is not requiring energy audits for
projects with total eligible project costs of $50,000 or less, but
wants to allow those projects the option of using an energy
[[Page 41282]]
assessment in lieu of an energy audit. In summary, the sections have
been rephrased to make clear our intent--that an applicant is required
to conduct an energy audit for projects with total eligible project
costs greater than $50,000 and that, for projects with total eligible
project costs of $50,000 or less, the applicant is required to conduct
either an energy audit or an energy assessment.
Comment: One commenter stated that rule needs to clearly state that
an energy audit is required on all energy efficiency projects under the
documentation portion of the regulations.
Response: As noted in the previous response, energy audits are not
required for all energy efficiency projects. The rule has been
clarified to clearly indicate when energy audits are required and when
they or energy assessments may be used.
Comment: One commenter stated that USDA may wish to consider the
requirements of the project team for energy efficiency improvement
projects. The commenter points out that, in the technical report for
energy efficiency improvement projects, an energy auditor is a required
part of the project team, but an energy audit is not required for
projects under $100,000. The commenter recommended that the title of
energy auditor be changed to energy auditor/assessor in order to be
clear as to how the requirements of an energy audit or assessment for
energy efficiency improvement projects would be affected.
Response: USDA has revised the rule to reflect that, for energy
efficiency improvement projects with total eligible project cost
greater than $200,000, the project team should include ``an energy
auditor or other service provider,'' where other service provider can
include an energy assessor. For energy efficiency improvement projects
with total eligible project costs of $200,000 or less, the final rule
requires the applicant to list ``all key service providers,'' which
would include an energy auditor or assessor.
The final rule requires either an energy assessment or an energy
audit for energy efficiency improvement projects. For energy efficiency
improvement projects with total eligible project costs greater than
$50,000, an energy audit must be conducted by or reviewed and certified
by an energy auditor. For energy efficiency improvement projects with
total eligible project costs equal to or less than $50,000, an energy
assessment or an energy audit may be conducted by either an energy
assessor or an energy auditor.
Self-Scoring
Comment: One commenter recommended that USDA allow applicants to
provide preliminary self-scoring to enable complete technical review
and scoring based on full applications. Another commenter felt that
self-evaluations in which the applicant would review which aspects of
their projects needed the most attention and to understand the funding
projects would be helpful both to USDA and the applicant. The commenter
stated that USDA could then compare their score calculations to the
applicant's self-evaluation and confer with the applicant if they
differ significantly.
Response: USDA agrees with both commenters. The final rule requires
applicants to submit a self-score.
F. Funding
Distribution of Funds
Comment: Several commenters made suggestions on how funds should be
distributed between the grant and loan programs. One commenter
recommended that a portion of the funds be specifically set aside for
grants initially, to be transferred to the loan programs if there are
not enough high scoring grant projects available to use all set-aside
funding. The commenter recommended that a loose guideline be added to
the regulations regarding the amount of money allotted for each type of
program. The commenter wants to ensure that the comparatively small
energy efficiency project proposals have equal access to funding as
larger renewable energy projects. Because of their lower cost, energy
efficiency projects are most likely to apply for grant funding, instead
of the loan guarantee or (in the future) a direct loan program. The
commenter believes that available funds should be distributed evenly
between the programs sections.
Another commenter suggested a split of funds between renewable
energy and energy efficiency projects. The commenter pointed out that
the proposed rule did not elaborate on the policy used in the last two
NOFAs of setting aside 50 percent of the funds for energy efficiency
projects until all proposals were reviewed. The commenter recommended
including the same language from the past two NOFAs in the final rule.
Response: First, this comment is outside the scope of the 9006
program regulation specifically. This comment deals with how USDA will
allocate the funds provided to the program by Congress each year. USDA
believes that all projects eligible under the 9006 program should have
equal access to funds. Each year, USDA will determine what percentage
of funds will be allocated to each of the funding programs. In making
this determination, USDA will consider these comments and other similar
comments with regard to allocations. It is USDA's intent that, if the
funds set aside for either grants or guaranteed loans are not entirely
obligated, the remaining funds will be made available to the other
program.
Comment: One commenter requested that USDA reserve at least 50
percent of the available funds in a program year for direct grants.
While loans and loan guarantees provide leverage of Federal dollars,
the commenter believes that these will have limited appeal to smaller
agricultural producers and rural small businesses and wants to ensure
that there are sufficient funds available to support smaller applicants
and smaller projects.
Response: As noted in the previous response, USDA will consider
this comment each year when we make the initial allocation of funds
between the various funding programs. USDA points out that the scoring
criteria will result in higher scores for those applications from
smaller agricultural producers, which will assist in directing funds to
these producers. USDA does not believe we should specifically set aside
funds for smaller projects.
Comment: One commenter stated that ``in the alternative, loan
guarantees and grants under the proposed rule should be allowed to
cover up to 80 percent of the cost of a qualified System.'' The
availability of long-term, low interest Federal loans and project
suitable grants would significantly increase the number of
agricultural-based energy systems and encourage economic development
and diversity within the agricultural community.
Response: With regard to the percentage of the loan or grant to be
made available to the applicant, the statute sets the limits and USDA
cannot increase it to either the requested 80 percent or 100 percent.
Therefore, no change to the rule has been made in this regard.
Comment: Five commenters stated that USDA should set aside 10
percent of available 9006 funds, or approximately $2.3 million, for the
grant program and allow applications to be made throughout the year
until funds are exhausted. Any unused funds could be rolled over to the
next year with a corresponding reduction in replenishment funding.
Response: As noted in previous responses, USDA will issue an
announcement each year identifying the
[[Page 41283]]
amount of funds available and the initial allocation of those funds
among grants, guaranteed loans, and direct loans. USDA will consider
this and other comments when making those allocations. If funds
initially allocated for one funding type (e.g., grants) are not
obligated within the fiscal year, USDA may make those funds available
to one of the other funding types (e.g., guaranteed loans) within the
9006 program. USDA does not plan to otherwise ``set aside'' any
specific amount of funds for any of the funding programs.
Lastly, the commenters suggested that any unused funds be rolled
over to the next year. While USDA would like to have this flexibility,
Congress determines whether the 9006 program funds must be spent in a
given year or can be carried forward.
Comment: One commenter suggested that more of the money be
allocated to small farmers and not just large corporations.
Response: The scoring system awards extra points to small
agricultural producers and to very small rural businesses, providing
the applicants with the opportunity to score higher than larger
agricultural producers. USDA believes this is the appropriate method
for directing funds to smaller applicants rather than allocating a
specific level of funds to small farmers.
Comment: One commenter suggested that grants for emerging
applications should be raised up to 50 percent of the installed
application of up to 5.0 megawatts (MW) for renewable energy
distributed applications.
Response: USDA cannot accommodate the commenter's request because
the statute limits the matching funds for grants to 25 percent and USDA
does not have the authority to raise this limit.
Comment: One commenter asked why energy audits or assessments,
feasibility studies, and business plans are included in this listing of
eligible project costs and whether these activities need to be
completed before the application is submitted and therefore becomes
ineligible. The commenter stated that if these activities do not need
to be completed, their applicability needs to be more clearly
explained.
Response: The final rule requires energy audits or assessments and
Technical Reports. Business-level feasibility studies will be required
for renewable energy projects with total eligible project costs greater
than $200,000. (In the proposed rule, business-level feasibility
studies were required for renewable energy projects with total eligible
project costs greater than $100,000.) These activities are included in
the list of eligible project costs because they are clearly part of
normal project development. Further, these activities must be completed
prior to submitting the application because the technical evaluation
and scoring of the application cannot be made without this information.
Failure to supply this information at the time of the application makes
the application incomplete, not necessarily ineligible. USDA will not
evaluate or score applications that are not essentially complete.
Therefore, applicants are advised not to submit applications without
these items, as applicable.
Comment: Two commenters stated that, in FY 2003 and FY 2004,
anaerobic digesters were awarded disproportionately funds compared to
other renewable energy systems during the same funding periods. A total
of $43 million in grant awards were made in FY 03 and FY 04. However,
during the same time period, anaerobic digesters were awarded $16
million in grant funds out of the total $43 million over 2 years. A
reason contributing to the higher portion of grant funds awarded to
anaerobic digesters is due to the high capital costs inherent to the
technology.
Anaerobic digesters systems are not solely renewable energy systems
in and of themselves. It is only after the investment is made in
generator sets, that an anaerobic digester serves the purpose of
generating electricity. The main benefits provided for by an anaerobic
digester are more effective onfarm manure management and odor control,
especially for facilities with large numbers of animal units. Not until
the investment is made in the electrical generation equipment does a
digester become a renewable energy system. Therefore, awarding one-
quarter of a total project cost for a system that serves multiple
purposes besides renewable energy generation is not consistent with the
intent of the statute.
Commenter recommended considering total project costs associated
with the anaerobic digester and energy recovery systems when
determining total project costs, but to allow as eligible only those
costs directly associated with energy use or production, such as
engines, boilers, generators, fuel preparation and delivery systems,
electrical interconnections, etc.
Response: The commenter refers to the distribution of funds to the
various technologies made under the 2003 and 2004 NOFAs and states that
anaerobic digesters were awarded a disproportionate share of the funds.
USDA points out that all projects for which funds were sought under
these two NOFAs were accepted. Thus, to the extent any one technology
received more funds than another reflects the types of applications
received and not any bias on the part of USDA to fund one technology
over another. In addition, the scoring in the final rule is intended to
be technology ``neutral.''
Finally, USDA disagrees with the commenter's recommendation that
only those costs associated with the energy use or production be
eligible costs. It is USDA's intent that all costs associated with the
development of any renewable energy technology project, from the
``ground up,'' and as specified in the rule are eligible costs.
Post-Application
Comment: One commenter noted that project funding is allowed for
post application construction or project improvements, except
residential. The commenter suggested that USDA add in parentheses after
residential (single family or multi-family) or simply say housing
landlords are not eligible for assistance.
Response: USDA does not agree that further clarification is needed
within the regulation. USDA believes that the phrase ``residential''
plainly includes single family and multi-family residences. If
additional clarification is needed, USDA will revise its regulations.
Comment: One commenter expressed concerns that grant funding could
not be used for residential projects. The commenter stated that
residential and business areas are inseparable on many farms and that
forcing farmers to separate such activities would be an undue burden.
The commenter recommended that the rule be changed to allow
residential-related expenditures when they are clearly business-related
expenses or when they cannot be distinguished from business expenses.
Three other commenters recommended that farm-based systems sharing
a single meter for residential and business purposes should be allowed.
Response: USDA recognizes that there will be instances where it is
impossible to distinguish between residential and business areas. The
decision to exclude residential projects was a policy decision on the
part of USDA, and we have decided not to make a change as requested by
the commenter. USDA made this decision, in part, on the basis of the
availability of other Federal programs for residential projects and the
availability of numerous State programs for residential projects. USDA
believes that it is an unnecessary duplication to
[[Page 41284]]
include residential projects under the 9006 program. In conclusion, if
an applicant cannot separate residential from business, the project
will not be eligible under the 9006 program. Therefore, a single meter
measuring residential and business usage is not allowed.
Comment: Two commenters requested that the ``post-application''
period be better defined. One of the commenters stated that it is not
entirely clear exactly when the ``post-application'' period begins. The
commenter recommended that ``post-application'' be defined as after the
date when the USDA officer receives the completed application.
The other commenter believes that there needs to be a clarification
of when the project is considered post-application purchase and post-
application construction. The commenter questioned whether the
applicant cannot initiate any construction until the application is
filed, or if the applicant is expected to wait to initiate construction
until the application is filed and approved by the Agency (even if the
project will move forward regardless if it receives funding). This
commenter also suggested using the term ``post-award'' rather than
post-application to further clarify and reinforce the concept that the
project should not start until funding has been awarded and the
necessary environmental review has been done.
Response: USDA agrees that the date the post-application period
begins needs to be better defined and further agrees with the commenter
that the post-application period begins when the Agency receives an
``essentially'' complete application. An ``essentially'' complete
application is one that has all parts necessary for USDA to determine
applicant and project eligibility, to score the application, and to
conduct the technical evaluation. USDA has incorporated this concept in
the definition of ``post-application.''
With the date of the post-application period beginning when the
Agency has received the completed application, the rule allows an
applicant to incur costs once an essentially complete application has
been received by the Agency. The applicant does not have to wait until
the application is approved to begin construction. However, if the
applicant takes any action that would limit the range of environmental
alternatives to be considered or that would have an adverse effect on
the environment, the project will be ineligible. Also, if the applicant
begins construction prior to submitting a completed application, those
costs are not eligible.
Finally, USDA does not see the need to substitute the term ``post-
award'' for ``post-application.'' The main difference is that
environmental clearance would have been completed by the Agency post-
award. Therefore, the applicant would not have to guess, as they do
post-application and pre-award, whether their construction would
potentially limit the range of environmental alternatives to be
considered or have an adverse impact on the environment and thereby
make the project ineligible. USDA believes that education of those
implementing the program and clarification of this point here is
sufficient. Therefore, USDA has not revised the terminology as
suggested.
New Construction
Comment: One commenter recommended that the proposed rule, which
currently excludes new building construction, unless it replaces a
virtually identical facility, be changed such that the incremental cost
of energy efficiency and renewable energy relative to standard new
building construction could be considered an eligible expense.
Response: USDA believes that there is no objective way to implement
the commenter's suggestion and is concerned that to try to implement
the commenter's suggestion could lead to abuse. Therefore, USDA has not
revised the regulation per the commenter's suggestion.
In-Kind Contributions
Comment: Several commenters were concerned about limiting the in-
kind contribution to 10 percent, with most suggesting that it be raised
to 25 percent. Commenters generally felt that limiting in-kind
contributions would unnecessarily hamper collaboration efforts with
such entities as universities, private foundations, and research
partners.
Response: USDA believes that 10 percent is a large enough
``window'' to allow universities and other parties to provide the type
of assistance they are capable of providing. Nothing in the rule
precludes such entities from assisting applicants, and the applicant
still benefits at the 10 percent limit. Therefore, USDA has retained
the 10 percent limit on in-kind contributions in the final rule.
Comment: One commenter felt that provisions within these sections
did not make it easy for the farmer or small business to serve as
contractor. The commenter felt that USDA should allow in-kind
contributions by farmers or small businesses and should allow farmers
and small businesses to serve as contractors ``without so much red tape
to save cost and to help leverage Federal funds.''
Response: The scope and complexity of many of the projects that
would be funded under the 9006 program would require the use of third-
party entities that possess the requisite expertise to construct
renewable energy projects and make energy efficiency improvements.
Further, if a project is not properly constructed and installed, the
applicant can hold the contractor responsible for completing the
project satisfactorily. This level of accountability is lost if the
applicant is also the contractor. Therefore, except as discussed below,
USDA has decided that it is in the best interest of the 9006 program as
a whole to prohibit applicants from also being the contractor.
Under the final rule, applicants will be allowed to perform part of
the work themselves provided they meet the expertise requirements
contained in Sec. 1780.67. As noted above, however, the applicant's
in-kind service will not be counted towards the matching fund
requirement and will reduce the total eligible costs associated with
the project (thereby reducing the maximum amount of funds that could be
requested).
Comment: One commenter stated that, although requirements for in-
kind contributions were reasonable, strictures against any other
Federal co-funding could restrict applications. The commenter observed
that an applicant could receive funding from Federal sources other than
USDA. Rather than impose a blanket ban on other Federal funding, the
commenter recommended that USDA develop a specific list of programmatic
funding exclusions.
Four other commenters suggested that co-funding from State rebate
programs be fully allowed. Another commenter stated that USDA should
allow full co-funding from State public benefit rebate programs.
Response: USDA made an administrative determination that the 25
percent limit for grant funding of a project is applicable to funds
received under the 9006 program and all other Federal grants. No
changes have been made in the final program. State funding, regardless
of source, is an acceptable source of matching funds.
Funding Levels
Comment: One commenter requested clarification of the $750,000
grant limitation per entity. The commenter asked if the limit applies
to a single fiscal year. The commenter also asked if the same
individual or entity can apply
[[Page 41285]]
for that amount the following year as well.
Response: USDA has clarified in the regulation that the $750,000
grant limitation applies to the Federal fiscal year. Applicants may
apply for grants (or loans) in successive years, with no limitation.
However, if a grantee (or borrower) has not made satisfactory progress
towards the completion of projects previously funded under the 9006
program, as determined by USDA, USDA will deny further grant or loan
assistance.
Comment: One commenter requested clarification on the relationship
of the B&I program and the proposed rule. The commenter asked whether
the B&I program guaranteed 50 percent of the loan or 80 percent to 100
percent.
Response: Under the 9006 program, an applicant may request
guaranteed loans under both the 9006 program and the B&I program for
the same project. In this instance, two loans would be established--one
under the 9006 program and the other under the B&I program. The percent
guarantee for each loan would be determined based on the respective
program. For the 9006 program loan, the percent of guarantee would
range from 70 to 85 percent depending on the amount of funds being
requested for the 9006 program loan (see Sec. 4280.123(c)). For the
B&I program loan, the percent guarantee would range from 60 to 80
percent, unless the Administrator grants an exception in which case the
loan guarantee could be as high as 90 percent (see Sec. 4279.119(b)).
Comment: Two commenters suggested that the grants be limited to
certain size (kilowatt) restrictions. One of the commenter suggested
that grants be limited to systems of 10 kW or less, with the 25 percent
grants capped at $15,000. The other commenter suggested that grants
would be limited to systems of 200 kW or less, with the 25 percent
grants capped at $50,000.
Response: USDA believes there should be an emphasis on small
projects. However, USDA believes it is important for the program to be
available to as many eligible projects as possible. Consequently, USDA
disagrees with the approach used in this comment to place emphasis on
small projects. Instead of adopting the size limitations suggested by
the commenter, USDA has decided to emphasize small projects by awarding
them priority points. Although the approach is different, we believe
this captures the concern of the commenter.
Comment: Several commenters commented on the minimum funding level
proposed for grant applications.
Several of the commenters supported the minimum funding amount of
$2,500. In general, these commenters stated that this level will
encourage small agricultural producers or rural small businesses to
apply for funding, that projects requiring additional assistance under
$2,500 are not likely to benefit in any sustainable way from the
additional assistance, and that the $2,500 amount also potentially
allows additional leverage for a larger number of projects to be
funded.
Two commenters, on the other hand, requested that USDA lower the
minimum funding level. One of these commenters stated that the majority
of their company's audit reports recommend installing a mix of
equipment that costs between $6,000 and $10,000. Since there is a
$10,000 minimum equipment cost that farmers must reach in order to be
eligible for Section 9006 grants, many small farms that can achieve
significant energy savings are not eligible to apply for any
assistance. These small farmers comprise the group targeted by Section
9006 as needing the most assistance, yet with the proposed rule they
are left out. One of the commenters recommends that, in order to best
serve the small, possibly struggling farms, USDA consider lowering the
minimum equipment cost.
The other of the two commenters requested USDA to clarify these
criteria to allow applications that combine small energy efficiency
projects. Although energy-efficiency projects can take the form of
large capital projects, they are often improvements and upgrades to
existing equipment and facilities. As such, energy-efficiency projects
do not always involve large capital expenditures. Given that small
farms and other rural small businesses are a major target audience, it
is likely that total project costs for many individual energy-
efficiency projects will fall under $10,000 (making them ineligible for
grants assuming a minimum grant of $2,500 with a 75 percent cost-share)
or even $5,000 (making them ineligible for guaranteed loans, assuming a
minimum loan of $2,500 with a 50 percent cost-share).
Response: USDA proposed the $2,500 minimum funding level because
the Agency recognized the application process, as proposed, was such
that it would be unlikely that projects costing less than $10,000 would
apply for funds under this program. However, with the simplified
application process that allows applicants to submit a less detailed
application, we believe that the minimum funding level can be reduced
to help attract additional, worthwhile projects. Based on the
commenters' suggestions, we have set the minimum funding level at
$1,500 (equivalent to $6,000 in total eligible project costs at the 25
percent funding level) for energy efficiency improvement projects.
Comment: Two commenters expressed concern over the minimum funding
amount of $2,500 for guaranteed loans. Both commenters stated that it
is not practical or economical to complete the paperwork process for
that small of a loan. One of the commenters recommended that the
minimum funding level be raised to $100,000. The other commenter
recommended at least $50,000. According to this commenter, it is
generally not worth anyone's effort for the documentation and costs
associated with a guaranteed loan to look at anything less than
$100,000.
Response: In the final rule, USDA has raised the minimum amount for
a guaranteed loan from $2,500 to $5,000. If the new minimum amount is
still not practical or economical to complete the paperwork process for
that size loan, then a lender is not required to participate in that
loan.
Comment: One commenter requested additional clarification to
determine the collateral positions/requirements if the maximum loan
request was applied for under this rule and another loan was requested
under the regular B&I program.
Response: Where joint financing is being secured by the same
assets, a parity lien position will be taken.
Other Funding Mechanisms
Comment: One commenter suggested that commercialized systems should
also be eligible for the USDA loan program either under Section 9006 or
Farmers Loans or via the Rural Utility Service (RUS).
Response: Commercialized renewable systems are eligible under the
9006 program. Commercial systems producing electricity are eligible for
funding under the RUS programs. However, the Farmers Home
Administration is no longer in existence. To determine whether or not
RUS programs are of interest to an entity, that entity should contact
RUS directly.
G. Evaluation/Scoring of Applications
General
Comment: Three commenters stated that, in FY 04, USDA awarded
several grants to applicants who also received grants in FY 03. The
commenters recommended that the rules discourage multiple applications
by the same
[[Page 41286]]
entities by awarding 5 points to applicants that have not been previous
funding recipients and by limiting funding for all project phases at a
single site to 2 years. According to the commenters, these two
conditions would help to spread the Section 9006 funding resources
among the broadest possible number of applicants and in broader
geographic areas.
Response: USDA has revised the regulation to award 10 points to
applicants who have not received funding in the 2 previous Federal
fiscal years. USDA, however, disagrees that funding at a single site
should be limited to 2 years or to any number of years. USDA believes
that each application should be evaluated on its own merit without
regard to previous applications made for projects at the same site. By
evaluating each application on its own merit, USDA ensures that funds
will only go to projects with significant merit.
Comment: One commenter felt that the evaluation criteria were not
detailed enough and did not account for the noneconomic benefits of any
particular project. The commenter recommended incorporating the
following weighted considerations into evaluation criteria:
Business Impact, 25 percent.
Technical Merit, 35 percent.
Environmental Benefits, 10 percent.
Replicability, 10 percent.
Small Applicant, 10 percent.
Rural Economic Development, 10 percent.
The commenter also provided extensive justification for his
recommendations.
Response: USDA has modified the criteria for scoring in the final
rule, taking into account this comment and others. In terms of this
commenter's suggestions, we have added or modified the criteria for
technical merit, environmental benefits, commercial availability
(replicability), and small applicants. We have not added a criterion
for business impact, although within the technical merit criterion we
have included a subcategory on financial and market assessment. Lastly,
we have not included a rural economic criterion. Eligible projects must
be located in rural areas and thus, we did not see this suggested
criterion as adding value to the scoring process.
With regard to the weighting suggestions, USDA has re-scored the
criteria as we deemed appropriate, to give higher weighting to
applications from smaller agricultural producers, very small
businesses, and small projects. We think this is appropriate to further
the goals of the authorizing statute.
Comment: One commenter expressed two concerns with the evaluation
of grant applications: Inconsistencies in how the evaluation criteria
are applied; and a disconnect between the kinds of projects that score
well based on these criteria and projects that have a good chance for
success or even being built. The commenter provided suggestions for
procedures and language to address the scoring inconsistencies and ways
that the evaluation criteria can be improved in order to better reward
stronger projects, including ensuring that State Offices submit the
entire application along with the assigned scores, providing more
training to State Offices responsible for administering the program,
and implementing a system to compare scores between renewable energy
and energy efficiency projects. With regard to the last suggestion, the
commenter stated that because the evaluation criteria for the two
categories of grant applications are different, it is important that
USDA have the ability to compare the projects to each other when
distributing the last bit of funding each year. The commenter believes
that a low-scoring energy efficiency project should not be funded over
a relatively higher scoring renewable energy project if funds for
renewable energy projects are exhausted more quickly (and vice versa).
The commenter suggested one possible method for comparing scores:
calculate a percentage of points earned by an applicant by dividing
points awarded by the total points possible. This percentage could be
used to compare renewable energy and energy efficiency projects when
allocating the last of the funds available each year.
Response: In order to ensure consistent results, USDA is
standardizing its evaluation materials and providing for a review of
all initial scoring. With regard to the assertion that there is a
``disconnect'' between projects that score well and those that have a
good chance for success or even being built, USDA has implemented in
the final rule a scoring criterion on technical merit. This should
alleviate the asserted disconnect for projects ``that have a good
chance for success.'' However, it is nearly impossible to establish
within a regulation whether or not a funded project will actually be
built by an applicant. USDA believes that only applicants who actually
intend to build their projects will expend the effort to submit an
application.
Finally, with regard to scoring between renewable energy projects
and energy efficiency improvement projects, in the final rule, USDA has
revised the points to equalize the maximum points that can be scored by
the two project types. This change puts all projects on equal footing
and allows a direct comparison of scores. USDA notes that an applicant
is allowed to submit applications for a combined renewable energy
project and energy efficiency improvement, and each application will be
evaluated separately based on its own merit.
Comment: One commenter suggested that innovative projects
leveraging different sources of funding (loans, guarantees, and grants)
should receive the highest priority eligible for grants.
Response: USDA disagrees that different types of funding should
serve as a criterion for scoring applications. USDA does not believe
that combining different sources of funding is important in determining
which projects receive funding, and therefore has not adopted the
commenter's suggestion.
Comment: One commenter recommended that USDA recognize and utilize
existing support infrastructure to assist in grant and loan
evaluations. Existing programs within USDA could be tapped to promote
prequalification screening, build grants-response assistance, and
supply project development workshops with necessary materials.
Response: USDA plans to develop training and assistance material to
help applicants utilize the 9006 program. However, we have not included
pre-qualification screening to the program because applicants can and
are encouraged to seek advice from their State Office prior to
beginning the application process to assess their project.
Comment: One commenter noted that, as proposed, the applicant is
required to create financial projections for a proposed project. In
doing this, there are no required formats and no checks on whether a
given set of projections is reasonable. As a result, two similar
projects could have very different financial projections and paybacks.
For example, one wind project might have a realistic assumption for
maintenance and insurance costs while another might have underestimated
these. The State Rural Development staffs do not have the knowledge to
catch these inconsistencies. Similarly, the technical reviewers at NREL
might only catch these discrepancies if they were way out of line, for
example, by a factor of two or more for significant expenses.
To address this evaluation problem, the commenter recommends that
USDA, with the assistance of NREL, develop standard industry metrics
and financial templates for the most common project types. Based on the
first 2 years of the
[[Page 41287]]
program, these project types should be small wind, utility-scale wind,
and anaerobic digesters. By having these metrics and templates, a
project with unrealistic assumptions would be easily `red flagged' by
reviewing staffs and, potentially, receiving either a revised score or
a qualified evaluation by reviewing staffs.
Response: The Agency agrees with the concept put forward by the
commenter. We do not believe, however, it is necessary to have these
incorporated into the rule implementing the 9006 program. We believe
that such industry metrics and financial template would be better
developed by experts in the industry with input from the U.S.
Department of Energy (DOE), the U.S. Environmental Protection Agency
(EPA), and USDA. Such material could then become part of the
implementation tools being developed to assist in the implementation of
the 9006 program.
Comment: One commenter stated that, currently, State Rural
Development staffs score an application based solely on information
provided by the applicant. It is our understanding that Rural
Development staffs then document how these scores were derived and
forward this annotated score sheet to DOE/EPA technical reviewers,
along with the technical feasibility study. They do not, however,
forward the complete application package including financial pro
formas. As a result, technical reviewers must rely on State staffs to
evaluate the projects on financial grounds. The commenter recommended
that USDA State Offices forward the complete application packet to
technical reviewers so that financial information can be evaluated in
more detail.
This same commenter stated that Rural Development staffs assigned
to this program are, for the most part, not trained to evaluate
renewable energy and energy efficiency projects, either on technical or
financial grounds. Yet they are being asked to provide preliminary
scoring for these projects before forwarding applications on to NREL
and then USDA headquarters. The commenter believes that the role of the
State Offices in reviewing applications should be solely to verify that
applications are complete, applicants and projects are eligible for
funding, and additional sources of funding, interconnection agreements,
and other qualifying conditions have been documented. At that point,
complete applications should be forwarded to NREL or other assisting
agencies for technical and financial review, as well as project
scoring. In addition, NREL should be provided discretion to adjust
scoring up or down from what an applicant claims based on their expert
judgment of realistic energy and financial performance of the proposed
project.
Response: Under the 9006 program, it is the Agency's intent that
State Office staffs review the application to determine applicant
eligibility, project eligibility, application completeness,
environmental assessment, and other qualifying conditions, and to
assign a preliminary score to the project. The Agency believes that
State Office staffs are competent to provide preliminary scoring of the
applications.
The State Office will then forward the entire application,
including financial information, to the technical reviewers (e.g.,
NREL, DOE). The technical reviewers will evaluate financial and
technical information separately and in tandem. The technical reviewers
will be responsible for scoring the project on their own. Under this
process, the technical reviewers will not adjust the State Office's
preliminary scoring, but will provide USDA with a recommendation based
on a comprehensive evaluation.
Once the technical reviewers have completed their review of the
application, they will return the entire application with their
recommended score for the application to the State Office. The State
Office will then forward the entire application to the National Office.
The National Office will make the final determination of the score to
be assigned to each application. The National Office will use a
committee composed of experienced business and financial people to make
adjustments to the score. USDA is the Agency responsible for the 9006
program and its allocation of funds to projects.
Comment: One commenter stated that the regulation language was
unclear as to how the technical review would be conducted. The
commenter did not feel that traditional lenders would be capable of
performing a technical review and recommended that USDA retain the
technical review function.
Response: While it is unclear to the Agency as to why the commenter
thought this would be conducted by a lender, as stated in the previous
response, USDA intends to retain the technical review function for all
proposed projects.
Comment: One commenter asked USDA to clarify whether the criteria
to be ``* * * individually addressed in narrative form on a separate
sheet of paper'' are to be addressed by the Agency or the applicant.
Response: The sentence referenced by the commenter should have
referred to the applicant. In the final rule, this has been replaced
with the requirement for the applicant to self-score the project.
Comment: One commenter suggested that scoring be geared toward
capturing measures that are easily replicated.
Response: We agree with the commenter that scoring should be geared
toward measures that are easily replicated because this provides for
objective scoring. We have changed some of the scoring criteria
significantly since the proposal. We believe that the scoring criteria
included in the final rule are necessary from both a statutory
perspective and an evaluative perspective. We have tried to make each
measure as replicable as possible, but recognize that for some criteria
(e.g., technical merit), this is essentially not practicable.
Ineligible or Incomplete Applications
Comment: One commenter stated that as written, it leads to the
conclusion that a decision that an application is incomplete can be
appealed when in fact it may be a decision subject to review rather
than appeal. The commenter, therefore, suggested that between the words
``any'' and ``appeal'' add the phrase ``applicable review or.''
Response: A determination by USDA that an application is incomplete
is subject to 7 CFR part 11, and we believe this is sufficiently clear
so that no change is necessary.
Energy Efficiency Techniques and Practices
Comment: One commenter suggested that additional points be given to
applications for renewable energy systems that specify energy-efficient
procedures and behaviors in their management plans. The commenter
believes that energy-efficient techniques and practices developed with
today's farming equipment can improve a farm's receptiveness to new
technologies and, therefore, improve the eventual payback of renewable
energy projects. The commenter further maintains that behavioral and
procedural project elements require no capital investment, and can be
incorporated into project management plans for renewable energy
systems.
Response: While USDA agrees that management plans that incorporate
specific energy-efficient procedures and behaviors are to be applauded,
such measures cannot be measured at the time an application is
submitted. It is possible that a management plan incorporating specific
energy-efficient procedures and behavior is never fully
[[Page 41288]]
implemented, while a management plan that does not address these items
is implemented in a fashion that incorporates these measures. USDA does
not believe, in the end, that these measures can be objectively
evaluated at the time of application scoring and, therefore, has
decided not to incorporate this suggestion in the final rule.
Energy Replacement and Generation
Comment: One commenter pointed out that producers who seek to
provide energy directly to their operators can earn at most 20 points
for the quantity of energy produced. According to the commenter, the
program was written to benefit both larger and smaller systems. The
commenter urged the Department to increase the opportunity for smaller
systems to compete by reducing the points awarded to systems intended
primarily for sale to no more than 10.
Another commenter recommended that USDA adjust the scoring system
to reward higher value on-site generation, which offsets retail energy
costs, rather than commercial generation of electricity sold at
wholesale rates.
Response: USDA agrees with the commenters and has reduced the
points associated with the generation of energy.
Comment: One commenter requested that case-based optimization and
integration be used and be better developed in this rule. According to
the commenter, the proposed point weightings arbitrarily establish an
``either-or'' condition not stemming from the 2002 Act. The commenter
states that, for most onsite energy projects, strict dedication to
electric generation may be only marginally economical as stand-alone
applications, while economies and efficiencies can be improved through
better combined heat and power (CHP) integration to serve both facility
thermal and electric loads. This ``case-optimized'' level of project
improvement couples design-based energy efficiency with installation of
a renewable energy generation package but requires a different
weighting of criteria.
Response: USDA generally agrees with the commenter and the
revisions we have made to the final rule should address most of the
commenter's concern. In the final rule, applicants can receive points
based on one of three scenarios--energy replacement, energy saving, or
energy generation. These scenarios are not focused on electric
generation. CHP projects that are installed primarily for self-use by
the agricultural producer or small business should score well under the
energy replacement scenario compared to projects that are strictly
electric generation projects.
Comment: One commenter asked if a renewable energy project can be
shown to offer significant increases in energy efficiency through
optimal use of thermal energy in addition to electrical energy, will
preference for CHP integration be given over ``electric-only'' project
design.
Response: While USDA acknowledges that CHP integration projects are
inherently more efficient than electric-only project designs (producing
more energy per unit input), we have not given direct preference to CHP
integration projects in the final rule. Instead, because they are
inherently more efficient, such projects will score higher than
electric-only projects during the scoring of applications. USDA
believes this is the best way of encouraging such designs within the
overall framework of the 9006 program.
Comment: One commenter suggested changing the last two words in
proposed Sec. 4280.112(d)(1)(i)(A) from ``utility company'' to
``current energy supplier'' because some projects may be replacing
propane and the propane company will not necessarily be a ``utility
company.''
Response: USDA has deleted the last sentence in the referenced
paragraph, because we deemed it to be only guidance and, thus, not
necessary to the final rule. USDA notes that we agree with the
commenter's point that some projects may be replacing propane, but with
the elimination of the sentence, we do not need to further address this
comment.
