Rural Energy for America Program-Grants and Guaranteed Loans
Federal RegisterApr 12, 2013
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DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4280
RIN 0570-AA76
Rural Energy for America Program—Grants and Guaranteed Loans
AGENCY:
Rural Business-Cooperative Service and Rural Utilities Service, USDA.
ACTION:
Proposed rule.
SUMMARY:
Rural Development, a mission area within the U.S. Department of Agriculture, is proposing grant and guaranteed loan programs for renewable energy systems and energy efficiency improvement projects as provided in the Food, Conservation, and Energy Act of 2008. The proposed rule will revise the Rural Energy for America Program (REAP) found in 7 CFR part 4280, subpart B.
DATES:
Comments on the proposed rule must be received on or before June 11, 2013. The comment period for the information collection under the Paperwork Reduction Act of 1995 continues through June 11, 2013.
ADDRESSES:
You may submit comments to this rule by any of the following methods:
•
Federal eRulemaking Portal: http://www.regulations.gov
. Follow the instructions for submitting comments.
•
Mail:
Submit written comments via the U.S. Postal Service to the Branch Chief, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, STOP 0742, 1400 Independence Avenue SW., Washington, DC 20250-0742.
•
Hand Delivery/Courier:
Submit written comments via Federal Express Mail or other courier service requiring a street address to the Branch Chief, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, 300 7th Street SW., 7th Floor, Washington, DC 20024.
All written comments will be available for public inspection during regular work hours at the 300 7th Street SW., 7th Floor address listed above.
FOR FURTHER INFORMATION CONTACT:
Kelley Oehler, Branch Chief, Energy Division, U.S. Department of Agriculture, 1400 Independence Avenue SW., Stop 3225, Washington, DC 20250-3201; telephone (202) 720-6819.
SUPPLEMENTARY INFORMATION:
EXECUTIVE SUMMARY
I. Purpose of the Regulatory Action
This proposed rule will revise 7 CFR part 4280, subpart B to include changes that the Agency had previously identified, but did not include in the April 2011 Interim Rule. The Agency did not include these changes in order to expedite the implementation of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) program modifications and to improve the administration of the program via an updated regulation rather than, in part, through
Federal Register
notices. This proposed rule fulfills our commitment to implement changes that were not included in the April 2011 Interim Rule.
The Agency is authorized under Section 9001 of the 2008 Farm Bill and Section 9007 of the amended Farm Security and Rural Investment Act of 2002 to continue providing to agricultural producers and rural small businesses loan guarantees and grants for the development and construction of renewable energy systems and energy efficiency improvement projects. The 2008 Farm Bill also authorized the Agency to provide grants specifically for energy audits, renewable energy development assistance, and renewable energy system feasibility studies.
II. Summary of Major Provisions of the Regulatory Action
The major substantive changes being proposed, along with a brief justification for each, are presented below.
•
Project eligibility.
The Agency is proposing to allow the purchase of refurbished renewable energy systems and the retrofitting of an existing renewable energy system as eligible projects under this subpart. These changes allow the Agency to provide funds to such projects in recognition of the maturation of the renewable energy industry, wherein earlier generations of systems are now being refurbished or retrofitted with more energy efficient components. To illustrate the difference between retrofitting and refurbishing, consider the following wind turbine example. A wind turbine would be considered retrofitted if new blades were put on to improve the efficiency of the turbine. If, however, the turbine is taken off site to a factory to have its gears and other worn parts replaced, it would be considered refurbished.
For energy efficiency improvement projects, the Agency is proposing several changes, including ensuring that energy efficiency improvements use less energy on an annual basis than the original building and/or equipment they improve or replace in order to be eligible for program funding. These changes are being proposed to provide clarification and achieve consistency in the administration of the program.
•
Technical reports.
Changes being proposed for technical reports include simplifying the energy efficiency improvement technical report; simplifying the technical report for renewable energy system projects with total project costs of $200,000 or less; revising provisions associated with what is required for an energy assessment and an energy audit; providing for a single technical report option for renewable energy systems submitted through the process for applications for projects with total project costs of $200,000 or less; and eliminating the distinction between large and small solar and wind projects in preparing the technical reports. The Agency is proposing these changes to reduce overall burden for the program and streamline the application process.
•
Applications.
The proposed rule incorporates three grant application processes—one for projects with total project costs greater than $200,000; one for projects with total project costs of $200,000 or less (but more than $80,000); and one for projects with total project costs of $80,000 or less. The three application processes require different amounts of paperwork. With the proposed changes, the smaller the total project costs, the lesser amount of paperwork and burden associated with the process. The Agency is proposing these changes to reduce overall burden for the program and to streamline the grant application process by requesting documentation for a complete application based on total project costs.
•
Scoring criteria.
The Agency is proposing to modify several elements of the scoring criteria including eliminating the technical merit and commercial availability criteria; adding a criterion based on energy generated per dollar requested; modifying the size of the agricultural producer/small business criterion; and modifying the environmental benefits criterion. These changes are being proposed to make the scoring more objective and to better align the scoring metrics with the goals of the program.
•
Pre-commercial technology.
The Agency is proposing to remove pre-commercial technology as an eligible technology. As proposed, only commercially available technologies would be eligible for grants and guaranteed loans. The Agency is making this change to avoid overlap with the Biorefinery Assistance guaranteed loan program.
•
Energy audit requirement threshold for Energy Efficiency Improvements (EEI) applications.
The Agency is proposing to raise the threshold for requiring an energy audit (versus an energy assessment) from $50,000 to $200,000 in total project cost. The Agency is proposing this change because experience with the program shows that the information provided in an energy assessment for these projects is sufficient for the Agency to assess the merits of the EEI project. Additionally, this change makes it unnecessary for an applicant to incur the cost of a full energy audit for a $50,000 project when an energy assessment provides sufficient information for the Agency to evaluate the project.
•
Energy analysis.
The Agency is proposing to allow for an energy efficiency improvement project with total project costs of $80,000 or less to conduct an energy analysis instead of an energy assessment or an energy audit. The Agency is proposing this because the information provided by an energy analysis for these size projects is sufficient for the Agency to assess the merits of the EEI project, while at the same time reducing the costs to the applicant as an energy analysis is less costly than an energy assessment.
•
Competing guaranteed loan only applications.
The Agency is proposing to implement for guaranteed loan-only applications a quarterly competition. Guaranteed loan-only applications that achieve a minimum priority score would compete for available funds on the first business day of the second month of each Federal fiscal quarter. Guaranteed loan-only applications that do not achieve the minimum priority score would only be able to compete for funding during the last quarter of the Federal fiscal year. The change to quarterly awards is intended to make this part of REAP more appealing to lenders and prospective borrowers by ensuring funds are available all year, while competing the loan applications is intended to help ensure the most worthwhile projects receive priority for funding.
III. Summary of Benefits and Costs
A Regulatory Impact Analysis (RIA) was undertaken to examine the benefits and costs of the proposed changes to the Interim Rule for REAP. The RIA calculated a net cost savings due to proposed improvements in the implementation of the REAP program.
The estimate of benefits under the proposed rule are not expected to differ significantly from those that would have occurred under the Interim Rule for REAP. However, the net savings afforded to applicants and to the federal government as a result of streamlining and reduced burden will result in positive net benefits. Using the estimate of cost changes per application and the estimate of the number of applications will be affected by this rulemaking, the net benefits of this rule are estimated to be approximately $3.7 million in Fiscal Year 2013.
In addition, these changes are not expected to affect the nature and size of the environmental and energy impacts of the REAP program. While there are expected to be job benefits from REAP funding, these jobs were not quantified.
Background Information
Executive Order 12866
This proposed rule has been reviewed under Executive Order (EO) 12866 and has been determined to be economically significant by the Office of Management and Budget. The EO defines a “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, or 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 this EO.
The Agency conducted a benefit-cost analysis to fulfill the requirements of EO 12866. In this analysis, the Agency identifies potential benefits and costs of REAP to lenders, borrowers, and the Agency. The analysis contains quantitative estimates of the burden to the public and the Federal government and qualitative descriptions of the expected economic, environmental, and energy impacts associated with REAP.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act 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 generally 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 one year. When such a statement is needed for a rule, section 205 of the 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 proposed 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 the UMRA.
Environmental Impact Statement
Under this program, the Agency conducts a National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321
et seq.,
review for each application received. To date, no significant environmental impacts have been reported, and Findings of No Significant Impact (FONSI) have been issued for each approved application. Taken collectively, the applications show no potential for significant adverse cumulative effects.
This document has been reviewed in accordance with 7 CFR part 1940, subpart G, “Environmental Program.” 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 NEPA, an Environmental Impact Statement is not required. Grant and guaranteed loan applications will be reviewed individually to determine compliance with NEPA.
Executive Order 12988, Civil Justice Reform
This proposed rule has been reviewed under EO 12988, Civil Justice Reform. In accordance with this rule: (1) All State and local laws and regulations that are in conflict with this 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.
Executive Order 13132, Federalism
It has been determined, under EO 13132, Federalism, that this proposed rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. The
provisions contained in the proposed 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 government levels.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have an economically significant impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.
In compliance with the RFA, Rural Development has determined that this action, while mostly affecting small entities, will not have a significant economic impact on a substantial number of these small entities. Rural Development made this determination based on the fact that this regulation only impacts those who choose to participate in the program. Small entity applicants will not be affected to a greater extent than large entity applicants.
Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use
The regulatory impact analysis conducted for this proposed rule meets the requirements for EO 13211, which states that an agency undertaking regulatory actions related to energy supply, distribution, or use is to prepare a Statement of Energy Effects. This analysis finds that this proposed rule will not have any adverse impacts on energy supply, distribution, or use.
Executive Order 12372, Intergovernmental Review of Federal Programs
This program is not subject to the provisions of EO 12372, which require intergovernmental consultation with State and local officials.
Executive Order 13175, Consultation and Coordination With Indian Tribal Governments
This EO imposes requirements on Rural Development in the development of regulatory policies that have Tribal implications or preempt Tribal laws. Rural Development has determined that the proposed rule has substantial direct effects on one or more Indian Tribe(s) or on either the relationship or the distribution of powers and responsibilities between the Federal Government and the Indian Tribes. This rule was included in the USDA Joint Agency Regional Consultations that consolidated consultation efforts of 70 rules from the 2008 Farm Bill. USDA Rural Development sent senior level agency staff to seven regional locations and reached out to Tribal leadership in each region to consult on this proposed rule. Upon completion of the consultation process, USDA Rural Development analyzed the feedback and incorporated input from the consultation into this regulation.
For example, with the intent to increase Tribal participation in the program, the definition of a small business in this rule includes Tribal corporations chartered under Section 17 of the Indian Reorganization Act (25 U.S.C. 477) or other Tribal business entities that have similar structures and relationships with their Tribal governments as determined by the Agency. The Agency shall determine the small business status of such a Tribal entity without regard to the resources of the Tribal government.
USDA will respond in a timely and meaningful manner to all Tribal government requests for consultation concerning this rule. The policies contained in this rule do not have implications that preempt Tribal law.
Programs Affected
The Catalog of Federal Domestic Assistance program number assigned to the affected program is 10.868, Rural Energy for America Program.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, USDA Rural Development will seek the Office of Management and Budget (OMB) approval of the reporting and recordkeeping requirements contained in this rule and hereby open a 60-day public comment period.
Title:
Rural Energy for America Program.
Type of Request:
New collection.
Abstract:
Rural Development is providing grants and guaranteed loans for the construction or retrofitting of renewable energy systems and to make energy efficiency improvements; grants for energy audits; grants for renewable energy development assistance; and grants for feasibility studies for renewable energy systems. This financial assistance is contained in 7 CFR part 4280, subpart B.
The collection of information is vital for Rural Development to make wise decisions regarding the eligibility of projects and borrowers in order to ensure compliance with the regulations and that the funds obtained from the Government are used appropriately (e.g., used for the purposes for which the guaranteed loans were awarded). The type of information required depends on the type of financial assistance being sought, as summarized below.
1.
Renewable energy systems (RES) and energy efficiency improvements (EEI) grants.
Persons seeking RES or EEI grants under this program will have to submit applications applicable to the size of their proposed projects. The information to be included is similar, but applications for projects with total project costs of $200,000 or less require less information to be submitted than applications for projects with total project costs of more than $200,000. Similarly, applications for projects with total project costs of $80,000 or less require still less information to be submitted than the other applications.
All applications require certain forms and certifications, applicant information (or, in the case of applications for projects with total project costs of $80,000 or less, a certification that the applicant is eligible), project information (or, in the case of applications for projects with total project costs of $80,000 or less, a certification that the project is eligible), information on previous grants and guaranteed loans received under REAP, information on environmental benefits, and matching funds, and a technical report. Applications for projects with total project costs of more than $200,000 also require financial information on the applicant and any affiliated companies, and, if the application is for a renewable energy system with total project costs of more than $200,000, a feasibility study for the renewable energy system. Information in the application will be used to determine applicant and project eligibility, including if the project has technical merit.
Between grant approval and completion of project construction, grantees are required to submit semiannual performance reports, with a final project development report due once the project has been constructed.
Once the project has been completed, annual reports are required on the project. For a renewable energy system project, the outcome project performance report is required annually for 3 years following its completion. For an energy efficiency improvement project, the outcome project performance report is required annually for 2 years following its completion.