Comment: Four commenters stated that USDA should clarify whether
``energy replacement'' refers to total use for the farm/business or
replacement of just one source of energy consumption (e.g., hot water
or irrigation pumping). This is important, as a potential project could
significantly replace the energy used in one farm or business activity
while having less of an impact on the enterprise's overall energy use.
As long as the renewable energy project is related to a measurable use
and specified application of energy (e.g., propane consumption for hot
water or electricity consumed for irrigation), then the applicant
should not have to measure energy replacement against overall energy
use but just against that specified source of energy consumption.
Another commenter stated that clarification is needed regarding the
base of energy use against which the energy replacement will be
measured. That is, if a farmer is planning on generating electricity,
is the base amount the energy bill for the entire farm enterprise, for
only the farmstead, or for only one grain elevator? This commenter felt
that either of these could be a legitimate base.
Response: USDA agrees with the commenters that energy replacement
should be measured against the energy consumption of the specific
source being replaced and not against the overall energy consumption of
the business. USDA, therefore, has reworded this criterion to reflect
the commenters' suggestion. In the final rule, we have indicated that
the base is the: ``estimated quantity of energy consumed over the same
12-month period during the previous year by the applicable energy
application.''
Comment: One commenter suggested that a definition of what
constitutes the ``baseline'' for baseline energy usage as discussed in
proposed Sec. 4280.111(d)(10)(iii)(A), may be helpful to applicants
and reviewers in evaluating a project. The commenter asked if the
``baseline'' is considered as the current energy usage and if the
baseline can be considered for a production improvement project. In
many cases, according to the commenter, energy efficiency projects are
implemented in conjunction with production increases. This may result
in a net increase of energy usage but allows for a reduced amount of
energy required per unit of production. The commenter suggested that
``baseline'' be defined as: Total energy consumption during production
by a process or facility.
Response: While we have not added a specific definition to the rule
for ``baseline'' energy usage, we have clarified in the evaluation
criterion, as noted in the previous response for energy replacement,
that the baseline is the ``estimated quantity of energy consumed over
the same 12-month period during the previous year by the applicable
energy application.'' We believe this provides sufficient guidance for
determining baseline energy usage for energy efficiency improvement
projects.
As noted in a previous response, while we have not revised the
definition of energy efficiency improvement, we have retained the
phrase ``that reduces energy consumption.'' This allows an applicant to
express the reduction in energy consumption in a number of ways,
including, but not necessarily limited to, energy saved per unit of
production.
Environmental Benefits Criterion
Comment: Several commenters suggested that this criterion
specifically identify environmental standards (in addition to health
and sanitation standards) and that additional points be
[[Page 41289]]
given to projects that exceed applicable environmental, health, and
sanitation standards. Some commenters objected to the awarding of
points to applicants whose projects end up just meeting the applicable
standards.
Response: USDA has determined that this criterion should focus on
environmental goals, as suggested by the commenters, but should not
address health and sanitary standards. Therefore, USDA has revised this
criterion to address only environmental goals, which awards points to
those projects that contribute to the environmental goals and
objectives of other Federal, State, or local programs.
Comment: One commenter stated that the criteria listed in the
proposed rule, ``to upgrade an existing facility or construct a new
facility required to meet sanitary standards,'' limits greatly the
amount of environmental benefit that could be reported as required by
the statute. Some suggestions would be to report the amount of nitrogen
oxides, sulfur oxides, hydrogen sulfide, and other pollutants
prevented, as well as the reduction of fossil fuels consumed due to the
installation of the system. Other environmental criteria may also
examine the potential impact on local water quality and wildlife.
Response: As noted in the previous response, USDA has revised this
criterion to only address ``environmental goals.'' The environmental
goals are intentionally worded broadly to allow applicants the
flexibility of determining which goals and objectives can be
considered, including emission reductions. In order to obtain the
points associated with ``environmental goals,'' the applicant must
provide documentation from an appropriate authority supporting the
applicant's claim.
Comment: Three commenters pointed out that Congress specified that
USDA should take into account ``the expected environmental benefits of
the renewable energy system'' in considering the amount of a grant or a
loan. The Department proposes to assign points for environmental
benefits only if the project is helping an operator to comply with an
existing law or regulation (``to upgrade an existing facility or
construct a new facility to meet applicable health or sanitary
standards''). The commenters suggested that the Department should
reconsider this criterion in the proposed rules. Since everyone is
subject to the same laws, we believe the Section 9006 program should
not subsidize compliance with the laws. The commenters believe that the
government should not be in the business of paying entities to comply
with the law. To resolve these concerns, the Department should make
clear that the term ``environmental benefits'' in the statute means the
expected or likely quantifiable pollution reduction or other
environmental gains by a particular project.
Response: In revising this criterion, USDA believes that projects
that ``contribute'' to environmental goals and objectives should
receive points. USDA does not believe this contribution needs to be
limited to exceeding such goals and objectives.
Comment: One commenter recommended changing the end of the last
sentence from ``is needed and required to meet the standard'' to read
``will result in the standard being met.'' Many environmental
regulatory agencies will not proscribe a single means to attain a
standard so the suggested wording allows for the ``more than one way to
skin a cat'' approach to be allowed.
Response: Because of the change in this criterion, as noted in
previous responses, this suggestion is no longer valid.
Commercial Availability Criterion
Comment: One commenter asked why the project would gain an
additional 10 points when a project is not even eligible for the 9006
program if it is not replicable and commercially available. The
commenter also asked what the appropriate way would be to address the
use of foreign technology. For example, the commenter asked if a
renewable energy system in use in Germany, but never has been utilized
in the United States, is considered commercially available and
replicable for the 9006 program. Lastly, the commenter asked if there
any regulations restricting the use of foreign technology, engineering,
and imported products.
Response: The project eligibility criteria include the requirement
that a project be either pre-commercially available or commercially
available. This criterion provides points for those projects that are
commercially available, whereas a pre-commercial project would not
receive any points under this criterion. USDA has decided to keep this
criterion in the final program.
Commercial availability and replicability of technology in a
foreign country does not translate to commercial availability and
replicability in the United States. To meet these requirements in the
United States it will be necessary for the foreign firm to have a
business presence in the United States to support the applicant in the
design, purchase, operation, and maintenance of the technology
provided, and there will need to be sufficient operating experience by
U.S. operators. If there are no operating units in the United States,
the technology will normally be considered pre-commercial without
adequate and serviceable performance and service guarantees from the
foreign supplier. Otherwise, there are no restrictions in this
regulation on the use of foreign technology, engineering, or imported
products.
Small Agricultural Producer
Comment: Several commenters stated that the criterion for small
agricultural producers needed to be revised to provide more points and
to reduce the gross market value associated with this criterion.
Response: USDA agrees with the commenters that more points need to
be given to small agricultural producers and that the threshold for
obtaining the points needs to be adjusted. In the proposed rule,
agricultural producers with less than $1 million in gross market value
would have received 10 points. In the final rule, we have reduced the
gross market value to $600,000 and the awarded points to 5. In
addition, we have added one additional condition under which additional
points can be awarded. Specifically, if the gross market value is less
than $200,000, the applicant will be awarded 10 points. In the final
rule, we also award 10 points to rural small businesses that meet the
definition of ``very small business'' (i.e., a business with fewer than
15 employees and less than $1 million in annual receipts).
Cost Effectiveness Criterion
Comment: One commenter recommended considering simple payback and
simple payback periods when granting loans. The payback considers the
initial investment costs and the resulting annual cashflow. The payback
time (period) is the length of time needed before an investment makes
enough to recoup the initial investment. But the payback method does
not account for savings after the initial investment is paid back from
the profits (cashflow) generated by the investment (project). This
method is a ``first-cut'' analysis to evaluate the viability of
investment.
Response: The Agency agrees with the commenter and has retained the
simply pay-back criterion under return on investment in the final rule.
In addition, applicants are required to provide in their Technical
Report an analysis of the proposed project's financial performance,
including the calculation
[[Page 41290]]
of simple payback. This financial performance analysis includes, but is
not limited to, investment and production incentives, loans, grants,
expected energy offsets, and ``other information necessary to assess
the project's cost effectiveness.'' Thus, the applicant has the
opportunity in the financial performance analysis to address savings
after the initial investment is paid back.
Comment: One commenter recommended altering the evaluation points
system for cost effectiveness to give greatest priority to energy-
efficiency projects with payback of 2 to 5 years. The commenter states
that projects with payback under 2 years are financially strong
inherently, and, therefore, may not require subsidy. The commenter
points out that many energy-efficiency projects display 2 to 5 year
paybacks, yet sustain savings well beyond year 5, with a large
potential for energy savings.
Response: USDA agrees that the length of payback is important. In
fact, USDA is encouraged by the 9006 statute to focus on payback. USDA
also agrees that projects with different paybacks should be treated
differently. However, USDA differs on how those with different paybacks
should be treated. In the final rule, USDA gives higher priority points
to projects with the paybacks of less than 4 years, a lesser priority
to projects with paybacks of between 4 and 7 years, and even less
priority to projects with an 8 to 11 year payback. USDA believes that
projects with very short paybacks will not likely need to participate
in this program and consequently the concern raised by the commenter
will be reduced, if not eliminated.
Matching Funds Criterion
Comment: One of the commenters suggested that USDA should correct
the apparent discrepancy in requiring applicants to exhibit financial
need while awarding higher points if the applicant is able to provide
greater than 85 percent of the total project cost.
Two other commenters also believe that the rule seems to
discriminate against applicants with financial need because applicants
receive more points for requesting a smaller share of total project
costs.
Response: The availability of matching funds is a key indicator of
an applicant's readiness to proceed with the proposed project. However,
USDA agrees with the commenters that the approach used in the proposed
rule seemed inconsistent and discriminatory as described by the
commenters. Therefore, we have made two significant changes to this
criterion in the final rule. (Note: In the final rule, this criterion
has been renamed ``Readiness.'')
First, in the proposed rule, this criterion awarded points based on
the matching funds provided by the agricultural producer or the small
business. In the final rule, this criterion awards points based on
matching funds to be provided by sources other than the agricultural
producer or small business.
Second, in the proposed rule, this criterion awarded points based
on the amount of matching funds being provided by the applicant. In the
final rule, points will be awarded on the basis of the percentage of
the matching funds for which an applicant has received commitments from
the sources providing those funds prior to receipt of the complete
application by the Agency. For example, an applicant who has received
commitments for 100 percent of the matching funds is awarded more
points than an applicant who has received commitments for 75 percent of
the matching funds.
Note that the revised criterion does not address the percent of
matching funds as in the proposed rule. Thus, for example, an applicant
providing 50 percent of the matching funds and an applicant providing
85 percent of the matching funds both receive the same number of points
if they both demonstrate they have 100 percent commitments of the
sources providing the matching funds.
Management Criterion
Comment: Several commenters expressed concern with this criterion
and recommended that USDA eliminate it. One of the commenters pointed
out that it is important for USDA to focus funding on projects with a
high likelihood of success, but awarding points to professionally
managed projects is misguided and unnecessary to further this
objective. Providing additional points to projects utilizing
professional managers favor larger projects for which such management
is a necessity. This goes against a program goal to support modestly
sized projects and discourages the active participation of individual
farmers and small businesses in managing their systems. Farmers who are
active in the management of their own systems see the benefits first-
hand and serve as a vital conduit for communicating the benefits of
such systems to other farmers, thus helping to increase their adoption.
The commenter urges USDA to remove the management criterion for the
evaluation criteria, and suggests that the likelihood of success of an
application can be adequately determined from other criteria.
Three of the commenters stated that the Department proposes to
award 10 points to renewable energy projects managed by third-party
operators. The commenters recommended that the Department eliminate
this criterion. First, this proposal penalizes applications for smaller
modular systems (for example, solar hot water and photovoltaic systems,
small wind turbines) that may require occasional third-party
maintenance but which certainly do not require ongoing outside
management. Second, this evaluation criterion is contrary to the
Section 45 Federal Production Tax Credit rules which require a
renewable energy project owner to be ``actively involved'' in day-to-
day management of the project (or have sufficient passive income) in
order to be eligible to utilize the credits. Third, only the largest
projects are likely to involve outside contractors or managers. The
commenters feel this criterion is a ``one size fits all'' condition
that discriminates against good projects that do not require outside
management.
Another of the commenters stated that he would not give 10 points
here. The commenter's experience over 2 years of applications shows
that almost all applicants are given these points, if for no other
reason than by merely stating they will have a third party do the
monitoring. This criterion does not distinguish one application from
another, and the quality of the management team is not something one
could easily evaluate in a review of these applications anyway.
Two other commenters expressed concern with awarding 10 points if a
renewable energy system will be monitored and managed by a qualified
third-party operator. One commenter stated that they had a wind farm
application last year that was not funded. The applicant has owned,
operated, and maintained wind turbines for about 10 years, and they are
qualified to monitor and manage their own wind turbines. However, they
lost 10 points because they did not hire a third party. The other
commenter stated that this stipulation will penalize applications for
smaller projects that may require occasional third-party maintenance,
but do not need ongoing outside project management. Only the largest
projects are likely to have third-party management, and third-party
management is no guarantee for a more effective, efficient run project
compared to a farm operator or small business owner. This criterion is
also contrary to the Section 45 Federal Production Tax
[[Page 41291]]
Credit rules which require a renewable energy project owner to be
``actively involved'' in the day-to-day management of the project.
Response: USDA agrees with the commenters and has removed this
criterion.
Comment: One commenter stated that management is another evaluation
criterion that was subject to the interpretation of the scorer as to
what constitutes a ``qualified third-party operator.'' For example: The
best option for providing construction, operations, and maintenance
services for large wind turbines is often the company that manufactures
the wind turbine. In FY 2004, there was at least one case where an
application received zero points for using the turbine manufacturer as
a third-party operator. In at least two other States, very similar
applications using this same management plan (and the same turbine
manufacturer) received the full 10 points. The commenter recommends
that for wind energy proposals, the turbine manufacturer should be
considered a ``qualified third-party operator.'' More direction on
which entities can be considered a ``qualified third-party operator''
is necessary. This section also does not specify how long of a contract
the applicant needs to have with the third-party operator, which could
be a source of some confusion. The commenter suggested requiring 5
years in order to qualify for full points.
The commenter also expressed concern that this category seems to
penalize smaller projects where third-party management might not have
any particular benefit or even be available. The commenter recommends
that this category at least be clarified so that points are awarded for
projects with well-qualified third-party managers appropriate for their
technology. This category should award points for any project that
presents a good management plan as determined by the technical review
committee. If a fair system for awarding points across technologies is
not practical, USDA should consider eliminating it altogether. The goal
of awarding projects with a high probability for success might be
better served by a category based on technical merit.
Response: As noted in the previous response, USDA has eliminated
this criterion from the final rule. Therefore, there is no need to
address the specific comments raised by this commenter.
Comment: One commenter suggested that the ``project management''
criterion should be applicable to energy efficiency activities that
support renewable energy projects.
Response: As noted above, USDA has elected to drop this criterion
for renewable energy projects and, therefore, does not deem it
reasonable to include it now for energy efficiency improvement
projects. Therefore, USDA has not included project management as a
criterion in the final program for energy efficiency improvement
projects.
Interest Rate Criterion
Comment: Three commenters recommended deleting this evaluation
criterion. According to the commenters, assigning points based on lower
loan rates disadvantages applicants who are not able to get these terms
from their lenders. While an inability to get these favorable interest
rates may reflect the perceived underlying risk of a borrower or
project, the commenters point out that it may also reflect the
unfamiliarity with renewable energy and energy efficiency systems by
rural lenders. Because the borrower is already paying these higher
rates, commenters do not believe that the borrower should also be
handicapped by not qualifying for these points in USDA's evaluation
criteria.
Response: USDA has retained this criterion because it provides some
incentive to lenders to keep their rates low. In addition, we have
revised the threshold for receiving points for a low interest rate from
1.75 to 1.5 points above the prime rate (to be consistent with the B&I
program).
Comment: One commenter noted that, in evaluating loans, the
proposal recommended giving the same number of points (5) for rates
below the prime rate plus 1.75 percent and for rates below the prime
rate plus 1 percent.
Response: The commenter is not correct. A total of 10 points was
possible under the proposed rule--5 points if the first condition is
met plus an additional 5 points if both conditions are met. While this
is still the case, we have revised the language in the final rule to
make this clearer.
New Criteria
Comment: Several commenters suggested USDA adopt additional scoring
criteria.
One commenter suggested that USDA award bonus points for projects
which use wind turbine designs evaluated by an independent third-party
program.
One commenter suggested that USDA award bonus points for programs
which integrate dispatchable energy generating schemes with wind energy
generation to increase total reliability and value and for programs
which create diffuse, large-scale, regional, on-farm, integrated wind-
farms. The bonus points should be sufficient to ensure that farmers
choose to collaborate in a ``cooperative'' program.
Three commenters suggested that USDA consider adding scoring
provisions that consider geographic diversity to assist the Agency in
cases of otherwise equal application scores.
One commenter recommended that projects which benefit low-income
families should be awarded additional points.
Response: As discussed below, USDA does not consider it necessary
to include these criteria in the scoring of an application.
USDA does not believe that scoring criteria should favor one
technology or design over another, but each project should be evaluated
based on its own technical merit; therefore, USDA has decided not to
award points for projects that use wind turbine designs evaluated by an
independent third-party program. However, project designs with strong
technical merit will receive additional priority points.
USDA agrees with the second commenter's first comment that
proposals that integrate interruptible energy generating schemes with
wind energy generation to increase total reliability and value are
desirable. However, USDA has decided that such schemes are adequately
addressed when evaluating the overall technical merit of a proposed
project and has decided not to award points strictly on the commenter's
suggested basis.
USDA agrees that the model suggested by the second comment of the
second commenter can be a successful business model. However, USDA does
not believe that it should be the purpose of the 9006 program to favor
one business model over another and, therefore, the suggested criterion
has not been adopted.
USDA does not believe the scoring criteria for applications should
favor one region of the country over another, but should remain focused
on the quality of the proposed projects. Therefore, the suggested
criterion has not been adopted.
USDA has not incorporated a specific criterion for low-income
families. The criterion that provides points for small agricultural
producers and very small businesses addresses, to some extent, the
income level of the applicant.
Comment: Three commenters suggested that USDA include a criterion
that considers the technical or overall merit of the project, which
would help further USDA's goal of funding projects with a high
likelihood of success. One of the commenters provided a sample of how
this category could be
[[Page 41292]]
quantitatively scored by the technical review team.
Response: USDA agrees with the commenters and has included a
``technical merit'' criterion in the scoring for both renewable energy
projects and energy efficiency improvement projects.
Comment: One commenter suggested that criteria be expanded to
encourage diversity of awardees in terms of the type of farm operation
and scale of operation.
Response: USDA does not believe the scoring criteria for
applications should favor one type of farm operation over another, but
should remain focused on the quality of the proposed projects.
Therefore, the suggested criterion has not been adopted.
With regard to the scale of operation, the rule already takes scale
into consideration by awarding additional points to small agricultural
producers and to very small businesses.
Comment: One commenter noted that the proposed rule makes no
distinction between applicants who have received previous funds through
the 9006 program and those seeking funds for the first time. To achieve
the program goal of assisting the greatest number of farmers and small
businesses in need, the commenter suggested that points be awarded to
applicants who have not received prior funding through the 9006
program.
Response: USDA agrees with the commenter that one of the goals of
the 9006 program is to provide access to as many different applicants
as possible. As noted previously, USDA has revised the regulation by
awarding 10 points to applicants who have not received a grant award
(or loan) within the previous 2 Federal fiscal years.
Comment: One commenter noted that States with local expertise have
received a disproportionate number of grants. To help correct this, the
commenter recommended that USDA encourage participation from regions
that have received limited funding by awarding 5 points for
applications from an underrepresented State.
Response: USDA has not incorporated this commenter's suggestion. As
noted previously, USDA will work with State Offices to help them
implement this program and conduct outreach. USDA believes this will
correct any ``underrepresentation'' and that it is not appropriate for
the scoring criteria to assume that responsibility.
Comment: One commenter suggested that USDA award bonus points for
projects which use wind turbine designs evaluated by an independent
third-party program. The bonus points should be sufficient to ensure
that farmers choose the best options available.
Response: USDA does not consider it necessary to include this
criterion in the scoring of application and has not adopted it. USDA
will score the Technical Merit of each proposed project on the basis of
the proposed technology and the information in the application, not on
the basis of who has reviewed the proposed project prior to USDA
receiving the application. To ensure the highest technical merit score,
USDA encourages all applicants to select the best available
technologies in the marketplace and to the extent an applicant believes
it is necessary to use technical experts to review the project to
ensure the applicant has not overlooked any elements that would affect
the technical merit of the project. However, USDA will not award points
on the basis of a third-party review.
H. Guaranteed Loans
General
Comment: Several commenters questioned whether the B&I guaranteed
loan program was a good model for the 9006 program.
Response: The commenters did not specify why they felt that the B&I
program was not a good model. Without specific reasons, USDA cannot
further respond other than to say we disagree and have continued to
model much of the 9006 Guaranteed Loan program on the B&I program.
While there are programmatic and policy differences, the 9006 program
is designed to complement, not compete with, the B&I program.
Comment: Two commenters stated that they believe that the Section
9006 Guaranteed Loan program imposes review, application, and reporting
burdens on the lender well above those for the B&I program or the
Guaranteed Loan programs offered by SBA. The commenters maintained that
few lenders would be willing to go through this effort in order to
close loans through this program and are more likely to use the B&I
program, which does not exclude guarantees for renewable energy systems
and still has capacity for additional loan guarantees.
Response: USDA disagrees with the commenters that the requirements
associated with the Guaranteed Loan program under the 9006 program are
more onerous than those under the B&I program. For the final rule, we
reviewed the requirements associated with the guaranteed loan portion
of the 9006 program and have included those elements from the B&I
program that are the minimum necessary to ensure technically feasible
renewable energy projects and energy efficiency improvement projects
are funded. We have modified the B&I program requirements only to the
extent necessary to make the 9006 program statutorily consistent and to
address the requirements associated with the particular technologies to
be funded under the 9006 program. As noted in the previous response,
the 9006 Guaranteed Loan program is meant to complement, not compete
with, the B&I program.
Comment: One commenter recommended that the application process
under the 9006 program be more streamlined than the B&I program to make
them worthwhile and encouraged USDA to look at patterning the rules on
the SBA loan guarantee program. This commenter encouraged the
Department to retain the guaranteed loan section in the final rule
because such a program might encourage lenders to add renewable energy
projects to their portfolios but without the risks and uncertainty of
the market that would otherwise discourage their involvement.
Response: We have retained the guaranteed loan program. In
addition, the 9006 program has simplified the application process for
applications for guaranteed loans of $600,000 or less, by incorporating
the use of Form RD 4279-1A and, for those applications for projects
with total eligible project costs of $200,000 or less, by allowing the
use of a ``reduced'' Technical Report. No other streamlining has been
done because any further streamlining would jeopardize USDA's ability
to ensure project viability and compliance.
Comment: One commenter suggested that only those exceptions to the
B&I program be noted in this section in order to keep the rule short.
Response: USDA agrees with the commenter and has revised this
section, and others, to identify which sections of the B&I program are
applicable and any and all differences.
Comment: Three commenters stated that many of the application,
documentation, loan structure, and loan servicing requirements
applicable to the FSA guaranteed loan program could also apply to the
renewable energy loan program and continue to protect the Government's
interests.
Response: USDA has not adopted this comment. USDA felt that it is
more important for the 9006 program to be consistent with other Rural
Development programs for ease of administration. This consistency
should help borrowers and applicants become familiar with and meet
Rural
[[Page 41293]]
Development requirements across multiple Rural Development programs.
Comment: Two commenters suggested that the rule allow for a
streamlined and simplified process for lenders that have been approved
as preferred lenders by the USDA Farm Services Agency (FSA).
Response: USDA has not incorporated this suggestion in the final
rule. The types of projects funded under the 9006 program are likely to
be significantly different than those under FSA programs. FSA programs
address agricultural production, while the 9006 program addresses
commercial energy production projects. Lenders approved under the FSA
program may not be experienced with the nature and scope of the
technologies associated with the projects that would be funded under
the 9006 program. Therefore, we have not incorporated the commenters'
suggestion.
Comment: Several commenters were concerned about the inclusion of
the guaranteed loan program in the Renewable Energy Systems and Energy
Efficiency Improvements Program. Two of the commenters were concerned
that the inclusion of the loan guarantees will reduce funding available
for the grant and direct loan elements of the program. One of these
commenters pointed out that the 9006 program is one of the few Federal
assistance grant programs (versus guaranteed loans) that provides money
to individuals to install renewable energy or energy efficiency
systems. Without information on how USDA will distribute the funds
(what percentage goes to grants and what percentage goes to guaranteed
loans), this commenter stated that his office cannot support the
guaranteed loan aspect of the program. The other commenter stated that
a loan default could put the grant program at risk and recommended the
use of direct loans rather than guaranteed loans.
Another commenter stated they have significant concerns about the
proposed loan guarantee program and urged USDA to postpone
implementation until higher levels of funding can be appropriated, or
else substantially restrict the amount of funding available for loan
guarantees compared to grants. This commenter asserted that
implementing the loan guarantee program without additional funding may
put the successful grant program in jeopardy. Adding the administrative
responsibilities of a loan guarantee program to the already demanding
grant program in the early years of implementation may prove to be too
much for the overstretched USDA staffs, likely requiring resources to
be diverted from limited project funds to cover administrative costs.
Loans and loan guarantees will not accomplish the program's intended
goal of offsetting the high initial capital costs of renewable energy
technologies for rural communities as effectively as grants, and we
respectfully request that USDA allow another comment period before a
loan guarantee program is tested to further examine its efficacy.
Section 9006 is the sole direct grant program for renewable energy and
energy efficiency installations, but these projects are already
eligible for other USDA loan programs such as the B&I loan guarantees.
Response: USDA believes that the guaranteed loan program will
complement, not compete with, the grant program by guaranteeing loans
made by commercial lenders to agricultural producers and rural small
businesses to support renewable energy systems and energy efficiency
improvements. Therefore, we are maintaining the guaranteed loan program
in the rule.
Comment: One commenter claimed that the guaranteed loan program, as
written, provides the lender with too much control of the project. The
commenter maintains that the purpose of rural development is lost when
the lender, which may be a large financial institution headquartered
far from the actual project, is responsible for the oversight of the
construction and operation of the system.
Response: The Agency feels the regulations provide sufficient
oversight to ensure regulatory compliance and prudent servicing by
lenders. Under the 9006 Guaranteed Loan program, lenders must
demonstrate they have the capacity and expertise to effectively
underwrite, process, and service all loans in a prudent manner. In
addition, the lenders are required to provide to the Agency periodic
loan status and financial reports on the borrower's operation,
including trends, strengths, weaknesses, extraordinary transactions,
and other indications of the financial condition of the borrower.
Lastly, the Agency will meet with the lender periodically to ascertain
how the guaranteed loan is being serviced and that the conditions and
covenants of the Loan Agreement are being enforced.
Comment: One commenter stated that they believe that a loan
guarantee program will not be overwhelmingly successful with regard to
energy efficiency projects because of the small funding requests for
energy efficiency projects. For this reason, the commenter supports
both the grant program and the direct loan program (while also
supporting the loan guarantee program for larger, often renewable
projects).
Response: While the commenter may be right in terms of the types of
funding that will be most likely utilized by the various types of
projects, there is no need to change the structure of the 9006 program
as proposed. Adjustments can be made in 9006 grant or loan allocations
to respond to unexpected demand.
Comment: One commenter recommended that, with the exception of
direct, intermediary or nontraditional lender guaranteed loans, USDA
should utilize grants rather than loans because the B&I program already
allows renewable energy and energy efficiency projects.
Response: As noted in previous responses, the 9006 program is
designed to complement the B&I program, and the guaranteed loan program
within the 9006 program is one of the funding mechanisms required by
the 2002 Farm Bill. For these reasons, USDA is maintaining the
guaranteed loan program in the 9006 program.
Comment: One commenter presented summaries of conversations with
two lenders experienced with wind energy projects who questioned how
effective a loan guarantee program would be. The lenders, in general,
indicated that the amount of funding currently available for the loan
guarantee program would not warrant all the work and risk of applying
for this loan guarantee. The lenders pointed out that banks would do
their own due diligence for a loan and projects qualifying for a loan
would receive the loan with or without the USDA loan guarantee. One of
the lenders indicated that his bank does not collateralize a farmer's
land. He said, ``A 50 percent loan guarantee would not bring anything
further to the table.'' Lastly, this lender described how his bank's
past usage of loan guarantees has been more as ``a last ditch effort''
to keep a farmer around rather than as a new business prospect. In
summary, the commenter believes that the loan guarantee program, as
presented, does not appear to offer much to the current business models
being used for farmer-owned large wind projects in Minnesota. The
commenter does acknowledge that this program may have something to
offer different kinds of banks or as yet undeveloped business models
for farmer-owned renewable energy projects. However, the commenter is
concerned about how well this program will be used given this
assessment from representatives that are already ``up to speed'' on
wind energy.
Response: As noted in previous responses, the guaranteed loan
program
[[Page 41294]]
within the 9006 program is one of the funding mechanisms required by
the 2002 Farm Bill. Therefore, USDA is maintaining the guaranteed loan
program in the 9006 program. Also as previously noted, the 9006 program
is designed to complement, not compete with, the B&I program. Thus,
funds from both programs can be used.
Comment: One commenter stated that they are concerned about the
potential cost and returns that a lender would experience under the
guaranteed program making it less attractive as proposed. The commenter
states that the expenses lenders would incur relative to the
application and servicing requirements, especially as it concerns
engaging outside technical experts and monitoring construction
activities, could be significant when the loan is originated,
especially for projects an individual producer could utilize in his/her
operation on a small scale. According to the commenter, the regulations
and requirements are geared toward large scale, multi-million dollar
projects undertaken by alliances of producers. The commenter
illustrates his concern by noting that, for a lender with a net
interest margin of 3.0 percent, each $100,000 guarantee commitment
($200,000 loan funds) results in $6,000 available to pay for the
origination and first year servicing of the loan. The fee, if not
passed on to the borrower, would reduce this amount to $5,000 in this
scenario. The expenses related to engaging technical experts to review
the project requirements and environmental impacts, supervising and
monitoring the construction of any facilities, and ongoing reporting to
the Agency could greatly exceed the net interest income available to
cover these expenses. Lenders with low net interest margins will lose
money unless the project is of sufficient size to be profitable for the
lender. Such a break-even size may represent too large of a project for
moderate-sized producers to develop, and they would not be able to
benefit from the program.
This commenter was also concerned that, as written, the guaranteed
loan program would discourage lenders from participating. Specifically,
the commenter made two recommendations to encourage lender
participation. First, the commenter recommended that USDA relax its
underwriting requirements in order to encourage lender participation in
the program. Due to the limited guarantee percentage for any given
project, lenders have a significant exposure in a project and this
should provide Rural Development staff with sufficient flexibility to
relax its requirements and still protect the government's interest. The
preamble states that smaller projects, or projects with a mature
technology, will require less information. The apparent threshold for a
``small'' project is less than $100,000 in project costs. The commenter
recommended that USDA raise this threshold significantly in order to
encourage lenders to utilize the program and be able to benefit small
operations.
Second, the commenter recommended that USDA require customary loan
analysis and documentation relative to projects under $1,000,000 (a
$500,000 guarantee), especially for lenders with FSA preferred lender
status, and that loan servicing be prudent and at all times protect the
Government's interest in the loan.
The commenter believes that having these two requirements for
originating and servicing loans would greatly simplify the regulations
that lenders are required to follow for small projects. While this
would result in differences between loan guarantee applications and
lenders, according to the commenter, the burdensome expenses would be
minimized and the returns to lenders from participating in the program
could be sufficient to encourage participation.
Response: USDA has not adopted these recommendations because the
various requirements in the 9006 program are consistent with other
Federal guaranteed loan programs' commercial underwriting and servicing
standards. Therefore, we have not revised the final rule with regards
to these aspects. On the other hand, as noted previously, small
projects (i.e., those with total eligible project costs of $200,000 or
less) now have less burden associated with their applications by being
able to submit less detailed Technical Reports. In addition,
applications for guaranteed loans of $600,000 or less may submit the
short application form for guaranteed loans (i.e., Form RD 4279-1a).]
Comment: One commenter stated that little effort had been made to
develop a guaranteed loan program tailored to individual farmers and
rural small businesses. The commenter stated that the level of
documentation required in the proposed rule is too cumbersome for most
applicants. The commenter stated that while the B&I program on which
the proposed program is modeled is a good program, it is intended for
larger businesses, with loan levels often in the tens of millions of
dollars. The level of financial screening for these large loan
guarantees is excessive if applied to the smaller loans that should be
offered under the 9006 program. The commenter also noted that potential
lenders have indicated that they are reasonably unlikely to participate
in such a cumbersome application approval and lending process. The
commenter then pointed to the SBA and the FSA guaranteed loan programs
as potential models for the 9006 guaranteed loan program and urged USDA
to reconfigure the 9006 guaranteed loan program along these lines. For
example, applications could be modeled on SBA's LowDoc program for
small guaranteed loans, which are substantially streamlined relative to
the proposed 9006 application.
Response: Based on the commenter's concerns, we have adopted a
reduced Technical Report for guaranteed loan applications for projects
with total eligible project costs of $200,000 or less. We believe that
this will facilitate access to the guaranteed loan program for small
agricultural producers and small rural businesses.
Term of Loan
Comment: Two commenters recommended increasing the term of the
loan. One of the commenters stated that, for some projects, an
equipment lending term of 15 years may be low. This commenter requested
expanding the term of loan for at least some technologies to 25-30
years. The other commenter stated that ``it is our belief that the USDA
would be most helpful to farmers and agricultural producers if it would
offer long-term (20 to 30 year), low interest loans for up to 100
percent of the equipment cost of farm-sited thermophilic anaerobic
digester based renewable energy systems that produce electrical energy
for export to the local power grid or biogas available for heating,
cooling, drying or other agricultural processed on the farm.''
Response: USDA agrees with the commenter that the term of loan
needs to be lengthened because of the nature of the technologies being
funded under the 9006 program and, therefore, has increased for
equipment and machinery the maximum term of loan to 20 years. By
statute (9006(c)(1)(B)), USDA cannot offer loans in excess of 50
percent of the cost of the activity.
Guarantee/Annual Renewal Fee Percentages
Comment: One commenter noted that, as proposed, the initial
guarantee fee is 1 percent and in subsequent years it is 0.5 percent
per year. The commenter recommended deleting the use of a guarantee fee
in subsequent years because having this fee will discourage any lenders
from participating in this program.
[[Page 41295]]
Response: USDA has retained these provisions in the final rule.
USDA does not have to charge the annual renewal fee. We will identify
if the annual renewal fee will be charged when we issue the
announcements for each fiscal year.
Lien Priority
Comment: One commenter, referring to the list of collateral and
lien priority, stated that perhaps some suggestions could be made as to
the appropriate relative lien priority (e.g. first, second, parity)
between two USDA guaranteed loans--one under this program, the other
under the B&I program.
Response: At minimum, the 9006 program must have parity. USDA will
not accept a junior lien position under the 9006 program. Section
4280.139(b) has been revised to indicate this.
Eligible Lenders
Nontraditional Lenders
Comment: Commenters recommended allowing non-traditional lenders to
participate in the guaranteed loan portion of the program and made
suggestions for allowing certain entities to be eligible lenders. Some
of the commenters suggested that nontraditional lenders may have more
``expertise'' with the renewable energy industry. Commenters identified
energy service companies and rural electric cooperatives as two
potential ``nontraditional'' lenders who should be allowed to
participate in the 9006 program. One of the commenters recommended
allowing non-traditional lenders for loans of up to $250,000. According
to this commenter, this will allow some State lending authorities and
Catalogue of Domestic Federal Assistance (CDFA) organizations access to
the program, and many of these groups are targeting energy efficiency/
renewable projects.
Response: USDA agrees with the commenters that nontraditional
lenders should be allowed. Therefore, USDA has revised the regulation
to allow lenders as they are allowed under the Agency's B&I program,
except for mortgage companies that are part of a holding company.
Comment: One commenter noted that the USDA should allow
intermediaries and recommended that USDA consider a loan program like
the Intermediary Relending Loan Program for States who use their
renewable energy or energy efficiency funds to make USDA guaranteed
loans.
Response: The Agency has no statutory authority to implement an
intermediary relending program (revolved loan funds) under this
program.
Lender's Functions and Responsibilities
Environmental Information
Comment: One commenter felt that this section put too much
responsibility on the lender for the environmental compliance and
notification for the project. The commenter recommended changing the
responsible party to the applicant (borrower). If the lender must be
responsible for alerting the Agency about environmental problems with
the project, the commenter contends that lenders will likely not want
to be involved with the loan guarantee program. According to the
commenter, most lenders, for example, would balk at the idea of being
responsible for a large wind turbine harming an endangered species.
Response: USDA does not agree with this comment. The 9006 program
is using the same procedures as specified in the B&I program. USDA
believes that this responsibility is appropriately placed with the
lender and has not revised it in the final rule.
Construction, Planning, and Performing Development
Comment: One commenter believes that proposed Sec. 4280.131(d),
which requires that all projects are designed according to accepted
practices, needs clarification on what the intent is. The commenter
maintains that this should be the responsibility of the engineer or
project designer and not the lender.
Response: The 9006 program is simply requiring the same level of
performance from a lender as is currently being required under the B&I
program. USDA sees no reason to change that level of performance.
Comment: One commenter felt that the following requirement put too
much responsibility on the lender: ``The lender must monitor the
progress and construction and undertake the reviews and inspections
necessary to ensure that construction conforms to applicable Federal,
state and local code requirements. * * *'' The commenter recommended
amending the language such that the applicant would provide project
oversight and provide the information for the lenders' records.
Response: Under the guaranteed lending portion of the 9006 program,
USDA must rely on the lender to make prudent lending decisions and
monitor the progress of the project. The lenders' proximity to the
project, its interest in the collateral aspect of the project, and its
knowledge of the interested parties are invaluable in ensuring
appropriate oversight of progress. Additionally, as with the B&I
program, the 9006 program requires the lender to ensure that all
project facilities are designed utilizing accepted architectural and
engineering practices that conform to the requirements of this subpart.
USDA believes that this responsibility is appropriately placed with the
lender and has not revised it in the final rule.
Replacement of Document
Comment: One commenter noted that, under the proposed Sec.
4280.138, USDA may issue a replacement Loan Note Guarantee or
Assignment Guarantee Agreement that was ``lost, stolen, destroyed,
mutilated or defaced.'' Along with a certificate of loss, the party
seeking the replacement document must provide an indemnity bond that
holds the USDA harmless from damage or loss incurred by reason of
replacing the document. The bond must be in an amount not less than the
unpaid principal and interest. The bond must be underwritten by a
qualified surety company listed in Treasury Department Circular 570
only when the principal balance and interest due on the note is $1
million or more. Therefore, bonds with amounts of less than $1 million
may be provided by other than a corporate surety.
The commenter encouraged USDA to reconsider this approach.
Corporate sureties, with extensive financial resources supporting them,
provide USDA the best assurance that the financial obligations under
the bond will be fulfilled. At a threshold of $1 million, USDA is
exposed to the risk that noncorporate sureties, such as an individual
surety, will have insufficient resources to protect the government from
significant loss. Because of the financial reporting requirements
established by the Treasury Department for corporate sureties, the
government knows that the surety has the financial ability to perform.
There are no such reporting requirements for individual sureties. In
light of the increased risk, we recommend that the proposed regulation
should be revised to require that all indemnity bonds provided under
Sec. 4280.138 must be provided by a surety company listed on the
Treasury Department Circular 570.
If USDA were to maintain the current $1 million threshold for the
corporate surety requirement, we recommend that it adopt requirements
similar to those in the Federal Acquisition Regulations (FAR) regarding
acceptable types of alternate security. The FAR sets forth the
acceptable types of security that may be posted by individual sureties
(see FAR Sec. 28-203-2). These include:
[[Page 41296]]
Cash, or certificates of deposit, or other cash
equivalents with a federally insured financial institution;
United States Government securities at market value;
Stocks and bonds actively traded on a national U.S.
security;
Real property owned in fee simple by the surety and
located within the United States or its outlying areas; and
Irrevocable letters of credit (ILC) issued by a federally
insured financial institution.
Thus, USDA is assured that quality assets are supporting the
guarantee.
Response: USDA agrees that it is essential to protect the interests
of the taxpayer. The practice of issuing replacement documentation
under specified circumstances is consistent with other Agency lending
programs, and broadens the scope by including ``defacement'' and
``mutilation'' as circumstances necessitating replacement.
Indemnity bond requirements are also consistent with other Agency
lending programs. We believe the 9006 program is not sufficiently
different to warrant a different approach. USDA requires corporate
bonding for larger projects without excluding noncorporate sureties
from smaller projects, providing the broadest range of opportunity for
the greatest number of potential sureties.
Credit Quality
Comment: One commenter asked how cash equity is defined. The
commenter is not concerned with the source of the asset, but with the
nature of how it's booked on the balance sheet. The commenter would
prefer the phrase ``tangible balance sheet equity.''
Response: Cash equity must be in the form of cash and should be on
deposit in a federally insured depository account. Cash differs from
``tangible balance sheet equity'' in that cash only includes liquid
funds. Tangible balance sheet equity may include other items of value
that are not cash. The final rule has not been revised.
Appraisals
Comment: One commenter requested clarification on what appraisals
USDA would require because the commenter believes the rule does not
clearly define what is to be appraised. The commenter suggested that,
if the applicant is a rural small business (i.e., an LLC), newly formed
for this project, the appraisal would be limited to the equipment they
wish to purchase. To illustrate, the commenter stated that in a case
where only a generator and associated equipment need to be appraised, a
simple formula might be useful. The formula could determine the value
of equipment that could be reused later to be worth 70 percent of the
equipment new.
Response: Under the 9006 program, appraisals for loans greater than
$600,000 are to be conducted in the same manner as for loans under the
B&I program. For loans of $600,000 or less, self-appraisals may be
used. In neither case are we addressing the appraisal process itself.
This provides the borrower/grantee with the greatest level of
flexibility in determining that level of investment it will request of
the Government. A specific formula, or series thereof, is not included
in the Regulation. However, guidance will be provided in support
training documentation that is outside the regulatory process.
Therefore, we have not revised the rule with regards to the manner in
which appraisals are to be conducted.
Personal and Corporate Guarantees
Comment: Several commenters recommended removing the provisions for
unconditional personal and corporate guarantees because of the
potential to discourage investors and applicants. For example, one of
the commenters noted that many applicants do not want to have to put
themselves or their farm up for collateral for their loan because the
farmer does not want to lose the farm if the project defaults on the
loan. Another commenter noted that investors in wind projects were
willing to invest money in such projects due to the production tax
credits available and the accelerated depreciation benefits. Such
investors would have no say in management or the operation of the
company. But such investors are not willing to guarantee the
transaction--their desire to be involved with the project is driven by
tax benefit reasons only. Finally, another commenter recommended that a
personal guarantee should not be required for those non-local investors
who are only buying tax credits and recommended an exception to the
requirement for a personal guarantee for non-local financial owners of
renewable energy projects, such as wind turbines.
Response: While USDA is sensitive to those who are concerned about
their personal liability and, for instance, using their farms as
collateral, nevertheless it is customary credit practice to require the
borrower to pledge personal and corporate guarantees sufficient to
protect the lender's and the Agency's interest. The situations noted by
the commenters involve ``passive'' investors; that is, those who only
invest in a project without any active participation in the management
or operation decisions. USDA agrees that to further promote renewable
energy projects, the rule should not discourage such investors.
Therefore, we have revised the rule to exclude passive investors from
the requirement to provide personal or corporate guarantees. However,
to the extent that investors and applicants have solely a nonpassive,
beneficial interest in the project, USDA believes it is necessary to
protect the public fisc to continue requiring unconditional personal
and corporate guarantees.
Requirements After Project Construction
Comment: Two commenters remarked on the reporting requirement for
energy efficiency improvement projects after project construction. One
of the commenters encouraged USDA to structure post-project reporting
requirements to collect data that will enhance industry understanding
of energy efficiency performance impacts. The other commenter stated
that the requirement to report the actual amount of energy produced by
the renewable energy system would be onerous for smaller projects that
lack metering. This commenter recommended exempting smaller projects
from this requirement and allowing qualitative system performance
reporting.
Response: The energy audit or assessment required for energy
efficiency improvement projects will provide most of the information
identified by the first commenter, including an estimate of energy
savings. While difficult, USDA believes it is necessary to keep this
reporting requirement for energy efficiency improvement projects, in
part to help evaluate the program's success.
Exception Authority
Comment: One commenter requested that, at a minimum, a lender with
an FSA preferred lender status be granted additional preference and
discretion under proposed Sec. 4280.104 with respect to loan guarantee
applications and servicing. The commenter stated that this could also
be allowed under Section 9006(c)(2)(G) of the 2002 Farm Bill where the
Secretary shall take into consideration ``other factors as
appropriate'' relative to application requirements. According to the
commenter, this would provide some separation between the loan and
grant programs since the grant program is a direct relationship with a
producer and the loan guarantee program is a direct relationship with a
lender. In addition, the commenter believes that this approach would
help to ``ensure that
[[Page 41297]]
loan programs are based on sound financial principles'' as stated in
the preamble relative to one of the main components for developing the
proposed regulations.
Response: USDA disagrees with the commenter's request. USDA
believes that all lenders must be treated equally and, therefore, has
not revised the rule as requested.
I. Direct Loans
Need for Program
Comment: A number of commenters objected, for a number of reasons,
to USDA not offering a direct loan program and urged USDA to
institutionalize a loan program as part of the final rule for Section
9006.
Commenters, for example, pointed out that the statute authorizing
the 9006 program calls for a direct loan program, that USDA has the in-
house capability for underwriting and servicing direct loans, that a
direct loan program would help leverage the available funds, and that
USDA in conjunction with the DOE has expertise and ability to evaluate
the financial and technical feasibility of these projects.
Two of the commenters further suggested that a direct loan program
would be easier to manage than a guaranteed loan program. One commenter
suggested that it would also be less costly to manage.
One of the commenters stated that if USDA is unable to issue a
final rule that includes the direct loan program for FY 2005, it should
include a supplemental rulemaking for the direct loan program later in
2005.
Response: USDA is still evaluating the resources necessary for
implementing a direct loan program. Assuming a positive evaluation,
USDA would expect to issue a rule proposing a direct loan program to
complement the grant and guaranteed loan program. In this final rule,
USDA has not modified the direct loan process that was in the proposed
rule.
Comment: One commenter stated that they agree with the Agency's
decision to not promulgate a regulation for the direct loan program
under Section 9006 at this time. This will allow for consideration of
changes in both program demand and technical innovation over time while
not unduly restricting the Agency's options in the short run.
Response: As noted in the previous response, USDA is still
evaluating the resources necessary for implementing a direct loan
program. USDA will also take into consideration the experience it gains
in implementing the grant and guaranteed loan program in developing any
direct loan program.
J. Laws That Contain Other Compliance Requirements
Environmental
Comment: Many commenters recommended that USDA either eliminate the
requirement for an environmental impact assessment or significantly
reduce the requirement for environmental assessments. One of the
commenters stated that because small projects by definition have a very
limited impact on the local environment and local government siting and
permitting processes are sufficient to ensure environmental protection.
Another of the commenters recommended removing specific environmental
requirements from the rule and instead issuing requirements annually.
Response: Projects funded under the 9006 program must comply with
all environmental requirements, including Federal, State, and local
requirements. All applicants must comply with the environmental
requirements applicable to their project. Funding a grant or loan or
providing a loan guarantee is a Federal action requiring compliance
with the National Environmental Policy Act (NEPA). While small projects
are likely to have fewer adverse environmental impacts than similar
larger projects, USDA cannot predetermine that all small projects will
have very limited impacts. USDA believes it is appropriate for
environmental evaluations prepared for projects to analyze the nature
and extent of a project's environmental impact. For these reasons, USDA
is not able to accommodate the commenter's request.
Comment: One commenter stated that the language ``identify all
environmental issues'' in the technical reports is not specific. The
commenter suggested that USDA make references to central environmental
review requirements for all types of energy systems such as proposed
Sec. 4280.114(d) and/or reference 7 CFR part 1940, subpart G, of this
title. Describe requirements for Class I or Class II environmental
reviews.
Response: As revised, the Technical Report requirements address the
need to identify environmental issues through Form RD 1940-20. However,
we have not made reference to other requirements (e.g., Class I or II
environmental reviews) because such requirements will be specific to
individual projects and cannot be addressed fully through specific
language in the rule. USDA advises all applicants to consult experts in
the development of their proposed project's technology to identify all
environmental issues that are associated with the applicant's proposed
project so that the Agency can make its environmental evaluation.
Comment: Two commenters were concerned that these requirements
placed an undue burden on the applicant. One of the commenters stated
that conducting an environmental impact assessment and initiating
consultation with other State agencies placed an undue burden on the
applicant. This commenter, therefore, recommended assigning the
responsibility for conducting the environmental assessment and informal
consultation with other agencies to the USDA State Offices. The other
commenter noted that applicants are asked to initiate the environmental
review process with such contacts as their State historical
preservation agencies on their own and, according to the commenter,
without having project funding in place, this shifts a substantial
burden to the applicants.
Response: Ultimately, the responsibility for environmental
evaluations rests on the Agency. Some applicants make arrangements to
assist the Agency with supporting documentation to speed the process.
USDA appreciates that this effort can be significant. Because such
efforts can be costly, USDA has included environmental assessment as an
eligible project cost (as part of professional services). USDA cannot
provide funds to applicants prior to a project being evaluated and
selected for an award.
Comment: One commenter stated that Rural Development Program
Support Staff have issued guidance that predetermines the level of
environmental review based on technology type, and that this ``one-
size-fits-all'' pre-classification places undue burdens on specific
projects. Instead, the commenter recommended that USDA draft a
programmatic environmental assessment and use that to develop pre-
classifications.
Another commenter stated that the environmental review process
should be simplified. According to the commenter, many of the approved
project activities, especially with energy efficiency projects, could
be categorically excluded from environmental review.
Response: Although not a part of this rule, USDA has identified
classes of action and established a minimum level of environmental
review for each category of action. For example, energy efficiency
projects are classified as categorical exclusions.
[[Page 41298]]
Comment: Several commenters felt that the environmental assessment
has been a particularly confusing area for applicants, who are often
unsure of the level of environmental review required and underestimate
the effort needed to complete the assessment. The commenters,
therefore, recommended that USDA place extensive, complete, and clear
information either in the final rule or on its Web site so that
applicants have a better understanding of what is required based on the
type and scope of their project. One of the commenters recommended
that, rather than referring applicants to Form RD 1940-20 or
regulations, USDA place extensive information either in the final rule
or on its Web site explaining the requirements.
Another commenter recommended that USDA provide a more clear
explanation of what is needed for the National Environmental Policy Act
approval including example completed checklists for various project
configurations, and should not require the applicant to initiate
consultation with State agencies and prepare a full environmental
impact analysis, unless a USDA review determines these steps are
necessary.
Response: USDA agrees with the commenters that the requirement for
environmental information can be confusing because it involves numerous
laws, regulations, and Executive Orders. The majority of these
requirements exist in 7 CFR part 1901, subpart F, 7 CFR part 1940,
subpart G, and 7 CFR part 3015, subpart V, and associated
Administrative Notices and Procedural Notices. USDA strongly advises
all potential applicants to seek assistance in this area when preparing
their applications.
USDA continues to refer to Form RD 1940-20 in the final rule
because that is the tool the Agency uses to collect the necessary
environmental information. USDA cannot in this rulemaking set forth
conditions to cover every potential circumstance under which full
environmental reviews and analyses are or are not required. Further, it
is not the intent of this program to usurp the requirements for such
assessments.
Comment: One commenter stated that somewhere in the rule, USDA
should allow for operational policies to be implemented and updated
without revisiting the rule. The commenter referred to the National
Environmental Policy Act (NEPA) requirements for projects as an area
that might be covered outside the rule. EPA allows categorical
exclusions from NEPA requirements. USDA does not at this time have a
complete list of technologies and energy efficiency improvements that
will fit under a categorical exclusion, but many probably will. By
authorizing in the rule the development of such a list as a legitimate
Agency policy responsibility, USDA can remove a significant
disincentive to applicants. The commenter claimed that farmers are
accustomed to going into their county USDA offices, whether Natural
Resources Conservation Service, Farm Service Agency or Rural
Development, and having the county office staff be able to refer to
their respective standards and specifications manuals and transparently
provide service and approval in a relatively short amount of time. Such
reference materials do not yet exist for the Renewable Energy Systems
and Energy Efficiency Improvements Program. At this time, the program
implementation process is transferring this technical requirement to
the farmer/rancher/rural small business. The commenter urged USDA not
to create a rule that precludes development of field office technical
guides that will be able to reduce the paperwork load on future program
participants.
Response: While not a formal comment on the rule, USDA responds by
stating it evaluated the proposed rule to identify which, if any,
portions could be implemented other than as a rule, in order to
facilitate updating. As noted previously, USDA intends to develop
implementation tools and training materials for the State Offices to
facilitate the implementation of the 9006 program.
However, as noted earlier, there are some aspects to the 9006
program which USDA cannot change. For example, projects are required to
comply with NEPA and other regulations, which are outside of the scope
of the 9006 program. USDA has provided for the development of various
forms of environmental reviews, which will serve as documentation of
environmental compliance.
Civil Rights Compliance
Comment: One commenter asked when the compliance reviews required
under Civil Rights (Title VI) compliance stop. The commenter points out
that the proposed regulation states ``Initial reviews will be conducted
after Form RD 400-4 is signed and all subsequent reviews every 3 years
after.'' The commenter then notes that the grant agreement states that
a compliance review will be done initially and the final will be done 3
years from the date of loan closing or when final disbursement of grant
funds has occurred.
Response: We agree with the commenter that the rule needs to
identify when compliance reviews stop. We have revised the rule
language based on the language in the grant agreement.
Comment: One commenter asked whether energy grants are subject to
Title VI.
Response: Energy grants are subject to Title VI, which was
indicated in the proposed rule, and the final rule retains the
language.
Insurance Requirements
Comment: One commenter stated that the insurance required may
preclude those seeking smaller awards from applying, as these premiums
may ultimately be more than the grant award. The commenter points out
that the proposed provisions allow for this requirement to be modified
or waived by USDA. The commenter, however, believes that these
provisions would be clearer if the regulation indicated those
situations to which those waivers or modifications applied.
Response: While USDA agrees with the commenter that insurance
requirements may be an obstacle to those seeking smaller awards, these
requirements are necessary to ensure the stability of the 9006 program
and to protect the Agency's interest and the public funding being made
available under this program. USDA believes that, given the variety of
circumstances that could present themselves, applying the waiver on a
case-by-case basis will be more equitable that establishing rigid
parameters for the use of waivers.
Comment: One commenter stated that they have a strong objection
from a member of the public to the insurance requirement of business
interruption insurance.
Response: USDA believes that business interruption insurance is
necessary for most projects, and is a requirement consistent with other
Federal grant and loan programs (e.g., the B&I program). USDA also
believes, however, that for smaller projects ($200,000 or less in total
eligible project costs), the cost of business interruption insurance
outweighs the benefit so it is not necessary. Therefore, USDA has
retained the requirement of business interruption insurance for all
projects with total eligible project costs greater than $200,000 and
has exempted this requirement for all projects with total eligible
project costs of $200,000 or less.
K. Construction Funding and Management
Comment: One commenter stated that the proposed rule disallows
applicants from any involvement in construction of
[[Page 41299]]
the system (in Sec. 4280.109(a)(2)--second sentence and in
4280.115(b)). The commenter recommended that the program be modified to
allow applicant construction, if ``the project has a third-party
contractor with principal responsibility for the design, installation
and construction of the system and where the applicant's ability to
perform the task is validated by the technical review team.''
A second commenter recommended that, provided applicants are
working under the supervision of a qualified installer, construction
services provided by the project owner be allowed, particularly
trenching, foundation digging and pouring, and other site preparation
activities with which many farmers are familiar.
Response: Under the final rule, an applicant is allowed to serve as
the prime contractor for projects built under the simplified
application process, which uses the reimbursement method, provided a
qualified consultant certifies the work performed. USDA notes that any
work performed by the applicant does not qualify as an in-kind
contribution and will lead to a reduction in eligible project costs for
that project.
Comment: A number of commenters questioned the use of 7 CFR part
1924 for the 9006 program, pointing out that 7 CFR part 1924 was
developed for residential construction and, thus, was not appropriate
for the 9006 program. Other comments were made concerning how the
proposed rule for the 9006 program intended to incorporate 7 CFR part
1924. The commenter pointed out that 7 CFR part 1924 is designed for
multi-family housing projects in which the Agency is the primary
lender. One of the commenters recommended reducing procurement
requirements to only what is required in 7 CFR parts 3015, 3016, and
3019.
Response: USDA agrees with the commenters that 7 CFR part 1924 is
not the best standard to use, and has replaced 7 CFR part 1924 with 7
CFR part 1780, while equipment procurement must be made in compliance
with 7 CFR part 3015.
Comment: One commenter stated that the procurement regulations are
excessive for an Agency participation of 25 to 50 percent in any given
project.
Response: As stewards of Federal funds, the Agency must determine
that program funds are used prudently. To meet this goal, all Federal
supported procurement must meet open and free competition procurement
standards. The final rule outlines project development and procurement
requirements based on the nature, scope, and complexity of the project
to allow the appropriate standards to be applied.
Comment: One commenter raised numerous issues on how the proposed
rule would implement 7 CFR part 1924. The commenter states that 7 CFR
part 1924, subpart A fails to address procedures and requirements for
the design/build method, the most common form of proposed procurement
being requested in the renewable energy and energy efficiency projects.
The commenter stated that procedures need to be developed to address
this situation and pointed out that RUS currently has a draft
regulation to cover this issue. The commenter, therefore, recommended
that the modified draft RUS requirements be incorporated into 7 CFR
1924, subpart A, under proposed Sec. 4280.115 along with utilizing the
Engineering Joint Contract Documents Committee (EJCDC) design-build
document set with the addition of the Federal Requirements section of
EJCDC, Funding Agency Edition, General Conditions C-710.
The commenter stated that proposed Sec. 4280.115(a)(5) should not
delete the applicability of 1924.5.(d)(4)(iv) to this rule. The
commenter noted that effective January 10, 1997, FSA, RHS, RBS, and RUS
amended their regulations regarding construction and other development
for farm, housing, community, and business programs to comply with the
National Earthquake Hazard Reduction Program's (NEHRP) Recommended
Provisions for the Development of Seismic Regulations for New
Buildings. According to the commenter, a PN was issued January 10,
1997, which amended the following sections of the regulations: 1924-A,
1942-A, 1948-C, and 1980-A. These regulations require that all new
building construction shall be designed and constructed in accordance
with earthquake (seismic) provisions of the codes listed in the
appropriate regulations.
The commenter stated that proposed Sec. 4280.115(a)(5) should not
delete the applicability of Sec. 1924.5(d)(4)(i) through (iv).
According to the commenter, 7 CFR part 1924, subpart A requires the
``Acknowledgment of compliance with the applicable seismic safety
requirements for new construction will be contained in the
certification of final plans and specification on the appropriate
Agency form.'' The commenter further states that these requirements
must remain to be in compliance with building safety provisions of the
Earthquake Hazards Reduction Act of 1977, (42 U.S.C. 7701 et seq.) as
implemented pursuant to Executive Order 12699.
The commenter stated that the deletion of the applicability of
Sec. 1924.13(e)(1) appears to be in error. According to the commenter,
Sec. 1924.13(e)(1) is for complex contracts requiring performance and
payment bonds. By deleting this section, the commenter points out, the
only complex contracting method that remains is Sec. 1924.13(e)(2),
which the commenter claims would be in violation of proposed Sec.
4280.115(b) which states: ``Recipients of grants under this subpart are
not authorized to construct the facility, project, or improvement in
total, or in part, or utilize their own personnel and/or equipment.''
Therefore the commenter recommended that, while Sec. 1924.13(e)(2)
should not apply and Sec. 1924.13(e)(1) should remain and that, based
on the types of projects being proposed, the EJCDC Funding Agency 2002
Edition (as outlined in RUS Bulletin 1780-26) needs to be added as an
alternative option to the American Institute of Architects (AIA)
documents.
Response: As noted in the previous response, the revised rule no
longer references 7 CFR part 1924. Thus, the issues and concerns raised
by this commenter are moot.
Comment: Two commenters expressed concern over the requirement to
use AIA documents.
According to one of the commenters, 7 CFR part 1924, subpart A,
requires the use of AIA documents, which are very seldom if ever used
in industrial construction. In addition, these documents are all
copyrighted and require originals to be purchased either in minimum
orders or bulk use licenses which must be renewed every year by the
designers. This commenter noted that USDA's Rural Development RUS has
done extensive work and development with EJCDC to develop a funding
Agency Edition of selected standard documents. These documents,
according to the commenter, were developed to provide information and
guidance to applicants and professional consultants in developing
engineering agreements and construction contracts that are legally
sufficient, ensure appropriate services are provided for a reasonable
fee, and expedite the achievement of the applicant's goals. These
documents are used for the construction of Wastewater Treatment Plants,
Water Treatment Plants, and related site utilities, including water and
sewer transmission lines and electric power lines. In all reality these
documents, according to the commenter, should replace the references to
the AIA documents in 7
[[Page 41300]]
CFR part 1924, subpart A but, at the least, the EJCDC Funding Agency
2002 Edition as outlined in RUS Bulletin 1780-26 need to be added as an
alternative option to the AIA documents. The commenter, therefore,
suggested that these requirements be incorporated under proposed Sec.
4280.115.
The other commenter stated that it does not seem appropriate to use
AIA documents for this program because there are few items in the
energy program that would utilize the services of an architect.
According to the commenter, the National Office is encouraging the use
of EJCDC documents for other programs for engineering and construction
contracts. The engineers have purchased these, and it does not make
sense to make them also purchase the AIA documents. In addition, the
use of EJCDC documents allows the engineer to pay a subscription fee to
use the documents, not a fee for every project that the documents are
used for. The AIA documents require a fee for each project that the
documents are used for.
Response: As noted in the previous responses in this section, the
final rule has been revised considerably regarding the basis for
construction planning and performing development. The final rule
retains reference to the use of selected AIA forms, but also allows
other contract documents as provided in the final rule.
Comment: Three commenters recommended that performance bonds should
not be required for projects below 100 kW.
Response: USDA agrees that performance bonds should not be required
for smaller projects. As such, surety (performance) bonds are not
required in the final rule for projects with total eligible costs of
$200,000 or less. If total eligible project costs are greater than
$200,000, performance bonds are required regardless of the capacity of
the project.
L. Miscellaneous
Comment: One commenter noted that Section 9006 of the Farm Bill was
intended to benefit independent family farms and ranches and their
rural communities, to increase energy security and to promote a healthy
environment for years to come. The commenter stated that USDA should
change the proposed rules to better reflect these benefits. The
commenter pointed out that sustainable agriculture and community
development is very important to Missouri Farmers Union and stated that
any incentives in this section should help family farmers and ranchers
conserve fuel, fertilizer, and other resources. The commenter also
stated that incentive projects should be farmer and community
controlled.
Response: USDA believes the 9006 program, as proposed, met the
goals set out for it in the authorizing statute. Under the final rule,
we have further increased meeting these goals by modifying the scoring
criteria to award more points than at proposal to smaller agricultural
producers and to include points for very small businesses.
With regard to ``incentive'' projects, USDA believes that the
commenter is referring to demonstration projects. The 9006 program is
not authorized to fund such types of projects, whether they are farmer
controlled or community controlled. Furthermore, the 9006 program is
available, by statute, only to agricultural producers and rural small
businesses. Community-controlled projects would be ``publicly owned''
projects and such projects are not eligible for funds under the 9006
program.
Timing of the Program
Comment: Many commenters expressed concern over the lack of amount
of time available to apply for funds and the timing of when the
applications were due, often recommending a year-round application
process or a late spring period. A sixth commenter also suggested
extending the duration of the application period.
Several other commenters stated that applicants have a very narrow
time window after receiving a provisional award to complete all
outstanding environmental and historical preservation reviews. Two of
these commenters expressed concern over the ``relatively short'' period
of time allowed to complete a full environmental assessment once the
project is selected to receive financial assistance. According to one
of the commenters, it has proven difficult for successful applicants to
accomplish the public input process and other required reviews before
the end of USDA's fiscal year. This commenter felt that moving the
program release date to the fall would help alleviate timing issues
associated with this review process. One of the commenters felt that
USDA did not make the requirements available early enough in the
process.
Response: The 9006 program in itself does not have deadlines
associated with the filing of applications. Application deadlines and
timeframes are identified in the announcements that USDA issues. It is
USDA's intent to issue future announcements earlier in the fiscal year
to allow applicants greater opportunity to prepare their applications
and to provide longer timeframes for application submittal.
Comment: One commenter stated that the time period for completing
the environmental assessment is very short and could result in
otherwise eligible projects being denied funding. The commenter
recommended adopting one of the following possible solutions:
Define the disbursement of funds as a major (irreversible)
Federal Action, rather than obligation, allowing funds to be obligated
prior to environmental assessment determination, while putting a
maximum time limit before funds were de-obligated.
Decouple extra-agency determinations and public hearing
and comment periods with obligation required by September 30 (the end
of the Federal fiscal year).
Make 9006 program funds no year money.
Response: USDA is not able to implement any of the commenter's
suggestions because we do not have the authority to implement them.
USDA cannot make the funds appropriated for the 9006 program ``no year
money;'' only Congress can do that. In addition, we cannot override the
requirements associated with the National Environmental Protection Act.
On the other hand, as noted in the previous response, USDA plans to
issue its announcements for the 9006 program in a more timely manner to
provide applicants more opportunity to prepare and submit their
applications.
Program Implementation, Awareness, and Tools
Comment: Several commenters recommended that USDA implement tools
to provide instruction to State and local offices to ensure consistent
implementation of the 9006 program and to conduct outreach to offices
and applicants concerning this program and other similar programs. For
example, one commenter stated that to the extent possible, USDA should
develop guidance documents for preparing information for small wind,
solar, biomass, and geothermal projects.
Response: While this is not a formal comment on the proposed rule,
USDA responds by agreeing with the commenters and is developing
implementation tools and programs to ensure consistency in the
implementation of the 9006 program and to conduct outreach to offices
and applicants.
Other
Comment: One commenter stated that USDA should focus all of its
financial
[[Page 41301]]
resources on diffuse, large-scale, regional, on-farm, integrated
windsheds. Within a windshed, individual wind turbines and
complementary biomass energy systems must be large enough that they can
contribute significant electricity to the regional/national grid but
small enough so that they do not require the development of a dedicated
electricity transmission infrastructure.
The commenter supported the recommendation by stating that, in
general, loan guarantees are preferred because loan guarantees maximize
the creation of production capacity. However, the loan guarantee
conditions (percentage of loan and percentage of guarantee) may need to
be modified initially during the first year or two until there is an
established pattern which can be used by lenders for loan evaluation.
Response: The model presented by the commenter is an acceptable
business model. However, the statute authorizing the 9006 program is to
be applied to more than just wind energy technologies. USDA does not
have authority to change the loan limits provided in the statute.
Therefore, USDA has rejected the commenter's suggestion.
Comment: Several commenters stated that currently very few
potential beneficiaries have been able to secure funding for solar or
small wind turbine projects. The USDA has also noted the very limited
number of small renewable energy projects. The commenters believe that
to provide maximum economic benefit to rural America, the program
should aim for a better balance of small and large projects and that
achieving this objective will require a radical departure from the
current NOFA procurement structure.
One commenter recommended that USDA streamline the administrative
compliance requirements for projects less than 200 kW in size. This
commenter also stated that they know there were many other potential
project applicants who were intimidated by the application process and
did not apply for funds even though their sites were well suited for
wind energy production from a technical, regulatory, and resource
perspective.
Points raised concerning the NOFA process by these commenters were:
Complex proposal requirements, cumbersome length and
redundancy, and preparation time burden discouraged numerous potential
small project applicants from applying;
An application and approval schedule that lacked the
flexibility needed to coordinate with the State rebate programs and
grant opportunities also needed to make the projects economically
attractive (i.e., some farmers did not want to apply for 9006 funds
until they were assured of also receiving additional subsidies, but
they would not get that answer until after the 9006 submission
deadline). For most small scale renewable energy projects the USDA
grants are necessary, but not sufficient;
Scoring that favored shorter payback period projects;
Scoring that favored applications in which 9006 funds were
a smaller percentage of total project cost;
Scoring that favored ``managed'' systems over owner-
operated systems;
Scoring that favored projects using renewable energy and
energy efficiency to help with environmental compliance, including pre-
existing compliance issues;
Scoring that favored energy sales over higher value on-
site consumption;
Requiring an interconnect agreement (or PPA) in advance of
project implementation, when most net metered projects do not require
such agreements. Two of the commenters noted that some State program
managers require an interconnect agreement (or PPA) in advance of
project implementation, when most net metered projects do not require
such agreements;
Allowing used or rebuilt equipment. One commenter
suggested that used equipment be allowed with no standards for
remanufacturing. One of the commenters pointed out that there were no
guidelines concerning the use of remanufactured equipment; and
Limiting in-kind match allowance. One of the commenters
also noted that the program did not allow the value of construction
work performed by project owners to count as match.