2.
Renewable energy systems and energy efficiency improvements guaranteed loans.
With one major exception, persons seeking loan guarantees under this program will have to submit applications that include the information required for grant applications of similar total project costs. For example, loan guarantee requests for total project costs of $200,000 or less would follow the application requirements of grants with total project costs of $200,000 or less (but more than $80,000). The major exception is in regards to the forms, certifications, and agreements required for loan guarantee applications, which include, but are not limited to, the lender's analysis, appraisals, commercial credit reports on the borrower, and proposed loan agreement. The information included in applications for loan guarantee will be used to determine applicant and project eligibility and to ensure that funds are used for projects that are likely to be financially sound.
Once a project has been approved and the loan has been guaranteed, lenders must submit periodic reports on the status of their loan portfolios and, when applicable, bimonthly default reports. In addition, lenders are required to conduct annual inspections of each completed project.
3.
Renewable energy system feasibility study grants.
Persons seeking a renewable energy system feasibility study grant will have to submit certain standard forms; the primary North American Industry Classification System (NAICS) code applicable to the applicant's operation if known or a description of the operation in enough detail for the Agency to determine the primary NAICS code; certification that the applicant is a legal entity in good standing (as applicable), and operating in accordance with the laws of the state(s) where the applicant has a place of business; a proposed scope of work; certification that the applicant has not received any other Federal or State assistance for a feasibility study for the same renewable energy system project that is the subject of the application; if the applicant is a rural small business, certification that the feasibility study grant will be for a renewable energy system project that is located in a rural area; and certification associated with financial information to determine the applicant's size. The information included in applications will be used to determine applicant and project eligibility and to ensure that funds are used for viable projects. Beginning the first full year after the feasibility study has been completed, a grantee is required to submit an outcome project performance report annually for 2 years on the status of the renewable energy system for which the feasibility study was completed.
4.
Energy audit and renewable energy development assistance grants.
Entities seeking an energy audit or renewable energy development assistance grant will have to submit certain standard forms; certification that the applicant is a legal entity in good standing (as applicable), and operating in accordance with the laws of the state(s) where the applicant has a place of business; and a proposed scope of work. The information included in applications for the grant will be used to determine applicant and project eligibility and to ensure that funds are used for viable projects.
While the project activities are being completed, grantees must submit semi-annual performance reports, which will, in part, compare actual accomplishments to the objectives, and a list of recipients. A final performance report is also required. Lastly, an outcome project performance report is required 1 year after submittal of the final performance report.
Estimate of Burden for Entire REAP Rule
The following estimates are based on the average over the first 3 years the program has been in place.
Estimate of Burden:
Public reporting burden for this collection of information is estimated to average 3.9 hours per response.
Respondents:
Agricultural producers; rural small businesses; units of State, tribal, or local government; instrumentalities of a State, tribal, or local government; land-grant colleges (including 1994 land-grant Tribal Colleges and Universities and 1890 land-grant Historically Black Colleges and Universities); universities, or other institutions of higher education; rural electric cooperatives; and public power entities.
Estimated Number of Respondents:
3,957.
Estimated Number of Responses per Respondent:
14.8.
Estimated Number of Responses:
58,399.
Estimated Total Annual Burden (hours) on Respondents:
219,347.
Copies of this information collection can be obtained from Jeanne Jacobs, Regulations and Paperwork Management Branch, Support Services Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling (202) 692-0040.
Comments
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of Rural Development, including whether the information will have practical utility; (b) the accuracy of the new Rural Development estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. Comments may be sent to Jeanne Jacobs, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, Rural Development, STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All responses to this proposed rule will be summarized and included in the request for OMB approval. All comments will also become a matter of public record.
E-Government Act Compliance
Rural Development is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
I. Background
Rural Development administers a multitude of Federal programs for the benefit of rural America, ranging from housing and community facilities to infrastructure and business development. Its mission is to increase economic opportunity and improve the quality of life in rural communities by providing the leadership, infrastructure, venture capital, and technical support that enables rural communities to prosper. To achieve its mission, Rural Development provides financial support (including direct loans, grants, and loan guarantees) and technical assistance to help enhance the quality of life and provide the foundation for economic development in rural areas.
In response to the Farm Security and Rural Investment Act of 2002 (FSRIA), which established the Renewable Energy Systems and Energy Efficiency Improvements Program under Title IX,
Section 9006, Rural Business-Cooperative Service (RBS) promulgated a rule (70 FR 41264, July 18, 2005) establishing the renewable energy systems and energy efficiency improvements program (7 CFR part 4280, subpart B) 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. Renewable energy sources eligible for funding included bioenergy, anaerobic digesters, electric geothermal, direct geothermal, solar, hydrogen, and wind.
Since it established the program, RBS has funded, through FY 2008, over 2,000 projects. Of these, nearly 1,700 projects have received grant-only funds totaling approximately $115 million. Another 327 projects received grants and guaranteed loans, totaling approximately $62.9 million in grant and loan funds combined, while 9 projects received only guaranteed loans totaling approximately $71 million.
Section 9001 of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) amended Title IX of the FSRIA. Under the 2008 Farm Bill and Section 9007 of the amended FSRIA, the Agency is authorized to continue providing to agricultural producers and rural small businesses loan guarantees and grants for the development and construction of renewable energy systems and energy efficiency improvement projects. In addition to the current set of renewable energy projects eligible for funding, the 2008 Farm Bill expands the program to include two new renewable energy technologies: hydroelectric and ocean energy. Further, the 2008 Farm Bill authorizes the Agency to provide grants specifically for energy audits, renewable energy development assistance, and renewable energy system feasibility studies. This newly expanded program is referred to as REAP, which continues the Agency's assistance to the adoption of both renewable energy systems and energy efficiency improvements through Federal government loan guarantees and grants.
On April 14, 2011, Rural Development published an Interim Rule for REAP (76 FR 21110). The Interim Rule established a consolidated REAP program by including each part of the program in a single subpart. Up to then, only the RES and EEI grant and guaranteed loan program requirements had been implemented under 7 CFR part 4280, subpart B and, for requirements established by the 2008 Farm Bill, through Federal Register notices. Since the 2008 Farm Bill, the requirements for RES feasibility study grants and for energy audit and renewable energy development assistance grants had been implemented through a series of Federal Register notices. For the RES feasibility studies, these notices were published on May 26, 2009 (74 FR 24769) and August 6, 2010 (75 FR 47525). For energy audits and renewable energy development assistance, these notices were published on March 11, 2009 (74 FR 10533) and May 27, 2010 (75 FR 29706).
As noted in the April 14, 2011,
Federal Register
notice, the Agency indicated that it would publish a proposed rule following publication of the Interim Rule. This notice fulfills that intent.
II. Discussion of Proposed Rule for REAP
In this section, the proposed rule for REAP is described. As has been noted, the Agency is proposing to revise 7 CFR part 4280, subpart B. The following paragraphs discuss the proposed changes, first by identifying several of the more significant changes and then discussing changes by sections.
A. Summary of Significant Changes
The Agency is proposing a number of revisions to 7 CFR part 4280, subpart B based, in part, on its effort to streamline and improve the program. The major substantive changes being proposed are summarized below.
1. Project eligibility.
The Agency is proposing to allow the purchase of a refurbished renewable energy system and the retrofitting of an existing renewable energy system as eligible projects for a RES or EEI grant, guaranteed loan or combination guaranteed loan and grant project. In addition, the Agency is clarifying several eligible projects and associated project costs, including:
• Making energy efficiency improvements that will use less energy on an annual basis than the original building and/or equipment that it will improve or replace;
• Replacing multiple pieces of equipment with one piece of equipment that will use less energy on an annual basis; and
• Constructing a new energy efficient building only when the building is used for the same purpose as the existing building, it will be more cost effective to construct a new building, and the new building will use less energy on an annual basis than improving the existing building.
In all cases, the applicant must demonstrate that less energy is used on an annual basis as documented in an energy analysis, assessment, or audit as applicable.
2.
Technical reports.
Numerous changes are being proposed for technical reports including, but not limited to, the following: simplifying the energy efficiency improvement technical report; simplifying the technical report for renewable energy system projects with total project costs of $200,000 or less; revising provisions associated with what is required for an energy assessment and an energy audit; providing for a single technical report option for renewable energy systems submitted through the process for applications for projects with total project costs of $200,000 or less; and eliminating the distinction between large and small solar and wind projects in preparing the technical reports.
3.
Applications.
The Agency is proposing changes to RES and EEI applications that are intended to reduce overall burden for the program and streamline the grant application process by requesting documentation for a complete application based on total project costs. Specifically, the proposed rule has defined three grant application processes to include projects with total project costs greater than $200,000, projects with total project costs of $200,000 or less (but more than $80,000), and projects with total project costs of $80,000 or less. With the proposed changes, the smaller the total project costs, the lesser amount of paperwork and burden associated with the process.
•
Applications for projects with total project costs of less than $200,000.
In addition to compiling applicable provisions into a single section within the rule, the Agency is proposing to remove the requirement that the Agency has to sign off on all procurement contracts for projects with total project costs of less than $200,000 (referred to in 7 CFR part 4280, subpart B as “simplified” applications).
•
Applications for projects with total project costs of $80,000 or less.
The Agency is proposing a new application process for projects with total project costs of $80,000 or less. These provisions are intended to reduce the application burden for these smaller projects from the current provisions in the Interim Rule, while still providing the Agency sufficient information to determine applicant and project eligibility and to evaluate and score the applications. The Agency is proposing the $80,000 threshold based on the set-aside for projects seeking grants of $20,000 or less and the maximum grant portion that the Agency can provide of 25 percent of the total project costs. For
more information on how these new provisions differ from the provisions for these applications under the Interim Rule for REAP, please see the discussion on “Grant applications for projects with total project costs of $80,000 or less” later in this preamble.
4.
Scoring criteria.
The Agency is proposing to modify several elements of the scoring criteria including eliminating the technical merit and commercial availability criteria; adding a criterion based on energy generated per dollar requested; modifying the size of the agricultural producer/small business criterion; and modifying the environmental benefits criterion. For a more detailed accounting of the changes being proposed to the scoring criteria, please see discussion for Table 1 under the “Section by section discussion of revisions to the RES and EEI Grant and Guaranteed Loan Program” later in this preamble.
5.
Pre-commercial technology.
The Agency is proposing to remove pre-commercial technology as an eligible technology. As proposed, only commercially available technologies would be eligible for grants and guaranteed loans.
6.
Energy audit requirement threshold for EEI applications.
The Agency is proposing to raise the threshold for requiring an energy audit (versus an energy assessment) from $50,000 to $200,000 in total project cost.
7.
Construction planning and performing development.
The Agency is proposing a major reorganization and clarification of these provisions to address confusion under 7 CFR part 4280, subpart B and to provide greater consistency in its implementation by each state.
8.
Competing guaranteed loan applications.
The Agency is proposing to establish new procedures for competing guaranteed loan applications. Major features of the new procedures are:
• Establishing quarterly competitions for guaranteed loan-only applications;
• Establishing each year a minimum score to determine whether an application is competed in each quarter (only those applications that score at or above the minimum score) or only in the last quarter of the Federal fiscal year (those applications that score below the minimum score and all other applications that were not funded);
• Procedures for making awards when there are insufficient funds available; and
• Limiting the number of competitions each application can participate for funding—four quarters for applications that score at or above the minimum score and only the last quarter of the Federal fiscal year for applications that score below the minimum score and all other applications that were not funded.
The proposed procedures are intended to encourage more guaranteed loan applications by making awards throughout the year. This allows potential applicants more flexibility in preparing and submitting their applications. Further, the Agency is encouraging better projects by establishing a minimum score.
Section by Section Discussion of Revisions to the RES and EEI Grant and Guaranteed Loan Program
Purpose (§ 4280.101)
The only change being proposed to this section is the removal of the reference to “in rural areas” because certain projects proposed by agricultural producers may be eligible for REAP funds even though the project is located in a non-rural area. The Agency is proposing this change for two reasons.
First, the Agency has determined that there are a number of agricultural producers that operate in non-rural areas that can benefit from REAP. Such agricultural producers may include commercial nurseries and truck farms (the growing of one or more crops on a scale necessary for shipment to distant markets) that are located near urban areas.
Second, to the extent the authorizing statutes allow, the Agency wanted REAP to be consistent with the Biorefinery Assistance Program, the Repowering Assistance Program, and the Advanced Biofuel Payment Program. The three programs do not include a rural area requirement in their respective interim rules published in February 2011.
Organization of This Subpart (§ 4280.102)
The purpose of this section continues to be providing the reader with an overview of the organization of the subpart. The section has been updated to reflect the changes in the rule.
Definitions (§ 4280.103)
The Agency is revising or deleting some of the definitions, as well as cross-referencing § 4279.2 for guaranteed loan terms. The Agency is also proposing to define several new terms.
Revised Terms
•
Anaerobic digester project.
The primary revision to this term is replacing “waste” with “or other Renewable Biomass” in order to clarify that human waste is an eligible feedstock to anaerobic digesters.
•
Bioenergy project.
This term is being updated to refer to “Renewable Biomass” and is being revised by removing the last portion of the definition referring to anaerobic digesters, which the Agency determined is unnecessary to define the term.