The combined effects of these problems discourage participation in
a program that should have much higher participation from small
renewable energy systems. For 2004, there were just 13 awards to small
wind and solar projects with combined funding of $590,226 or 2.6
percent of total funds awarded.
Response: All of the points raised by these commenters as
shortcomings of the NOFA process and to the extent they were carried
over into the proposed 9006 program have been addressed earlier in this
document.
Most of the commenter's concerns, which for the most part we agree
with, have been addressed in a ``favorable'' fashion. A simplified
application process is now available, the scoring criteria have been
adjusted to address the concerns raised by the commenters,
interconnection agreements have been addressed, streamlining (although
based on project size) has been addressed and the rule specifically
addresses used, remanufactured, and rebuilt equipment. The final rule,
however, does not differ with regard to in-kind contributions. In
addition, USDA plans to publish its announcements for grants and loan
applications in a more timely fashion.
In summary, the 9006 program has been revised from the proposed
rule and contains differences from the NOFA procurement procedures that
we believe will encourage applications for small projects, including
solar and wind, by awarding points for such projects. We believe the
revised scoring criteria bring about a better balance among projects of
all sizes.
Comment: One commenter, commenting on proposed Sec.
4280.111(d)(3)(ix)(D), suggested that the use of the word unanticipated
in the third line is a non sequitur. The purpose of the risk plan is to
anticipate potential major component failure. The commenter suggested
substituting ``unanticipated'' with ``potential.''
Response: USDA agrees with the commenter and has revised the rule,
here and elsewhere, accordingly.
Comment: One commenter, commenting on proposed Sec.
4280.111(d)(5)(i)(C), suggested striking the term ``bodies.''
Response: USDA agrees with the commenter and has revised the rule,
here and elsewhere, accordingly.
V. Regulatory Information
A. Paperwork Reduction Act
The information collection and recordkeeping requirements contained
in this regulation have been approved by the Office of Management and
Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and were
assigned OMB control number 0570-0050 in accordance with the Paperwork
Reduction Act of 1995. Under the Paperwork Reduction Act of 1995, no
person is required to respond to a collection of information unless it
displays a valid OMB number. The revisions in this rulemaking for part
4280 required an amendment to the burden package and this modification
has been approved by OMB.
B. Intergovernmental Review
The Rural Development Grant, Guaranteed Loan, and Direct Loan
Program is subject to the provisions of Executive Order 12372, which
requires intergovernmental consultation with State and local officials.
Rural Development will conduct intergovernmental consultation in the
[[Page 41302]]
manner delineated in RD Instruction 1940-J, ``Intergovernmental Review
of Department of Agriculture Programs and Activities,'' in 7 CFR part
3015, subpart V.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires Federal agencies to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedures
Act or any other statute, unless the Agency certifies that the rule
will not have a significant economic impact on a substantial number of
small entities. Small entities include small businesses, small
organizations, and small governments. The major purpose of the RFA is
to keep paperwork and regulatory requirements from getting out of
proportion to the scale of the entities being regulated, without
compromising the objectives of the Act.
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
602), the undersigned has determined and certified by signature of this
document that this final rule would not have a significant economic
impact on a substantial number of small entities. This action impacts
those who choose to participate in the grant, guaranteed loan, and
direct loan program and requires only minimum information/paperwork to
evaluate an application. Therefore, a regulatory flexibility analysis
was not performed.
Although a regulatory flexibility analysis was not performed, the
Agency conducted a cost-benefit analysis and an initial regulatory
flexibility analysis (IRFA) that examines the impact on small entities.
The cost-benefit analysis and the IRFA (referred to as the Unified
Analysis) are available for review in the docket and the results are
summarized below.
The program targets rural small businesses and agricultural
producers. The vast majority of these agricultural producers also
qualify as small businesses. Based on data compiled by the USDA
Economic Research Service and the SBA, approximately 3 million entities
would qualify under this program.
The cost-benefit analysis reflects a large net beneficial impact.
The expenditure of slightly less than $100 million in nominal USDA
funds over 5 years (approximately $23 million per year for FY 2003
through FY 2005 and approximately $11 million per year for FY 2006 and
FY 2007) from FY 2003 through FY 2007 represents a present value cost
in constant year 2000 dollars of approximately $69 million. This sum in
turn supports total program funding (USDA funds and private funds) of
over $1 billion. The cumulative cashflow benefits through 2007 are $261
million in comparison to the $69 million cost. The cashflow benefits
based upon life-cycle analysis are $1.4 billion, again based upon this
$69 million cost.
Given that almost the entire program is directed at small
businesses, the burden analysis is a representative measure for small
businesses of the reporting, recordkeeping, and other compliance costs.
The burden analysis estimated an annual (3-year average) cost of $1.8
million for an estimated 469 applicants per year.
As noted above, the rule is directed almost entirely at small
businesses. Therefore, the cost-benefit analysis represents the results
as it affects small businesses.
D. Civil Justice Reform
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this rule: (1) All State and
local laws and regulations that are in conflict with this final rule
will be preempted, (2) no retroactive effect will be given to this
rule, and (3) administrative proceedings in accordance with 7 CFR part
11 must be exhausted before bringing suit in court challenging action
taken under this rule, unless those regulations specifically allow
bringing suit at an earlier time.
E. National Environmental Policy Act
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G. Rural Development has determined that this action does not
constitute a major Federal action significantly affecting the quality
of the human environment, and, in accordance with the National
Environmental Policy Act of 1969, Pub. L. 91-190, an Environmental
Impact Statement is not required.
F. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments, and the private sector. Under section 202 of the UMRA,
Rural Development must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local, or tribal
governments, in the aggregate, or to the private sector of $100 million
or more in any 1 year. When such a statement is needed for a rule,
section 205 of UMRA generally requires Rural Development to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, more cost-effective, or least burdensome alternative
that achieves the objectives of the rule.
This final rule contains no Federal mandates (under the regulatory
provisions of title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus, this rule is not subject to
the requirements of sections 202 and 205 of UMRA.
G. Executive Order 13132, Federalism
It has been determined under Executive Order 13132, Federalism,
that this final rule does not have sufficient Federalism implications
to warrant the preparation of a Federalism assessment. The provisions
contained in this final rule will not have a substantial direct effect
on States or their political subdivisions or on the distribution of
power and responsibilities among the various levels of government.
H. Executive Order 12866, Regulatory Planning and Review
Under Executive Order 12866, this final rule has been determined to
be ``significant'' and, therefore, has been reviewed by the OMB. The
Order defines ``significant'' regulatory action as one that is likely
to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety in State, local or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
List of Subjects in 7 CFR Part 4280
Business and industry, Economic development, Energy, Direct loan
programs, Grant programs, Guaranteed loan programs, Renewable energy
systems, Energy efficiency improvements, Rural areas.
0
For the reasons stated in the preamble, chapter XLII, title 7, of the
Code of Federal Regulations is amended as follows:
[[Page 41303]]
CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES
SERVICE, DEPARTMENT OF AGRICULTURE
0
1. Part 4280 is added to read as follows:
PART 4280--LOANS AND GRANTS
Subpart A--[Reserved]
Subpart B--Renewable Energy Systems and Energy Efficiency Improvements
Program
Sec.
4280.101 Purpose.
4280.102 General.
4280.103 Definitions.
4280.104 Exception authority.
4280.105 Appeals.
4280.106 Conflict of interest.
4280.107 Applicant eligibility.
4280.108 Project eligibility.
Section A. Grants
4280.109 Qualification for simplified applications.
4280.110 Grant funding.
4280.111 Application and documentation.
4280.112 Evaluation of grant applications.
4280.113 Insurance requirements.
4280.114 Laws that contain other compliance requirements.
4280.115 Construction planning and performing development.
4280.116 Grantee requirements.
4280.117 Servicing grants.
4280.118-4280.120 [Reserved]
Section B. Guaranteed Loans
4280.121 Borrower eligibility.
4280.122 Project eligibility.
4280.123 Guaranteed loan funding.
4280.124 Interest rates.
4280.125 Terms of loan.
4280.126 Guarantee/annual renewal fee percentages.
4280.127 [Reserved]
4280.128 Application and documentation.
4280.129 Evaluation of guaranteed loan applications.
4280.130 Eligible lenders.
4280.131 Lender's functions and responsibilities.
4280.132 Access to records.
4280.133 Conditions of guarantee.
4280.134 Sale or assignment of guaranteed loan.
4280.135 Participation.
4280.136 Minimum retention.
4280.137 Repurchase from holder.
4280.138 Replacement of document.
4280.139 Credit quality.
4280.140 Financial statements.
4280.141 Appraisals.
4280.142 Personal and corporate guarantees.
4280.143 Loan approval and obligation of funds.
4280.144 Transfer of lenders.
4280.145 Changes in borrower.
4280.146 Conditions precedent to issuance of Loan Note Guarantee.
4280.147 Issuance of the guarantee.
4280.148 Refusal to execute Loan Note Guarantee.
4280.149 Requirements after project construction.
4280.150 Insurance requirements.
4280.151 Laws that contain other compliance requirements.
4280.152 Servicing guaranteed loans.
4280.153 Substitution of lender.
4280.154 Default by borrower.
4280.155 Protective advances.
4280.156 Liquidation.
4280.157 Determination of loss and payment.
4280.158 Future recovery.
4280.159 Bankruptcy.
4280.160 Termination of guarantee.
Section C. Direct Loans
4280.161 Direct loan process.
4280.162-.192 [Reserved]
Section D. Combined Funding
4280.193 Combined funding.
4280.194-.199 [Reserved]
4280.200 OMB control number.
Appendix A to Part 4280--Technical Reports for Projects with Total
Eligible Project Costs of $200,000 or Less
Appendix B to Part 4280--Technical Reports for Projects with Total
Eligible Project Costs of Greater than $200,000
Subpart A--[Reserved]
Subpart B--Renewable Energy Systems and Energy Efficiency
Improvements Program
Sec. 4280.101 Purpose.
(a) The purpose of this subpart is to provide financial assistance
to agricultural producers and rural small businesses for the purpose of
purchasing and installing renewable energy systems and energy
efficiency improvements in rural areas. Financial assistance to any
single entity may be provided as a direct loan, guaranteed loan or
grant, or a combination of a loan and grant. This subpart contains the
procedures and requirements for providing such financial assistance.
(b) The Agency will allocate funds between the direct, guaranteed,
and grant programs each year, including any other terms such as the
transfer of funds between these allocations.
Sec. 4280.102 General.
(a) Sections 4280.103 through 4280.106 discuss definitions,
exception authority, appeals, and conflict of interest, which are
applicable to all of the funding programs under this subpart.
(b) Eligibility is discussed in terms of both applicants and
projects. Section 4280.107 contains the eligibility requirements for
applicants and Sec. 4280.108 contains the eligibility requirements for
projects.
(c) Section A, Sec. Sec. 4280.109 through 4280.117, discusses
grants. Section 4280.109 discusses the circumstances under which an
applicant may qualify to submit a simplified application for a grant.
Sections 4280.110 through 4280.114 address grant funding, grant
application procedures, required documentation, the evaluation process,
and post-grant Federal requirements for both the simplified and full
application processes. Sections 4280.115 through 4280.117 address
project planning, development, and completion as related to grant
servicing.
(d) Section B, Sec. Sec. 4280.121 through 4280.160, discusses
guaranteed loans. Sections 4280.121 through 4280.126 discuss procedures
and requirements for making and processing loans guaranteed by the
Agency. Section 4280.128 addresses the application and documentation
requirements, separating the requirements for loans over $600,000 and
for loans of $600,000 or less. Section 4280.129 addresses the
evaluation of guaranteed loan applications. Sections 4280.130 through
4280.160 provide guaranteed loan origination and servicing
requirements. These requirements apply to lenders, holders, and other
parties involved in making, guaranteeing, holding, servicing, or
liquidating such loans.
(e) Section D presents the process by which the Agency will make
direct loans.
(f) Section E presents the process by which the Agency will make
combined loan and grant funding available.
(g) Appendix A contains the Technical Report requirements for
projects with total eligible project costs of $200,000 or less and
Appendix B contains the Technical Report requirements for projects with
total eligible project costs greater than $200,000.
Sec. 4280.103 Definitions.
Terms used in this subpart are defined in either Sec. 4279.2 of
this chapter or in this section. If a term is defined in both Sec.
4279.2 and this section, it will have, for purposes of this subpart
only, the meaning given in this section.
Agency. The Rural Business-Cooperative Service or successor Agency
assigned by the Secretary of Agriculture to administer the 9006
program. References to the National Office, Finance Office, State
Office, or other Agency offices or officials should be read as prefaced
by ``Agency'' or ``Rural Development'' as applicable.
Agricultural producer. An individual or entity directly engaged in
the production of agricultural products, including crops (including
farming); livestock (including ranching); forestry products;
hydroponics; nursery stock; or aquaculture, whereby 50 percent or
[[Page 41304]]
greater of their gross income is derived from the operations.
Anaerobic digester project. A renewable energy system that uses
animal waste and other organic substrates to produce thermal or
electrical energy via anaerobic digestion.
Annual receipts. The total income or gross income (sole
proprietorship) plus cost of goods sold.
Applicant. The agricultural producer or rural small business that
is seeking a grant, guaranteed loan, or direct loan, or a combination
of a grant and loan, under this subpart.
Assignment guarantee agreement (Form RD 4279-6) or successor form.
A signed agreement among the Agency, the lender, and the holder
containing the terms and conditions of an assignment of a guaranteed
portion of a loan.
Bioenergy project. A renewable energy system that produces fuel,
thermal energy, or electric power from a biomass source, other than an
anaerobic digester project.
Biogas. Biomass converted to gaseous fuels.
Biomass. Any organic material that is available on a renewable or
recurring basis, including agricultural crops; trees grown for energy
production; wood waste and wood residues; plants, including aquatic
plants and grasses; fibers; animal waste and other waste materials; and
fats, oils, and greases, including recycled fats, oils, and greases. It
does not include paper that is commonly recycled or unsegregated solid
waste.
Borrower. Any party or parties liable for a direct or guaranteed
loan made under this subpart except guarantors.
Capacity. The maximum load that an apparatus or heating unit is
able to meet on a sustained basis as rated by the manufacturer.
Commercially available. A system that has a proven operating
history specific to the proposed application. Such a system is based on
established design, and installation procedures and practices.
Professional service providers, trades, large construction equipment
providers, and labor are familiar with installation procedures and
practices. Proprietary and balance of system equipment and spare parts
are readily available. Service is readily available to properly
maintain and operate the system. An established warranty exists for
parts, labor, and performance.
Conditional Commitment (Form RD 4279-3) or successor form. Agency
notice to the lender that the loan guarantee is approved subject to the
completion of all conditions and requirements set forth by the Agency.
Default. The condition where a borrower or grantee is not in
compliance with one or more loan covenants or grant conditions as
stipulated in the Letter of Conditions, Conditional Commitment, or Loan
or Grant Agreement.
Delinquent loan. A loan for which a scheduled loan payment has not
been received by the due date or within any grace period as stipulated
in the promissory note and loan agreement.
Demonstrated financial need. The demonstration by an applicant that
the applicant is unable to finance the project from its own and
commercially available resources without grant assistance, or that the
project proposed by the applicant cannot achieve the income and
cashflows to sustain it financially over the long term without grant
assistance.
Design/build method. A method of project development whereby all
design, engineering, procurement, construction, and other related
project activities are performed under a single contract. The prime
contractor is solely responsible and accountable for successful
delivery of the project to the owner.
Eligible project costs. The total project costs that are eligible
to be paid with program funds.
Energy assessment. A report conducted by an experienced energy
assessor, certified energy manager or professional engineer assessing
energy cost and efficiency by analyzing energy bills and briefly
surveying the target building, machinery, or system. The report
identifies and provides a savings and cost analysis of low-cost/no-cost
measures. The report will estimate the overall costs and expected
energy savings from these improvements, and dollars saved per year. The
report will estimate weighted-average payback period in years.
Energy assessor. An individual or entity that conducts an energy
assessment.
Energy audit. A report conducted by a Certified Energy Manager or
Professional Engineer that focuses on potential capital-intensive
projects and involves detailed gathering of field data and engineering
analysis. The report will provide detailed project costs and savings
information with a high level of confidence sufficient for major
capital investment decisions. It will estimate costs, expected energy
savings from the subject improvements, and dollars saved per year. The
report will estimate weighted-average payback period in years.
Energy auditor. An individual or entity that conducts an energy
audit.
Energy efficiency improvement. Improvements to a facility,
building, or process that reduces energy consumption, or reduces energy
consumed per square foot.
Existing business. A business that has completed at least one full
business cycle.
Fair market value of equity in real property. Fair market value of
real property, as established by appraisal, less the outstanding
balance of any mortgages, liens, or encumbrances.
Feasibility study. An analysis of the economic, market, technical,
financial, and management feasibility of a proposed project or
business.
Financial feasibility. The ability of a project or business to
achieve the income, credit, and cashflows to financially sustain a
project over the long term. The concept of financial feasibility
includes assessments of the cost-accounting system, the availability of
short-term credit for seasonal businesses, and the adequacy of raw
materials and supplies.
Geothermal, direct use. A system that uses thermal energy directly
from a geothermal source.
Geothermal, electric generation. A system that uses geothermal
energy to produce high pressure steam for electric power production.
Holder. A person or entity, other than the lender, who owns all or
part of the guaranteed portion of the loan with no servicing
responsibilities. When the single note option is used and the lender
assigns a part of the guaranteed note to an assignee, the assignee
becomes a holder only when the Agency receives notice and the
transaction is completed through the use of Form RD 4279-6.
Hydrogen project. A renewable energy system that produces hydrogen
or, a renewable energy system that uses mechanical or electric power or
thermal energy from a renewable resource using hydrogen as an energy
transport medium.
In-kind contributions. Applicant or third-party real or personal
property or services benefiting the Federally assisted project or
program that are contributed by the applicant or a third-party entity.
The identifiable value of goods and services must directly benefit the
project.
Interconnection agreement. The terms and conditions governing the
interconnection and parallel operation of the grantee's or borrower's
electric generation equipment and the utility's electric power system.
[[Page 41305]]
Interim financing. A temporary or short-term loan made with the
clear intent that it will be repaid through another loan, cash, or
other financing mechanism. Interim financing is frequently used to pay
construction and other costs associated with a planned project, with
permanent financing to be obtained after project completion.
Large solar, electric. Large solar electric systems are those for
which the rated power of the system is larger than 10 kilowatts (kW).
Large solar electric systems are either stand-alone (off grid) or
interconnected to the grid (on grid).
Large solar, thermal. Large solar thermal systems are those for
which the rated storage volume of the system is greater than 240
gallons or that have a collector area of more than 1,000 square feet.
Large wind system. A wind energy project for which the rated power
of the individual wind turbine(s) is larger than 100kW.
Lender. The organization making, servicing, and collecting the loan
that is guaranteed under the provisions of this subpart.
Lender's agreement (Form RD 4279-4) or successor form. Agreement
between the Agency and the lender setting forth the lender's loan
responsibilities.
Loan Note Guarantee (Form RD 4279-5) or successor form. Issued and
executed by the Agency containing the terms and conditions of the
guarantee.
Loan-to-value. The ratio of the dollar amount of a loan to the
dollar value of the discounted collateral pledged as security for the
loan.
Matching funds. The funds needed to pay for the portion of the
eligible project costs not funded or guaranteed by the Agency through a
grant, direct loan, or guaranteed loan under this program. Unless
authorized by statute, matching funds cannot include grants from any
Federal grant program.
Necessary capital improvement. A capital improvement required to
keep an existing system in compliance with regulations or to maintain
technical or operational feasibility.
Parity. A lien position whereby two or more lenders share a
security interest of equal priority in collateral. In the event of
default, each lender is affected on a pro rata basis.
Participation. The sale of interest in a loan by the lender wherein
the lender retains the note, collateral securing the note, and all
responsibility for loan servicing and liquidation.
Passive investor. An equity investor that does not actively
participate in management and operation decisions of the business
entity as evidenced by a contractual arrangement.
Post-application. The date that the Agency receives an essentially
completed application. An ``essentially completed'' application is an
application that contains all parts necessary for the Department of
Agriculture (USDA) to determine applicant and project eligibility, to
score the application, and to conduct the technical evaluation.
Power purchase arrangement. The terms and conditions governing the
sale and transportation of electricity produced by the grantee or
borrower to another party.
Pre-commercial technology. Technology that has emerged through the
research and development process and has technical and economic
potential for commercial application, but is not yet commercially
available.
Promissory Note. Evidence of debt. A note that a borrower signs
promising to pay a specific amount of money at a stated time or on
demand.
Qualified consultant. A third-party entity possessing the
knowledge, expertise, and experience to perform in an efficient,
effective, and authoritative manner the specific task required.
Qualified party. An entity possessing the knowledge, expertise, and
experience to perform a specific task.
Renewable energy. Energy derived from a wind, solar, biomass, or
geothermal source; or hydrogen derived from biomass or water using
wind, solar, biomass, or geothermal energy sources.
Renewable energy system. A system that produces or produces and
delivers usable energy from a renewable energy source.
Rural. Any area other than a city or town that has a population of
greater than 50,000 inhabitants and the urbanized area contiguous and
adjacent to such a city or town according to the latest decennial
census of the United States.
Simplified application. An application that conforms to the
criteria and procedures specified in Sec. 4280.109.
Small business. An entity is considered a small business in
accordance with the Small Business Administration's (SBA) small
business size standards by the North American Industry Classification
System (NAICS) found in Title 13 CFR part 121. A private entity,
including a sole proprietorship, partnership, corporation, cooperative
(including a cooperative qualified under section 501(c)(12) of the
Internal Revenue Code), and an electric utility, including a Tribal or
governmental electric utility, that provides service to rural consumers
on a cost-of-service basis without support from public funds or subsidy
from the Government authority establishing the district, provided such
utilities meet SBA's definition of small business. These entities must
operate independent of direct Government control. With the exception of
the entities described above, all other non-profit entities are
excluded.
Small solar, electric. Small solar electric projects are those for
which the rated power of the system is 10kW or smaller. Small solar
electric projects are either stand-alone (off grid) or interconnected
to the grid at less than 600 volts (on grid).
Small solar, thermal. Small solar thermal projects are those for
which the rated storage volume of the system is 240 gallons or smaller
or that have a collector area of 1,000 square feet or less.
Small wind system. Wind energy system for which the rated power of
the wind turbine is 100kW or smaller and with a generator hub height of
120 feet or less. A small wind system is either stand-alone or
connected to the local electrical system at less than 600 volts.
Spreadsheet. A table containing data from a series of financial
statements of a business over a period of time. Financial statement
analysis normally contains spreadsheets for balance sheets and income
statements and may include cashflow statement data and commonly used
ratios. The spreadsheets enable a reviewer to easily scan the data,
spot trends, and make comparisons.
State. Any of the 50 States, the Commonwealth of Puerto Rico, the
District of Columbia, the Virgin Islands of the United States, Guam,
American Samoa, the Commonwealth of the Northern Mariana Islands, the
Republic of Palau, the Federated States of Micronesia, and the Republic
of the Marshall Islands.
Total project cost. The sum of all costs associated with a
completed project.
Used equipment. Any equipment that has been used in any previous
application and is provided in an ``as is'' condition.
Very small business. A business with fewer than 15 employees and
less than $1 million in annual receipts.
Sec. 4280.104 Exception authority.
The Administrator may, on a case-by-case basis, make an exception
to any requirement or provision of this subpart that is not
inconsistent with any authorizing statute or applicable law, if the
Administrator determines that application of the requirement or
provision would adversely affect the USDA's interest.
[[Page 41306]]
Sec. 4280.105 Appeals.
Only the grantee, borrower, lender, or holder can appeal an Agency
decision made under this subpart. In cases where the Agency has denied
or reduced the amount of final loss payment to the lender, the adverse
decision may be appealed by the lender only. An adverse decision that
only impacts the holder may be appealed by the holder only. A decision
by a lender adverse to the interest of the borrower is not a decision
by the Agency, whether or not concurred in by the Agency. An adverse
decision regarding a grant or direct loan application may be appealed
by the applicant only. Appeals will be handled in accordance with 7 CFR
part 11 of this title. Any party adversely affected by an Agency
decision under this subpart may request a determination of
appealability from the Director, National Appeals Division, USDA,
within 30 days of the adverse decision.
Sec. 4280.106 Conflict of interest.
No conflict of interest or appearance of conflict of interest will
be allowed. For purposes of this subpart, conflict of interest
includes, but is not limited to, distribution or payment of grant,
loan, and guaranteed loan funds or award of project contracts to an
individual owner, partner, stockholder, or beneficiary of the applicant
or borrower or a close relative of such an individual when such
individual will retain any portion of the ownership of the applicant or
borrower.
Sec. 4280.107 Applicant eligibility.
(a) To receive a grant or loan under this subpart, an applicant
must meet each of the criteria, as applicable, as set forth in
paragraphs (a)(1) through (5) of this section.
(1) The applicant must be an agricultural producer or rural small
business.
(2) Individuals must be citizens of the United States (U.S.) or
reside in the U.S. after being legally admitted for permanent
residence.
(3) Entities must be at least 51 percent owned, directly or
indirectly, by individuals who are either citizens of the U.S. or
reside in the U.S. after being legally admitted for permanent
residence.
(4) Applicants and owners will be ineligible to receive funds under
this subpart as discussed in paragraphs (a)(4)(i) and (ii) of this
section.
(i) If an applicant or owner has an outstanding judgment obtained
by the U.S. in a Federal Court (other than in the United States Tax
Court), is delinquent in the payment of Federal income taxes, or is
delinquent on a Federal debt, the applicant is not eligible to receive
a grant, direct loan, or guaranteed loan until the judgment is paid in
full or otherwise satisfied or the delinquency is resolved.
(ii) If an applicant has been debarred from receiving Federal
assistance, the applicant is not eligible to receive a grant, direct
loan, or guaranteed loan under this subpart.
(5) A grant applicant must have demonstrated financial need.
(b) An applicant that has received one or more grants and/or loans
under this program must make satisfactory progress, as determined by
the Agency, toward completion of any previously funded projects before
it will be considered for subsequent funding.
Sec. 4280.108 Project eligibility.
For a renewable energy system or energy efficiency improvement
project to be eligible to receive a grant or loan under this subpart,
the proposed project must meet each of the criteria, as applicable, in
paragraphs (a) through (g) of this section.
(a) The project must be for the purchase of a renewable energy
system or to make energy efficiency improvements.
(b) The project must be for a pre-commercial or commercially
available, and replicable technology.
(c) The project must have technical merit, as determined using the
procedures specified in Sec. 4280.112(d).
(d) The project must be located in a rural area, as defined in
Sec. 4280.103.
(e) The applicant must be the owner of the project and control the
revenues and expenses of the project, including operation and
maintenance. A third-party under contract to the owner may be used to
control revenues and expenses and manage the operation and/or
maintenance of the project.
(f) Sites must be controlled by the agricultural producer or small
business for the financing term of any associated Federal loans or loan
guarantees.
(g) Satisfactory sources of revenue in an amount sufficient to
provide for the operation, management, maintenance, and debt service of
the project must be available for the life of the project.
Section A. Grants
Sec. 4280.109 Qualification for simplified applications.
When applying for a grant, applicants may qualify for the
simplified application process. In order to use the simplified
application process, each of the conditions specified in paragraphs
(a)(1) through (8) of this section must be met.
(a) Simplified application criteria. (1) The applicant must be
eligible in accordance with Sec. 4280.107.
(2) The project must be eligible in accordance with Sec. 4280.108.
(3) Total eligible project costs must be $200,000 or less.
(4) The proposed project must use commercially available renewable
energy systems or energy efficiency improvements.
(5) Construction planning and performing development must be
performed in compliance with Sec. 4280.115. The applicant or the
applicant's prime contractor must assume all risks and responsibilities
of project development.
(6) The applicant or the applicant's prime contractor is
responsible for all interim financing.
(7) The proposed project is scheduled to be completed within 24
months after entering into a grant agreement. The Agency may extend
this period if the Agency determines, at its sole discretion, that the
applicant is unable to complete the project for reasons beyond the
applicant's control.
(8) The applicant agrees not to request reimbursement from funds
obligated under this program until after project completion, including
all operational testing and certifications acceptable to the Agency.
(b) Application processing and administration. (1) Application
documents. Application documents shall be submitted in accordance with
Sec. 4280.111 or, if applying for a combined grant and loan, also in
accordance with Sec. 4280.193(c).
(2) Demonstrated financial need. The applicant must certify that it
meets the definition of demonstrated financial need, as defined in
Sec. 4280.103. The Agency may require the applicant to provide
supplemental information that will allow the Agency to make its own
determination of the applicant's financial need.
(3) Project development. Section 4280.115 applies, except as
follows:
(i) Any grantee may participate in project development without
direct compensation subject to the approval in writing by the prime
contractor, provided that all applicable construction practices,
manufacturer instructions, and all safety codes and standards are
followed during construction and testing, and the work product meets
all applicable manufacture specifications, and all applicable codes and
standards. The prime contractor remains responsible for all the overall
successful completion of the project, including any work done by the
grantee, or
[[Page 41307]]
(ii) A grantee who can demonstrate to the Agency that the grantee
has the necessary experience and other resources to successfully
complete the project may serve as the prime contractor/installer.
Projects where the grantee serves as the prime contractor will need to
secure the services of an independent, professionally responsible,
qualified consultant to certify testing specifications, procedures, and
testing results.
(4) Project completion. The project is complete when the applicant
has provided a written final project development, testing, and
performance report acceptable to the Agency. Upon notification of
receipt of an acceptable project completion report, the applicant may
request grant reimbursement. The Agency reserves the right to observe
the testing.
(5) Insurance. Section 4280.113 applies, except business
interruption insurance is not required.
Sec. 4280.110 Grant funding.
(a) The amount of grant funds that will be made available to an
eligible project under this subpart will not exceed 25 percent of total
eligible project costs. Eligible project costs are specified in
paragraph (c) of this section.
(b) The applicant is responsible in securing the remainder of the
total eligible project costs not covered by grant funds. The amount
secured by the applicant must be the remainder of total eligible
project costs.
(1) Without specific statutory authority, other Federal grant funds
and applicant in-kind contributions cannot be used to meet the matching
fund requirement. Third-party, in-kind contributions are limited to 10
percent of the matching fund requirement of the grant. The Agency will
advise if the proposed third-party, in-kind contributions are
acceptable in accordance with 7 CFR part 3015 of this title.
(2) Passive third-party equity contributions are acceptable for
renewable energy system projects, including those that are eligible for
Federal production tax credits, provided the applicant meets the
requirements of Sec. 4280.107.
(c) Eligible project costs are only those costs associated with the
items identified in paragraphs (c)(1) through (9) of this section, as
long as the items are an integral and necessary part of the renewable
energy system or energy efficiency improvement.
(1) Post-application purchase and installation of equipment (new,
refurbished, or remanufactured), except agricultural tillage equipment,
used equipment, and vehicles.
(2) Post-application construction or improvements, except
residential.
(3) Energy audits or assessments.
(4) Permit and license fees.
(5) Professional service fees, except for application preparation.
(6) Feasibility studies and Technical Reports.
(7) Business plans.
(8) Retrofitting.
(9) Construction of a new energy efficient facility only when the
facility is used for the same purpose, is approximately the same size,
and based on the energy audit will provide more energy savings than
improving an existing facility. Only costs identified in the energy
audit for energy efficiency improvements are allowed.
(d) The maximum amount of grant assistance to one individual or
entity will not exceed $750,000 per Federal fiscal year. For those
applicants that have not received a grant award during the previous 2
Federal fiscal years, additional points will be added to their priority
score.
(e) Applications for renewable energy system grants will be
accepted for a minimum grant request of $2,500 up to a maximum of
$500,000.
(f) Applications for energy efficiency improvement grants will be
accepted for a minimum grant request of $1,500 up to a maximum of
$250,000.
(g) In determining the amount of a grant awarded, the Agency will
take into consideration the following six criteria:
(1) The type of renewable energy system to be purchased;
(2) The estimated quantity of energy to be generated by the
renewable energy system;
(3) The expected environmental benefits of the renewable energy
system;
(4) The extent to which the renewable energy system will be
replicable;
(5) The amount of energy savings expected to be derived from the
activity, as demonstrated by an energy audit comparable to an energy
audit under 7 U.S.C. 8105; and
(6) The estimated length of time it would take for the energy
savings generated by the activity to equal the cost of the activity.
Sec. 4280.111 Application and documentation.
The requirements in this section apply to grant applications under
this subpart.
(a) General. Separate applications must be submitted for renewable
energy system and energy efficiency improvement projects. Applicants
may only submit one application for each type of project per Federal
fiscal year. An original and one complete copy of each application are
required that follow the outline below. Each application must include a
Table of Contents with clear pagination and chapter identification.
(b) Grant application content. Applications and documentation for
projects using the simplified application process, as described in
Sec. 4280.109, must provide the required information organized
pursuant to the Table of Contents in a chapter format presented in the
order shown in paragraphs (b)(1) through (3) and (b)(5) through (7) of
this section; paragraph (b)(4) of this section does not apply for
projects using the simplified application process. Applications and
documentation for projects not using the simplified application process
must provide the required information organized pursuant to the Table
of Contents in a chapter format presented in the order shown in
paragraphs (b)(1) through (8) of this section.
(1) Forms, certifications, and organizational documents. Each
application must contain the items identified in paragraphs (b)(1)(i)
through (iii) in this section.
(i) Project specific forms.
(A) Form SF-424, ``Application for Federal Assistance.''
(B) Form SF-424C, ``Budget Information--Construction Programs.'' A
more detailed budget breakdown is required in the Technical Report.
(C) Form SF-424D, ``Assurances--Construction Programs.''
(D) Form RD 1940-20, ``Request for Environmental Information.''
(ii) Certifications.
(A) AD-1049, ``Certification Regarding Drug-Free Workplace
Requirements (Grants) Alternative 1--For Grantees Other than
Individuals.''
(B) AD-1048, ``Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion--Lower Tiered Covered
Transactions.''
(C) Exhibit A-1 of RD Instruction 1940-Q, ``Certification for
Contracts, Grants and Loans,'' required by 7 CFR 3018.110 if the grant
exceeds $100,000.
(D) Form SF-LLL, ``Disclosure of Lobbying Activities,'' must be
completed if the applicant or borrower has made or agreed to make
payment using funds other than Federal appropriated funds to influence
or attempt to influence a decision in connection with the application.
(E) AD-1047, ``Certification Regarding Debarment, Suspension, and
Other Responsibility Matters--Primary Covered Transactions.''