•
Blended liquid transportation fuel.
This term is being clarified by recasting the last part of the definition to refer to Federal or State requirements, whichever of the two is higher.
•
Capacity.
This term is being clarified by replacing “load” with “output rate” and replacing “meet” with “attain.”
•
Commercially available.
This term is being revised to: (1) clarify that the proven operating history has to be for at least one year and warranties are only required on major parts, and (2) add a provision for technologies currently only available outside the United States to qualify as commercially available.
•
Design/build method.
This term is being revised by replacing “prime contractor” with “contractor.”
•
Eligible project costs.
This term is being revised by including costs that are eligible to be paid or guaranteed with program funds as part of eligible project costs.
•
Energy assessment.
This term is being revised in three ways. First, “experienced energy assessor, certified energy manager, or professional engineer” is being replaced with “Energy Auditor, Energy Assessor, or an individual supervised by either an Energy Assessor or Energy Auditor.” Second, the assessment of energy “use” is being added. Third, the details of what constitutes an energy assessment are being revised and moved from the definition section to Section C of Appendix A of this subpart.
•
Energy assessor.
This term is being revised as to who qualifies as an energy assessor under this subpart and to require that the energy assessor must be a qualified consultant.
•
Energy audit.
This term is being revised in two ways. First, “certified energy manager or professional engineer” is being replaced with “energy auditor.” Second, the details of what constitutes an energy audit are being revised and moved from the definition section to Section B of Appendix A of this subpart.
•
Energy auditor.
The term is being revised as to who qualifies as an energy auditor under this subpart and to require that the energy auditor must be a qualified consultant.
•
Energy efficiency improvement.
This term is being revised by adding “or replacement of”; by replacing “a facility, building, or process” with “an
existing building and/or equipment”; and by replacing “reduce energy consumption, or reduce energy consumed per square foot” with “reduces energy consumption on an annual basis.”
•
Feasibility study.
This term is being revised by adding “conducted by a qualified consultant.”
•
Financial feasibility.
This term is being revised by referring to “sufficient income” rather than “the income.”
•
Geothermal electric generation.
This term is being clarified by referring to “thermal energy from a geothermal source” and by removing “high pressure steam for” because it is not needed.
•
Hydroelectric energy.
The term being defined in the proposed rule is now “hydroelectric source” to conform to the terminology in the 2008 Farm Bill. In addition, the definition has been clarified to refer to it as a “Renewable Energy System producing electricity.” Lastly, the definition now includes reference to hydroelectric sources with a rated power of 30 megawatts or less, rather than having a separate definition for small hydropower.
•
Hydrogen project.
This definition is being edited for clarification.
•
Instrumentality.
Examples have been added to the definition.
•
Interconnection agreement.
This term is being revised by adding “A contract containing” to the beginning of the definition.
•
Matching funds.
This term is being clarified by referring to total eligible project costs instead of eligible project costs.
•
Passive investor.
This term is being clarified by replacing “arrangement” with “agreement.”
•
Qualified consultant.
This term is being expanded by incorporating from the definition of “qualified party” the concept of an independent third-party.
•
Renewable biomass.
The definition for renewable biomass is provided to the Agency by the 2008 Farm Bill. This term is being clarified to identify it includes “other biodegradable waste” and to state that waste material does not include unsegregated solid waste.
•
Renewable energy site assessment.
This definition is being revised through editing and presentation to be consistent with the technical report requirements contained in Sections A through C of Appendix B for renewable energy system applications submitted with a total project cost of $200,000 or less.
•
Rural Business Cooperative Service Grant Agreement (Form RD 4280-2) or successor form.
This term is being redefined as “Grant Agreement” and is being updated to reflect the new name of the form.
•
Simple payback.
This term is being revised in several ways.
Reference to “(including REAP grants)” in several equations is being removed because the phrase is unnecessary.
The calculation of energy saved or replaced is being revised. The applicant is to calculate the actual average annual total energy used in the original building and/or equipment, as applicable, prior to the RES or EEI project over the most recent 36 months of operation or, if in operation less than 36 months, over the length of ownership. Next, the applicant is to calculate the projected average annual total energy that would have been used in the original building and/or equipment, as applicable, for this same 36-month period if the proposed project had been in place over that time period. The difference between these two values for the applicable time period represents the amount of energy saved or replaced. The Agency notes that the value of the price of energy used in the calculation of simple payback is to be calculated for this same 36-month period or period of ownership, if less than 36 months.
The adjustment for energy efficiency equipment based on the ratio of capacity is being removed. However, there may be projects where multiple pieces of equipment are being replaced by one piece of equipment. The applicant must demonstrate in an energy analysis, assessment, or audit, as applicable, that the average annual total energy used by the one piece of equipment is less than the combined average annual total energy used by the multiple pieces of equipment.
The calculation of simple payback for flexible fuel pumps is being revised to specify that only the flexible fuel pump cost, revenue, and expenses are to be included in the calculation. In addition, income is now “average net income” and is based on all energy-related revenue streams.
•
Small business.
This term is being revised by removing reference to providing service to rural consumers “on a cost-of-service basis without support from public funds or subsidy from the Government authority establishing the district.”
Added Terms
•
Complete application.
This term is being added to clarify the timeframe for when eligible project costs can begin to be incurred.
•
Federal fiscal year.
This term is being added to ensure clarity in implementing the subpart.
•
Energy analysis.
This term is being added because the Agency is proposing to allow for an energy efficiency improvement project with total project costs of $80,000 or less to conduct an energy analysis instead of an energy assessment or an energy audit. In addition, the details of what constitutes an energy analysis have been added to § 4280.119(b)(3)(iii). The Agency notes that an energy analysis covers the same areas as an energy assessment, but will have less detail than an energy assessment, as provided in Appendix A of this subpart.
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Hybrid.
This term is being added because the program now specifically addresses projects in which more than one renewable technology is proposed.
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Immediate family.
This term is being added to conform to a proposed change, as discussed later, replacing “close relative” with “immediate family.”
•
Inspector.
This term is being added to clarify who can perform inspections required under the subpart.
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Retrofitting.
This term is being added because the rule addresses retrofitting as an eligible project purpose.
•
Rural Small Business.
This term is being added to clarify the applicability of certain sections of the rule.
Deleted Terms
The following terms are being deleted because they are already defined in § 4279.2 of this part and the Agency has determined there is no reason for the terms to be defined differently between regulations.
• Borrower.
• Holder.
• Interim financing.
• Lender.
• Participation.
• Promissory note.
The following terms are being deleted because they are no longer used in this subpart.
• Existing business.
• Fair market value of equity in real property.
• Hydropower.
• Large solar, electric.
• Large solar, thermal.
• Large wind system.
• Necessary capital improvement.
• Post-application.
• Pre-commercial technology.
• Qualified party.
• Simplified application.
• Small hydropower.
• Small solar, electric.
• Small solar, thermal.
• Small wind system.
• Spreadsheet.
• Very small business.
Exception Authority (§ 4280.104)
This section is being revised to focus consideration of the application of
requirement or provision on the financial interest of the Federal government when evaluating whether to make an exception.
Review or Appeal Rights (§ 4280.105)
This section is being revised, in part, to conform with recent energy title rulemakings to be simpler and to identify the availability of a review of an Agency decision and, in part, to clarify which parties may appeal an adverse decision associated with a guaranteed loan loss payment and with a combined funding application.
Conflicts of Interest (§ 4280.106)
This section is being revised to clarify and provide examples of conflict of interest situations dealing with the receipt of Federal awards, matching funds, and procurement contracts. In addition, a new paragraph specifically addressing assistance to Agency employees and their relatives and associates has been included. The Agency is adding this provision to provide greater transparency and accountability in government.
Laws That Contain Other Compliance Requirements (§ 4280.108)
Several references have been moved or deleted as follows:
• Reference to equal employment opportunity is being relocated from this section to the Construction Planning and Performing Development section (see § 4280.124(a)(2)).
• Reference to the Equal Credit Opportunity Act at the end of paragraph (a) of this section is being removed because it duplicates reference to it earlier in the paragraph and thus is unnecessary.
• Reference to the Americans with Disabilities Act as a separate, stand alone paragraph was removed because it is adequately covered elsewhere in this section and in the Construction Planning and Performing Development section (see § 4280.124(d)(2)).
• Reference to Executive Order 12898, which addresses the Agency's conduct of a Civil Rights Impact Analysis, is being removed because it is internal Agency policy and as such it is unnecessary to include it in a rule.
With regard to 7 CFR 4280.108(e), Environmental analysis, the Agency is proposing that, if the applicant takes any actions or incurs any obligations that would either limit the range of alternatives to be considered or that would have an adverse effect on the environment prior to the Agency completing the environmental review, such action or obligation “may” (rather than “will”) result in the project being determined by the Agency to be ineligible. This change is not intended to limit any NEPA requirements. Actions taken by an applicant prior to Agency review that have an adverse effect on the environment, would be a basis for the Agency to determine the project ineligible for funding. Further, the Agency is proposing to clarify this provision by changing “during the time of application or application review” to “prior to the Agency completing the environmental review.” Lastly, because this provision addresses any project's eligibility, it has been moved to the project eligibility section for each program.
General Applicant, Application, and Funding Provisions (§ 4280.110)
Several changes are being proposed for this section. Paragraph (b) is being added to address application submittal. Previously, application windows were identified through the issuance of notices in the
Federal Register
. As proposed, all applications (grants, guaranteed loans, and combination grants and guaranteed loans) may be submitted at any time throughout the year except for energy audit and renewable energy development assistance applications. The Agency will select grant and combination grant and guaranteed loan applications based on the grant application's score and subject to available funding.
All guaranteed loan-only applications will be scored. Applications that are ready for funding and that score at or above the minimum score will be competed on a quarterly basis, with higher scoring applications receiving priority. Applications ready for funding, but that score below the minimum score and all other applications that were not funded will only be competed during the last quarter of the Federal fiscal year.
Paragraph (c) is being added to set limits on the number of applications an applicant can submit each Federal fiscal year. Specifically, an applicant can submit only one application for a renewable energy system project, one application for an energy efficiency improvement project, and one application for a renewable energy system feasibility study project. Thus, for example, an applicant cannot submit applications for two renewable energy system projects in the same Federal fiscal year. This provision clarifies the Agency's intent in implementing the program to provide for a greater distribution of funds by limiting an applicant to one application for each of the three types of projects each Federal fiscal year. An applicant will still, however, be allowed to submit a total of three applications, one for each type of project.
Paragraph (d), currently 7 CFR 4280.116(a)(1), is being clarified to refer to “types of funding requests” rather than to “types of funding applications.” In addition, the Agency is moving these provisions to this section because they are more appropriately placed in the general section of the rule than in the RES/EEI grant section.
Paragraph (e) is being added to address modifications to applications once they have been submitted to the Agency, how the date of record is affected, and how the Agency will consider the modified application for selection.
In addition to retitling paragraph (f) to “Incomplete applications,” the provisions associated with incomplete applications are being clarified.
Paragraph (h) is being added to address provisions common to the technical reports submitted with the application—the level of detail each is to provide; modifications to the technical report prior to the applicant's selection of a final design, equipment vendor, or contractor; and hybrid projects. For the most part, these provisions are the same as found in 7 CFR 4280, subpart B, but have been brought together in this paragraph.
Paragraph (i) addresses technical merit. The Agency will determine the technical merit of all applications submitted under this subpart, except for renewable energy system feasibility study grant applications and energy audit and renewable energy development assistance grant applications.
While projects that are without technical merit are still ineligible, the Agency is proposing to replace scoring the technical merit of a project with a process for determining whether the project has or does not have technical merit. Under the Interim Rule, technical merit is a criterion used to score and rank applications to determine which projects are funded. The Agency has determined based on its experience with REAP applications that this criterion is too subjective and has determined that it is in the best interest of the program not to continue using it to score applications. However, the very nature of REAP is such that only projects that have “technical merit” be eligible for funding. Thus, the Agency is proposing to revise the regulation such that each proposed project will be determined by the Agency either to have technical merit or not to have technical merit.
The Agency will make the technical merit determination based on the
information provided in the application, including the technical report whose purpose is to provide the details of the proposed project. The Agency will examine such items in the technical report as prior performance data of the system, experience of the installation team, resource data, and the engineering of the system in making its decision on technical merit.
If the information in the application is insufficient to allow the Agency to make a technical merit determination, the application will be considered incomplete. If the Agency determines that an application is incomplete, it will notify the applicant of the elements that made the application incomplete. The applicant will be given an opportunity to provide the missing information. If the applicant provides the missing information on or before the last applicable application deadline, the Agency will continue considering the application for funding as described in the subpart. However, if the applicant provides the missing information after the last applicable application deadline, the Agency will only consider the application for funding in subsequent funding cycles as described in the subpart.
Paragraph (j) has been added to clarify that all grants awarded under this subpart must be completed within 2 years from the date the Grant Agreement was signed by the Agency unless otherwise approved by the Agency. All grant funds must be returned to the Agency if the grantee does not meet the requirements of the Grant Agreement.