[[Page 41308]]
(F) Form RD 400-1, ``Equal Opportunity Agreement.''
(G) Form RD 400-4, ``Assurance Agreement.''
(H) Intergovernmental consultation comments in accordance with 7
CFR part 3015, subpart V, of this title.
(I) Applicants and borrowers must provide a certification
indicating whether or not there is a known relationship or association
with an Agency employee.
(J) Applicants must provide certification that they meet the
definition of demonstrated financial need, as defined in Sec.
4280.103.
(iii) Organizational documents. Except for sole proprietors, each
applicant must submit, with the application, a copy of the legal
organizational documents.
(2) Table of Contents. Include page numbers for each component of
the application in the table of contents. Begin pagination immediately
following the Table of Contents.
(3) Project Summary. Provide a concise summary of the project
proposal and applicant information, project purpose and need, and
project goals that includes the following:
(i) Title. Provide a descriptive title of the project (identified
on SF 424).
(ii) Applicant eligibility. Describe how each of the applicable
criteria identified in Sec. 4280.107(a)(1) through (5) is met.
(iii) Project eligibility. Describe how each of the criteria, as
applicable, in Sec. 4280.108(a) through (g) is met. Clearly state
whether the application is for the purchase of a renewable energy
system or to make energy efficiency improvements. The response to Sec.
4280.108(a) must include a brief description of the system or
improvement. This description must be sufficient to provide the reader
with a frame of reference when reviewing the rest of the application.
Additional project description information may be needed later in the
application.
(iv) Operation description. Describe the applicant's total farm/
ranch/business operation and the relationship of the proposed project
to the applicant's total farm/ranch/business operation. Provide a
description of the ownership of the applicant, including a list of
individuals and/or entities with ownership interest, names of any
corporate parents, affiliates, and subsidiaries, as well as a
description of the relationship, including products, between these
entities.
(v) Financial information for size determination. Provide financial
information to allow the Agency to determine the applicant's size. All
information submitted under this paragraph must be substantiated by
authoritative records.
(A) Rural small businesses. Provide sufficient information to
determine total annual receipts for and number of employees of the
business and any parent, subsidiary, or affiliates at other locations.
Voluntarily providing tax returns is one means of satisfying this
requirement. The information provided must be sufficient for the Agency
to make a determination of business size as defined by SBA.
(B) Agricultural producers. Provide the gross market value of your
agricultural products, gross agricultural income, and gross nonfarm
income of the applicant for the calendar year preceding the year in
which you submit your application.
(4) Financial information. Financial information is required on the
total operation of the agricultural producer/rural small business and
its parent, subsidiary, or affiliates at other locations. All
information submitted under this paragraph must be substantiated by
authoritative records.
(i) Historical financial statements. Provide historical financial
statements prepared in accordance with Generally Accepted Accounting
Practices (GAAP) for the past 3 years, including income statements and
balance sheets. If agricultural producers are unable to present this
information in accordance with GAAP, they may instead present financial
information for the past years in the format that is generally required
by commercial agriculture lenders.
(ii) Current balance sheet and income statement. Provide a current
balance sheet and income statement prepared in accordance with GAAP and
dated within 90 days of the application. Agricultural producers should
present financial information in the format that is generally required
by commercial agriculture lenders.
(iii) Pro forma financial statements. Provide pro forma balance
sheet at start-up of the agricultural producer's/rural small business'
business that reflects the use of the loan proceeds or grant award; and
3 additional years, indicating the necessary start-up capital,
operating capital, and short-term credit; and projected cashflow and
income statements for 3 years supported by a list of assumptions
showing the basis for the projections.
(iv) Demonstration of Financial Need. Provide sufficient
information or documentation that allows the Agency to make its own
determination of the applicant's financial need.
(5) Matching funds. Submit a spreadsheet identifying sources of
matching funds, amounts, and status of matching funds. The spreadsheet
must also include a directory of matching funds source contact
information. Attach any applications, correspondence, or other written
communication between applicant and matching fund source.
(6) Self-Evaluation Score. Self-score the project using the
evaluation criteria in Sec. 4280.112(e). To justify the score, submit
the total score along with appropriate calculations and attached
documentation, or specific cross-references to information elsewhere in
the application.
(7) Renewable Energy and Energy Efficiency Improvements Technical
Report. A Technical Report must be submitted as part of the application
to allow the Agency to determine the overall technical merit of the
renewable energy system or energy efficiency improvement project.
(i) Simplified applications. Simplified applications, which are
submitted for renewable energy projects or energy efficiency
improvement projects with total eligible project costs of $200,000 or
less, must include a Technical Report prepared in accordance with the
requirements specified in paragraphs (b)(7)(i)(A) through (C) of this
section.
(A) The Technical Report must be prepared in accordance with
Appendix A of this subpart. If a renewable energy project does not fit
one of the technologies identified in Appendix A, the applicant must
submit a Technical Report in accordance with paragraph (b)(7)(ii) of
this section. The information in all Technical Reports must be of
sufficient detail to allow the Agency to score the project and evaluate
its technical feasibility.
(B) Either an energy assessment or an energy audit is required for
energy efficiency improvement projects. For energy efficiency
improvement projects with total eligible project costs greater than
$50,000, an energy audit must be conducted; it must be conducted by or
reviewed and certified by an energy auditor. For energy efficiency
improvement projects with total eligible project costs of $50,000 or
less, an energy assessment or an energy audit may be conducted by
either an energy assessor or an energy auditor.
(C) Technical Reports prepared prior to the applicant's selection
of a prime contractor may be modified after selection, pursuant to
input from the prime contractor, and submitted to the Agency, provided
the overall scope of the project is not materially changed as
determined by the Agency. Changes in the report must be accompanied by
an updated Form RD 1940-20.
[[Page 41309]]
(ii) Full applications. Full applications, which must be submitted
for applications for renewable energy projects or energy efficiency
improvement projects with total eligible project costs greater than
$200,000, must include a full Technical Report prepared in accordance
with Appendix B of this subpart and with paragraphs (b)(7)(ii)(A)
through (G) of this section, as applicable.
(A) The Technical Report must demonstrate that the renewable energy
system or energy efficiency improvement project can be installed and
perform as intended in a reliable, safe, cost-effective, and legally
compliant manner.
(B) Either an energy assessment or an energy audit is required for
energy efficiency improvement projects. For energy efficiency
improvement projects with total eligible project costs greater than
$50,000, an energy audit must be conducted; it must be conducted by or
reviewed and certified by an energy auditor. For energy efficiency
improvement projects with total eligible project costs of $50,000 or
less, an energy assessment or an energy audit may be conducted by
either an energy assessor or an energy auditor.
(C) For renewable energy projects with total eligible project costs
greater than $400,000 and for energy efficiency improvement projects
with total eligible project costs greater than $200,000, the design
review, installation monitoring, testing prior to commercial operation,
and project completion certification will require the services of a
licensed professional engineer (PE) or team of licensed PEs.
(D) For projects with total eligible project costs greater than
$1,200,000, the Technical Report must be reviewed and include an
opinion and recommendation by an independent qualified consultant.
(E) Technical Reports prepared prior to the applicant's selection
of a final design, equipment vendor, or prime contractor, or other
significant decision may be modified and resubmitted to the Agency,
provided the overall scope of the project is not materially changed as
determined by the Agency. Changes in the Technical Report must be
accompanied by an updated Form RD 1940-20.
(F) All information provided in the Technical Report will be
evaluated against the requirements provided in Appendix B of this
subpart. Any Technical Report not prepared in the following format and
in accordance with Appendix B, where applicable, will be penalized
under scoring for technical merit.
(G) All Technical Reports shall follow the outline presented below
and shall contain the information described in paragraphs
(b)(7)(ii)(G)(1) through (10) of this section and Appendix B, if the
technology is identified in Appendix B for the particular project. If
none of the Technical Reports in Appendix B apply to the proposed
technology, the applicant may submit a Technical Report that conforms
to the overall outline and subjects specified in paragraph
(b)(7)(ii)(G) of this section. For Technical Reports prepared for
technologies not identified in Appendix B, the Agency will review the
reports and notify, in writing, the applicant of the changes to the
report required in order for the Agency to accept the report.
(1) Qualifications of the project team. Describe the project team,
their professional credentials, and relevant experience. The
description must support that the project team service, equipment, and
installation providers have the necessary professional credentials,
licenses, certifications, or relevant experience to develop the
proposed project.
(2) Agreements and permits. Describe the necessary agreements and
permits required for the project and the anticipated schedule for
securing those agreements and permits. For example, interconnection
agreements and purchase power arrangements are necessary for all
renewable energy projects electrically interconnected to the utility
grid. The applicant must demonstrate that the applicant is familiar
with the regulations and utility policies and that these arrangements
will be secured in a reasonable timeframe.
(3) Energy or resource assessment. Describe the quality and
availability of the renewable resource, and an assessment of expected
energy savings through the deployment of the proposed system or
increased production created by the system.
(4) Design and engineering. Describe the intended purpose of the
project and the design, engineering, testing, and monitoring needed for
the proposed project. The description must support that the system will
be designed, engineered, tested, and monitored so as to meet its
intended purpose, ensure public safety, and comply with applicable
laws, regulations, agreements, permits, codes, and standards. In
addition, the applicant must identify all the major equipment that is
proprietary equipment and justify how this unique equipment is needed
to meet the requirements of the proposed design.
(5) Project development. Describe the overall project development
method, including the key project development activities and the
proposed schedule for each activity. The description must identify each
significant historical and projected activity, its beginning and end,
and its relationship to the time needed to initiate and carry the
activity through to successful project completion. The description must
address applicant project development cashflow requirements. Details
for equipment procurement and installation shall be addressed in
paragraphs (b)(7)(ii)(G)(7) and (8) of this section.
(6) Project economic assessment. Describe the financial performance
of the proposed project. The description must address project costs,
energy savings, and revenues, including applicable investment and
production incentives. Cost centers include, but are not limited to,
administrative and general, fuel supply, operations and maintenance,
product delivery and debt service. Revenues to be considered must
accrue from the sale of energy, offset or savings in energy costs,
byproducts, and green tags. Incentives to be considered must accrue
from government entities.
(7) Equipment procurement. Describe the availability of the
equipment required by the system. The description must support that the
required equipment is available and can be procured and delivered
within the proposed project development schedule.
(8) Equipment installation. Describe the plan for site development
and system installation, including any special equipment requirements.
In all cases, the system or improvement must be installed in
conformance with manufacturer's specifications and design requirements,
and comply with applicable laws, regulations, agreements, permits,
codes, and standards.
(9) Operations and maintenance. Describe the operations and
maintenance requirements of the system, including major rebuilds and
component replacements necessary for the system to operate as designed
over the design life. All systems or improvements must have a warranty.
The warranty must cover and provide protection against both breakdown
and a degradation of performance. The performance of the renewable
energy system or energy efficiency improvement must be monitored and
recorded as appropriate to the specific technology.
(10) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and associated
wastes at
[[Page 41310]]
the end of their useful lives. The budget for and any unique concerns
associated with the dismantling and disposal of project components and
their wastes must also be described.
(8) Business-level feasibility study for renewable energy systems.
For each application for a renewable energy system project, with total
eligible project costs greater than $200,000, a business-level
feasibility study by an independent, qualified consultant will be
required by the Agency for start-up businesses or existing businesses.
An acceptable business-level feasibility study must at least include an
evaluation of economic, market, technical, financial, and management
feasibility.
Sec. 4280.112 Evaluation of grant applications.
(a) General review. The Agency will evaluate each application and
make a determination as to whether the applicant is eligible, the
proposed grant is for an eligible project, and the proposed grant
complies with all applicable statutes and regulations.
(b) Ineligible applications. If either the applicant or the project
is ineligible, the Agency will inform the applicant in writing of the
decision, reasons therefore, and any appeal rights. No further
evaluation of the application will occur.
(c) Incomplete applications. If the application is incomplete, the
Agency will return it to the applicant to provide the applicant the
opportunity to resubmit the application. The Agency will identify those
parts of the application that are incomplete. Upon receipt of a
complete application, the Agency will complete its evaluation of the
application.
(d) Technical merit. The Agency's determination of a project's
technical merit will be based on the information provided by the
applicant. The Agency may engage the services of other government
agencies or other recognized industry experts in the applicable
technology field, at its discretion, to evaluate and rate the
application. The Agency may use this evaluation and rating to determine
the level of technical merit of the proposed project. Projects that the
Agency determines are without technical merit shall be deemed
ineligible.
(e) Evaluation criteria. Agency personnel will score and fund each
application based on the evaluation criteria specified in paragraphs
(e)(1) through (9) of this section.
(1) Quantity of energy replaced, produced, or saved. Points may
only be awarded for energy replacement, energy savings, or energy
generation. Points will not be awarded for more than one category.
(i) Energy replacement. If the proposed renewable energy system is
intended primarily for self-use by the agricultural producer or rural
small business and will provide energy replacement of greater than
zero, but equal to or less than 25 percent, 5 points will be awarded;
greater than 25 percent, but equal to or less than 50 percent, 10
points will be awarded; or greater than 50 percent, 15 points will be
awarded. Energy replacement is to be determined by dividing the
estimated quantity of renewable energy to be generated over a 12-month
period by the estimated quantity of energy consumed over the same 12-
month period during the previous year by the applicable energy
application. The estimated quantities of energy must be converted to
either British thermal units (BTUs), Watts, or similar energy
equivalents to facilitate scoring. If the estimated energy produced
equals more than 150 percent of the energy requirements of the
applicable process(es), the project will be scored as an energy
generation project.
(ii) Energy savings. If the estimated energy expected to be saved
by the installation of the energy efficiency improvements will be from
20 percent up to, but not including 30 percent, 5 points will be
awarded; 30 percent up to, but not including 35 percent, 10 points will
be awarded; or, 35 percent or greater, 15 points will be awarded.
Energy savings will be determined by the projections in an energy
assessment or audit. Projects with total eligible project costs of
$50,000 or less that opt to obtain a professional energy audit will be
awarded an additional 5 points.
(iii) Energy generation. If the proposed renewable energy system is
intended primarily for production of energy for sale, 10 points will be
awarded.
(2) Environmental benefits. If the purpose of the proposed system
contributes to the environmental goals and objectives of other Federal,
State, or local programs, 10 points will be awarded. Points will only
be awarded for this paragraph if the applicant is able to provide
documentation from an appropriate authority supporting this claim.
(3) Commercial availability. If the proposed system or improvement
is currently commercially available and replicable, 5 points will be
awarded. If the proposed system or improvement is commercially
available and replicable and is also provided with a 5-year or longer
warranty providing the purchaser protection against system degradation
or breakdown or component breakdown, 10 points will be awarded.
(4) Technical merit score. The Technical Merit of each project will
be determined using the procedures specified in paragraphs (e)(4)(i)
and (ii) of this section. The procedures specified in paragraph
(e)(4)(i) will be used to score paragraphs (e)(4)(i)(A) through (J) of
this section. The final score awarded will be calculated using the
procedures described in paragraph (e)(4)(ii) of this section.
(i) Technical merit. Each subparagraph has its own maximum possible
score and will be scored according to the following criteria: If the
description in the subparagraph has no significant weaknesses and
exceeds the requirements of the subparagraph, 100 percent of the total
possible score for the subparagraph will be awarded. If the description
has one or more significant strengths and meets the requirements of the
subparagraph, 80 percent of the total possible score will be awarded
for the subparagraph. If the description meets the basic requirements
of the subparagraph, but also has several weaknesses, 60 percent of the
points will be awarded. If the description is lacking in one or more
critical aspects, key issues have not been addressed, but the
description demonstrates some merit or strengths, 40 percent of the
total possible score will be awarded. If the description has serious
deficiencies, internal inconsistencies, or is missing information, 20
percent of the total possible score will be awarded. If the description
has no merit in this area, 0 percent of the total possible score will
be awarded. The total possible points for Technical Merit is 35 points.
(A) Qualifications of the project team (maximum score of 10
points). The applicant has described the project team service
providers, their professional credentials, and relevant experience. The
description supports that the project team service, equipment, and
installation providers have the necessary professional credentials,
licenses, certifications, or relevant experience to develop the
proposed project.
(B) Agreements and permits (maximum score of 5 points). The
applicant has described the necessary agreements and permits required
for the project and the schedule for securing those agreements and
permits.
(C) Energy or resource assessment (maximum score of 10 points). The
applicant has described the quality and availability of a suitable
renewable resource or an assessment of expected energy savings for the
proposed system.
[[Page 41311]]
(D) Design and engineering (maximum score of 30 points). The
applicant has described the design, engineering, and testing needed for
the proposed project. The description supports that the system will be
designed, engineered, and tested so as to meet its intended purpose,
ensure public safety, and comply with applicable laws, regulations,
agreements, permits, codes, and standards.
(E) Project development schedule (maximum score of 5 points). The
applicant has described the development method, including the key
project development activities and the proposed schedule for each
activity. The description identifies each significant task, its
beginning and end, and its relationship to the time needed to initiate
and carry the project through to successful completion. The description
addresses grantee or borrower project development cashflow
requirements.
(F) Project economic assessment (maximum score of 20 points). The
applicant has described the financial performance of the proposed
project, including the calculation of simple payback. The description
addresses project costs and revenues, such as applicable investment and
production incentives, and other information to allow the assessment of
the project's cost effectiveness.
(G) Equipment procurement (maximum score of 5 points). The
applicant has described the availability of the equipment required by
the system. The description supports that the required equipment is
available, and can be procured and delivered within the proposed
project development schedule.
(H) Equipment installation (maximum score of 5 points). The
applicant has described the plan for site development and system
installation.
(I) Operation and maintenance (maximum score of 5 points). The
applicant has described the operations and maintenance requirements of
the system necessary for the system to operate as designed over the
design life.
(J) Dismantling and disposal of project components (maximum score
of 5 points). The applicant has described the requirements for
dismantling and disposing of project components at the end of their
useful life and associated wastes.
(ii) Calculation of Technical Merit Score. To determine the actual
points awarded a project for Technical Merit, the following procedure
will be used: The score awarded for paragraphs (e)(4)(i)(A) through (J)
of this section will be added together and then divided by 100, the
maximum possible score, to achieve a percentage. This percentage will
then be multiplied by the total possible points of 35 to achieve the
points awarded for the proposed project for Technical Merit.
(5) Readiness. If the applicant has written commitments from the
source(s) confirming commitment of 50 percent up to but not including
75 percent of the matching funds prior to the Agency receiving the
complete application, 5 points will be awarded. If the applicant has
written commitments from the source(s) confirming commitment of 75
percent up to but not including 100 percent of the matching funds prior
to the Agency receiving the complete application, 10 points will be
awarded. If the applicant has written commitments from the source(s) of
matching funds confirming commitment of 100 percent of the matching
funds prior to the Agency receiving the complete application, 15 points
will be awarded.
(6) Small agricultural producer/very small business. If the
applicant is an agricultural producer producing agricultural products
with a gross market value of less than $600,000 in the preceding year,
5 points will be awarded. If the applicant is an agricultural producer
producing agricultural products with a gross market value of less than
$200,000 in the preceding year or is a very small business, as defined
in Sec. 4280.103, 10 points will be awarded.
(7) Simplified application/low cost projects. If the applicant is
eligible for and uses the simplified application process or the project
has total eligible project costs of $200,000 or less, 5 points will be
awarded.
(8) Previous grantees and borrowers. If an applicant has not been
awarded a grant or loan under this program within the 2 previous
Federal fiscal years, 5 points will be awarded.
(9) Return on investment. If the proposed project will return the
cost of the investment in less than 4 years, 10 points will be awarded;
4 years up to but not including 8 years, 4 points will be awarded; or 8
years up to 11 years, 2 point will be awarded.
Sec. 4280.113 Insurance requirements.
Agency approved insurance coverage must be maintained for the life
of the grant unless this requirement is waived or modified by the
Agency in writing.
(a) National flood insurance is required in accordance with 7 CFR
part 1806, subpart B, of this title, if applicable.
(b) Business interruption insurance is required except for projects
with total eligible project costs of $200,000 or less.
Sec. 4280.114 Laws that contain other compliance requirements.
(a) Equal employment opportunity. For all construction contracts
and grants in excess of $10,000, the contractor must comply with
Executive Order 11246, as amended by Executive Order 11375, and as
supplemented by applicable Department of Labor regulations (41 CFR part
60). The applicant is responsible for ensuring that the contractor
complies with these requirements.
(b) Equal opportunity and nondiscrimination. The Agency will ensure
that equal opportunity and nondiscriminatory requirements are met in
accordance with the Equal Credit Opportunity Act and 7 CFR 15d,
Nondiscrimination in Programs and Activities, conducted by USDA. The
Agency will not discriminate against applicants on the basis of race,
color, religion, national origin, sex, marital status, or age (provided
that the applicant has the capacity to contract); to the fact that all
or part of the applicant's income derives from public assistance
program; or to the fact that the applicant has in good faith exercised
any right under the Consumer Credit Protection Act.
(c) Civil rights compliance. Recipients of grants must comply with
the Americans with Disabilities Act of 1990, Title VI of the Civil
Rights Act of 1964, and Section 504 of the Rehabilitation Act of 1973.
This may include collection and maintenance of data on the race, sex,
and national origin of the recipient's membership/ownership and
employees. These data must be available to conduct compliance reviews
in accordance with 7 CFR part 1901, subpart E, Sec. 1901.204 of this
title. Initial reviews will be conducted after Form RD 400-4 is signed
and all subsequent reviews every 3 years thereafter for loans. The last
review shall occur 3 years after the date of loan closing. Grants will
require one subsequent compliance review after the last disbursement of
grant funds have been made, and the facility has been in full operation
for 90 days.
(d) Environmental analysis. Subpart G of part 1940 of this title
outlines environmental procedures and requirements for this subpart.
Prospective applicants are advised to contact the Agency to determine
environmental requirements as soon as practicable after they decide to
pursue any form of financial assistance directly
[[Page 41312]]
or indirectly available through the Agency.
(1) Any required environmental review must be completed by the
Agency prior to the Agency obligating any funds.
(2) The applicant will be notified of all specific compliance
requirements, including, but not limited to, the publication of public
notices, and consultation with State Historic Preservation Offices and
the U.S. Fish and Wildlife Service.
(3) A site visit by the Agency may be scheduled, if necessary, to
determine the scope of the review.
(4) The applicant taking any actions or incurring any obligations
during the time of application or application review and processing
that would either limit the range of alternatives to be considered or
that would have an adverse effect on the environment, such as the
initiation of construction, will result in project ineligibility.
(e) Executive Order 12898. When a project is proposed and financial
assistance requested, the Agency will conduct a Civil Rights Impact
Analysis (CRIA) with regards to environmental justice. The CRIA must be
conducted and the analysis documented utilizing Form RD 2006-38,
``Civil Rights Impact Analysis Certification.'' This certification must
be done prior to loan approval, obligation of funds, or other
commitments of Agency resources, including issuance of a Letter of
Conditions or Form RD 4279-3 of guarantee, whichever occurs first.
(f) Uniform Federal assistance regulations. Grants will be
administered in accordance with 7 CFR part 3015 of this title.
Sec. 4280.115 Construction planning and performing development.
The requirements of this section apply for planning, designing,
bidding, contracting, and constructing renewable energy systems and
energy efficiency improvement projects as applicable. For contracts of
$200,000 or less, the simple contract method, as specified in paragraph
(e) of this section, may be used. Contracts greater than $200,000 shall
use the contract method specified in paragraph (g) of this section.
(a) Technical services. Applicants are responsible for providing
the engineering, architectural, and environmental services necessary
for planning, designing, bidding, contracting, inspecting, and
constructing their facilities. Services may be provided by the
applicant's ``in-house'' engineer or architect or through contract,
subject to Agency concurrence. Engineers and architects must be
licensed in the State where the facility is to be constructed.
(b) Design policies. Facilities funded by the Agency will meet the
requirements of 7 CFR subpart C of part 1780, Sec. 1780.57(b), (c),
(d), and (o) of this title. Final plans and specifications must be
reviewed by the Agency and approved prior to the start of construction.
(c) Owners accomplishing work. In some instances, owners may wish
to perform a part of the work themselves. For an owner to perform
project development work, the owner must meet the experience
requirements of 7 CFR subpart C of part 1780, Sec. 1780.67 of this
title. For an owner to provide a portion of the work, with the
remainder to be completed by a contractor, a clear understanding of the
division of work must be established and delineated in the contract. In
such cases, the contractor will be required to inspect the owner's work
and accept it. Owners are not eligible for payment for their own work
as it is not an eligible project cost. See Sec. 4280.110(c) of this
subpart for further details on eligible project costs.
(d) Equipment purchases. Equipment purchases of less than $200,000
will not require a performance and payment bond, unless required by the
applicant, as long as the contract purchase is a lump sum payment and
the manufacturer provides the required warranties on the equipment as
outlined in paragraph (i) in the applicable section found in Appendices
A and B of this subpart. Payment shall be certified by copies of the
Manufacturer's paid invoices and warranty documents.
(e) Simple contract method. The simple contract method may be used
for small projects with a contract not greater than $200,000. In
smaller projects, Agency funds will typically be used to reimburse
project costs upon completion of the work as a lump sum payment.
Partial payments will be made in accordance with Form RD 4280-2,
``Grant Agreement,'' and Form RD 1924-6, ``Construction Contract,'' or
other Agency approved contract. All construction work will be performed
under a written contract, as described below. A design/build method,
where the same person or entity provides design and engineering work,
as well as construction or installation, may be used under this method.
(1) Contracting requirements threshold. For contracts above
$100,000, certain Federal requirements, including surety, must be met.
An attachment to the contract may be used to incorporate language for
these requirements.
(2) Forms used. Form RD 1924-6 or other Agency approved contract
must be used. Other contracts must be approved by the Agency and may be
used only if they are customarily used in the area and protect the
interest of the applicant and the Government with respect to compliance
with items such as the drawings, specifications, payments for work,
inspections, completion, nondiscrimination in construction work and
acceptance of the work. The Agency will not become a party to a
construction contract or incur any liability under it. No contract
shall become effective until concurred in writing by the Agency. Such
concurrence statement shall be attached to and made a part of the
contract.
(3) Contract provisions. Contracts will have a listing of
attachments and the minimum provisions of the contract will include:
(i) The contract sum;
(ii) The dates for starting and completing the work;
(iii) The amount of liquidated damages to be charged;
(iv) The amount, method, and frequency of payment;
(v) Whether or not surety bonds will be provided. If not, a latent
defects bond may be required, as described in paragraph (e)(4) of this
section;
(vi) The requirement that changes or additions must have prior
written approval of the Agency; and
(vii) The warranty period to be provided in accordance with
Appendices A and B, sections 1 through 10, paragraph (i)(1).
(4) Surety. Surety per 7 CFR subpart C of part 1780, Sec.
1780.75(c) of this title will be required, and made a part of the
contract, if the applicant requests it, or if the contractor requests
partial payments for construction work. If the contractor will receive
a lump sum payment at the end of work, the Agency will not require
surety. In such cases where no surety is provided and the project
involves pre-commercial technology, first of its type in the U.S., or
new designs without sufficient operating hours to prove their merit, a
latent defects bond may be required to cover the work.
(5) Equal opportunity. Section 1901.205 of subpart E of part 1901
of this title applies to all financial assistance involving
construction contracts and subcontracts in excess of $10,000. Language
for this requirement is included in Form RD 1924-6. If this form is not
used, such language must be made a part of the Agency approved
contract.
(6) Obtaining bids and selecting a contractor. (i) The applicant
may select
[[Page 41313]]
a contractor and negotiate a contract or contact several contractors
and request each to submit a bid. The applicant will provide a
statement to the Agency describing the process for obtaining the bid(s)
and what alternatives were considered.
(ii) When a price has already been negotiated by an applicant and a
contractor, the Agency will review the proposed contract. If the
contractor is qualified to perform the development and provide a
warranty of the work and the price compares favorably with the cost of
similar construction in the area, further negotiation is unnecessary.
If the Agency determines the price is too high or otherwise
unreasonable, the applicant will be required to negotiate further with
the contractor. If a reasonable price cannot be negotiated or if the
contractor is not qualified, the applicant will be required to
negotiate with another contractor.
(iii) When an applicant has proposed development with no contractor
in mind, competition will be required. The applicant must obtain bids
from as many qualified contractors, dealers, or trades people as
feasible depending on the method and type of construction.
(iv) If the award of the contract is by competitive bidding, Form
RD 1924-5, ``Invitation for Bid (Construction Contract),'' or another
similar Agency approved invitation bid form containing the requirements
of subpart E of part 1901 of this title may be used. All contractors
from whom bids are requested should be informed of all conditions of
the contract, including the time and place of opening bids. Conditions
shall not be established which would give preference to a specific
bidder or type of bidder. When applicable, copies of Forms RD 1924-6
and RD 400-6, ``Compliance Statement,'' also should be provided to the
prospective bidders.
(7) Awarding the contract. The applicant, with the concurrence of
the Agency, will consider the amount of the bids or proposals, and all
conditions listed in the invitation. On the basis of these
considerations, the applicant will select and notify the lowest
responsible bidder. The contract will be awarded using Form RD 1924-6
or similar Agency approved document as described in this section.
(8) Final payments. Prior to making final payment on the contract
when a surety bond is not used, the Agency will be provided with Form
RD 1924-9, ``Certificate of Contractor's Release,'' and Form RD 1924-
10, ``Release by Claimants,'' executed by all persons who furnished
materials or labor in connection with the contract. The applicant
should furnish the contractor with a copy of Form RD 1924-10 at the
beginning of the work in order that the contractor may obtain these
releases as the work progresses.
(f) Design/build contracts. The design/build method, where the same
person or entity provides design and engineering work, as well as
construction or installation, may be used with Agency written approval.
If the design/build contract amount is $200,000 or less, development
and contracting will follow paragraph (e) of this section. If the
design/build contract amount is greater than $200,000, Agency prior
concurrence must be obtained as described below, and the remaining
requirements of this section apply.
(1) Concurrence information. The applicant will request Agency
concurrence by providing the Agency at least the information specified
in paragraphs (f)(1)(i) through (viii) of this section.
(i) The owner's written request to use the design/build method with
a description of the proposed method.
(ii) A proposed scope of work describing in clear, concise terms
the technical requirements for the contract. It should include a
nontechnical statement summarizing the work to be performed by the
contractor and the results expected, and a proposed construction
schedule showing the sequence in which the work is to be performed.
(iii) A proposed firm-fixed-price contract for the entire project
which provides that the contractor shall be responsible for any extra
cost which may result from errors or omissions in the services provided
under the contract, as well as compliance with all Federal, State, and
local requirements effective on the contract execution date.
(iv) Where noncompetitive negotiation is proposed, an evaluation of
the contractor's performance on previous similar projects in which the
contractor acted in a similar capacity.
(v) A detailed listing and cost estimate of equipment and supplies
not included in the construction contract but which are necessary to
properly operate the facility.
(vi) Evidence that a qualified construction inspector who is
independent of the contractor has or will be hired.
(vii) Preliminary plans and outline specifications. However, final
plans and specifications must be completed and reviewed by the Agency
prior to the start of construction.
(viii) The owner's attorney's opinion and comments regarding the
legal adequacy of the proposed contract documents and evidence that the
owner has the legal authority to enter into and fulfill the contract.
(2) Agency concurrence of design/build method. The Agency shall
review the material submitted by the applicant. When all items are
acceptable, the loan approval official will concur in the use of the
design/build method for the proposal.
(3) Forms used. The American Institute of Architects (AIA) Form
A191, ``Standard Form of Agreement Between Owner and Design/Builder,''
should be used. Other Agency approved contract documents may be used
provided they are customarily used in the area and protect the interest
of the applicant and the Agency with respect to compliance with items
such as the drawings, specifications, payments for work, inspections,
completion, nondiscrimination in construction work, and acceptance of
the work. The Agency will not become a party to a construction contract
or incur any liability under it. No contract shall become effective
until concurred in writing by the Agency. Such concurrence statement
shall be attached to and made a part of the contract.
(4) Contract provisions. Contracts will have a listing of
attachments and shall meet the following requirements:
(i) The contract sum;
(ii) The dates for starting and completing the work;
(iii) The amount of liquidated damages, if any, to be charged;
(iv) The amount, method, and frequency of payment;
(v) Surety provisions that meet the requirements of 7 CFR subpart C
of part 1780, Sec. 1780.75(c) of this title;
(vi) The requirement that changes or additions must have prior
written approval of the Agency;
(vii) The warranty period to be provided in accordance with
Appendices A and B, sections 1 through 10, paragraph (i);
(viii) Contract review and concurrence in accordance with 7 CFR
subpart C of part 1780, Sec. 1780.61(b) of this title;
(ix) Owner's contractual responsibility in accordance with 7 CFR
subpart C of part 1780, Sec. 1780.68 of this title; and
(x) Further contract provisions concerning remedies, termination,
surety, equal employment opportunity, anti-kickback, records, State
energy conservation plan, change orders, Agency concurrence, retainage,
and other compliance requirements must be met in accordance with 7 CFR
subpart C of part 1780, Sec. 1780.75 of this title.
[[Page 41314]]
(5) Obtaining bids and selecting a contractor. The applicant may
select a contractor based on competitive sealed bids, competitive
negotiation, or noncompetitive negotiation as described in 7 CFR
subpart C of part 1780, Sec. 1780.72(b), (c), or (d) of this title.
(g) Contract method. If the contract amount is greater than
$200,000 and is not of the design/build method, the following
conditions must be met:
(1) Procurement method. Procurement method shall comply with the
requirements of 7 CFR subpart C of part 1780, Sec. Sec. 1780.72,
1780.75, and 1780.76 of this title.
(2) Forms used. The AIA Form A101, ``Standard Form of Agreement
Between Owner/Contractor,'' or Engineering Joint Counsel Document
Committee (EJCDC) Form C-521, ``Suggested Form of Agreement Between
Owner and Contractor (Stipulated Price) Funding Agency Edition,''
should be used. Other Agency approved contract documents may be used
provided they are customarily used in the area and protect the interest
of the applicant and the Agency with respect to compliance with items
such as the drawings, specifications, payments for work, inspections,
completion, nondiscrimination in construction work, and acceptance of
the work. The Agency will not become a party to a construction contract
or incur any liability under it. No contract shall become effective
until concurred in writing by the Agency. Such concurrence statement
shall be attached to and made a part of the contract.