Notifications (§ 4280.111)
Three changes are being made to this section. First, the paragraph addressing ineligible applications was integrated into the paragraph addressing eligibility notifications. Second, reference is being made to lenders to make this section applicable to guaranteed loan applications. Third, paragraph (c), which is titled “Awards” is being retitled “Disposition of applications.” This change is being made to clarify that this paragraph applies to not only applications selected for award, but to applications that are not selected for award. The Agency is also proposing to add a provision to this paragraph that it will include any applicable appeal or review rights in its notification to applicants whose applications are not funded.
Renewable Energy System and Energy Efficiency Improvements Grants
Applicant Eligibility (§ 4280.112)
This section provides the criteria the Agency will use to determine whether an applicant is eligible to receive an RES or EEI grant under this subpart, including identifying situations in which an applicant will be determined to be ineligible.
Paragraph (b) addresses ownership and control requirements. While a similar provision is found in 7 CFR part 4280, subpart B under project eligibility, the proposed rule clarifies and expands these requirements. It requires ownership and site ownership or control for the project at the time of application and, if an award is made, for the useful life of the project as described in the grant agreement.
Paragraph (c) addresses revenues and expenses. While a similar provision is found in 7 CFR part 4280, subpart B under project eligibility, the proposed rule clarifies and expands these requirements. It requires that the applicant have available at the time of application satisfactory sources of revenue in an amount sufficient to provide for the operation, management, maintenance, and any debt service of the project for the useful life of the project. In addition, the applicant must control the revenues and expenses of the project, including its operation and maintenance, for which the assistance is sought.
Paragraph (d) is new and clarifies that applicants are required to have the legal authority necessary to apply for and carry out the purpose of the grant. This specific provision has been part of administering the program, but it is not easily identifiable in 7 CFR part 4280, subpart B.
Paragraph (e) is new and clarifies that applicants are required to follow the Universal identifier and SAM requirements of 2 CFR unless exempt under 2 CFR 25.110.
Project Eligibility (§ 4280.113)
This section provides the criteria the Agency will use to determine whether a project is eligible to receive an RES or EEI grant under this subpart. These provisions of the proposed rule are similar to 7 CFR part 4280, subpart B, but there are several differences to note.
With regard to project eligibility, the Agency is proposing several changes. For renewable energy systems, the Agency is clarifying that funds can be used to purchase “new” or “Refurbished” renewable energy systems. In addition, the Agency is proposing to allow funds to be used to retrofit existing renewable energy systems.
The Agency is proposing to include as an eligible energy efficiency improvement project, the construction of a new energy efficient building only when the building is used for the same purpose, and based on an energy audit or energy assessment, as applicable, it will be more cost effective to construct a new building and will provide more energy savings than improving the existing building.
The Agency is removing pre-commercial technology from being eligible; all projects must now be for commercially available technologies. The Agency is making this change to avoid overlap with the Biorefinery Assistance guaranteed loan program.
The Agency is adding the conditions that must be met for the construction of a new energy efficiency improvement building in order to be an eligible project. Specifically, such construction would be an eligible project only when the building is used for the same purpose, it will be more cost effective to construct a new building, and it will use less energy on an annual basis than improving the existing building. The Agency is adding a new eligibility criterion addressing duplicative grant applications. Specifically, as proposed, if the proposed energy efficiency improvement would duplicate the same energy efficiency improvement that had previously received funds under this subpart, then the proposed improvement is ineligible. For example, an applicant received a grant to replace the windows in a warehouse with more energy efficient windows. Shortly thereafter, the applicant decides to replace the new windows. An application for replacing the new windows would be ineligible for REAP funding.
As noted above, the Agency is relocating the ownership and control and revenue provisions of 7 CFR 4280.113(f) through (h) from the project eligibility section to the applicant eligibility section.
The separate technical feasibility provision is removed because an application has to pass a technical merit review as discussed previously (which technical feasibility is part of) in order to be considered for funding.
RES/EEI Grant Funding (§ 4280.115)
This section addresses four areas associated with grant funding, as summarized below.
Maximum grant assistance (paragraph (a)(3)).
While the maximum amount that an individual or entity can receive in a Federal fiscal year is not
changing (it remains at $750,000), the Agency is clarifying that this maximum amount applies to all grant assistance received under this subpart, including energy audit, renewable energy development assistance, and feasibility study grants.
Matching funds (paragraph (b)).
The Agency is clarifying that the applicant is responsible for securing the remainder of the total project costs not covered by grant funds rather than just total eligible project costs and modifying the text found in paragraph (b)(2) of this section to clarify that equity raised from the sale of Federal tax credits is an acceptable form of passive third-party contributions.
Eligible project costs (paragraph (c)).
The Agency is proposing several changes to the eligible project costs.
In addition to the cost being an “integral component,” the Agency is allowing as an alternative that the cost can be “directly related to and its use and purpose is limited to” the renewable energy system or energy efficiency improvement.
The Agency is replacing the term “post-application” with “after a Complete Application has been received” for clarity in determining the eligibility of certain project costs.
With regard to the purchase and installation of equipment, the Agency is removing reference to “remanufactured” equipment and relocating the exceptions for agricultural tillage equipment, used equipment, and vehicles to the ineligible project costs section.
The Agency is removing the provision associated with pro-rating eligible project costs based for energy efficiency improvement projects that have a greater capacity than the existing building and/or equipment being replaced. Under the proposed rule, no such pro-rating would be used.
The Agency is clarifying that the permit fees referred to are construction permit fees.
The Agency is clarifying that eligible project costs for professional service fees are those fees incurred for qualified consultants, contractors, installers, and other third-party services.
Reference to energy analyses, energy assessments, energy audits, technical reports, and feasibility studies has been moved to the eligible project costs section for guaranteed loans. These items are no longer considered as eligible project costs for grants. Because these items are needed as part of a complete grant application, costs incurred before the complete application is submitted to the Agency are considered ineligible project costs.
The Agency has relocated from eligible project cost provisions, the construction of a new energy efficiency facility to the project eligibility section.
Ineligible project costs (paragraph (d)).
To provide clarity on what costs would not be eligible for funding, the Agency developed a paragraph specifically addressing ineligible project costs.
Grant Applications—General (§ 4280.116)
This is a new section to clarify that under paragraph (a), separate applications are to be submitted for renewable energy system and energy efficiency improvement projects and also only an original application needs to be submitted. Under the current 7 CFR part 4280, subpart B, separate applications for renewable energy system and energy efficiency improvement projects are not discussed and an original and a copy of the application are required.
Paragraph (b) of this section states which section of the rule applies to applications with total project costs of greater than $200,000, applications with total project costs of $200,000 or less (but more than $80,000), and applications with total project costs of $80,000 or less. Lastly, paragraph (c) of this section addresses how the Agency will evaluate each application. This paragraph is very similar to the paragraph (a) of 7 CFR 4280.117, but adds a reference to the technical merit of the project and having complete application documentation.
Grant Applications for Projects With Total Project Costs Greater Than $200,000 (§ 4280.117)
Certifications are being required in place of documentation and some of the forms only need to be submitted at the time of award because they are not needed at the time of application. The Agency is also proposing to remove the provision requiring a Table of Contents with clear pagination and chapter identification.
To clarify their applicability, the Agency is adding a new paragraph (f) to identify the construction planning and performing development provisions that are applicable to these grant applications by cross-referencing § 4280.124.
Grant Applications for Projects With Total Project Costs of $200,000 or Less (§ 4280.118)
This section incorporates the criteria for submitting such applications, which are currently found in 7 CFR 4280.114.
Under paragraph (a), the Agency is proposing that only commercially available projects be eligible for REAP (paragraph (a)(2) of § 4280.118 cross references the requirements of § 4280.113 and more specifically to § 4280.113(b) which requires the project to be “Commercially Available”). In addition, because the Agency is proposing that all projects awarded grants under REAP be completed within 2 years, the criterion requiring such applicants to complete projects within 2 years is also no longer needed.
The Agency is proposing changes to the content for these applications (see paragraph (b)), including moving forms not needed at the application stage to the award stage.
The primary change being proposed for construction planning and performing development is allowing for small acquisition and construction procedures to be utilized and not requiring the need for applicant to get Agency approval on contracts (see paragraph (c)).
The Agency is proposing a new process that clearly identifies the payment process for projects (see paragraph (d) of this section).
Grant Applications for RES and EEI Projects With Total Project Costs of $80,000 or Less (§ 4280.119)
This section identifies the contents of an application for projects with total project costs of $80,000 or less. A technical report is still required for this application process; however, it can be submitted as a narrative rather than a separate report like under the other two application processes in the proposed rule. Energy efficiency improvement projects applying under this process will have to provide 36 months of data for total energy used and projected and the total cost of the energy as well as projected.
The structure of this section parallels that for applications for projects with total project costs of less than $200,000. Paragraph (a) identifies the criteria for submitting applications for projects with total project costs of $80,000 or less. These criteria are identical to those for submitting applications for projects with total project costs of $200,000 or less, except for the threshold (i.e., $80,000 versus $200,000).
Application content is presented in paragraph (b). In general, the Agency is proposing to simplify the application by requiring the applicant to certify to a number of items (e.g., applicant eligibility, project eligibility) rather than submit information with the application. The following identify specific differences associated with
these applications compared to the applications for the other two tiers:
• Certify that the applicant meets the criteria for submitting a “$80,000 or less” application
• Submit a “unique” set of certifications covering:
○ Applicant and project eligibility criteria
○ Ability of project to meet is intended purpose
○ Will abide to open and free competition requirements
○ For bioenergy projects, any and all woody biomass feedstock from National forest system land or public lands cannot be used as a higher value wood-based product
○ For flexible fuel pumps, blended liquid transportation fuel is available and there is demand for that fuel in its service area
• Application description, including the financial information, in § 4280.117(b) is not required
• A separate project description and identification of project location is not required
• RES feasibility study (§ 4280.117(d)) does not apply and thus is not required (difference from the “>$200,000” applications only)
• Less onerous technical reports from the other two application tiers, including for EEI applicants the submittal of an energy analysis rather than either an energy assessment or energy audit.
Paragraphs (c) and (d) presents the procurement and payment processes, which are the same as for projects with total project costs of $200,000 or less (but more than $80,000).
Scoring Grant Applications (§ 4280.120)
This section identifies the criteria the Agency will use to score each RES and EEI application. The Agency is including a provision that would allow it to modify the scoring through the publication of a Federal Register notice.
Numerous changes have been made to the scoring criteria as summarized in Table 1. Reasons for the changes are discussed following Table 1.
Table 1—Summary of Scoring Criteria Changes for RES/EEI Grant Applications
7 CFR part 4280, subpart B criteria
and maximum points
Proposed criteria and maximum points
Summary of changes
1. Quantity of energy replaced, produced or saved, and flexible fuel pumps
b. Quantity of energy generated or saved per REAP grant dollar requested, and renewable fuel dispensed through flexible fuel pumps (max 25 points)
Replaces this criterion with “Quantity of energy generated or saved per REAP grant dollar requested, and renewable fuel dispensed through flexible fuel pumps”.
2. Environmental benefits (max 10 points)
a. Environmental benefits (max 5 points)
1. Revises criterion to award points based on positive effects in three areas: resource conservation, public health, and the environment.
2. Decreases points from 10 to 5.
3. Commercial availability (max 10 points)
Removed.
4. Technical merit (max 35 points)
Removes criterion as scoring criterion. Instead, all projects will be assessed on a pass/fail basis for technical merit.
5. Readiness (max 15 points)
c. Readiness (max 25 points)
Increases points from 15 to 25.
6. Small agricultural producer/very small business (max 10 points)
d. Size of agricultural producer or rural small business (max 10 points)
Changes metric for awarding points to size of applicant relative to the Small Business Administration's small business size standards.
7. Simplified application/low cost projects (max 5 points)
Removes criterion.
8. Previous grantees or borrowers (max 5 points)
e. Previous grantees or borrowers (max 10 points)
Increases maximum points from 5 to 10.
•
Quantity of energy replaced, produced or saved, and flexible fuel pumps.
The Agency is replacing this criterion with “Quantity of energy generated or saved per REAP grant dollar requested, and renewable fuel dispensed through flexible fuel pumps” based on Office of Inspector General audit recommendation and given that maintaining both criteria would be duplicative.
•
Environmental benefits.
The Agency is revising the method for awarding points under this criterion. Under the Interim Rule, an applicant is required to obtain a letter from an authority within the State supporting the project. While support from the State is viewed as positive, it puts extra burden on the applicant to obtain the letter and puts those applicants that do not get a letter at a disadvantage. In addition, receiving such a letter does not make it a better project. Lastly, under the current guidance it has also been very hard to quantify environmental benefits. Therefore, for these reasons, the Agency is proposing to award points under this criterion based on the applicant providing documentation that the proposed project will have a positive effect on any of the three impact areas: resource conservation, public health, and environment.
•
Commercial availability.
The Agency is removing this criterion because only commercially available technologies are eligible for the program.
•
Technical merit.
The Agency is removing this criterion for scoring purposes because of its subjective nature. Instead, the Agency is proposing to make technical merit an eligibility criterion. Based on the information in the technical report, the Agency will make a determination as to whether a project has technical merit or not. If the Agency determines that a project does not have technical merit, the project will be ineligible for funding.
•
Readiness.
In order to encourage applicants to provide written commitment of matching funds with the application submittal, the Agency is proposing to increase the maximum number of points awarded under this criterion from 15 to 25.
•
Small agricultural producer/very small business.