(3) Contract provisions. Contracts will have a listing of
attachments and shall meet the requirements of 7 CFR subpart C of part
1780, Sec. 1780.75 of this title and the following requirements:
(i) The contract sum;
(ii) The dates for starting and completing the work;
(iii) The amount of liquidated damages, if any, to be charged;
(iv) The amount, method, and frequency of payment;
(v) Surety provisions that meet the requirements of 7 CFR subpart C
of part 1780, Sec. 1780.75(c) of this title;
(vi) The requirement that changes or additions must have prior
written approval of the Agency;
(vii) The warranty period to be provided in accordance with
Appendices A and B, sections 1 through 10, paragraph (i);
(viii) Contract review and concurrence in accordance with 7 CFR
subpart C of part 1780, Sec. 1780.61(b) of this title;
(ix) Owner's contractual responsibility in accordance with 7 CFR
subpart C of part 1780, Sec. 1780.68 of this title; and
(x) Further contract provisions concerning remedies, termination,
surety, equal employment opportunity, anti-kickback, records, State
energy conservation plan, change orders, Agency concurrence, retainage,
and other compliance requirements must be met in accordance with 7 CFR
subpart C of part 1780, Sec. 1780.75 of this title.
(4) Obtaining bids and selecting a contractor. The applicant may
select a contractor based on competitive sealed bids, competitive
negotiation, or noncompetitive negotiation as described in 7 CFR
subpart C of part 1780, Sec. 1780.72(b), (c), or (d) of this title.
(5) Contract award. Applicants awarding contracts must comply with
7 CFR subpart C of part 1780, Sec. 1780.70(h) of this title.
(6) Contracts awarded prior to applications. Applicants awarding
contracts prior to filing an application must comply with 7 CFR subpart
C of part 1780, Sec. 1780.74 of this title.
(7) Contract administration. Contract administration must comply
with 7 CFR subpart C of part 1780, Sec. 1780.76 of this title. If
another authority, such as a Federal or State Agency, is providing
funding and requires oversight of inspections, change orders, and pay
requests, the Agency may accept copies of their reports or forms as
meeting oversight requirements of the Agency.
Sec. 4280.116 Grantee requirements.
(a) A Letter of Conditions will be prepared by the Agency,
establishing conditions that must be understood and agreed to by the
applicant before any obligation of funds can occur. The applicant must
sign a ``Letter of Intent to Meet Conditions'' and Form RD 1940-1,
``Request for Obligation of Funds,'' if they accept the conditions of
the grant.
(b) The grantee must sign and abide by all requirements contained
in Form RD 4280-2 and this subpart.
Sec. 4280.117 Servicing grants.
Grants will be serviced in accordance with subparts E and O of part
1951 of this title and Form RD 4280-2.
Sec. Sec. 4280.118--4280.120 [Reserved]
Section B. Guaranteed Loans
Sec. 4280.121 Borrower eligibility.
To receive a guaranteed loan under this subpart, a borrower must
meet each of the criteria, as applicable, identified in Sec.
4280.107(a)(1) through (4).
Sec. 4280.122 Project eligibility.
For a project to be eligible to receive a guaranteed loan under
this subpart, the project must meet each of the criteria, as
applicable, in Sec. 4280.108(a) through (g). In addition, guaranteed
loan funds may be used for necessary capital improvements to an
existing renewable energy system.
Sec. 4280.123 Guaranteed loan funding.
(a) The amount of the loan that will be made available to an
eligible project under this subpart will not exceed 50 percent of total
eligible project costs. Eligible project costs are specified in
paragraph (e) of this section.
(b) The minimum amount of a guaranteed loan made to a borrower will
be $5,000, less any program grant amounts. The maximum amount of a
guaranteed loan made to a borrower is $10 million.
(c) The percentage of guarantee, up to the maximum allowed by this
section, will be negotiated between the lender and the Agency. The
maximum percentage of guarantee is 85 percent for loans of $600,000 or
less; 80 percent for loans greater than $600,000 up to and including $5
million; and 70 percent for loans greater than $5 million up to and
including $10 million.
(d) The total amount of the loans guaranteed by the Agency under
this program to one borrower, including the outstanding principal and
interest balance of any existing loans guaranteed by the Agency under
this program, and new loan request, must not exceed $10 million.
(e) Eligible project costs are only those costs associated with the
items identified in paragraphs (e)(1) through (11) of this section, as
long as the items are an integral and necessary part of the renewable
energy system or energy efficiency improvement.
(1) Post-application purchase and installation of equipment (new,
refurbished, or remanufactured), except agricultural tillage equipment,
used equipment, and vehicles.
(2) Post-application construction or improvements, except
residential.
(3) Energy audits or assessments.
(4) Permit and license fees.
(5) Professional service fees, except for application preparation.
(6) Feasibility studies and technical reports.
(7) Business plans.
(8) Retrofitting.
(9) Construction of a new energy efficient facility only when the
facility is used for the same purpose, is approximately the same size,
and based on the energy audit will provide more energy savings than
improving an existing facility. Only costs identified in the energy
audit for energy efficiency improvements are allowed.
[[Page 41315]]
(10) Working capital.
(11) Land acquisition.
(f) In determining the amount of a loan awarded, the Agency will
take into consideration the following six criteria:
(1) The type of renewable energy system to be purchased;
(2) The estimated quantity of energy to be generated by the
renewable energy system;
(3) The expected environmental benefits of the renewable energy
system;
(4) The extent to which the renewable energy system will be
replicable;
(5) The amount of energy savings expected to be derived from the
activity, as demonstrated by an energy audit comparable to an energy
audit under 7 U.S.C. 8105; and
(6) The estimated length of time it would take for the energy
savings generated by the activity to equal the cost of the activity.
Sec. 4280.124 Interest rates.
(a) The interest rate for the guaranteed loan will be negotiated
between the lender and the applicant and may be either fixed or
variable as long as it is a legal rate. The variable rate must be based
on published indices, such as money market indices. In no case,
however, shall the rate be more than the rate customarily charged
borrowers in similar circumstances in the ordinary course of business.
The interest rate charged is subject to Agency review and approval.
(b) Comply with Sec. 4279.125(a), (b), and (d) of this chapter.
Sec. 4280.125 Terms of loan.
(a) The repayment term for a loan for:
(1) Real estate must not exceed 30 years;
(2) Machinery and equipment must not exceed 20 years, or the useful
life, including major rebuilds and component replacement, whichever is
less;
(3) Combined loans on real estate and equipment must not exceed 30
years; and
(4) Working capital loans must not exceed 7 years.
(b) The first installment of principal and interest will, if
possible, be scheduled for payment after the project is operational and
has begun to generate income.
(c) Payment terms must comply with Sec. 4279.126(c) of this
chapter.
(d) The maturity of a loan will be based on the use of proceeds,
the useful life of the assets being financed, and the borrower's
ability to repay.
(e) All loans guaranteed through this program must be sound, with
reasonably assured repayment.
(f) Guarantees must be provided only after consideration is given
to the borrower's overall credit quality and to the terms and
conditions of renewable energy and energy efficiency subsidies, tax
credits, and other such incentives.
(g) A principal plus interest repayment schedule is permissible.
Sec. 4280.126 Guarantee/annual renewal fee percentages.
(a) Fee ceilings. The maximum guarantee fee that may be charged is
1 percent. The maximum annual renewal fee that may be charged is 0.5
percent. The Agency will establish each year the guarantee fee and
annual renewal fee and a notice will be published in the Federal
Register.
(b) Guarantee fee. The guarantee fee will be paid to the Agency by
the lender and is nonrefundable. The guarantee fee may be passed on to
the borrower. The guarantee fee must be paid at the time the Loan Note
Guarantee is issued.
(c) Annual renewal fee. The annual renewal fee will be calculated
on the unpaid principal balance as of close of business on December 31
of each year. It will be calculated by multiplying the outstanding
principal balance times the percent of guarantee times the annual
renewal fee. The fee will be billed to the lender in accordance with
the Federal Register publication. The annual renewal fee may not be
passed on to the borrower.
Sec. 4280.127 [Reserved]
Sec. 4280.128 Application and documentation.
The requirements in this section apply to guaranteed loan
applications under this subpart.
(a) General. Applications must be submitted in accordance with the
requirements specified in Sec. 4280.111(a).
(b) Application content for guaranteed loans greater than $600,000.
Applications and documentation for guaranteed loans greater than
$600,000 must provide the required information organized pursuant to a
Table of Contents in a chapter format presented in the order shown in
paragraphs (b)(1) and (2) of this section.
(1) Guaranteed loan application content. (i) Table of Contents.
Include page numbers for each component of the application in the table
of contents. Begin pagination immediately following the Table of
Contents.
(ii) Project Summary. Provide a concise summary of the proposed
project and applicant information, project purpose and need, and
project goals, including the following:
(A) Title. Provide a descriptive title of the project (identified
on SF 424).
(B) Borrower eligibility. Describe how each of the criteria,
identified in Sec. 4280.107(a)(1) through (4), is met.
(C) Project eligibility. Describe how each of the criteria, as
applicable in Sec. 4280.108(a) through (g), is met. Clearly state
whether the application is for the purchase of a renewable energy
system (including making necessary capital improvements to an existing
renewable energy system) or to make energy efficiency improvements. The
response to Sec. 4280.108(a) must include a brief description of the
system or improvement. This description is to provide the reader with a
frame of reference for reviewing the rest of application. Additional
project description information will be needed later in the
application.
(D) Operation description. Describe the applicant's total farm/
ranch/business operation and the relationship of the proposed project
to the applicant's total farm/ranch/business operation as specified in
Sec. 4280.111(b)(3)(iv).
(iii) Financial information for size determination. Provide
financial information to allow the Agency to determine the applicant's
size as specified in Sec. 4280.111(b)(3)(v).
(iv) Matching funds. Submit a spreadsheet identifying sources,
amounts, and status of matching funds as specified in Sec.
4280.111(b)(5).
(v) Self-evaluation score. Self-score the project using the
evaluation criteria in Sec. 4280.112(e) as specified in Sec.
4280.111(b)(6).
(vi) Renewable energy and energy efficiency technical report. For
both renewable energy projects and energy efficiency improvement
projects, submit a Technical Report in accordance with applicable
provisions of Appendix B of this subpart and as specified in Sec.
4280.111(b)(7)(ii). For loan requests in excess of $600,000, the
services of a licensed professional engineer (P.E.) or a team of
licensed P.E.'s is required. If none of the Technology Reports in
Appendix B apply to the proposed technology, the applicant may submit a
Technical Report that conforms to the overall outline and subjects
specified in applicable provisions of Sec. 4280.111(b)(7)(ii)(A)
through (G).
(vii) Business-level feasibility study for renewable energy
systems. For each application for a renewable energy system project
submitted by a start-up or existing business, a business-level
feasibility study by an independent qualified consultant will be
required by the Agency. An acceptable business-level feasibility study
must at least include an evaluation of economic,
[[Page 41316]]
market, technical, financial, and management feasibility.
(2) Lender forms, certifications, and agreements. Each application
submitted under paragraph (b)(1) of this section must contain
applicable items described in paragraphs (b)(2)(i) through (xii) of
this section.
(i) A completed Form RD 4279-1, ``Application for Loan Guarantee.''
(ii) Form RD 1940-20.
(iii) A personal credit report from an Agency approved credit
reporting company for each owner, partner, officer, director, key
employee, and stockholder owning 20 percent or more interest in the
borrower's business, except passive investors and those corporations
listed on a major stock exchange.
(iv) Appraisals completed in accordance with Sec. 4280.141.
Completed appraisals should be submitted when the application is filed.
If the appraisal has not been completed when the application is filed,
the applicant must submit an estimated appraisal. In all cases, a
completed appraisal must be submitted prior to the loan being closed.
(v) Commercial credit reports obtained by the lender on the
borrower and any parent, affiliate, and subsidiary firms.
(vi) Current personal and corporate financial statements of any
guarantors.
(vii) Intergovernmental consultation comments in accordance with 7
CFR part 3015, subpart V, of this title.
(viii) Financial statements as specified in Sec. 4280.111(b)(4)(i)
through (iii). Financial information is required on the total operation
of the agricultural producer/rural small business and its parent,
subsidiary, or affiliates at other locations. All information submitted
under this paragraph must be substantiated by authoritative records.
(ix) Business-level feasibility study.
(x) Lender's complete comprehensive written analysis in accordance
with Sec. 4280.139.
(xi) A certification by the lender that it has completed a
comprehensive written analysis of the proposal, the borrower is
eligible, the loan is for authorized purposes with technical merit, and
there is reasonable assurance of repayment ability based on the
borrower's history, projections, equity, and the collateral to be
obtained.
(xii) A proposed Loan Agreement or a sample Loan Agreement with an
attached list of the proposed Loan Agreement provisions. The following
requirements must be addressed in the proposed or sample Loan
Agreement:
(A) Prohibition against assuming liabilities or obligations of
others;
(B) Restriction on dividend payments;
(C) Limitation on the purchase or sale of equipment and fixed
assets;
(D) Limitation on compensation of officers and owners;
(E) Minimum working capital or current ratio requirement;
(F) Maximum debt-to-net worth ratio;
(G) Restrictions concerning consolidations, mergers, or other
circumstances;
(H) Limitations on selling the business without the concurrence of
the lender;
(I) Repayment and amortization of the loan;
(J) List of collateral and lien priority for the loan, including a
list of persons and corporations guaranteeing the loan with a schedule
for providing the lender with personal and corporate financial
statements. Financial statements for corporate and personal guarantors
must be updated at least annually once the guarantee is provided;
(K) Type and frequency of financial statements to be required from
the borrower for the duration of the loan;
(L) The addition of any requirements imposed by the Agency in Form
RD 4279-3;
(M) A reserved section for any Agency environmental requirements;
and
(N) A provision for the lender or the Agency to have reasonable
access to the project and its performance information during its useful
life or the term of the loan, whichever is longer, including the
periodic inspection of the project by a representative of the lender or
the Agency.
(c) Application content for guaranteed loans of $600,000 or less.
Applications and documentation for guaranteed loans $600,000 or less
must comply with paragraphs (c)(1) and (2) of this section.
(1) Application Contents. Applications and documentation for
guaranteed loans $600,000 or less must provide the required information
organized pursuant to a Table of Contents in a chapter format presented
in the order shown in Sec. 4280.111(b)(2) through (8), except as
specified in paragraphs (c)(1)(i) through (iii) of this section.
(i) Section 4280.111(b)(7)(i) does not apply.
(ii) Technical Reports must be submitted according to paragraph
(c)(1)(ii)(A) or (B) of this section, as applicable.
(A) For renewable energy projects and energy efficiency projects
utilizing commercially available systems or improvements and with total
eligible project costs of $200,000 or less, submit a Technical Report
as described in Appendix A of this subpart. If a renewable energy
project does not fit on of the technologies identified in Appendix A,
the applicant must submit a Technical Report that conforms to the
overall outline and subjects specified in Sec. 4280.111(b)(7)(ii)(G).
(B) For renewable energy projects and energy efficiency projects
utilizing pre-commercial technology or with total eligible project
costs greater than $200,000, submit a Technical Report as described in
Appendix B of this subpart and as specified in Sec.
4280.111(b)(7)(ii)(G)(1) through (10), as applicable.
(iii) Business-level feasibility study for renewable energy
systems. For each application for a renewable energy system project
submitted by a start-up or existing business, a business-level
feasibility study by an independent qualified consultant will be
required by the Agency. An acceptable business-level feasibility study
must at least include an evaluation of economic, market, technical,
financial, and management feasibility. Renewable energy projects with
total eligible project costs of $200,000 or less are exempt from the
feasibility study requirement.
(2) Lender forms, certifications, and agreements. Applications
submitted under paragraph (c) of this section must use Form RD 4279-1A,
``Application for Loan Guarantee, Short Form,'' and include the
documentation contained in paragraphs (b)(2)(ii), (vii), (viii), (ix),
(x), and (xii) of this section. The lender must have the documentation
contained in paragraphs (b)(2)(iii), (iv), (v), (vi), and (xi)
available in its files for the Agency's review.
Sec. 4280.129 Evaluation of guaranteed loan applications.
(a) General review. The Agency will evaluate each application to
confirm that both the borrower and project are eligible, the project
has technical merit, there is reasonable assurance of repayment, there
is sufficient collateral and equity, and the proposed loan complies
with all applicable statutes and regulations. If the Agency determines
it is unable to guarantee the loan, the lender will be informed in
writing. Such notification will include the reasons for denial of the
guarantee.
(b) Ineligible applications. If either the borrower or the project
is ineligible, the Agency will inform the lender in writing of the
reasons and provide any appeal rights. No further evaluation of the
application will occur.
(c) Incomplete applications. If the application is incomplete, the
Agency will identify those parts of the application that are incomplete
and return it, with a written explanation, to
[[Page 41317]]
the lender for possible future resubmission. Upon receipt of a complete
application, the Agency will complete its evaluation.
(d) Technical merit determination. The Agency's determination of a
project's technical merit will be based on the information provided by
the applicant. The Agency may engage the services of other government
agencies or recognized industry experts in the applicable technology
field, at its discretion, to evaluate and rate the application. The
Agency may use this evaluation and rating to determine the level of
technical merit of the proposed project. Projects determined by the
Agency to be without technical merit shall be deemed ineligible.
(e) Evaluation criteria. The Agency will score each application
based on the evaluation criteria specified in Sec. 4280.112(e) (except
for the criteria specified in Sec. 4280.112(e)(5)) and in paragraphs
(e)(1) and (2) of this section. Points will be awarded for either
paragraph (e)(1) or (2) of this section, but not both.
(1) If the interest rate on the loan is to be below the prime rate
(as published in The Wall Street Journal) plus 1.5 percent, 5 points
will be awarded.
(2) If the interest rate on the loan is to be below the prime rate
(as published in The Wall Street Journal) plus 1 percent, 10 points
will be awarded.
Sec. 4280.130 Eligible lenders.
Eligible lenders are those identified in Sec. 4279.29 of this
chapter, excluding mortgage companies that are part of a bank-holding
company.
Sec. 4280.131 Lender's functions and responsibilities.
(a) General. Lenders are responsible for implementing the
guaranteed loan program under this subpart. All lenders requesting or
obtaining a loan guarantee must comply with Sec. 4279.30(a)(1)(i)
through (ix) of this chapter.
(b) Credit evaluation. The lender's credit evaluation must comply
with Sec. 4279.30(b) of this chapter.
(c) Environmental information. Lenders must ensure that borrowers
furnish all environmental information required under 7 CFR part 1940,
subpart G, of this title and must comply with Sec. 4279.30(c) of this
chapter.
(d) Construction planning and performing development. The lender
must comply with Sec. 4279.156(a) and (b) of this chapter, except
under paragraph Sec. 4279.156(a) of this chapter, the lender must also
ensure that all project facilities are designed utilizing accepted
architectural and engineering practices that conform to the
requirements of this subpart.
(e) Loan closing. The loan closing must be in compliance with Sec.
4279.30(d) of this chapter.
Sec. 4280.132 Access to records.
Both the lender and borrower must permit representatives of the
Agency (or other agencies of the U.S.) to inspect and make copies of
any records pertaining to any Agency guaranteed loan during regular
office hours of the lender or borrower or at any other time upon
agreement between the lender, the borrower, and the Agency, as
appropriate.
Sec. 4280.133 Conditions of guarantee.
All loan guarantees will be subject to Sec. 4279.72 of this
chapter.
Sec. 4280.134 Sale or assignment of guaranteed loan.
Any sale or assignment of the guaranteed loan must be in accordance
with Sec. 4279.75 of this chapter.
Sec. 4280.135 Participation.
All participation must be in accordance with Sec. 4279.76 of this
chapter.
Sec. 4280.136 Minimum retention.
Minimum retention must be in accordance with Sec. 4279.77 of this
chapter.
Sec. 4280.137 Repurchase from holder.
Any repurchase from a holder must be in accordance with Sec.
4279.78 of this chapter.
Sec. 4280.138 Replacement of document.
Documents must be replaced in accordance with Sec. 4279.84 of this
chapter, except, in Sec. 4279.84(b)(1)(v), a full statement of the
circumstances of any defacement or mutilation of the Loan Note
Guarantee or Assignment Guarantee Agreement would also need to be
provided.
Sec. 4280.139 Credit quality.
The lender must determine credit quality and must address all of
the elements of credit quality in a written credit analysis, including
adequacy of equity, cashflow, collateral, history, management, and the
current status of the industry for which credit is to be extended.
(a) Cashflow. All efforts will be made to structure debt so that
the business has adequate debt coverage and the ability to accommodate
expansion.
(b) Collateral. Collateral must have documented value sufficient to
protect the interest of the lender and the Agency. The discounted
collateral value will normally be at least equal to the loan amount.
Lenders will discount collateral consistent with sound loan-to-value
policy. Guaranteed loans made under this subpart shall have at least
parity position with guaranteed loans made under subpart B of part 4279
of this title.
(c) Industry. The current status of the industry will be
considered. Borrowers developing well established commercially
available renewable energy systems with significant support
infrastructure may be considered for better terms and conditions than
those borrowers developing systems with limited infrastructure.
(d) Equity. In determining the adequacy of equity, the lender must
meet the criteria specified in paragraph (d)(1) of this section for
loans over $600,000 and the criteria in paragraph (d)(2) of this
section for loans of $600,000 or less. Cash equity injection, as
discussed in paragraphs (d)(1) and (2) of this section, must be in the
form of cash. Federal grant funds may be counted as cash equity.
(1) For loans over $600,000, borrowers shall demonstrate evidence
of cash equity injection in the project of not less than 25 percent of
eligible project costs. The fair market value of equity in real
property that is to be pledged as collateral for the loan may be
substituted in whole or in part to meet the cash equity requirement.
However, the appraisal completed to establish the fair market value of
the real property must not be more than 1 year old and must meet Agency
appraisal standards.
(2) For loans of $600,000 or less, borrowers shall demonstrate
evidence of cash equity injection in the project of not less than 15
percent of eligible project costs. The fair market value of equity in
real property that is to be pledged as collateral for the loan may be
substituted in whole or in part to meet the cash equity requirement.
However, the appraisal completed to establish the fair market value of
the real property must not be more than 1 year old and must meet Agency
appraisal standards.
(e) Lien priorities. The entire loan will be secured by the same
security with equal lien priority for the guaranteed and unguaranteed
portions of the loan. The unguaranteed portion of the loan will neither
be paid first nor given any preference or priority over the guaranteed
portion. A parity or junior position may be considered provided that
discounted collateral values are adequate to secure the loan in
accordance with paragraph (b) of this section after considering prior
liens.
Sec. 4280.140 Financial statements.
(a) The financial information required in Sec. 4280.111(b)(3)(v)
and (b)(4) is
[[Page 41318]]
required for the guaranteed loan program.
(b) If the proposed guaranteed loan exceeds $3 million, the Agency
may require annual audited financial statements, at its sole discretion
when the Agency is concerned about the applicant's credit risk.
Sec. 4280.141 Appraisals.
(a) Conduct of appraisals. All appraisals must be in accordance
with Sec. 4279.144 of this chapter.
(1) For loans of $600,000 or more, a complete self-contained
appraisal must be conducted. Lenders must complete at least a
Transaction Screen Questionnaire for any undeveloped sites and a Phase
I environmental site assessment on existing business sites, which
should be provided to the appraiser for completion of the self-
contained appraisal.
(2) For loans for less than $600,000, a complete summary appraisal
may be conducted in lieu of a complete self-contained appraisal as
required under paragraph (a)(1) of this section. Summary appraisals
must be conducted in accordance with Uniform Standards of Professional
Appraisal Practice (USPAP).
(b) Specialized appraisers. Specialized appraisers will be required
to complete appraisals in accordance with paragraphs (a)(1) and (2) of
this section. The Agency may approve a waiver of this requirement only
if a specialized appraiser does not exist in a specific industry or
hiring one would cause an undue financial burden to the borrower.
Sec. 4280.142 Personal and corporate guarantees.
(a) All personal and corporate guarantees must be in accordance
with Sec. 4279.149(a) of this chapter.
(b) Except for passive investors, unconditional personal and
corporate guarantees for those owners with a beneficial interest
greater than 20 percent of the borrower will be required where legally
permissible.
Sec. 4280.143 Loan approval and obligation of funds.
The lender and applicant must comply with Sec. 4279.173 of this
chapter, except that either or both parties may also propose alternate
conditions to the Conditional Commitment if certain conditions cannot
be met.
Sec. 4280.144 Transfer of lenders.
All transfers of lenders must be in accordance with Sec. 4279.174
of this chapter, except that it will be the Agency rather than the loan
approval official who may approve the substitution of a new eligible
lender.
Sec. 4280.145 Changes in borrower.
All changes in borrowers must be in accordance with Sec. 4279.180
of this chapter, but the eligibility requirements of this program
apply.
Sec. 4280.146 Conditions precedent to issuance of Loan Note
Guarantee.
(a) The Loan Note Guarantee will not be issued until the lender
certifies to the conditions identified in paragraphs Sec. 4279.181(a)
through (o) of this chapter and paragraph (b) of this section.
(b) All planned property acquisitions and development have been
performing at a steady state operating level in accordance with the
technical requirements, plans, and specifications, conforms with
applicable Federal, State, and local codes, and costs have not exceeded
the amount approved by the lender and the Agency.
Sec. 4280.147 Issuance of the guarantee.
(a) When loan closing plans are established, the lender must notify
the Agency in writing. At the same time, or immediately after loan
closing, the lender must provide the following to the Agency:
(1) Lender's certifications as required by Sec. 4280.146;
(2) An executed Form RD 4279-4; and
(3) An executed Form RD 1980-19, ``Guaranteed Loan Closing
Report,'' and appropriate guarantee fee.
(b) When the Agency is satisfied that all conditions for the
guarantee have been met, the Loan Note Guarantee and the following
documents, as appropriate, will be issued:
(1) Assignment Guarantee Agreement. If the lender assigns the
guaranteed portion of the loan to a holder, the lender, holder, and the
Agency must execute the Assignment Guarantee Agreement;
(2) Certificate of Incumbency. If requested by the lender, the
Agency will provide the lender with a copy of Form RD 4279-7,
``Certificate of Incumbency and Signature,'' with the signature and
title of the Agency official responsible for signing the Loan Note
Guarantee, Lender's Agreement, and Assignment Guarantee Agreement;
(3) Copies of legal loan documents; and
(4) Disbursement plan, if working capital is a purpose of the
project.
Sec. 4280.148 Refusal to execute Loan Note Guarantee.
If the Agency determines that it cannot execute the Loan Note
Guarantee, Sec. 4279.187 of this chapter will apply.
Sec. 4280.149 Requirements after project construction.
Once the project has been constructed, the lender must provide the
Agency periodic reports from the borrower. The borrower's reports will
include the information specified in paragraphs (a) and (b) of this
section, as applicable.
(a) Renewable energy projects. For renewable energy projects,
commencing the first full calendar year following the year in which
project construction was completed and continuing for 3 full years,
provide a report detailing the information specified in paragraphs
(a)(1) through (7) of this section.
(1) The actual amount of energy produced in BTUs, kilowatt-hours,
or similar energy equivalents.
(2) If applicable, documentation that any identified health and/or
sanitation problem has been solved.
(3) The annual income and/or energy savings of the renewable energy
system.
(4) A summary of the cost of operating and maintaining the
facility.
(5) A description of any maintenance or operational problems
associated with the facility.
(6) Recommendations for development of future similar projects.
(7) Actual jobs created or saved.
(b) Energy efficiency improvement projects. For energy efficiency
improvement projects, commencing the first full calendar year following
the year in which project construction was completed and continuing for
2 full years, provide a report detailing the actual amount of energy
saved due to the energy efficiency improvements.
Sec. 4280.150 Insurance requirements.
Each borrower must obtain the insurance required in Sec. 4280.113.
The coverage required by this section must be maintained for the life
of the loan unless this requirement is waived or modified by the Agency
in writing.
Sec. 4280.151 Laws that contain other compliance requirements.
Each lender and borrower must comply with the requirements
specified in Sec. 4280.114(d), Sec. Sec. 4279.58, and 4279.156(c) and
(d) of this chapter.
Sec. 4280.152 Servicing guaranteed loans.
The lender must service the entire loan and must remain mortgagee
and secured party of record notwithstanding the fact that another party
may hold a portion of the loan. The entire loan must be secured by the
same security with equal lien priority for the guaranteed and
unguaranteed portions of the loan. The unguaranteed portion of a loan
will neither be paid first nor given any
[[Page 41319]]
preference or priority over the guaranteed portion of the loan.
(a) Routine servicing. Comply with Sec. 4287.107 of this chapter,
except that all notifications from the lender to the Agency shall be in
writing and all actions by the lender in servicing the entire loan must
be consistent with the servicing actions that a reasonable, prudent
lender would perform in servicing its own portfolio.
(b) Interest rate adjustments. Comply with Sec. 4287.112 of this
chapter, except that under Sec. 4287.112(a)(3) of this chapter the
interest rates, after adjustments, must comply with the requirements
for interest rates on new loans as established by Sec. 4280.124.
(c) Release of collateral. (1) Collateral may only be released in
accordance with Sec. 4287.113(a) and (b) of this chapter and paragraph
(c)(2) of this section.
(2) Within the parameters of paragraph (c)(1) of this section,
lenders may, over the life of the loan, release collateral (other than
personal and corporate guarantees) with a cumulative value of up to 20
percent of the original loan amount without Agency concurrence, if the
proceeds generated are used to reduce the guaranteed loan or to buy
replacement collateral or real estate equal to or greater than the
collateral being replaced.
(d) Subordination of lien position. All subordinations of the
lender's lien position must comply with Sec. 4287.123 of this chapter.
(e) Alterations of loan instruments. All alterations of loan
instruments must comply with Sec. 4287.124 of this chapter.
(f) Loan transfer and assumption. All loan transfers and
assumptions must comply with Sec. 4287.134(c), (d), (f), (g), and (i)
through (k) of this chapter in addition to the following:
(1) Documentation of request. All transfers and assumptions must be
approved in writing by the Agency and must be to eligible applicants in
accordance with Sec. 4280.121. An individual credit report must be
provided for transferee proprietors, partners, offices, directors, and
stockholders with 20 percent or more interest in the business, along
with such other documentation as the Agency may request to determine
eligibility.
(2) Terms. Loan terms must not be changed unless the change is
approved in writing by the Agency with the concurrence of any holder
and the transferor (including guarantors), if they have not been or
will not be released from liability. Any new loan terms must be within
the terms authorized by Sec. 4280.125. The lender's request for
approval of new loan terms will be supported by an explanation of the
reasons for the proposed change in loan terms.
(3) Additional loans. Loans to provide additional funds in
connection with a transfer and assumption must be considered as a new
loan application under Sec. 4280.128.
(4) Loss resulting from transfer. If a loss should occur upon
consummation of a complete transfer and assumption for less than the
full amount of the debt and the transferor (including personal
guarantors) is released from liability, the lender, if it holds the
guaranteed portion, may file Form RD 449-30, ``Loan Note Guaranteed
Loss of Report,'' to recover its pro rata share of the actual loss. If
a holder owns any of the guaranteed portion, such portion must be
repurchased by the lender or the Agency in accordance with Sec.
4279.78(c) of this chapter. In completing the report of loss, the
amount of the debt assumed will be entered as net collateral
(recovery). Approved protective advances and accrued interest thereon
made during the arrangement of a transfer and assumption will be
included in the calculations.
Sec. 4280.153 Substitution of lender.
(a) All substitutions of lenders must comply with Sec.
4287.135(a)(2) and (b) of this chapter and paragraph (b) of this
section.
(b) The Agency may approve the substitution of a new lender if the
proposed substitute lender:
(1) Is an eligible lender in accordance with Sec. 4280.130;
(2) Is able to service the loan in accordance with the original
loan documents; and
(3) Acquires title to the unguaranteed portion of the loan held by
the original lender and assumes all original loan requirements,
including liabilities and servicing responsibilities.
Sec. 4280.154 Default by borrower.
If the loan goes into default, the lender must comply with Sec.
4287.145 of this chapter.
Sec. 4280.155 Protective advances.
All protective advances made by the lender must comply with Sec.
4287.156 of this chapter.
Sec. 4280.156 Liquidation.
All liquidations must comply with Sec. 4287.157 of this chapter,
except as follows:
(a) Under Sec. 4287.157(d)(13) of this chapter, whenever $200,000
is used substitute $100,000; and
(b) Under Sec. 4287.157(d)(13) of this chapter, replace the
sentence ``The appraisal shall consider this aspect'' with ``Both the
estimate and the appraisal shall consider this aspect.''
Sec. 4280.157 Determination of loss and payment.
Loss and payments will be determined in accordance with Sec.
4287.158 of this chapter.
Sec. 4280.158 Future recovery.
Future recoveries will be conducted in accordance with Sec.
4287.169 of this chapter.
Sec. 4280.159 Bankruptcy.
Bankruptcies will be handled in accordance with Sec. 4287.170 of
this chapter, except that the notification required under Sec.
4287.170(b)(4) of this chapter shall be made in writing.
Sec. 4280.160 Termination of guarantee.
Guarantees will be terminated in accordance with Sec. 4287.180 of
this chapter.
Section C. Direct Loans
Sec. 4280.161 Direct Loan Process.
(a) The Agency will determine each year whether or not direct loan
funds are available. For each year in which direct loan funds are
available, the Agency will publish a Notice of Funds Availability
(NOFA) in the Federal Register.
(b) In each direct loan NOFA, the Agency will identify the
following:
(1) The amount of funds available for direct loans;
(2) Applicant and project eligibility criteria;
(3) Minimum and maximum loan amounts;
(4) Interest rates;
(5) Terms of loan;
(6) Application and documentation requirements;
(7) Evaluation of applications;
(8) Actions required of the applicant/borrower (e.g., appraisals,
land and property acquisition);
(9) Insurance requirements;
(10) Laws that contain other compliance requirements;
(11) Construction planning and performing development;
(12) Requirements after project construction;
(13) Letter of Conditions, loan agreement, and loan closing
process;
(14) Processing and servicing of direct loans by the Agency; and
(15) Any applicable definitions.
Sec. 4280.162-4280.192 [Reserved]
Section D. Combined Funding
Sec. 4280.193 Combined funding.
The requirements for a project for which an applicant is seeking a
[[Page 41320]]
combined grant and guaranteed loan are defined as follows:
(a) Eligibility. Applicants must meet the applicant eligibility
requirements specified in Sec. 4280.107 and the borrower eligibility
requirements specified in Sec. 4280.121. Projects must meet the
project eligibility requirements specified in Sec. Sec. 4280.108 and
4280.122. Applicants may submit simplified applications if the project
meets the requirements specified in Sec. 4280.109.
(b) Funding. Funding provided under this section is subject to the
limits described in paragraphs (b)(1) through (3) of this section.
(1) The amount of any combined grant and guaranteed loan must not
exceed 50 percent of total eligible project costs. For purposes of
combined funding requests, total eligible project costs are based on
the total costs associated with those items specified in Sec. Sec.
4280.110(c) and 4280.123(e). The applicant must provide the remaining
total funds needed to complete the project.
(2) Third-party, in-kind contributions will be limited to 10
percent of the matching fund requirement of any financial assistance
provided to the applicant.