The Agency is proposing to change the basis for awarding points to size of applicant relative to the Small Business Administration's small business size standards. Under the Interim Rule for
REAP, there are different measurement standards for determining the size of a small agricultural producer and the size of a very small business for awarding of points under this scoring criterion. The new provision will measure each applicant based on the size requirement published by the Small Business Administration. Grantees one-third or less than the SBA size requirement will get full points, while those two-thirds or less of the SBA size requirement will get one-half of the points. The Agency has determined this is a more equitable method for awarding points for this criterion between agricultural producers and rural small businesses.
•
Simplified applications/low cost projects.
The Agency is proposing to remove this criterion because it will set aside funding for grants requesting less than $20,000 and therefore priority points are not needed.
•
Previous grantees or borrowers.
In order to encourage new applicants, the Agency is proposing to increase points awarded under this criterion from 5 to 10. Under the proposed rule, an applicant who has not received a grant in the previous two years will be awarded 5 points, while an applicant that has never received REAP funding will receive 10 points.
Selecting RES and EEI Grants for Award (§ 4280.121)
This is a new section and addresses the process the Agency will use to select applications for awards as summarized below. This section covers the following:
•
Application competitions (paragraphs (a) through (c)).
Paragraphs (a) through (c) describe application competitions and deadline dates to compete for funding. Paragraph (a) describes the process for State competitions, paragraph (b) is dedicated to the grants of $20,000 or less set-aside, and paragraph (c) describes the details for national competitions. In the past, application competitions and deadlines have been published in a
Federal Register
notice on an annual basis. The proposed rule is establishing these dates in the rule to ensure that program delivery is not solely tied to the Federal budgetary process and applications can be accepted year round except for energy audit and renewable energy development assistance applications.
•
Funding selected applications (paragraph (d)).
This paragraph identifies how the Agency will handle an application selected for funding, but for which insufficient funds remain to fund the application.
•
Disposition of ranked applications not funded (paragraph (f)).
This paragraph identifies how long an application will be held by the Agency and for which competitions the application may compete for funds as described in paragraphs (a) through (c) of this section. Disposition of ranked applications not funded was never discussed in 7 CFR part 4280, subpart B, and the Agency wants to ensure that applicants are aware of their chances for funding. Thus, this paragraph was added for clarity.
•
Commencement of the project (paragraph (g)).
Applicants are put on notice that they assume all risks if they purchase the technology proposed or start construction of the proposed project after the application has been received by the Agency, but prior to award announcement.
Awarding and Administering RES and EEI Grants (§ 4280.122)
This section addresses the process the Agency will use to award and administer grants. This section places in one spot in the rule, several provisions that are currently found in various places of 7 CFR part 4280, subpart B. By doing so, the proposed rule provides a clearer presentation of this process.
Servicing RES and EEI Grants (§ 4280.123)
This section addresses the procedures the Agency will use to service RES and EEI grants. The proposed section expands upon the provisions found in § 4280.121 and includes several provisions found in other portions of 7 CFR part 4280, subpart B.
Many of the provisions are being incorporated from the grant agreement into the text of the regulation. Some of the provisions (e.g., programmatic changes, project monitoring, transfer of obligations, and grant close-out) are similar to provisions developed by the Agency or as cited in the Department regulations when it was considering consolidating various grant programs into a single rule.
The renewable energy system and energy efficiency improvement grant outcome project performance reporting requirements in this section are very similar to those found in 7 CFR part 4280, subpart B, with the differences found in the report contents.
For the renewable energy system report, the Agency is proposing to drop from the report the documentation of any identified health and/or sanitation problem that has been solved because the Agency has determined that it provides little benefit. In its place, the Agency is proposing to add the type of technology to the report. Two other changes are to clarify that the actual amount of energy generated will be reported as an “annual” amount and to identify how that amount is to be calculated.
For energy efficiency improvement projects, the Agency is proposing one substantive change. The Agency is adding to the report the actual jobs created or saved. While creating or saving jobs is being added to the reporting requirements, the Agency does not expect every energy efficiency project to have an impact on employment. Most energy efficiency projects may report zero jobs created or saved, because the impact of the grant was to save the applicant money on energy bills and improve their profitability.
Construction Planning and Performing Development (§ 4280.124)
This section replaces the current construction planning and performing development provisions found in 7 CFR 4280.119. While this section is organized differently from the current corresponding section, it covers many of the same subjects.
The primary change is the provision of exceptions to the surety requirements for: (1) Small acquisition and construction procedures, (2) equipment purchases and installation-only projects of more than $200,000 if two conditions are met, and (3) other construction projects that have only one contractor performing work.
There are also numerous substantive changes associated with the provisions for technical services for projects with total project costs greater than $400,000. The proposed rule clarifies that technical services may be provided by the applicant's `in-house' professional engineers or contracted professional engineers. In addition, all contracts for design services require Agency concurrence. Services performed by engineers may only be done by engineers licensed in the state in which the facility is located.
Further, the Agency is proposing an exemption from these requirements for projects with total project costs greater than $400,000 if State or Tribal law does not require the use of a licensed professional engineer and if the project is not complex and can be completed to meet the requirements of the program without the services of a licensed professional engineer. An example to demonstrate this exemption would be a large equipment purchase that does not require changes to a structure or require State-approved plans to be installed.
RES and EEI Guaranteed Loans
Compliance With §§ 4279.29 Through 4279.99 (§ 4280.125)
7 CFR part 4280, subpart B required compliance with the Business and Industry (B&I) provisions found in §§ 4279.29 through 4279.99, but contained a number of exceptions. Because there is no need to maintain a distinction for loans guaranteed under REAP, the proposed rule follows the provisions of the B&I regulations, with one exception. The one exception is associated with § 4279.71, because REAP does not apply to public bodies and non-profit corporations.
One of the distinctions being removed is the current REAP provision that excludes mortgage companies that are part of a bank holding company from being an eligible lender. To the extent the B&I provisions allow such entities to be an eligible lender, so would REAP.
Guarantee Fee/Annual Renewal Fee (§ 4280.126)
The Agency is proposing to conform the REAP guarantee fee and annual renewable fee provisions (found in 7 CFR 4280.127) to those found in the B&I rule. The one exception is that the B&I provisions for receiving a reduced guarantee fee would not apply to REAP guaranteed loans. Instead, the Agency is proposing to announce the conditions, if any, in a
Federal Register
notice that would enable a reduced guarantee fee for REAP guaranteed loans.
Borrower Eligibility (§ 4280.127)
The Agency is proposing that eligible borrowers meet the same eligibility as RES/EEI grant applicants. However, some of the applicant requirements have been moved from other places in 7 CFR part 4280, subpart B into proposed § 4280.112 and those that are applicable to borrowers are repeated in this section (rather than cross-referencing back to § 4280.112).
Project Eligibility (§ 4280.128)
The basic eligibility requirements for projects are the same as for RES/EEI grants, but, as noted earlier in the preamble, some of those requirements have changed. In addition, the Agency is proposing to allow loans for the purchase of a qualifying existing renewable energy system to be guaranteed. This provision would replace 7 CFR 4280, subpart B's provision for “necessary capital improvements to an existing renewable energy system.”
Guaranteed Loan Funding (§ 4280.129)
The Agency is proposing several changes to these provisions for guaranteed loan funding.
The Agency is identifying project costs that would be ineligible for payment using the guaranteed loan. These are consistent with the items identified as ineligible for payment under the RES/EEI grant provisions, except that construction or equipment costs that would be incurred regardless of the installation of a renewable energy system or energy efficiency improvement may be included as an eligible project cost for guaranteed loans. In addition, the Agency is including as ineligible project costs, paragraph (p) from the B&I provisions at 7 CFR 4279.114, which addresses loans made with the proceeds of any obligation the interest on which is excludable from income under 26 U.S.C. 103 or a successor statute.
The Agency is also proposing to refer to eligible project costs that are included under grants (7 CFR 4280.115(c)) for guaranteed loans as well as the following items:
• Working capital;
• Land acquisition;
• Routine lender fees; and
• Energy analyses, energy assessments, energy audits, technical reports, business plans, and feasibility studies completed and acceptable to the Agency, if no portion was financed by any other Federal or State grant or payment assistance, including, but not limited to, a REAP energy analysis, assessment, or audit, feasibility study, or renewable energy development assistance grant.
The Agency is proposing that these four sets of eligible costs be “capped” at no more than 5 percent of the guaranteed loan amount. This cap is intended to ensure that these expenses do not inadvertently or otherwise consume a substantial share of funds for the actual project.
Loan Processing (§ 4280.130)
In the proposed rule, the Agency is proposing to reduce the number of exceptions between REAP and B&I loan guarantees. The following paragraphs summarize the proposed changes.
a.
Interest rates.
In the proposed rule, the interest rate provisions for B&I guaranteed loans would apply in their entirety to REAP guaranteed loans. This would remove some changes in the determination of interest rates, but the Agency has determined that the B&I provisions are sufficient and any difference between the two programs in unnecessary.
b.
Loan terms.
In the proposed rule, the loan term provisions for B&I guaranteed loans would apply in their entirety to REAP guaranteed loans. This would change the loan term for machinery and equipment and eliminate a few specific requirements, but the Agency has determined that the B&I provisions are sufficient and any difference between the two programs in unnecessary.
c.
Insurance requirements.
The Agency is proposing to make the insurance requirement identical to those in the B&I program. 7 CFR part 4280, subpart B requires that the coverage be maintained for the life of the loan unless this requirement is waived or modified by the Agency. The Agency has determined that the provisions of the B&I program are sufficient and that this requirement is unnecessary.
d.
Appraisals.
The Agency has determined that the additional appraisal requirements found in 7 CFR part 4280, subpart B do not need to be maintained for the program. Therefore, the Agency is proposing that REAP appraisals be conducted in accordance with the B&I appraisal provisions.
e.
Construction planning and performing development.
The Interim Rule provides specific provisions for construction planning and performing development (see 7 CFR 4280.119). Under the proposed rule, the Agency is proposing that 7 CFR 4279.156 applies to guaranteed loan projects under this subpart.
Credit Quality (§ 4280.131)
The Agency is proposing to make the credit quality requirements identical to those in the B&I program with the exception of equity. In general, with the exception of equity, conforming the REAP credit quality provisions to those in the B&I program does not create substantive changes from 7 CFR part 4280, subpart B.
With regard to the proposed equity provisions, there are substantive differences from the 7 CFR part 4280, subpart B equity provisions and the B&I guaranteed loan program equity provisions. There is no longer a distinction between the size of the loan guarantee for REAP equity requirements. For example, the cash equity injection is specified at 25 percent for all loan guarantees. The Agency is also proposing to eliminate the provision in 7 CFR 4280, subpart B that allows the fair market value of equity in real property that is to be pledged as collateral for the loan to be substituted for any portion of the cash equity requirement.
Financial Statements (§ 4280.132)
The proposed rule would adopt, in their entirety, the financial statement provisions found in the B&I program, except that, due to a difference in eligible applicants, the proposed rule would allow agricultural producers the option of providing financial information in the manner that is generally required by commercial lenders. The Agency notes that the financial information requested in 7 CFR 4280.140(a) is still being requested under the proposed rule, but in a different provision.
Personal and Corporate Guarantees (§ 4280.134)
Except for passive investors, the Agency is proposing to allow all of § 4279.149 to apply to this subpart. Currently, the 7 CFR part 4280, subpart B adopts only § 4279.149(a).
Scoring RES and EEI Guaranteed Loan Only Applications (§ 4280.135)
The Agency is proposing this new section to clarify how guaranteed loan-only applications will be scored. Specifically, these applications will be scored using the same criteria as for RES and EEI grants, but with the calculations, as applicable, to be made using guaranteed loan amounts and not grant amounts. This section also identifies that the Agency will establish a minimum score each year to assist in funding higher priority projects. The minimum score will also be used to determine whether or not an application is competed in each quarter. Lastly, the Agency will notify applicants whose applications are below the minimum score.
Application and Documentation (§ 4280.137)
A number of changes are being proposed for guaranteed loan applications, as discussed below.
a.
Applications for guaranteed loan requests greater than $600,000.
To provide flexibility for the applicant, the Agency is proposing to remove the requirement that the application be “organized pursuant to a Table of Contents format in a chapter format presented in the order shown” and provision of a project summary.
The application content still mirrors that required for RES/EEI grants and, thus, the changes described earlier in this proposed rule for those applications would apply to these guaranteed loan applications as well.
Several substantive changes were made to the lender forms, certifications, and agreements that are to be submitted with the application, as follows:
• With regard to appraisals, the Agency is proposing to add that its approval in the form of a Conditional Commitment may be issued subject to receipt of adequate appraisals.
• With regard to historical financial statements, the Agency is proposing to remove reference to Generally Accepted Accounting Principles and adding a provision to allow agricultural producers to submit these statements in the format that is generally required by commercial agricultural lenders.
• The Agency is proposing to remove reference to the business-level feasibility study because the feasibility study is required through a cross-reference to the provisions for grant applications.
• The Agency is proposing to remove the requirement for certification by the lender that it has completed a comprehensive written analysis of the proposal. This certification duplicates the requirement to submit the lender's complete comprehensive written analysis.
• With regard to the certification by the lender that the loan is for authorized purposes, the Agency is proposing to remove the phrase “with technical merit.”
b.