(3) The minimum combined funding request allowed is $5,000, with
the grant portion of the funding request being at least $1,500.
(c) Application and documentation. When applying for combined
funding, the applicant must submit separate applications for both types
of assistance (grant and guaranteed loan). Each application must meet
the requirements, including the requisite forms and certifications,
specified in Sec. Sec. 4280.111 and 4280.128. The separate
applications must be submitted simultaneously. The applicant must
submit at least one set of documentation, but does not need to submit
duplicate forms or certifications.
(d) Evaluation. The Agency will evaluate each application according
to applicable procedures specified in Sec. Sec. 4280.112 and 4280.129.
(e) Interest rate and terms of loan. The interest rate and terms of
the loan for the loan portion of the combined funding request will be
determined based on the procedures specified in Sec. Sec. 4280.124 and
4280.125 for guaranteed loans.
(f) Other provisions. In addition to the requirements specified in
paragraphs (a) through (e) of this section, the combined funding
request shall be subject to the other requirements specified in this
subpart, including, but not limited to, processing and servicing
requirements, as applicable, as described in paragraphs (f)(1) and (2)
of this section.
(1) All other provisions of Section A of this subpart shall apply
to the grant portion of the combined funding request.
(2) All other provisions of Section B of this subpart shall apply
to the guaranteed loan portion of the combined funding request.
Sec. Sec. 4280.194-4280.199 [Reserved]
Sec. 4280.200 OMB control number.
The information collection requirements contained in the regulation
have been approved by the Office of Management and Budget (OMB) and
have been assigned OMB control number 0570-0050. A person is not
required to respond to a collection of information unless it displays a
currently valid OMB control number.
Appendix A to Part 4280
Technical Reports for Projects With Total Eligible Project Costs of
$200,000 or Less
The Technical Report for projects with total eligible project
costs of $200,000 or less must demonstrate that the project design,
procurement, installation, startup, operation, and maintenance of
the renewable energy system or energy efficiency improvement will
operate or perform as specified over its design life in a reliable
and a cost-effective manner. The Technical Report must also identify
all necessary project agreements, demonstrate that those agreements
will be in place, and that necessary project equipment and services
are available over the design life.
All technical information provided must follow the format
specified in Sections 1 through 10 of this appendix. Supporting
information may be submitted in other formats. Design drawings and
process flowcharts are encouraged as exhibits. A discussion of each
topic is not necessary if the topic is not applicable to the
specific project. Questions identified in the Agency's technical
review of the project must be answered to the Agency's satisfaction
before the application will be approved. The applicant must submit
the original technical report plus one copy to the Rural Development
State Office. Depending on the level of engineering required for the
specific project or if necessary to ensure public safety, the
services of a licensed professional engineer or a team of licensed
professional engineers may be required.
Section 1. Bioenergy
The technical requirements specified in this section apply to
bioenergy projects, which are, as defined in Sec. 4280.103,
renewable energy systems that produce fuel, thermal energy, or
electric power from a biomass source, other than an anaerobic
digester project.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate
evidence of the availability of the renewable resource required for
the system to operate as designed. Indicate the type, quantity,
quality, and seasonality of the biomass resource, including harvest
and storage, where applicable. Where applicable, indicate shipping
or receiving method and required infrastructure for shipping. For
proposed projects with an established resource, provide a summary of
the resource.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system;
(5) Describe the expected electric power, fuel production, or
thermal energy production of the proposed system as rated and as
expected in actual field conditions. For systems with a capacity of
more than 20 tons per day of biomass, address performance on a
monthly and annual basis. For small projects such as a commercial
biomass furnace or pelletizer of up to 5 tons daily capacity,
proven, commercially available devices need not be addressed in
detail. Describe the uses of or the market for electricity, heat, or
fuel produced by the system;
(6) Discuss the impact of reduced or interrupted biomass
availability on the system process; and
(7) Describe the project site and address issues such as
proximity to the load or the electrical grid, unique safety
concerns, and whether special circumstances exist.
[[Page 41321]]
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate that the
project can be adequately managed and be able to identify impacts of
any delays on the project completion. The applicant must submit a
statement certifying that the project will be completed within 2
years from the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 2. Anaerobic Digester Projects
The technical requirements specified in this section apply to
anaerobic digester projects, which are, as defined in Sec.
4280.103, renewable energy systems that use animal waste and other
organic substrates to produce thermal or electrical energy via
anaerobic digestion.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of digestible substrate resource
available. Indicate the source of the data and assumptions. Indicate
the substrates used as digester inputs, including animal wastes,
food-processing wastes, or other organic wastes in terms of type,
quantity, seasonality, and frequency of collection. Describe any
special handling of feedstock that may be necessary. Describe the
process for determining the feedstock resource. Show the digestion
conversion factors and calculations used to estimate biogas
production and heat or power production.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system;
(5) Describe the expected electric power, fuel production, or
thermal energy production of the proposed system as rated and as
expected in actual field conditions. Describe the uses of or the
market for electricity, heat, or fuel produced by the system; and
(6) Describe the project site and address issues such as
proximity to the load or the electrical grid, unique safety
concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed and be able to identify impacts of any delays
on the project completion. The applicant must submit a statement
certifying that the project will be completed within 2 years from
the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying ``open and free'' competition will be used for
the procurement of project components in a manner consistent with
the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 3. Geothermal, Electric Generation
The technical requirements specified in this section apply to
electric generation geothermal projects, which are, as defined in
Sec. 4280.103, systems that use geothermal energy to produce high
pressure steam for electric power production.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credential for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits, including any permits or agreements required
for well construction and for disposal or re-injection of cooled
geothermal waters and the schedule for securing those agreements and
permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
[[Page 41322]]
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate
evidence of the availability of the renewable resource required for
the system to operate as designed. Indicate the quality of the
geothermal resource, including temperature, flow, and sustainability
and what conversion system is to be installed. Describe any special
handling of cooled geothermal waters that may be necessary. Describe
the process for determining the geothermal resource, including
measurement setup for the collection of the geothermal resource
data. For proposed projects with an established resource, provide a
summary of the resource and the specifications of the measurement
setup.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system;
(5) Describe the expected electric power, fuel production, or
thermal energy production of the proposed system as rated and as
expected in actual field conditions. Describe the uses of or the
market for electricity, heat, or fuel produced by the system; and
(6) Describe the project site and address issues such as
proximity to the load or the electrical grid, unique safety
concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate that the
project can be adequately managed and be able to identify impacts of
any delays on the project completion. The applicant must submit a
statement certifying that the project will be completed within 2
years from the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 4. Geothermal, Direct Use
The technical requirements specified in this section apply to
direct use geothermal projects, which are, as defined in Sec.
4280.103, systems that use thermal energy directly from a geothermal
source.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits, including any permits or agreements required
for well construction and for disposal or re-injection of cooled
geothermal waters and the schedule for securing those agreements and
permits.
(2) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate
evidence of the availability of the renewable resource required for
the system to operate as designed. Indicate the quality of the
geothermal resource, including temperature, flow, and sustainability
and what direct use system is to be installed. Describe any special
handling of cooled geothermal waters that may be necessary. Describe
the process for determining the geothermal resource, including
measurement setup for the collection of the geothermal resource
data. For proposed projects with an established resource, provide a
summary of the resource and the specifications of the measurement
setup.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide one-line diagram for the electrical interconnection.
Provide diagrams or schematics as required showing all major
installed structural, mechanical, and electrical components of the
system;
(5) Describe the expected thermal energy production of the
proposed system as rated and as expected in actual field conditions.
Describe the uses of, or the market for, heat produced by the
system; and
(6) Describe the project site and address issues such as
proximity to the load, unique safety concerns, and whether special
circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed and be able to identify impacts of any delays
on the project completion. The applicant must submit a statement
certifying that the project will be completed within 2 years from
the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling
[[Page 41323]]
and disposing of project components and associated wastes at the end
of their useful lives.
Section 5. Hydrogen
The technical requirements specified in this section apply to
hydrogen projects, which are, as defined in Sec. 4280.103,
renewable energy systems that produce hydrogen, or a renewable
energy system that uses mechanical or electric power or thermal
energy from a renewable resource using hydrogen as an energy
transport medium.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the type, quantity, quality, and seasonality of the
local renewable resource that will be used to produce the hydrogen.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system; and
(5) Describe the project site and address issues such as
proximity to the load or the electrical grid, unique safety
concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed and be able to identify impacts of any delays
on the project completion. The applicant must submit a statement
certifying that the project will be completed within 2 years from
the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 6. Solar, Small
The technical requirements specified in this section apply to
small solar electric projects and small solar thermal projects, as
defined in Sec. 4280.103.
Small solar electric projects are those for which the rated
power of the system is 10kW or smaller. Small solar electric
projects are either stand-alone (off grid) or interconnected to the
grid at less than 600 volts (on grid).
Small solar thermal projects are those for which the rated
storage volume of the system is 240 gallons or smaller, or which
have a collector area of 1,000 square feet or less.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of solar resource available. Indicate the
source of the solar data and assumptions.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system; and
(5) Describe the project site and address issues such as solar
access, orientation, proximity to the load or the electrical grid,
unique safety concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate that the
project can be adequately managed and be able to identify impacts of
any delays on the project completion. The applicant must submit a
statement certifying that the project will be completed within 2
years from the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building
[[Page 41324]]
and electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 7. Solar, Large
The technical requirements specified in this section apply to
large solar electric projects and large solar thermal projects, as
defined in Sec. 4280.103.
Large solar electric systems are those for which the rated power
of the system is larger than 10kW. Large solar electric systems are
either stand-alone (off grid) or interconnected to the grid (on
grid).
Large solar thermal systems are those for which the rated
storage volume of the system is greater than 240 gallons or that
have a collector area of more than 1,000 square feet.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credential for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of solar resource available. Indicate the
source of the solar data and assumptions.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system; and
(5) Describe the project site and address issues such as solar
access, orientation, proximity to the load or the electrical grid,
unique safety concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed and be able to identify impacts of any delays
on the project completion. The applicant must submit a statement
certifying that the project will be completed within 2 years from
the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 8. Wind, Small
The technical requirements specified in this section apply to
small wind systems, which are, as defined in Sec. 4280.103, wind
energy systems for which the rated power of the wind turbine is
100kW or smaller and with a generator hub height of 120 feet or
less. Small wind systems are either stand-alone or connected to the
local electrical system at less than 600 volts.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of local wind resource where the small
wind turbine is to be installed. Indicate the source of the wind
data and assumptions.
(d) Design and engineering. Applicants must certify that their
project will be designed and engineered so as to meet the intended
purpose, will ensure public safety, and will comply with applicable
laws, regulations, agreements, permits, codes, and standards. In
addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide a one-line diagram for the electrical
interconnection. Provide diagrams or schematics as required showing
all major installed structural, mechanical, and electrical
components of the system; and
(5) Describe the project site and address issues such as
proximity to the load or the electrical grid, unique safety
concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed and be able to identify impacts of any delays
on the project completion. The applicant must submit a statement
certifying that the project will be completed within 2 years from
the date of approval.
[[Page 41325]]
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 9. Wind, Large
The technical requirements specified in this section apply to
large wind systems, which are, as defined in Sec. 4280.103, wind
energy projects for which the rated power of the individual wind
turbine(s) is larger than 100kW.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional.
(b) Agreements, permits, and certifications.
(1) Identify all necessary agreements and permits required for
the project and the status and schedule for securing those
agreements and permits.
(2) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(3) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of local wind resource where the large
wind turbine is to be installed. Indicate the source of the wind
data and assumptions. Projects greater than 500kW must obtain wind
data from the proposed project site. For such projects, describe the
proposed measurement setup for the collection of the wind resource
data. For proposed projects with an established wind resource,
provide a summary of the wind resource and the specifications of the
measurement setup. Large wind systems larger than 500kW in size will
typically require at least 1 year of on-site monitoring. If less
than 1 year of data is used, the qualified meteorological consultant
must provide a detailed analysis of correlation between the site
data and a nearby long-term measurement site.
(d) Design and engineering. Applicants must submit a statement
certifying that their project will be designed and engineered so as
to meet the intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits,
codes, and standards. In addition, applicants must:
(1) Provide authoritative evidence that the system will be
designed and engineered so as to meet its intended purpose;
(2) List possible suppliers and models of major pieces of
equipment;
(3) Provide a description of the components, materials, or
systems to be installed. Include the location of the project;
(4) Provide one-line diagram for the electrical interconnection.
Provide diagrams or schematics as required showing all major
installed structural, mechanical, and electrical components of the
system; and
(5) Describe the project site and address issues such as
proximity to the load or the electrical grid, unique safety
concerns, and whether special circumstances exist.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed and be able to identify impacts of any delays
on the project completion. The applicant must submit a statement
certifying that the project will be completed within 3 years from
the date of approval.
(f) Project economic assessment. Provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the system
to operate as designed over the design life. State the design life
of the system.
(1) Provide information on all system warranties. A minimum 3-
year warranty for equipment and a 10-year warranty on design are
expected.
(2) If the project has any unique operation and maintenance
issues, describe them.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives.
Section 10. Energy Efficiency Improvements
The technical requirements specified in this section apply to
energy efficiency improvement projects, which are, as defined in
Sec. 4280.103, improvements to a facility, building, or process
that reduces energy consumption.
(a) Qualifications of key project service providers. List all
key project service providers. If one or more licensed professionals
are involved in the project, provide the credentials for each
professional. For projects with total eligible project costs greater
than $50,000, also discuss the qualifications of the energy auditor,
including any relevant certifications by recognized organizations or
bodies.
(b) Agreements, permits, and certifications.
(1) The applicant must certify that they will comply with all
necessary agreements and permits required for the project. Indicate
the status and schedule for securing those agreements and permits.
(2) Identify all environmental issues, including any compliance
issues associated with or expected as a result of the project on
Form RD 1940-20, ``Request for Environmental Information,'' and in
compliance with 7 CFR part 1940, subpart G, of this title.
(c) Energy assessment.
(1) For all energy efficiency improvement projects, provide
adequate and appropriate evidence of energy savings expected when
the system is operated as designed.
(2) For energy efficiency improvement projects with total
eligible project costs greater than $50,000, an energy audit must be
conducted. An energy audit is a written report by an independent,
qualified party that documents current energy usage, recommended
potential improvements and their costs, energy savings from these
improvements, dollars saved per year, and simple payback period in
years (total costs divided by annual dollars of energy savings). The
methodology of the energy audit must meet professional and industry
standards. The energy audit must cover the following:
[[Page 41326]]
(i) Situation report. Provide a narrative description of the
facility or process, its energy system(s) and usage, and activity
profile. Also include price per unit of energy (electricity, natural
gas, propane, fuel oil, renewable energy, etc.,) paid by the
customer on the date of the audit. Any energy conversion should be
based on use rather than source.
(ii) Potential improvements. List specific information on all
potential energy-saving opportunities and their costs.
(iii) Technical analysis. Discuss the interactions among the
potential improvements and other energy systems.
(A) Estimate the annual energy and energy costs savings expected
from each improvement identified in the potential project.
(B) Calculate all direct and attendant indirect costs of each
improvement.
(C) Rank potential improvement measures by cost-effectiveness.
(iv) Potential improvement description. Provide a narrative
summary of the potential improvement and its ability to provide
needed benefits, including a discussion of nonenergy benefits such
as project reliability and durability.
(A) Provide preliminary specifications for critical components.
(B) Provide preliminary drawings of project layout, including
any related structural changes.
(C) Document baseline data compared to projected consumption,
together with any explanatory notes. When appropriate, show before-
and-after data in terms of consumption per unit of production, time
or area. Include at least 1 year's bills for those energy sources/
fuel types affected by this project. Also submit utility rate
schedules, if appropriate.
(D) Identify significant changes in future related operations
and maintenance costs.
(E) Describe explicitly how outcomes will be measured.
(d) Design and engineering. The applicant must submit a
statement certifying that their project will be designed and
engineered so as to meet the intended purpose, will ensure public
safety, and will comply with applicable laws, regulations,
agreements, permits, codes, and standards.
(1) Identify possible suppliers and models of major pieces of
equipment.
(2) Describe the components, materials, or systems to be
installed. Include the location of the project.
(e) Project development schedule. Provide a project schedule in
an appropriate level of detail that will demonstrate the project can
be adequately managed. The applicant must submit a statement
certifying that the project will be completed within 2 years from
the date of approval.
(f) Project economic assessment. For projects with total
eligible project costs greater than $50,000, provide an analysis of
the proposed project to demonstrate its financial performance,
including the calculation of simple payback. The analysis should
include applicable investment incentives, productivity incentives,
loans and grants, and expected energy offsets or sales on a monthly
and annual basis. In addition, provide other information necessary
to assess the project's cost effectiveness.
(g) Equipment procurement. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. The project must be installed in
accordance with applicable local, State, and national building and
electrical codes and regulations. Include a statement from the
applicant certifying that equipment installation will be made in
accordance with all applicable safety and work rules. Upon
successful system installation and following established operation,
the successful applicant must deliver invoices and evidence of
payment.
(i) Operations and maintenance. Identify any unique operations
and maintenance requirements of the project necessary for the
improvement(s) to perform as designed over the design life. State
the design life of the improvement(s). Provide information regarding
component warranties.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and proper disposal of the project components
and associated wastes at the end of their useful lives.
Appendix B to Part 4280
Technical Reports for Projects With Total Eligible Project Costs
Greater Than $200,000
The Technical Report for projects with total eligible project
costs greater than $200,000 (and for any other project that must
submit a Technical Report under this appendix) must demonstrate that
the project design, procurement, installation, startup, operation,
and maintenance of the renewable energy system or energy efficiency
improvement will operate or perform as specified over its design
life in a reliable and a cost-effective manner. The Technical Report
must also identify all necessary project agreements, demonstrate
that those agreements will be in place, and that necessary project
equipment and services are available over the design life.
All technical information provided must follow the format
specified in Sections 1 through 10 of this appendix. Supporting
information may be submitted in other formats. Design drawings and
process flowcharts are encouraged as exhibits. A discussion of each
topic is not necessary if the topic is not applicable to the
specific project. Questions identified in the Agency's technical
review of the project must be answered to the Agency's satisfaction
before the application will be approved. The applicant must submit
the original technical report plus one copy to the Rural Development
State Office. Renewable energy projects with total eligible project
costs greater than $400,000 and for energy efficiency improvement
projects with total eligible project costs greater than $200,000
require the services of a licensed professional engineer (PE) or
team of PEs. Depending on the level of engineering required for the
specific project or if necessary to ensure public safety, the
services of a licensed PE or a team of licensed PEs may be required
for smaller projects.
Section 1. Bioenergy
The technical requirements specified in this section apply to
bioenergy projects, which are, as defined in Sec. 4280.103,
renewable energy systems that produce fuel, thermal energy, or
electric power from a biomass source, other than an anaerobic
digester project.
(a) Qualifications of project team. The bioenergy project team
will vary according to the complexity and scale of the project. For
engineered systems, the project team should consist of a system
designer, a project manager, an equipment supplier, a project
engineer, a construction contractor or system installer, and a
system operator and maintainer. One individual or entity may serve
more than one role. The project team must have demonstrated
expertise in similar bioenergy systems development, engineering,
installation, and maintenance. Authoritative evidence that project
team service providers have the necessary professional credentials
or relevant experience to perform the required services must be
provided. Authoritative evidence that vendors of proprietary
components can provide necessary equipment and spare parts for the
system to operate over its design life must also be provided. The
application must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design/
build method, often referred to as turnkey, where the applicant
establishes the specifications for the project and secures the
services of a developer who will design and build the project at the
developer's risk;
(2) Discuss the bioenergy system equipment manufacturers of
major components being considered in terms of the length of time in
business and the number of units installed at the capacity and scale
being considered;
(3) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor
qualifications for engineering, designing, and installing bioenergy
systems, including any relevant certifications by recognized
organizations. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating with
references, if available; and
(4) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining bioenergy renewable energy
equipment or projects. Provide a list of the same or similar
projects designed, installed, or supplied and currently operating
with references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (8).
(1) Identify zoning and code issues, and required permits and
the anticipated schedule for meeting those requirements and securing
those permits.
[[Page 41327]]
(2) Identify licenses where required and the schedule for
obtaining those licenses.
(3) Identify land use agreements required for the project and
the anticipated schedule for securing the agreements and the term of
those agreements.
(4) Identify any permits or agreements required for solid,
liquid, and gaseous emissions or effluents and the schedule for
securing those permits and agreements.
(5) Identify available component warranties for the specific
project location and size.
(6) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(7) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(8) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the type, quantity, quality, and seasonality of the biomass
resource, including harvest and storage, where applicable. Where
applicable, also indicate shipping or receiving method and required
infrastructure for shipping. For proposed projects with an
established resource, provide a summary of the resource.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Projects shall be engineered by a qualified party.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive, including
site selection, system and component selections, and system
monitoring equipment. Systems must be constructed by a qualified
party.
(1) Provide a concise but complete description of the bioenergy
project, including location of the project, resource
characteristics, system specifications, electric power system
interconnection, and monitoring equipment. Identify possible vendors
and models of major system components. Describe the expected
electric power, fuel production, or thermal energy production of the
proposed system as rated and as expected in actual field conditions.
For systems with a capacity of more than 20 tons per day of biomass,
address performance on a monthly and annual basis. For small
projects such as a commercial biomass furnace or pelletizer of up to
5 tons daily capacity, proven, commercially available devices need
not be addressed in detail. Describe the uses of or the market for
electricity, heat, or fuel produced by the system. Discuss the
impact of reduced or interrupted biomass availability on the system
process.
(2) Describe the project site and address issues such as site
access, foundations, backup equipment when applicable, and
environmental concerns with emphasis on land use, air quality, water
quality, soil degradation, habitat fragmentation, land use,
visibility, odor, noise, construction, and installation issues.
Identify any unique construction and installation issues.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
resource assessment, system and site design, permits and agreements,
equipment procurement, and system installation from excavation
through startup and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including project management, resource assessment,
project design, project permitting, land agreements, equipment, site
preparation, system installation, startup and shakedown, warranties,
insurance, financing, professional services, and operations and
maintenance costs. Provide a detailed analysis and description of
annual project revenues and expenses. Provide a detailed description
of applicable investment incentives, productivity incentives, loans,
and grants. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Bioenergy systems may be
constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Identify all the major equipment that is proprietary and
justify how this unique equipment is needed to meet the requirements
of the proposed design. Include a statement from the applicant
certifying that ``open and free'' competition will be used for the
procurement of project components in a manner consistent with the
requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Fully describe the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment needed for
project construction, and provide a description of the startup and
shakedown specifications and process and the conditions required for
startup and shakedown for each equipment item individually and for
the system as a whole. Include a statement from the applicant
certifying that equipment installation will be made in accordance
with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. In addition:
(1) Provide information regarding available system and component
warranties and availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed system, including maintenance schedule for the
mechanical, piping, and electrical systems and system monitoring and
control requirements. Provide information that supports expected
design life of the system and timing of major component replacement
or rebuilds. Discuss the costs and labor associated with the
operation and maintenance of the system, and plans for in-sourcing
or out-sourcing. Describe opportunities for technology transfer for
long-term project operations and maintenance by a local entity or
owner/operator; and
(3) For systems having a biomass input capacity exceeding 10
tons of biomass per day, provide and discuss the risk management
plan for handling large, potential failures of major components.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 2. Anaerobic Digester Projects
The technical requirements specified in this section apply to
anaerobic digester projects, which are, as defined in Sec.
4280.103, renewable energy systems that use animal waste and other
organic substrates to produce thermal or electrical energy via
anaerobic digestion.
(a) Qualifications of project team. The anaerobic digester
project team should consist of a system designer, a project manager,
an equipment supplier, a project engineer, a construction
contractor, and a system operator or maintainer. One individual or
entity may serve more than one role. The project team must have
demonstrated commercial-scale expertise in anaerobic digester
systems development, engineering, installation, and maintenance as
related to the organic materials and operating mode of the system.
Authoritative evidence that project team service providers have the
necessary professional credentials or relevant experience to perform
the required services must be provided. Authoritative evidence that
vendors of proprietary components can provide necessary equipment
and spare parts for the system to operate over its design life must
also be provided. The application must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the
[[Page 41328]]
project at the applicant's risk, and a design/build method, often
referred to as turnkey, where the applicant establishes the
specifications for the project and secures the services of a
developer who will design and build the project at the developer's
risk;
(2) Discuss the anaerobic digester system equipment
manufacturers of major components being considered in terms of the
length of time in business and the number of units installed at the
capacity and scale being considered;
(3) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor
qualifications for engineering, designing, and installing anaerobic
digester systems, including any relevant certifications by
recognized organizations. Provide a list of the same or similar
projects designed, installed, or supplied and currently operating
consistent with the substrate material with references, if
available; and
(4) For regional or centralized digester plants, describe the
system operator's qualifications and experience for servicing,
operating, and maintaining similar projects. Farm scale systems may
not require operator experience as the developer is typically
required to provide operational training during system startup and
shakedown. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating consistent with the
substrate material with references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (8).
(1) Identify zoning and code issues, and required permits and
the anticipated schedule for meeting those requirements and securing
those permits.
(2) Identify licenses where required and the schedule for
obtaining those licenses.
(3) For regional or centralized digester plants, identify
feedstock access agreements required for the project and the
anticipated schedule for securing those agreements and the term of
those agreements.
(4) Identify any permits or agreements required for transport
and ultimate waste disposal and the schedule for securing those
agreements and permits.
(5) Identify available component warranties for the specific
project location and size.
(6) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(7) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(8) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the substrates used as digester inputs, including animal wastes,
food processing wastes, or other organic wastes in terms of type,
quantity, seasonality, and frequency of collection. Describe any
special handling of feedstock that may be necessary. Describe the
process for determining the feedstock resource. Provide either
tabular values or laboratory analysis of representative samples that
include biodegradability studies to produce gas production estimates
for the project on daily, monthly, and seasonal basis.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Projects shall be engineered by a qualified party.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive, including
site selection, digester component selection, gas handling component
selection, and gas use component selection. Systems must be
constructed by a qualified party.
(1) Provide a concise but complete description of the anaerobic
digester project, including location of the project, farm
description, feedstock characteristics, a step-by-step flowchart of
unit operations, electric power system interconnection equipment,
and any required monitoring equipment. Identify possible vendors and
models of major system components. Provide the expected system
energy production, heat balances, and material balances as part of
the unit operations flowchart.
(2) Describe the project site and address issues such as site
access, foundations, backup equipment when applicable, and
environmental concerns with emphasis on land use, air quality, water
quality, soil degradation, habitat degradation, land use,
visibility, odor, noise, construction, and installation issues.
Identify any unique construction and installation issues.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
feedstock assessment, system and site designs, permits and
agreements, equipment procurement, system installation from
excavation through startup and shakedown, and operator training.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including project management, feedstock assessment,
project design, project permitting, land agreements, equipment, site
preparation, system installation, startup and shakedown, warranties,
insurance, financing, professional services, training and
operations, and maintenance costs of both the digester and the gas
use systems. Provide a detailed analysis and description of annual
project revenues and expenses. Provide a detailed description of
applicable investment incentives, productivity incentives, loans,
and grants. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Anaerobic digester
systems may be constructed of components manufactured in more than
one location. Provide a description of any unique equipment
procurement issues such as scheduling and timing of component
manufacture and delivery, ordering, warranties, shipping, receiving,
and on-site storage or inventory. Identify all the major equipment
that is proprietary and justify how this unique equipment is needed
to meet the requirements of the proposed design. Include a statement
from the applicant certifying that ``open and free'' competition
will be used for the procurement of project components in a manner
consistent with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment needed for
project construction, and provide a description of the startup and
shakedown specifications and process and the conditions required for
startup and shakedown for each equipment item individually and for
the system as a whole. Include a statement from the applicant
certifying that equipment installation will be made in accordance
with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Ensure that systems must have at least a 3-year warranty for
equipment and a 10-year warranty on design. Provide information
regarding system warranties and availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed project, including maintenance for the digester, the
gas handling equipment, and the gas use systems. Describe any
maintenance requirements for system monitoring and control
equipment;
(3) Provide information that supports the expected design life
of the system and the timing of major component replacement or
rebuilds;
(4) Provide and discuss the risk management plan for handling
large, potential failures of major components. Include in the
discussion, costs and labor associated with the operation and
maintenance of the system, and plans for in-sourcing or out-
sourcing; and
(5) Describe opportunities for technology transfer for long-term
project operations and
[[Page 41329]]
maintenance by a local entity or owner/operator.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 3. Geothermal, Electric Generation
The technical requirements specified in this section apply to
electric generation geothermal projects, which are, as defined in
Sec. 4280.103, systems that use geothermal energy to produce high
pressure steam for electric power production.
(a) Qualifications of project team. The electric generating
geothermal plant project team should consist of a system designer, a
project manager, an equipment supplier, a project engineer, a
construction contractor, and a system operator and maintainer. One
individual or entity may serve more than one role. The project team
must have demonstrated expertise in geothermal electric generation
systems development, engineering, installation, and maintenance.
Authoritative evidence that project team service providers have the
necessary professional credentials or relevant experience to perform
the required services must be provided. Authoritative evidence that
vendors of proprietary components can provide necessary equipment
and spare parts for the system to operate over its design life must
also be provided. The application must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design/
build method, often referred to as turnkey, where the applicant
establishes the specifications for the project and secures the
services of a developer who will design and build the project at the
developer's risk;
(2) Discuss the geothermal plant equipment manufacturers of
major components being considered in terms of the length of time in
business and the number of units installed at the capacity and scale
being considered;
(3) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor
qualifications for engineering, designing, and installing geothermal
electric generation systems, including any relevant certifications
by recognized organizations. Provide a list of the same or similar
projects designed, installed, or supplied and currently operating
with references, if available; and
(4) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining electric generating
geothermal projects. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating with
references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (7).
(1) Identify zoning and code issues and required permits and the
anticipated schedule for meeting those requirements and securing
those permits.
(2) Identify any permits or agreements required for well
construction and for disposal or re-injection of cooled geothermal
waters and the schedule for securing those agreements and permits.
(3) Identify land use or access to the resource agreements
required for the project and the anticipated schedule for securing
the agreements and the term of those agreements.
(4) Identify available component warranties for the specific
project location and size.
(5) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements.
(6) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(7) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the quality of the geothermal resource, including temperature, flow,
and sustainability and what conversion system is to be installed.
Describe any special handling of cooled geothermal waters that may
be necessary. Describe the process for determining the geothermal
resource, including measurement setup for the collection of the
geothermal resource data. For proposed projects with an established
resource, provide a summary of the resource and the specifications
of the measurement setup.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Projects shall be engineered by a qualified party.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive, including
site selection, system and component selection, conversion system
component and selection, design of the local collection grid,
interconnection equipment selection, and system monitoring
equipment. Systems must be constructed by a qualified party.
(1) Provide a concise but complete description of the geothermal
project, including location of the project, resource
characteristics, thermal system specifications, electric power
system interconnection equipment and project monitoring equipment.
Identify possible vendors and models of major system components.
Provide the expected system energy production on a monthly and
annual basis.
(2) Describe the project site and address issues such as site
access, proximity to the electrical grid, environmental concerns
with emphasis on land use, air quality, water quality, habitat
fragmentation, visibility, noise, construction, and installation
issues. Identify any unique construction and installation issues.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
resource assessment, system and site design, permits and agreements,
equipment procurement, and system installation from excavation
through startup and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including project management, resource assessment,
project design, project permitting, land agreements, equipment, site
preparation, system installation, startup and shakedown, warranties,
insurance, financing, professional services, and operations and
maintenance costs. Provide a detailed analysis and description of
annual project revenues, including electricity sales, production tax
credits, revenues from green tags, and any other production
incentive programs throughout the life of the project. Provide a
detailed description of applicable investment incentives,
productivity incentives, loans, and grants. In addition, provide
other information necessary to assess the project's cost
effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Geothermal systems may be
constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Identify all the major equipment that is proprietary and
justify how this unique equipment is needed to meet the requirements
of the proposed design. Include a statement from the applicant
certifying that ``open and free'' competition will be used for the
procurement of project components in a manner consistent with the
requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment needed for
project construction, and provide a description of the startup and
shakedown specifications and process and the conditions required for
startup or shakedown for each equipment item individually and for
the system as a whole. Include a statement from the applicant
certifying that equipment installation will be made in accordance
with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance
[[Page 41330]]
requirements of the system necessary for the system to operate as
designed over the design life. The application must:
(1) Ensure that systems must have at least a 3-year warranty for
equipment. Provide information regarding turbine warranties and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed project, including maintenance for the mechanical
and electrical systems and system monitoring and control
requirements;
(3) Provide information that supports expected design life of
the system and timing of major component replacement or rebuilds;
(4) Provide and discuss the risk management plan for handling
large, potential failures of major components such as the turbine.
Include in the discussion, costs and labor associated with the
operation and maintenance of the system, and plans for in-sourcing
or out-sourcing; and
(5) Describe opportunities for technology transfer for long-term
project operations and maintenance by a local entity or owner/
operator.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 4. Geothermal, Direct Use
The technical requirements specified in this section apply to
direct use geothermal projects, which are, as defined in Sec.
4280.103, systems that use thermal energy directly from a geothermal
source.
(a) Qualifications of project team. The geothermal project team
should consist of a system designer, a project manager, an equipment
supplier, a project engineer, a construction contractor, and a
system operator and maintainer. One individual or entity may serve
more than one role. The project team must have demonstrated
expertise in geothermal heating systems development, engineering,
installation, and maintenance. Authoritative evidence that project
team service providers have the necessary professional credentials
or relevant experience to perform the required services must be
provided. Authoritative evidence that vendors of proprietary
components can provide necessary equipment and spare parts for the
system to operate over its design life must also be provided. The
application must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design/
build method, often referred to as turnkey, where the applicant
establishes the specifications for the project and secures the
services of a developer who will design and build the project at the
developer's risk;
(2) Discuss the geothermal system equipment manufacturers of
major components being considered in terms of the length of time in
business and the number of units installed at the capacity and scale
being considered;
(3) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor
qualifications for engineering, designing, and installing direct use
geothermal systems, including any relevant certifications by
recognized organizations. Provide a list of the same or similar
projects designed, installed, or supplied and currently operating
with references, if available; and
(4) Describe system operator's qualifications and experience for
servicing, operating, and maintaining direct use generating
geothermal projects. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating with
references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (7).
(1) Identify zoning and code issues, and required permits and
the anticipated schedule for meeting those requirements and securing
those permits.
(2) Identify licenses where required and the schedule for
obtaining those licenses.
(3) Identify land use or access to the resource agreements
required for the project and the anticipated schedule for securing
the agreements and the term of those agreements.