Applications for guaranteed loan requests of $600,000 or less.
The Agency is proposing to remove the requirement that the application be “organized pursuant to a Table of Contents format in a chapter format presented.”
The application content will vary for these projects depending on the total project cost for the proposed project. If the total project cost is more than $200,000, the application would contain the information specified for RES/EEI grant applications of similar size. If the total project cost is $200,000 or less, the application would contain the information specified for RES/EEI grant applications of similar size.
Changes in the application content for these applications parallel those identified earlier in this proposed rule for RES/EEI grant applications.
With regard to forms, certifications, and agreements, the Agency is proposing to require the lender to submit the appraisal rather than keep it on file and to submit the certification by the lender that the borrower is eligible, the loan is for authorized purposes, and there is a reasonable assurance of repayment.
Evaluation of RES and EEI Guaranteed Loan Applications (§ 4280.138)
The Agency is proposing to modify 7 CFR part 4280, subpart B provisions for application evaluation (see 7 CFR 4280.129) in several ways.
The Agency is proposing to evaluate applicant and project eligibility using the procedures specified in 7 CFR 4279.165, except that the applicant and project eligibility criteria for REAP will be used.
The Agency has moved the provisions for technical merit determination (7 CFR 4280.129(b)) to a general section of the rule. One change being proposed is that the interest rate on the loan would not be used as a scoring criterion.
Lastly, the Agency is removing the evaluation criteria from 7 CFR 4280.129(c) and including the revised criteria in § 4280.135, as discussed earlier.
Loan Approval and Obligation of Funds (7 CFR 4280.139)
The Agency has determined that a separate provision for loan approval and obligation of funds in 7 CFR part 4280, subpart B is not required.
Selection of RES and EEI Guaranteed Loan Only Applications (§ 4280.139)
This is a new section that contains the procedures to be used for competing guaranteed loan only applications as has been described earlier. The procedures in this section apply only to guaranteed loan only applications. The process and procedures for guaranteed loan applications that are part of a combination funding request are covered under § 4280.165.
Conditions Precedent to the Issuance of the Loan Note Guarantee (§ 4280.142)
The Agency is proposing to conform the REAP provisions to the B&I provisions with two exceptions, which are: that all development must have been performed at a steady state operating level in accordance with the technical requirements and, when applicable, a copy of the executed power purchase agreement must be provided to the Agency before the Loan Note Guarantee can be issued.
Servicing Guaranteed Loans (§ 4280.152)
With two exceptions, the Agency is proposing that REAP guaranteed loans be serviced in accordance with the servicing provisions for B&I guaranteed loans. In general, this results in few changes, because 7 CFR part 4280, subpart B already cross-references most of the B&I servicing regulations with few changes.
The two remaining exceptions pertain to borrowers being determined to be eligible borrowers under the REAP regulation when they are involved in a
transfer and assumption and to loans providing additional funds in connection with a transfer and assumption must be considered as new loan application under the REAP regulation and would compete against other applications received for funding consideration in that competition cycle for the fiscal year, provided there is sufficient budget authority available to fund the project.
Combined Funding for Renewable Energy Systems and Energy Efficiency Improvements
Changes being proposed for applications for renewable energy systems and energy efficiency improvement projects seeking combined funding are summarized below.
• Clarifying that the grant portion of the combined funding request shall not exceed 25 percent of total eligible project costs.
• Clarifying what the contents of the guaranteed loan application are if the guaranteed loan request is greater than $600,000 or is less than or equal to $600,000.
• Clarifying what needs to be submitted when both applications would contain the same documentation, form, or certification.
• Requiring that the grant portion of the funding request must be at least $1,500 for energy efficiency improvement projects and at least $2,500 for renewable energy system projects.
• Identifying when the System for Awards Management (SAM) number and expiration date must be submitted.
• Adding a provision to identify how combined funding applications will be handled if they are ranked, but not funded.
• Adding a provision indicating that compliance reviews will be conducted.
• Revising the process for evaluating combined funding requests to refer only to the grant procedures.
Renewable Energy System Feasibility Study Grants
Changes being proposed for renewable energy system feasibility study grants are summarized below.
General Provisions (§ 4280.169)
The Agency is proposing to add a provision that would make a feasibility study application ineligible if the applicant proposes to conduct any portion of the feasibility study. In other words, the feasibility study must be conducted entirely by entities other than the applicant.
Applicant Eligibility (§ 4280.170)
In addition to make a few clarifying changes, the Agency is proposing to add new conditions, which would make this set of applicant eligibility requirements consistent with the other grant programs in REAP. These four provisions are:
• In lieu of being the prospective owner of the RES project, the applicant has the option of being the prospective controller of the site for the useful life of the property on which the RES would be placed; and
• The applicant must have the legal authority necessary to apply for and carry out the purpose of the grant.
• The applicant is required to follow the Universal identifier and the SAM requirements of 2 CFR unless exempt under 2 CFR 25.110.
Eligibility of RES Projects for Feasibility Study Grants (§ 4280.171)
In addition to several clarifications, the Agency is also proposing two substantive changes to this section.
The Agency is removing the provision that would allow the technology to be a “pre-commercial” technology to qualify. This change is consistent with the overall proposed change to RES project eligibility requirements as stated earlier in this Notice.
The Agency is adding a provision cautioning the applicant from taking any actions or incurring any obligations prior to the Agency completing the environmental review 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, because taking any such actions or incurring any such obligations could result in project ineligibility.
Application Eligibility Provisions
While the proposed rule would no longer have this section, its provisions have been incorporated elsewhere in the rule. There is one change, however, associated with the 7 CFR part 4280, subpart B requirement prohibiting a feasibility study application being submitted in the same Federal fiscal year that a renewable energy system application is submitted and vice-versa. This requirement is being replaced with one that states: “An applicant can apply for only one Renewable Energy System project, one Energy Efficiency Improvement project, and one Feasibility Study project under this subpart per Federal fiscal year.” This could, theoretically, allow an applicant to submit a feasibility study application and a renewable energy system application for the same renewable energy system in the same Federal fiscal year.
Grant Funding for RES Feasibility Studies (§ 4280.173)
Several substantive changes are being proposed for this section.
The Agency is proposing to increase the maximum amount of grant funds from $50,000 to $100,000, but still require the lesser of the $100,000 or 25 percent of the total eligible costs.
The Agency is proposing to revise the list of items that illustrate what can be considered as eligible projects costs as follows:
• Payment of services to qualified consultants to perform the evaluations needed for the feasibility study and to complete the feasibility study; and
• Other studies or assessments to evaluate the economic, technical, market, financial, and management feasibility of the renewable energy system that are needed to complete the feasibility study (e.g., resource assessment, transmission study, or environmental study).
The reference to resource assessment, transmission study, and environmental study in 7 CFR part 4280, subpart B has been incorporated into the second item describing eligible project costs.
The Agency is proposing to add two new ineligible project costs: preparing the application package and funding of political or lobbying activities. These two new ineligible project costs are consistent with the other grant provisions.
The provision concerning the requirement to expend the grant funds within 2 years still applies to feasibility study grants, but has been relocated to the General section of the rule (see proposed § 4280.110(j)).
Feasibility Study Grant Applications—Content (§ 4280.176)
In addition to several clarifying and conforming edits, the following substantive changes are being proposed.
The provision requiring a Table of Contents with clear pagination and chapter identification is being removed.
The requirement to submit a copy of legal organizational documents is being removed.
Applicants would now identify the primary NAICS code applicable to their operation, if known, or a description of their operation in sufficient detail for the Agency to determine the applicable primary NAICS code.
Applicants are now certifying that they are legal entities in good standing, if applicable, and operating in accordance with the laws of the state(s) in which the applicants have a place of business.
Removed from the proposed scope of work (referred to in 7 CFR part 4280,
subpart B as the proposed work plan) is the requirement to submit a description of the feasibility study to be conducted. In addition, reference to the applicant requiring those conducting the feasibility study to consider and document within the feasibility study the important environmental factors and alternatives is being removed because such consideration is adequately covered elsewhere in the rule. The changes to the paragraphs concerning the experience of the qualified consultants and the source and amount of matching funds are clarification in nature, with emphasis on submitting written commitments in part so that the Agency can score the application.
The submittal of the applicant's DUNS number is removed because it is already required on Standard Form SF-424, “Application for Federal Assistance.”
With regard to the financial information, the Agency is only requesting a certification on financial items specific to rural small businesses and agricultural producers. This information is needed for scoring purposes and rather than having an applicant submit financial statements, the Agency will accept a certification on the applicable financial items.
Evaluation of Feasibility Study Grant Applications (§ 4280.177)
The Agency has determined that the process for evaluating feasibility study grant applications is no different than the process it will use to evaluate RES/EEI grant applications. Therefore, rather than repeating that process, as was done in 7 CFR part 4280, subpart B, the Agency is proposing to cross-reference the RES/EEI grant application process. The one difference is that a technical merit determination is not applicable to feasibility study grant applications.
Scoring Feasibility Study Grant Applications (§ 4280.178)
The Agency is proposing several substantive changes to how it will score feasibility study grant applications. These changes are summarized in Table 2.
Table 2—Summary of Scoring Criteria Changes for RES Feasibility Study Grant Applications
7 CFR part 4280, subpart B
Proposed change(s)
Energy replacement or generation
Remove as a scoring criterion.
Commitment of funds
Increase maximum points from 10 to 25.
Written commitments are required in order to obtain points.
Distribution of points is changed.
Designation as a small agricultural producer or rural small business
Criterion changed to size of agricultural producer or rural small business.
Points reduced from 20 to 10.
Points awarded on basis of relative size of the applicant to SBA size standards for the applicant's applicable NAICS code.
Experience and qualifications
Points increased from 15 to 25.
Distribution of points changed.
Size of grant request
Dollar thresholds doubled for determining points awarded.
Previous grantees and borrowers
New criterion for “Previous grantees and borrowers”.
Maximum 10 points.
Consistent with change made in RES/EEI grant scoring.
Resources to implement project
Removed.
Selecting Feasibility Study Grant Applications for Award (§ 4280.179)
The Agency is proposing to revamp the process it will use to select feasibility study applications for award. While higher scoring applications will still receive preference, the Agency is proposing to accept applications throughout the year, with two competitions held. The first competition would be for those complete and eligible applications received by November 30; and the second, for those received by May 31. All applications would be eligible for two rounds of competitions, which could result in an application being competed across two Federal fiscal years (i.e., first competed in the May 31 competition and then again in the November 30 competition).
The Agency is revising one of the provisions associated with funding selected applications by requiring that the applicant provide the remaining total funds needs to complete the project in situations in which the applicant agrees to lower its grant request in order to be awarded the grant. This replaces the current provision that the Agency must determine the project is financially feasible at the lower amount.
The Agency is also proposing to add a new provision that puts the applicant on notice that the applicant assumes all risk if the choice is made to purchase the technology proposed or start construction of the project to be financed in the grant application after the complete application has been received by the Agency.
Actions Prior to Grant Closing (7 CFR 4280.180)
The Agency is proposing to move the two provisions in this section to new locations within the proposed rule. The first paragraph concerning environmental assessment is covered in the proposed rule at § 4280.108(c). The second paragraph concerning evidence of funds is covered in the proposed rule at § 4280.181, which cross references § 4280.122.
Awarding and Administering Feasibility Study Grants (§ 4280.181)
The Agency has determined that, with two exceptions, the same process for awarding and administering RES/EEI grants is applicable to feasibility study grants and that there is no reason to repeat those provisions. Thus, this section has been modified to refer back to the corresponding RES/EEI grant section.
The two exceptions noted in the previous paragraph are:
• the insurance requirements in § 4280.122(b) does not apply unless equipment is purchased, and
• the power purchase agreement specified in § 4280.122(e) does not apply.
Servicing Feasibility Study Grants (§ 4280.182)
The Agency has determined that, with a few exceptions and additions, the same process for servicing RES/EEI grants is applicable to feasibility study grants and that there is no reason to
repeat those provisions. Thus, this section has been modified to refer back to the corresponding RES/EEI grant section.
The exceptions noted in the previous paragraph are:
• Feasibility study grant funds are to be expended on a pro rata basis with matching funds;
• Form SF-270, “Request for Advancement or Reimbursement,” is to be used;
• The final 10 percent of grant funds will be held back until an acceptable feasibility study has been submitted;
• Upon completion of the project, the feasibility study acceptable to the Agency and Form SF-270 are to be submitted; and
• Outcome project performance reports are to be submitted beginning the first full year after completion of the feasibility study.
The Agency notes that it is proposing one change to the project performance report. This change is to add a discussion, when applicable, of why the renewable energy system is not underway.
Energy Audit and Renewable Energy Development Assistance Grants
Changes being proposed for energy audit and renewable energy development assistance grants are summarized below.
Applicant Eligibility (§ 4280.186)
Two substantive changes are being proposed to this section.
The Agency is proposing to remove the option of allowing an applicant to “obtain” the legal authority necessary such that all applicants must have the necessary legally authority at the time of application.
Currently, 7 CFR part 4280, subpart B requires that this legal authority is necessary “to carry out the purpose of the grant.” The Agency is proposing an additional requirement—that the applicant has the legal authority necessary to “apply for the grant” as well.
Project Eligibility (§ 4280.187)
The Agency is proposing several clarifications to this section, including removing the text identifying what constitutes an energy audit, because that material is covered in Section B of Appendix A of this subpart. In addition to these clarifications, the Agency is proposing one substantive change. As it is proposing to do for the RES feasibility study grants, the Agency is adding a provision cautioning the applicant from taking any actions or incurring any obligations prior to the Agency completing the environmental review 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, because taking any such actions or incurring any such obligations could result in project ineligibility.
Grant Funding for Energy Audit and Renewable Energy Development Assistance (§ 4280.188)
The proposed changes to the paragraph on eligible project costs are clarification-type changes, including removing unnecessary examples. One example is replacing the term “administrative expenses” with “expenses charged as a direct cost or as an indirect cost * * * for administering the grant.”
With regard to ineligible project costs, the Agency is proposing to add as an identified ineligible project cost, any goods or services provided by a person or entity that has a conflict of interest. The Agency is also proposing to add the leasing of equipment as an ineligible project cost. The current provision associated with the payment of costs incurred prior to the application date was removed from the list of ineligible project costs. The Agency has determined that it is unnecessarily duplicative of the provision that limits eligible project costs to only those costs that are incurred after a complete application has been received by the Agency.
In addition, the Agency is proposing to allow a grantee to use program income to further the objectives of their project or energy audit services offered during the grant period in accordance with Department regulations.
Energy Audit/Renewable Energy Development Assistance Grant Applications—Content (§ 4280.190)
In addition to several clarifying and conforming edits, the following substantive changes are being proposed.
The Agency is proposing that an applicant may only submit one energy audit (EA) grant application and one renewable energy development assistance (REDA) grant application each Federal fiscal year and that combination applications (one in which an applicant proposed both EA and REDA) will not be accepted. The Agency is proposing to drop several items from the application as follows.
• A copy of the applicant's organizational documents showing the applicant's legal existence and authority to perform the activities under the grant (7 CFR 4280.190(d)).
• The Executive Summary (7 CFR 4280.190(e)(1)).
• The itemized budget (7 CFR 4280.190(e)(4)).
• The narrative addressing the applicant's resources, including personnel, finances, and technology, to complete what is proposed (7 CFR 4280.190(e)(7), although the applicant is still required to demonstrate that it has sufficient resources to complete all projects if the project is located in multiple states.
• The most recent financial audit of the applicant, or subdivision thereof, that will be performing the project (7 CFR 4280.190(f)).
• The applicant's DUNS number (7 CFR 4280.190(g)), because it is contained in Standard Form SF-424.
• Dropping the “using State and Federal support” provision in 7 CFR 4280.190(e)(6)(iii) when describing the applicant's experience, resulting in a broader discussion.
The Agency is proposing to add several items to the application as follows.
• Certification that the applicant is a legal entity in good standing (as applicable) and operating in accordance with the laws of the state(s) where the applicant has a place of business.
• A description of the goals of the project.
• Identification of the specific needs for the service area and the target audience to be served.
• The name and contact information, if available, for those that will be served by the project.
• Identification of the specific needs for the service area and the target audience to be served.
• Discussing whether the applicant has any existing programs that can demonstrate the achievement of energy savings or energy generation with the agricultural producers and/or rural small businesses the applicant has served.
• If the applicant has received one or more awards within the last 5 years in recognition of its renewable energy, energy savings, or energy-based technical assistance, describing that achievement.
The Agency is proposing to revise several of the requirements, including:
• Consolidating provisions associated with the timeline and schedule for the project.
• Consolidating the requirements associated with outreach (7 CFR 4280.190(e)(9)) into a more general description of what is being requested.
Evaluation of EA and REDA Grant Applications (§ 4280.191)
The Agency has determined that the process for evaluating energy audit and REDA grant applications is no different than the process it will use to evaluate RES/EEI grant applications. Therefore, the Agency is proposing to cross-reference the RES/EEI grant application process. The one difference is that a technical merit determination is not applicable to either EA or REDA grant applications.
Scoring EA and REDA Grant Applications (§ 4280.192)
The Agency is proposing several substantive changes to how it will score energy audit and REDA grant applications. These changes are summarized in Table 3.
Table 3—Summary of Scoring Criteria Changes for Energy Audit and Renewable Energy Development Assistance Grant Applications
Interim rule
Proposed change(s)
Project proposal
Remove as a scoring criterion.
Use of grant funds for administrative expenses
Remove as a scoring criterion.
Applicant's organizational experience in completing proposed activity
Changed title of scoring criterion.
Increased maximum points from 15 to 25.
Adjusted distribution of points.
Geographic scope of project
Points increased from 10 to 20.
Adjusted distribution of points.
Number of agricultural producers/rural small businesses to be served
Points increased from 15 to 20.
Distribution of points changed.
Added a new metric to receive an additional 10 points if the applicant provides a list of ultimate recipients, including their name and contact information, that are ready to be assisted.
Potential to produce energy savings and its attending environmental benefits
Points decreases from 25 to 10.
Revised distribution and how points will be awarded.
Marketing and outreach plan
Points decreased from 10 to 5.
Level of commitment of other funds for the project
Increased points from 5 to 20.
Revised distribution and how points will be awarded.
Selecting EA and REDA Grant Applications for Award (§ 4280.193)
The Agency is proposing several substantive changes to this section.
The Agency is proposing a single competition for all complete applications received by January 31 of each year.
In selecting applications for funding, if two or more applications score the same and if remaining funds are insufficient to fund each application, the Agency is proposing to distribute the remaining funds to each such application on a pro-rata basis. While the Agency is proposing to continue the provision that unfunded applications will not be carried forward into the next Federal fiscal year, the Agency is adjusting the language to make this clear (currently the rule only refers to not carrying unfunded applications forward into Fiscal Year 2012).
Actions Prior to Grant Closing
The Agency is proposing to remove 7 CFR 4280.194.
Awarding and Administering EA and REDA Grants (§ 4280.195)
The Agency has determined that, with three exceptions, the same process for awarding and administering RES/EEI grants is applicable to energy audit and REDA grants and that there is no reason to repeat those provisions. Thus, this section has been modified to refer back to the corresponding RES/EEI grant section.
The three exceptions noted in the previous paragraph are:
• The insurance requirements in § 4280.122(b) do not apply. Instead, the Agency is proposing that the grantee must provide satisfactory evidence to the Agency that all officers of grantee organization authorized to receive and/or disburse Federal funds are covered by such bonding and/or insurance requirements as are normally required by the grantee.
• Form RD 400-1, “Equal Opportunity Agreement,” specified in § 4280.122(c)(6) is not required.
• The power purchase agreement specified in § 4280.122(h) does not apply.
Servicing EA and REDA Grants (§ 4280.196)
The Agency has determined that, with a few exceptions and additions, the same process for servicing RES/EEI grants is applicable to energy audit and REDA grants and that there is no reason to repeat those provisions. Thus, this section has been modified to refer back to the corresponding RES/EEI grant section.
The exceptions noted in the previous paragraph are:
• Grant disbursement;
• Semi-annual reports;
• Final performance report; and
• Outcome project performance reports (referred to in 7 CFR part 4280, subpart B as Final Status Reports.)
The Agency is proposing to remove the requirement to identify the percentage of financial resources expended on contractors for the semi-annual and final performance reports.
III. Request for Comments
The Agency is interested in receiving comments on all aspects of the proposed rule. Areas in which the Agency is seeking specific comments are identified below. All comments should be submitted as indicated in the
ADDRESSES
section of this preamble. In addition, all written comments received under the REAP interim rule that was published in the
Federal Register
on April 14, 2011 (76 FR 21110) will be considered along with any comments received under this proposed rule. The Agency will address all written comments in a final rule in the
Federal Register
.
a. The Agency is proposing to allow projects with total project costs of no more than $200,000 to submit applications that contain less documentation. The Agency is requesting comment on this threshold as to whether it is at an appropriate level. If you believe that the level should be different, please identify your suggested level and provide your rationale.
b. The Agency is proposing to allow projects with total project costs of no
more than $80,000 to submit applications that contain less documentation. The Agency is requesting comment on this threshold as to whether it is at an appropriate level. If you believe that the level should be different, please identify your suggested level and provide your rationale.
c. The Agency is seeking comment on the definition of small business. This definition has changed since the original rule was developed as the Section 9006 program. The Agency is interested in alternative definitions that would simplify the identification of small businesses. Please be sure to provide your rationale.
d. As proposed, the maximum grant that would be made for a renewable energy system feasibility study is $100,000. The Agency is interested in receiving comments on the appropriateness of this limit. If you believe that the level should be different, please identify your suggested level and provide your rationale.
e. The Agency is proposing to award points for flexible fuel pumps based on the average annual gallons of renewable fuel estimated to be sold over the first two years by the pumps per grant dollar requested. The Agency is seeking comment on this metric. For example, to what extent would this metric be a good selection criterion? The Agency is also seeking suggestions for alternative metrics. Please be sure to be specific in your comments and suggestions and provide your rationale.
f. The Agency is considering replacing the current cash equity requirement with a minimum of 25 percent tangible balance sheet equity (or a maximum debt-to-tangible net worth ratio of 3:1). Please comment on this consideration, including pros and cons on each metric (i.e. cash equity, tangible balance sheet equity) and your suggestions on the level of debt-to-tangible net worth ratio. In addition, the Agency acknowledges that Federal and State grants can be recorded differently on the balance sheet and how this can impact tangible balance sheet equity in various ways. This should also be a consideration when making comments on the proposed cash equity requirement change. Please be sure to provide your rationale for your position.
g. The Agency is seeking to encourage greater use of REAP guaranteed loans. The Agency is interested in other possible provisions to expand the use of the guaranteed loan only applications under REAP. To make informed decisions in this regard, the Agency needs a better understanding of specific rule provisions that affect the decision to use or not use REAP guaranteed loans.
For any suggested changes to the rule that you believe will encourage more guaranteed loan only applications, please be sure to provide your rationale/basis for each suggested change. An important consideration for the Agency in making any change is the potential effect on increasing the risk of default and thus increasing the subsidy rate (which would reduce the level of funding that the Agency could use in making loan guarantees). Therefore, please be sure to address this issue and, to the extent possible, suggest ways that could mitigate increases in risk.
h. As noted in the preamble to this rule, the Agency is proposing to compete guaranteed-loan only applications on a quarterly basis. The Agency is specifically seeking comment on the frequency with which guaranteed-loan only applications are competed. Please comment on how the frequency of competition cycles such as monthly, semi-annually, and annually would meet the needs of lenders and borrowers better than quarterly competitions. Please be specific in your comments and provide your rationale.
i. The Agency is considering issuing the REAP Loan Note Guarantee prior to construction for technologies that demonstrate lower risk to the government. The Agency is interested in receiving comments on the appropriateness of this action and would like to receive suggestions on what type of technologies should be considered. Please be sure to be specific in your comments and provide your rationale.
j. The Agency is seeking comment on how a multi-farm, community digester project could be developed based upon the requirements contained in this proposed rule. Please be sure to be specific in your comments and provide your rationale.
k. The current REAP regulation allows the State Director or the Administrator to award points to an application that is “for an under-represented technology” (see § 4280.120(g)). Under Renewable Energy Systems, there are different categories or technologies: wind, solar, renewable biomass, ocean (including tidal, wave, current, and thermal), geothermal, hydroelectric source, or hydrogen derived from one of these sources. Energy efficiency only has one category.
The Agency is considering revising how it awards points for the “under-represented technology” provision for EEI technology. For example, looking at the number of prior lighting project awards compared to the number of prior grain dryer or poultry house project awards and awarding State Director or Administrator points to those projects that are under-represented. To this end, the Agency is seeking comments on the following questions. In all cases, please provide your rationale to support your comments.
• For energy efficiency improvement projects, how would you suggest subdividing EEI projects to create “similar classes of EEI technologies” for purposes of determining “under-representation”?
• Should we determine under-represented based on the pool of applications each year or based on the historical data for the program?
List of Subjects in 7 CFR Part 4280
Loan programs—Business and industry, Economic development, Energy, Energy Efficiency Improvements, Feasibility studies, Grant programs, Guaranteed loan programs, Renewable Energy Systems, and Rural areas.
For the reasons set forth in the preamble, under the authority at 5 U.S.C. 301, 7 U.S.C. 1989, and 7 U.S.C. 8107, chapter XLII of title 7 of the Code of Federal Regulations is proposed to be amended as follows: Chapter XLII—Rural Business-Cooperative Service and Rural Utilities Service, Department of Agriculture
PART 4280—LOAN AND GRANTS
1. The authority citation for part 4280 continues to read as follows:
Authority:
5 U.S.C. 301; 7 U.S.C. 940c; 7 U.S.C. 8107
2. Subpart B is revised as follows:
Subpart B—Rural Energy for America Program
General
Sec.
4280.101
Purpose.
4280.102
Organization of subpart.
4280.103
Definitions.
4280.104
Exception authority.
4280.105
Review or appeal rights.
4280.106
Conflict of interest.
4280.107
USDA Departmental regulations.
4280.108
Laws that contain other compliance requirements.
4280.109
Ineligible applicants, borrowers, and owners.
4280.110
General applicant, application, and funding provisions.
4280.111
Notifications.
Renewable Energy System and Energy Efficiency Improvement Grants
4280.112
Applicant eligibility.