(4) Identify any permits or agreements required for well
construction and for disposal or re-injection of cooled geothermal
waters and the anticipated schedule for securing those permits and
agreements.
(5) Identify available component warranties for the specific
project location and size.
(6) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(7) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the quality of the geothermal resource, including temperature, flow,
and sustainability and what direct use system is to be installed.
Describe any special handling of cooled geothermal waters that may
be necessary. Describe the process for determining the geothermal
resource, including measurement setup for the collection of the
geothermal resource data. For proposed projects with an established
resource, provide a summary of the resource and the specifications
of the measurement setup.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Projects shall be engineered by a qualified party.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive, including
site selection, system and component selection, thermal system
component selection, and system monitoring equipment. Systems must
be constructed by a qualified party.
(1) Provide a concise but complete description of the geothermal
project, including location of the project, resource
characteristics, thermal system specifications, and monitoring
equipment. Identify possible vendors and models of major system
components. Provide the expected system energy production on a
monthly and annual basis.
(2) Describe the project site and address issues such as site
access, thermal backup equipment, environmental concerns with
emphasis on land use, air quality, water quality, habitat
fragmentation, visibility, noise, construction, and installation
issues. Identify any unique construction and installation issues.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
resource assessment, system and site design, permits and agreements,
equipment procurement, and system installation from excavation
through startup and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including project management, resource assessment,
project design, project permitting, land agreements, equipment, site
preparation, system installation, startup and shakedown, warranties,
insurance, financing, professional services, and operations and
maintenance costs. Provide a detailed analysis and description of
annual project revenues and expenses. Provide a detailed description
of applicable investment incentives, productivity incentives, loans,
and grants. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Geothermal systems may be
constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Identify all the major equipment that is proprietary and
justify how this unique equipment is needed to meet the requirements
of the proposed design. Include a statement from the applicant
certifying that ``open and free'' competition will be used for the
procurement of project components in a manner consistent with the
requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation,
[[Page 41331]]
provide details regarding the scheduling of major installation
equipment needed for project construction, and provide a description
of the startup and shakedownspecifications and process and the
conditions required for startup and shakedown for each equipment
item individually and for the system as a whole. Include a statement
from the applicant certifying that equipment installation will be
made in accordance with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Ensure that systems must have at least a 3-year warranty for
equipment. Provide information regarding system warranties and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed project, including maintenance for the mechanical
and electrical systems and system monitoring and control
requirements;
(3) Provide information that supports expected design life of
the system and timing of major component replacement or rebuilds;
(4) Provide and discuss the risk management plan for handling
large, potential failures of major components. Include in the
discussion, costs and labor associated with the operation and
maintenance of the system, and plans for in-sourcing or out-
sourcing; and
(5) Describe opportunities for technology transfer for long-term
project operations and maintenance by a local entity or owner/
operator.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 5. Hydrogen Projects
The technical requirements specified in this section apply to
hydrogen projects, which are, as defined in Sec. 4280.103,
renewable energy systems that produce hydrogen or, a renewable
energy system that uses mechanical or electric power or thermal
energy from a renewable resource using hydrogen as an energy
transport medium.
(a) Qualifications of project team. The hydrogen project team
will vary according to the complexity and scale of the project. For
engineered systems, the project team should consist of a system
designer, a project manager, an equipment supplier, a project
engineer, a construction contractor or system installer, and a
system operator and maintainer. One individual or entity may serve
more than one role. The project team must have demonstrated
expertise in similar hydrogen systems development, engineering,
installation, and maintenance. Authoritative evidence that project
team service providers have the necessary professional credentials
or relevant experience to perform the required services must be
provided. Authoritative evidence that vendors of proprietary
components can provide necessary equipment and spare parts for the
system to operate over its design life must also be provided. The
application must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design/
build method, often referred to as turnkey, where the applicant
establishes the specifications for the project and secures the
services of a developer who will design and build the project at the
developer's risk;
(2) Discuss the hydrogen system equipment manufacturers of major
components for the hydrogen system being considered in terms of the
length of time in the business and the number of units installed at
the capacity and scale being considered;
(3) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor
qualifications for engineering, designing, and installing hydrogen
systems, including any relevant certifications by recognized
organizations. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating with
references, if available; and
(4) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining hydrogen system equipment
or projects. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating with
references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (8).
(1) Identify zoning and building code issues, and required
permits and the anticipated schedule for meeting those requirements
and securing those permits.
(2) Identify licenses where required and the schedule for
obtaining those licenses.
(3) Identify land use agreements required for the project and
the anticipated schedule for securing the agreements and the term of
those agreements.
(4) Identify any permits or agreements required for solid,
liquid, and gaseous emissions or effluents and the anticipated
schedule for securing those permits and agreements.
(5) Identify available component warranties for the specific
project location and size.
(6) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(7) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(8) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the type, quantity, quality, and seasonality of the biomass
resource. For solar, wind, or geothermal sources of energy used to
generate hydrogen, indicate the local renewable resource where the
hydrogen system is to be installed. Local resource maps may be used
as an acceptable preliminary source of renewable resource data. For
proposed projects with an established renewable resource, provide a
summary of the resource.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Projects shall be engineered by a qualified party.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive, including
site selection, system and component selection, and system
monitoring equipment. Systems must be constructed by a qualified
party.
(1) Provide a concise but complete description of the hydrogen
project, including location of the project, resource
characteristics, system specifications, electric power system
interconnection equipment, and monitoring equipment. Identify
possible vendors and models of major system components. Describe the
expected electric power, fuel production, or thermal energy
production of the proposed system. Address performance on a monthly
and annual basis. Describe the uses of or the market for
electricity, heat, or fuel produced by the system. Discuss the
impact of reduced or interrupted resource availability on the system
process.
(2) Describe the project site and address issues such as site
access, foundations, backup equipment when applicable, and any
environmental and safety concerns with emphasis on land use, air
quality, water quality, and safety hazards. Identify any unique
construction and installation issues.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
resource assessment, system and site design, permits and agreements,
equipment procurement, and system installation from excavation
through startup and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including project management, resource assessment,
project design and
[[Page 41332]]
engineering, project permitting, land agreements, equipment, site
preparation, system installation, startup and shakedown, warranties,
insurance, financing, professional services, and operations and
maintenance costs. Provide a detailed analysis and description of
annual project revenues and expenses. Provide a detailed description
of applicable investment incentives, productivity incentives, loans,
and grants. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Hydrogen systems may be
constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues,
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, and receiving, and on-site storage
or inventory. Identify all the major equipment that is proprietary
and justify how this unique equipment is needed to meet the
requirements of the proposed design. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment needed for
project construction, and provide a description of the startup and
shakedown specifications and process and the conditions required for
startup and shakedown for each equipment item individually and for
the system as a whole. Include a statement from the applicant
certifying that equipment installation will be made in accordance
with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Provide information regarding system warranties and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed project, including maintenance of the reformer,
electrolyzer, or fuel cell as appropriate, and other mechanical,
piping, and electrical systems and system monitoring and control
requirements;
(3) Provide information that supports expected design life of
the system and timing of major component replacement or rebuilds;
(4) Provide and discuss the risk management plan for handling
large, potential failures of major components. Include in the
discussion, costs and labor associated with the operation and
maintenance of the system, and plans for in-sourcing or out-
sourcing; and
(5) Describe opportunities for technology transfer for long-term
project operations and maintenance by a local entity or owner/
operator.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 6. Solar, Small
The technical requirements specified in this section apply to
small solar electric projects and small solar thermal projects, as
defined in Sec. 4280.103.
Small solar electric projects are those for which the rated
power of the system is 10kW or smaller. Small solar electric
projects are either stand-alone (off grid) or interconnected to the
grid at less than 600 volts (on grid).
Small solar thermal projects are those for which the rated
storage volume of the system is 240 gallons or smaller, or which
have a collector area of 1,000 square feet or less.
(a) Qualifications of project team. The small solar project team
should consist of a system designer, a project manager or general
contractor, an equipment supplier of major components, a system
installer, a system maintainer, and, in some cases, the owner of the
application or load served by the system. One individual or entity
may serve more than one role. Authoritative evidence that project
team service providers have the necessary professional credentials
or relevant experience to perform the required services must be
provided. Authoritative evidence that vendors of proprietary
components can provide necessary equipment and spare parts for the
system to operate over its design life must also be provided. The
application must:
(1) Discuss the qualifications of the suppliers of major
components being considered;
(2) Describe the knowledge, skills, and abilities needed to
service, operate, and maintain the system for the proposed
application; and
(3) Discuss the project manager, system designer, and system
installer qualifications for engineering, designing, and installing
small solar systems, including any relevant certifications by
recognized organizations. Provide a list of the same or similar
systems designed or installed by the design and installation team
and currently operating with references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (5).
(1) Identify zoning, building, and electrical code issues, and
required permits and the anticipated schedule for meeting those
requirements and securing those permits.
(2) Identify available component warranties for the specific
project location and size.
(3) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(4) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(5) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the source of the solar data and assumptions.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. For small solar electric systems, the engineering must be
comprehensive, including solar collector design and selection,
support structure design and selection, power conditioning design
and selection, surface or submersible water pumps and energy storage
requirements as applicable, and selection of cabling, disconnects
and interconnection equipment. For small solar thermal systems, the
engineering must be comprehensive, including solar collector design
and selection, support structure design and selection, pump and
piping design and selection, and energy storage design and
selection.
(1) Provide a concise but complete description of the small
solar system, including location of the project and proposed
equipment specifications. Identify possible vendors and models of
major system components. Provide the expected system energy
production based on available solar resource data on a monthly (when
possible) and annual basis and how the energy produced by the system
will be used.
(2) Describe the project site and address issues such as solar
access, orientation, proximity to the load or the electrical grid,
environmental concerns such as water quality and land use, unique
safety concerns such as hazardous materials handling, construction,
and installation issues, and whether special circumstances exist.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
system and site design, permits and agreements, equipment
procurement, and system installation from excavation through startup
and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
[[Page 41333]]
project costs, including design, permitting, equipment, site
preparation, system installation, system startup and shakedown,
warranties, insurance, financing, professional services, and
operations and maintenance costs. Provide a detailed description of
applicable investment incentives, productivity incentives, loans,
and grants. Provide a detailed description of historic or expected
energy use and expected energy offsets or sales on a monthly and
annual basis. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Small solar systems may
be constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Provide a detailed description of equipment
certification. Identify all the major equipment that is proprietary
and justify how this unique equipment is needed to meet the
requirements of the proposed design. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment needed for
project construction, and provide a description of the startup and
shakedown specifications and process and the conditions required for
startup and shakedown for each equipment item individually and for
the system as a whole. Include a statement from the applicant
certifying that equipment installation will be made in accordance
with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Ensure that systems must have at least a 5-year warranty for
equipment. Provide information regarding system warranty and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed system, including maintenance schedules for the
mechanical and electrical and software systems;
(3) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations
or maintenance; and
(4) Provide information regarding expected system design life
and timing of major component replacement or rebuilds. Include in
the discussion, costs and labor associated with the operation and
maintenance of the system, and plans for in-sourcing or out-
sourcing.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes. Describe any
environmental compliance requirements such as proper disposal or
recycling procedures to reduce potential impact from any hazardous
chemicals.
Section 7. Solar, Large
The technical requirements specified in this section apply to
large solar electric projects and large solar thermal projects, as
defined in Sec. 4280.103.
Large solar electric systems are those for which the rated power
of the system is larger than 10kW. Large solar electric systems are
either stand-alone (off grid) or interconnected to the grid (on
grid).
Large solar thermal systems are those for which the rated
storage volume of the system is greater than 240 gallons or that
have a collector area of more than 1,000 square feet.
(a) Qualifications of project team. The large solar project team
should consist of an equipment supplier of major components, a
project manager, general contractor, system engineer, system
installer, and system maintainer. One individual or entity may serve
more than one role. Authoritative evidence that project team service
providers have the necessary professional credentials or relevant
experience to perform the required services must be provided.
Authoritative evidence that vendors of proprietary components can
provide necessary equipment and spare parts for the system to
operate over its design life must also be provided. The application
must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design/
build method, often referred to as turnkey, where the applicant
establishes the specifications for the project and secures the
services of a developer who will design and build the project at the
developer's risk;
(2) Discuss the qualifications of the suppliers of major
components being considered;
(3) Discuss the project manager, general contractor, system
engineer, and system installer qualifications for engineering,
designing, and installing large solar systems, including any
relevant certifications by recognized organizations. Provide a list
of the same or similar systems designed or installed by the design,
engineering, and installation team and currently operating with
references, if available; and
(4) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining the system for the
proposed application. Provide a list of the same or similar systems
designed or installed by the design, engineering, and installation
team and currently operating with references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (5).
(1) Identify zoning, building, and electrical code issues, and
required permits and the anticipated schedule for meeting those
requirements and securing those permits.
(2) Identify available component warranties for the specific
project location and size.
(3) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(4) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(5) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the source of the solar data and assumptions.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards.
(1) For large solar electric systems, the engineering must be
comprehensive, including solar collector design and selection,
support structure design and selection, power conditioning design
and selection, surface or submersible water pumps and energy storage
requirements as applicable, and selection of cabling, disconnects,
and interconnection equipment. A complete set of engineering
drawings, stamped by a professional engineer, must be provided.
(2) For large solar thermal systems, the engineering must be
comprehensive, including solar collector design and selection,
support structure design and selection, pump and piping design and
selection, and energy storage design and selection. Provide a
complete set of engineering drawings stamped by a professional
engineer.
(3) For either type of system, provide a concise but complete
description of the large solar system, including location of the
project and proposed equipment and system specifications. Identify
possible vendors and models of major system components. Provide the
expected system energy production based on available solar resource
data on a monthly (when possible) and annual basis and how the
energy produced by the system will be used.
[[Page 41334]]
(4) For either type of system, provide a description of the
project site and address issues such as solar access, orientation,
proximity to the load or the electrical grid, environmental concerns
such as land use, water quality, habitat fragmentation, and
aesthetics, unique safety concerns, construction, and installation
issues, and whether special circumstances exist.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
system and site design, permits and agreements, equipment
procurement, and system installation from excavation through startup
and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including design and engineering, permitting,
equipment, site preparation, system installation, system startup and
shakedown, warranties, insurance, financing, professional services,
and operations and maintenance costs. Provide a detailed description
of applicable investment incentives, productivity incentives, loans,
and grants. Provide a detailed description of historic or expected
energy use and expected energy offsets or sales on a monthly and
annual basis. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Large solar systems may
be constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Provide a detailed description of equipment
certification. Identify all the major equipment that is proprietary
and justify how this unique equipment is needed to meet the
requirements of the proposed design. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment, including
cranes and other devices needed for project construction, and
provide a description of the startup and shakedown specifications
and process and the conditions required for startup and shakedown
for each equipment item individually and for the system as a whole.
Include a statement from the applicant certifying that equipment
installation will be made in accordance with all applicable safety
and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Ensure that systems must have at least a 5-year warranty for
equipment. Provide information regarding system warranty and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed system, including maintenance schedules for the
mechanical, electrical, and software systems;
(3) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations
or maintenance; and
(4) Provide information regarding expected system design life
and timing of major component replacement or rebuilds. Include in
the discussion, costs and labor associated with the operation and
maintenance of the system, and plans for in-sourcing or out-
sourcing.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes. Describe any
environmental compliance requirements such as proper disposal or
recycling procedures to reduce any potential impact from hazardous
chemicals.
Section 8. Wind, Small
The technical requirements specified in this section apply to
small wind systems, which are, as defined in Sec. 4280.103, wind
energy systems for which the rated power of the wind turbine is
100kW or smaller and with a generator hub height of 120 ft or less.
Small wind systems are either stand-alone or connected to the local
electrical system at less than 600 volts.
(a) Qualifications of project team. The small wind project team
should consist of a system designer, a project manager or general
contractor, an equipment supplier of major components, a system
installer, a system maintainer, and, in some cases, the owner of the
application or load served by the system. One individual or entity
may serve more than one role. Authoritative evidence that project
team service providers have the necessary professional credentials
or relevant experience to perform the required services must be
provided. Authoritative evidence that vendors of proprietary
components can provide necessary equipment and spare parts for the
system to operate over its design life must also be provided. The
application must:
(1) Discuss the small wind turbine manufacturers and other
equipment suppliers of major components being considered in terms of
their length of time in business and the number of units installed
at the capacity and scale being considered;
(2) Describe the knowledge, skills, and abilities needed to
service, operate, and maintain the system for the proposed
application; and
(3) Discuss the project manager, system designer, and system
installer qualifications for engineering, designing, and installing
small wind systems, including any relevant certifications by
recognized organizations. Provide a list of the same or similar
systems designed, installed, or supplied and currently operating
with references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (5).
(1) Identify zoning, building, and electrical code issues, and
required permits and the anticipated schedule for meeting those
requirements and securing those permits.
(2) Identify available component warranties for the specific
project location and size.
(3) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses, where required, and the
anticipated schedule for meeting those requirements and obtaining
those agreements. This is required even if the system is installed
on the customer side of the utility meter. For systems planning to
utilize a local net metering program as their interconnection
agreement, describe the applicable local net metering program.
(4) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(5) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Indicate
the source of the wind data and the conditions of the wind
monitoring when collected at the site or assumptions made when
applying nearby wind data to the site.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Small wind systems must be engineered by either the wind
turbine manufacturer or other qualified party. Systems must be
offered as a complete, integrated system with matched components.
The engineering must be comprehensive, including turbine design and
selection, tower design and selection, specification of guy wire
anchors and tower foundation, inverter/controller design and
selection, energy storage requirements as applicable, and selection
of cabling, disconnects, and interconnection equipment, as well as
the engineering data needed to match the wind system output to the
application load, if applicable.
(1) Provide a concise but complete description of the small wind
system, including location of the project, proposed turbine
specifications, tower height and type of tower, type of energy
storage and location of storage if applicable, proposed inverter
[[Page 41335]]
manufacturer and model, electric power system interconnection
equipment, and application load and load interconnection equipment
as applicable. Identify possible vendors and models of major system
components. Provide the expected system energy production based on
available wind resource data on a monthly (when possible) and annual
basis and how the energy produced by the system will be used.
(2) Describe the project site and address issues such as access
to the wind resource, proximity to the electrical grid or
application load, environmental concerns with emphasis on historic
properties, visibility, noise, bird and bat populations, and
wildlife habitat destruction and/or fragmentation, construction, and
installation issues and whether special circumstances such as
proximity to airports exist. Provide a 360-degree panoramic
photograph of the proposed site, including indication of prevailing
winds when possible.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
system and site design, permits and agreements, equipment
procurement, and system installation from excavation through startup
and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the project, including the calculation of
simple payback. Provide a detailed analysis and description of
project costs, including design, permitting, equipment, site
preparation, system installation, system startup and shakedown,
warranties, insurance, financing, professional services, and
operations and maintenance costs. Provide a detailed description of
applicable investment incentives, productivity incentives, loans,
and grants. Provide a detailed description of historic or expected
energy use and expected energy offsets or sales on a monthly and
annual basis. In addition, provide other information necessary to
assess the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Small wind systems may be
constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Provide a detailed description of equipment
certification. Identify all the major equipment that is proprietary
and justify how this unique equipment is needed to meet the
requirements of the proposed design. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment, including
cranes and other devices needed for project construction, and
provide a description of the startup and shakedown specifications
and process and the conditions required for startup and shakedown
for each equipment item individually and for the system as a whole.
Include a statement from the applicant certifying that equipment
installation will be made in accordance with all applicable safety
and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Ensure that systems must have at least a 5-year warranty for
equipment and a commitment from the supplier to have spare parts
available. Provide information regarding system warranty and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed system, including maintenance schedules for the
mechanical, electrical, and software systems;
(3) Provide historical or engineering information that supports
expected design life of the system and timing of major component
replacement or rebuilds. Include in the discussion, costs and labor
associated with the operation and maintenance of the system, and
plans for in-sourcing or out-sourcing; and
(4) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations
or maintenance.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 9. Wind, Large
The technical requirements specified in this section apply to
wind energy systems, which are, as defined in Sec. 4280.103, wind
energy projects for which the rated power of the individual wind
turbine(s) is larger than 100kW.
(a) Qualifications of project team. The large wind project team
should consist of a project manager, a meteorologist, an equipment
supplier, a project engineer, a primary or general contractor,
construction contractor, and a system operator and maintainer, and
in some cases, the owner of the application or load served by the
system. One individual or entity may serve more than one role.
Authoritative evidence that project team service providers have the
necessary professional credentials or relevant experience to perform
the required services must be provided. Authoritative evidence that
vendors of proprietary components can provide necessary equipment
and spare parts for the system to operate over its design life must
also be provided. The application must:
(1) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design/
build method, often referred to as turnkey, where the applicant
establishes the specifications for the project and secures the
services of a developer who will design and build the project at the
developers risk;
(2) Discuss the large wind turbine manufacturers and other
equipment suppliers of major components being considered in terms of
the length of time in business and the number of units installed at
the capacity and scale being considered;
(3) Discuss the project manager, equipment supplier, project
engineer, and construction contractor qualifications for
engineering, designing, and installing large wind systems, including
any relevant certifications by recognized organizations. Provide a
list of the same or similar projects designed, installed, or
supplied and currently operating with references, if available;
(4) Discuss the qualifications of the meteorologist, including
references; and
(5) Describe system operator's qualifications and experience for
servicing, operating, and maintaining the system for the proposed
application. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating with
references, if available.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (b)(1) through (6).
(1) Identify zoning, building, and electrical code issues, and
required permits and the anticipated schedule for meeting those
requirements and securing those permits.
(2) Identify land use agreements required for the project and
the anticipated schedule for securing the agreements and the term of
those agreements.
(3) Identify available component warranties for the specific
project location and size.
(4) For systems planning to interconnect with a utility,
describe the utility's system interconnection requirements, power
purchase arrangements, or licenses where required and the
anticipated schedule for meeting those requirements and obtaining
those agreements.
(5) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(6) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Resource assessment. Provide adequate and appropriate data
to demonstrate the amount of renewable resource available. Projects
greater than 500kW must obtain wind data from the proposed project
site. For such projects, describe the proposed measurement setup for
the collection of the wind resource data. For proposed projects with
an established wind resource, provide a
[[Page 41336]]
summary of the wind resource and the specifications of the
measurement setup. Large wind systems larger than 500kW in size will
typically require at least 1 year of on-site monitoring. If less
than 1 year of data is used, the qualified meteorological consultant
must provide a detailed analysis of the correlation between the site
data and a nearby, long-term measurement site.
(d) Design and engineering. Provide authoritative evidence that
the system will be designed and engineered so as to meet its
intended purpose, will ensure public safety, and will comply with
applicable laws, regulations, agreements, permits, codes, and
standards. Large wind systems must be engineered by a qualified
party. Systems must be engineered as complete, integrated systems
with matched components. The engineering must be comprehensive,
including site selection, turbine selection, tower selection, tower
foundation, design of the local collection grid, interconnection
equipment selection, and system monitoring equipment. For stand-
alone, non-grid applications, engineering information must be
provided that demonstrates appropriate matching of wind turbine and
load.
(1) Provide a concise, but complete, description of the large
wind project, including location of the project, proposed turbine
specifications, tower height and type of tower, the collection grid,
interconnection equipment, and monitoring equipment. Identify
possible vendors and models of major system components. Provide the
expected system energy production based on available wind resource
data on a monthly and annual basis. For wind projects larger than
500kW in size, provide the expected system energy production over
the life of the project, including a discussion on inter-annual
variation using a comparison of the on-site monitoring data with
long-term meteorological data from a nearby monitored site.
(2) Describe the project site and address issues such as site
access, proximity to the electrical grid or application load,
environmental concerns with emphasis on historic properties,
visibility, noise, bird and bat populations, and wildlife habitat
destruction and/or fragmentation, construction, and installation
issues and whether special circumstances such as proximity to
airports exist.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
resource assessment, system and site design, permits and agreements,
equipment procurement, and system installation from excavation
through startup and shakedown.
(f) Project economic assessment. Provide a study that describes
the costs and revenues of the proposed project to demonstrate the
financial performance of the proposed project. Provide a detailed
analysis and description of project costs, including project
management, resource assessment, project design, project permitting,
land agreements, equipment, site preparation, system installation,
startup and shakedown, warranties, insurance, financing,
professional services, and operations and maintenance costs. Provide
a detailed description of applicable investment incentives,
productivity incentives, loans, and grants. Provide a detailed
analysis and description of annual project revenues, including
electricity sales, production tax credits, revenues from green tags,
and any other production incentive programs throughout the life of
the project. Provide a description of planned contingency fees or
reserve funds to be used for unexpected large component replacement
or repairs and for low productivity periods. In addition, provide
other information necessary to assess the project's cost
effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
by the system is available and can be procured and delivered within
the proposed project development schedule. Large wind turbines may
be constructed of components manufactured in more than one location.
Provide a description of any unique equipment procurement issues
such as scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Provide a detailed description of equipment
certification. Identify all the major equipment that is proprietary
and justify how this unique equipment is needed to meet the
requirements of the proposed design. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for site development and system installation, provide details
regarding the scheduling of major installation equipment, including
cranes or other devices, needed for project construction, and
provide a description of the startup and shakedown specifications
and process and the conditions required for startup and shakedown
for each equipment item individually and for the system as a whole.
Include a statement from the applicant certifying that equipment
installation will be made in accordance with all applicable safety
and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the system necessary for the system to
operate as designed over the design life. The application must:
(1) Ensure that systems must have at least a 3-year warranty for
equipment. Provide information regarding turbine warranties and
availability of spare parts;
(2) Describe the routine operations and maintenance requirements
of the proposed project, including maintenance schedules for the
mechanical and electrical systems and system monitoring and control
requirements;
(3) Provide information that supports expected design life of
the system and timing of major component replacement or rebuilds;
(4) Provide and discuss the risk management plan for handling
large, potential failures of major components such as the turbine
gearbox or rotor. Include in the discussion, costs and labor
associated with the operation and maintenance of the system, and
plans for in-sourcing or out-sourcing;
(5) Describe opportunities for technology transfer for long-term
project operations and maintenance by a local entity or owner/
operator; and
(6) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations
or maintenance.
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Section 10. Energy Efficiency Improvements
The technical requirements specified in this section apply to
projects that involve energy efficiency improvements, which are, as
defined in Sec. 4280.103, improvements to a facility, building, or
process that reduces energy consumption. The system engineering for
such projects must be performed by a qualified party or certified
Professional Engineer.
(a) Qualifications of project team. The energy efficiency
project team is expected to consist of an energy auditor or other
service provider, a project manager, an equipment supplier of major
components, a project engineer, and a construction contractor or
system installer. One individual or entity may serve more than one
role. Authoritative evidence that project team service providers
have the necessary professional credentials or relevant experience
to perform the required services must be provided. Authoritative
evidence that vendors of proprietary components can provide
necessary equipment and spare parts for the system to operate over
its design life must also be provided. The application must:
(1) Discuss the qualifications of the various project team
members, including any relevant certifications by recognized
organizations;
(2) Describe qualifications or experience of the team as related
to installation, service, operation and maintenance of the project;
(3) Provide a list of the same or similarly engineered projects
designed, installed, or supplied by the team or by team members and
currently operating. Provide references if available; and
(4) Discuss the manufacturers of major energy efficiency
equipment being considered, including length of time in business.
(b) Agreements, permits, and certifications. Identify all
necessary agreements and permits required for the energy efficiency
improvement(s) and the status and anticipated schedule for securing
those agreements and permits, including the items specified in
paragraphs (b)(1) through (4). The applicant must also submit a
statement certifying that the applicant will comply with all
necessary agreements and permits for the energy efficiency
improvement(s).
(1) Identify building code, electrical code, and zoning issues
and required permits, and the anticipated schedule for meeting those
requirements and securing those permits.
[[Page 41337]]
(2) Identify available component warranties for the specific
project location and size.
(3) Identify all environmental issues, including environmental
compliance issues, associated with the project on Form RD 1940-20,
``Request for Environmental Information,'' and in compliance with 7
CFR part 1940, subpart G, of this title.
(4) Submit a statement certifying that the project will be
installed in accordance with applicable local, State, and national
codes and regulations.
(c) Energy assessment. Provide adequate and appropriate evidence
of energy savings expected when the system is operated as designed.
(1) Provide information on baseline energy usage (preferably
including energy bills for at least 1 year), expected energy savings
based on manufacturers specifications or other estimates, estimated
dollars saved per year, and payback period in years (total
investment cost equal to cumulative total dollars of energy
savings). Calculation of energy savings should follow accepted
methodology and practices. System interactions should be considered
and discussed.
(2) For energy efficiency improvement projects with total
eligible project costs greater than $50,000, an energy audit is
required. An energy audit is a written report by an independent,
qualified party that documents current energy usage, recommended
potential improvements and their costs, energy savings from these
improvements, dollars saved per year, and simple payback period in
years (total costs divided by annual dollars of energy savings). The
methodology of the energy audit must meet professional and industry
standards. The energy audit must cover the following:
(i) Situation report. Provide a narrative description of the
facility or process, its energy system(s) and usage, and activity
profile. Also include price per unit of energy (electricity, natural
gas, propane, fuel oil, renewable energy, etc.,) paid by the
customer on the date of the audit. Any energy conversion should be
based on use rather than source.
(ii) Potential improvements. List specific information on all
potential energy-saving opportunities and their costs.
(iii) Technical analysis. Give consideration to the interactions
among the potential improvements and other energy systems:
(A) Estimate the annual energy and energy costs savings expected
from each improvement identified in the potential project;
(B) Calculate all direct and attendant indirect costs of each
improvement; and
(C) Rank potential improvements measures by cost-effectiveness.
(iv) Potential improvement description. Provide a narrative
summary of the potential improvement and its ability to provide
needed benefits, including a discussion of nonenergy benefits such
as project reliability and durability.
(A) Provide preliminary specifications for critical components.
(B) Provide preliminary drawings of project layout, including
any related structural changes.
(C) Document baseline data compared to projected consumption,
together with any explanatory notes. When appropriate, show before-
and-after data in terms of consumption per unit of production, time
or area. Include at least 1 year's bills for those energy sources/
fuel types affected by this project. Also submit utility rate
schedules, if appropriate.
(D) Identify significant changes in future related operations
and maintenance costs.
(E) Describe explicitly how outcomes will be measured.
(3) For energy efficiency improvement projects with total
eligible project costs equal to or less than $50,000, an energy
assessment or energy audit is required. If an energy assessment is
performed, provide adequate and appropriate evidence of energy
savings expected when the system is operated as designed. If an
energy audit is performed, it must follow the requirements specified
in paragraph (c)(2).
(d) Design and engineering. Provide authoritative evidence that
the energy efficiency improvement(s) will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and
will comply with applicable laws, regulations, agreements, permits,
codes, and standards.
(1) Energy efficiency improvement projects in excess of $50,000
must be engineered by a qualified party. Systems must be engineered
as a complete, integrated system with matched components.
(2) For all energy efficiency improvement projects, identify and
itemize major energy efficiency improvements, including associated
project costs. Specifically delineate which costs of the project are
directly associated with energy efficiency improvements. Describe
the components, materials or systems to be installed and how they
improve the energy efficiency of the process or facility being
modified. Discuss passive improvements that reduce energy loads,
such as improving the thermal efficiency of a storage facility, and
active improvements that directly reduce energy consumption, such as
replacing existing energy consuming equipment with high efficiency
equipment, as separate topics. Discuss any anticipated synergy
between active and passive improvements or other energy systems.
Include in the discussion any change in on-site effluents,
pollutants, or other by-products.
(3) Identify possible suppliers and models of major pieces of
equipment.
(e) Project development schedule. Identify each significant
task, its beginning and end, and its relationship to the time needed
to initiate and carry the project through startup and shakedown.
Provide a detailed description of the project timeline, including
energy audit (if applicable), system and site design, permits and
agreements, equipment procurement, and system installation from site
preparation through startup and shakedown.
(f) Project economic assessment. For projects whose total
eligible costs are greater than $50,000, provide an analysis of the
proposed project to demonstrate its financial performance, including
the calculation of simple payback. The analysis should include
applicable investment incentives, productivity incentives, loans and
grants, and expected energy offsets or sales on a monthly and annual
basis. In addition, provide other information necessary to assess
the project's cost effectiveness.
(g) Equipment procurement. Demonstrate that equipment required
for the energy efficiency improvement(s) is available and can be
procured and delivered within the proposed project development
schedule. Energy efficiency improvements may be constructed of
components manufactured in more than one location. Provide a
description of any unique equipment procurement issues such as
scheduling and timing of component manufacture and delivery,
ordering, warranties, shipping, receiving, and on-site storage or
inventory. Provide a detailed description of equipment
certification. Identify all the major equipment that is proprietary
and justify how this unique equipment is needed to meet the
requirements of the proposed design. Include a statement from the
applicant certifying that ``open and free'' competition will be used
for the procurement of project components in a manner consistent
with the requirements of 7 CFR part 3015 of this title.
(h) Equipment installation. Describe fully the management of and
plan for installation of the energy efficiency improvement(s),
identify specific issues associated with installation, provide
details regarding the scheduling of major installation equipment
needed for project discussion, and provide a description of the
startup and shakedown specifications and process and the conditions
required for startup and shakedown for each equipment item
individually and for the system as a whole. Include in this
discussion any unique concerns, such as the effects of energy
efficiency improvements on system power quality. Include a statement
from the applicant certifying that equipment installation will be
made in accordance with all applicable safety and work rules.
(i) Operations and maintenance. Identify the operations and
maintenance requirements of the energy efficiency improvement(s)
necessary for the energy efficiency improvement(s) to perform as
designed over the design life. The application must:
(1) Provide information regarding component warranties and the
availability of spare parts;
(2) Describe the routine operation and maintenance requirements
of the proposed project, including maintenance schedules for the
mechanical and electrical systems and system monitoring and control
requirements;
(3) Provide information that supports expected design life of
the improvement(s) and timing of major component replacement or
rebuilds;
(4) Provide and discuss the risk management plan for handling
large, potential failures of major components. Include in the
discussion, costs and labor associated with the operation and
maintenance of the improvement(s), and plans for in-sourcing or out-
sourcing; and
(5) For owner maintained portions of the improvement(s),
describe any unique knowledge, skills, or abilities needed for
service operations or maintenance.
[[Page 41338]]
(j) Dismantling and disposal of project components. Describe a
plan for dismantling and disposing of project components and
associated wastes at the end of their useful lives. Describe the
budget for and any unique concerns associated with the dismantling
and disposal of project components and their wastes.
Dated: July 6, 2005.
Gilbert G. Gonzalez, Jr.,
Acting Under Secretary, Rural Development.
[FR Doc. 05-13685 Filed 7-15-05; 8:45 am]
BILLING CODE 3410-XY-P