4280.113
Project eligibility.
4280.114
[Reserved]
4280.115
RES and EEI grant funding.
4280.116
Grant applications—general.
4280.117
Grant applications for RES and EEI projects with total project costs greater than $200,000.
4280.118
Grant applications for RES and EEI projects with total project costs of $200,000 or less.
4280.119
Grant applications for RES and EEI projects with total project costs of $80,000 or less.
4280.120
Scoring RES and EEI grant applications.
4280.121
Selecting RES and EEI grant applications for award.
4280.122
Awarding and administering RES and EEI grants.
4280.123
Servicing RES and EEI grants.
4280.124
Construction planning and performing development.
Renewable Energy System and Energy Efficiency Improvement Guaranteed Loans
4280.125
Compliance with §§ 4279.29 through 4279.99.
4280.126
Guarantee/annual renewal fee.
4280.127
Borrower eligibility.
4280.128
Project eligibility.
4280.129
Guaranteed loan funding.
4280.130
Loan processing.
4280.131
Credit quality.
4280.132
Financial statements.
4280.133
[Reserved]
4280.134
Personal and corporate guarantees.
4280.135
Scoring RES and EEI guaranteed loan only applications.
4280.136
[Reserved]
4280.137
Application and documentation.
4280.138
Evaluation of RES and EEI guaranteed loan applications.
4280.139
Selection of RES and EEI guaranteed loan only applications.
4280.140
[Reserved]
4280.141
Changes in borrower.
4280.142
Conditions precedent to issuance of loan note guarantee.
4280.143
Requirements after project construction.
4280.144-4280.151
[Reserved]
4280.152
Servicing guaranteed loans.
4280.153-4280.164
[Reserved]
Combined Funding for Renewable Energy Systems and Energy Efficiency Improvements
4280.165
Combined funding for renewable energy systems and energy efficiency improvements.
4280.166-4280.168
[Reserved]
Renewable Energy System Feasibility Study Grants
4280.169
General provisions.
4280.170
Applicant eligibility.
4280.171
Eligibility of RES projects for feasibility study grants.
4280.172
[Reserved]
4280.173
Grant funding for RES feasibility studies.
4280.174-4280.175
[Reserved]
4280.176
Feasibility study grant applications—content.
4280.177
Evaluation of feasibility study grant applications.
4280.178
Scoring feasibility study grant applications.
4280.179
Selecting feasibility study grant applications for award.
4280.180
[Reserved]
4280.181
Awarding and administering feasibility study grants.
4280.182
Servicing feasibility study grants.
4280.183—4280.185
[Reserved]
Energy Audit and Renewable Energy Development Assistance Grants
4280.186
Applicant eligibility.
4280.187
Project eligibility.
4280.188
Grant funding for energy audit and renewable energy development assistance.
4280.189
[Reserved]
4280.190
EA and REDA grant applications—content.
4280.191
Evaluation of EA and REDA grant applications.
4280.192
Scoring EA and REDA grant applications.
4280.193
Selecting EA and REDA grant applications for award.
4280.194
[Reserved]
4280.195
Awarding and administering EA and REDA grants.
4280.196
Servicing EA and REDA grants.
4280.197-4280.199
[Reserved]
4280.200
OMB control number.
Appendix A to Part 4280—Technical Report for Energy Efficiency Improvement Projects
Appendix B to Part 4280—Technical Reports for Renewable Energy System (RES) Projects with Total Project Costs of $200,000 or Less
Appendix C to Part 4280—Technical Reports for Renewable Energy System Projects with Total Project Costs of Greater than $200,000
Appendix D to Part 4280 -Feasibility Study Content
General
§ 4280.101
Purpose.
The subpart contains the procedures and requirements for providing the following financial assistance under the Rural Energy for America Program (REAP):
(a) Grants or guaranteed loans, or a combination grant and guaranteed loan, for the purpose of purchasing and installing Renewable Energy Systems (RES) and Energy Efficiency Improvements (EEI);
(b) Grants for conducting RES Feasibility Studies; and
(c) Grants to assist Agricultural Producers and Rural Small Businesses by conducting Energy Audits (EA) and providing recommendations and information on Renewable Energy Development Assistance (REDA) and improving energy efficiency.
§ 4280.102
Organization of subpart.
(a) Sections 4280.103 through 4280.111 discuss definitions; exception authority; review or appeal rights; conflict of interest; USDA Departmental Regulations; other applicable laws; ineligible applicants, borrowers, and owners; general applicant, application, and funding provisions; and notifications, which are applicable to all of the funding programs under this subpart.
(b) Sections 4280.112 through 4280.124 discuss the requirements specific to RES and EEI grants. Sections 4280.112 and 4280.113 discuss, respectively, applicant and project eligibility. Section 4280.115 addresses funding provisions for these grants. Sections 4280.116 through 4280.119 address grant application content and required documentation. Sections 4280.120 through 4280.123 address the scoring, selection, awarding and administering, and servicing of these grant applications. Section 4280.124 addresses construction planning and development.
(c) Sections 4280.125 through 4280.152 discuss the requirements specific to RES and EEI guaranteed loans. Sections 4280.125 through 4280.128 discuss eligibility and requirements for making and processing loans guaranteed by the Agency. Section 4280.129 addresses funding for guaranteed loans. In general, Sections 4280.130 through 4280.152 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. Section 4280.137 addresses the application requirements for guaranteed loans.
(d) Section 4280.165 presents the process by which the Agency will make combined loan guarantee and grant funding available for RES and EEI projects.
(e) Sections 4280.170 through 4280.182 presents the process by which the Agency will make RES Feasibility Study grant funding available. These sections cover applicant and project eligibility, grant funding, application content, evaluation, scoring, selection, awarding and administering, and servicing.
(f) Sections 4280.186 through 4280.196 present the process by which the Agency will make EA and REDA grant funding available. These sections cover applicant and project eligibility, grant funding, application content, evaluation, scoring, selection, awarding and administering, and servicing.
(g) Appendices A through C cover technical report requirements. Appendix A applies to EEI projects; Appendix B applies to RES projects with Total Project Costs of $200,000 or less; and Appendix C applies RES projects with Total Project Costs greater
than $200,000. Appendix D identifies the contents of the Feasibility Study that will be required to be submitted to the Agency if funding is provided under §§ 4280.169 through 4280.182. Appendices A and B do not apply to RES and EEI projects with Total Project Costs of $80,000 or less, respectively. Instead, technical report requirements for these projects are found in § 4280.119.
§ 4280.103
Definitions.
Terms used in this subpart are defined in either § 4279.2 of this chapter or in this section. If a term is defined in both § 4279.2 and this section, it will have, for purposes of this subpart only, the meaning given in this section. Terms used in this subpart that have the same meaning as the terms defined in this section have been capitalized in this subpart.
Administrator.
The Administrator of Rural Business-Cooperative Service within the Rural Development Mission Area of the U.S. Department of Agriculture.
Agency.
The Rural Business-Cooperative Service (RBS) or successor agency assigned by the Secretary of Agriculture to administer the Rural Energy for America 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 greater of their gross income is derived from the operations.
Anaerobic digester project.
A Renewable Energy System that uses animal or other Renewable Biomass and may include other organic substrates, via anaerobic digestion, to produce biomethane that is used to produce thermal or electrical energy or that is converted to a compressed gaseous or liquid state.
Annual receipts.
The total income or gross income (sole proprietorship) plus cost of goods sold.
Applicant.
(1) Except for EA and REDA grants, the Agricultural Producer or Rural Small Business that is seeking a grant, guaranteed loan, or a combination of a grant and loan, under this subpart.
(2) For EA and REDA grants, a unit of state, tribal, or local government; a land-grant college or university or other Institution of Higher Education; a rural electric cooperative; a Public Power Entity; or an Instrumentality of a State, Tribal, or local government that is seeking an EA or REDA grant under this subpart.
Assignment Guarantee Agreement (Form RD 4279-6, or successor form).
The 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, using the single note system.
Bioenergy project.
A Renewable Energy System that produces fuel, thermal energy, or electric power from a Renewable Biomass source only.
Blended liquid transportation fuel.
A fuel used for transportation that:
(1) Is composed of one or more fuel types, at least one of which must meet the Renewable Fuel Standard, and
(2) Results in a blended fuel that exceeds the highest Federal or State percentage volume, if any, for a renewable fuel required for each retail service station for the respective jurisdiction. For example, if the Federal government required E15 be dispensed at all retail service stations and a State required E30 be dispensed at all retail service stations in this State, then Applicants in that State would be eligible for funds under this program only if the Flexible Fuel Pump to be installed would dispense a Blended Liquid Transportation Fuel higher than E30 (e.g., E50, E85).
Capacity.
The maximum output rate that an apparatus or heating unit is able to attain on a sustained basis as rated by the manufacturer.
Commercially available.
A system that has a proven operating history for at least one year 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 major parts and labor. If the system is currently Commercially Available only outside of the U.S., authoritative evidence of the foreign operating history, performance and reliability is required in order to address the proven operating history.
Complete application.
An application that contains all parts necessary for the Agency to determine Applicant and project eligibility, to score the application, and, where applicable, to enable the Agency to perform a technical evaluation of the project.
Conditional Commitment (Form RD 4279-3, or successor form).
The Agency's notice to the lender that the loan guarantee it has requested is approved subject to the completion of all conditions and requirements set forth by the Agency and outlined in the Conditional Commitment.
Departmental regulations.
The regulations of the Department of Agriculture's Office of Chief Financial Officer (or successor office) as codified in 2 CFR part 417 and 7 CFR parts 3000 through 3099, including, but not necessarily limited to, 7 CFR parts 3015 through 3019, 7 CFR part 3021, and 7 CFR part 3052, and successor regulations to these parts.
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 contractor is solely responsible and accountable for successful delivery of the project to the grantee and/or borrower as applicable.
Eligible project costs.
The Total Project Costs that are eligible to be paid or guaranteed with program funds.
Energy analysis.
An Agency-approved report prepared by an individual or entity who has at least 3 years experience and completed at least five energy analyses, energy assessments, or energy audits on similar type projects, assessing energy use, cost and efficiency by analyzing energy bills and surveying the target building and/or equipment sufficiently to provide an Agency-approved energy analysis.
Energy assessment.
An Agency-approved report prepared by an Energy Auditor, Energy Assessor, or an individual supervised by either an Energy Assessor or Energy Auditor, assessing energy use, cost, and efficiency by analyzing energy bills and surveying the target building and/or equipment sufficiently to provide an Agency-approved energy assessment. The final energy assessment must be validated and signed by the Energy Assessor or Energy Auditor who conducted the assessment or by the supervising Energy Assessor or Energy Auditor of the individual who conducted the assessment, as applicable.
Energy assessor.
A Qualified Consultant who has at least 3 year experience and completed at least five Energy Assessments or Energy Audits on similar type projects and who adheres to generally recognized engineering principles and practices.
Energy audit (EA).
A comprehensive report that meets an Agency approved standard prepared by an Energy Auditor
or an individual supervised by an Energy Auditor that documents current energy usage; recommended potential improvements, typically called energy conservation measures, and their costs; energy savings from these improvements; dollars saved per year; and Simple Payback. The methodology of the energy audit must meet professional and industry standards. The final energy audit must be validated and signed off by the Energy Auditor who conducted the audit or by the supervising Energy Auditor of the individual who conducted the audit, as applicable.
Energy auditor.
A Qualified Consultant that meets one of the following criteria:
(1) A Certified Energy Auditor certified by the Association of Energy Engineers;
(2) A Certified Energy Manager certified by the Association of Energy Engineers;
(3) A Licensed Professional Engineer in the State in which the audit is conducted with at least 1 year experience and who has completed at least two similar type Energy Audits; or
(4) An individual with a four-year engineering or architectural degree with at least 3 years experience and who has completed at least five similar type Energy Audits.
Energy efficiency improvement (EEI).
Improvements to or replacement of an existing building and/or equipment that reduces energy consumption on an annual basis.
Feasibility study.
An analysis conducted by a qualified consultant of the economic, market, technical, financial, and management feasibility of a proposed project or business.
Federal fiscal year.
The 12-month period beginning October 1 of any given year and ending on September 30 of the following year.
Financial feasibility.
The ability of a project or business to achieve sufficient income, credit, and cash flow 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.
Flexible fuel pump.
A retail pump that combines and dispenses a Blended Liquid Transportation Fuel or dispenses a Blended Liquid Transportation Fuel. If a flexible fuel pump dispenses more than one blend of liquid transportation fuel, at least one of the blends must meet the definition of Blended Liquid Transportation Fuel found in this section.
Geothermal direct generation.
A system that uses thermal energy directly from a geothermal source.
Geothermal electric generation.
A system that uses thermal energy from a geothermal source to produce electricity.
Grant agreement (Form RD 4280-2, Rural Business Cooperative Service Grant Agreement, or successor form).
An agreement between the Agency and the grantee setting forth the provisions under which the grant will be administered.
Hybrid.
A combination of two or more Renewable Energy technologies that are incorporated into a unified system to support a single project.
Hydroelectric source.
A Renewable Energy System producing electricity using various types of moving water including, but not limited to, diverted run-of-river water, in-stream run-of-river water, and in-conduit water. For the purposes of this subpart, only those hydroelectric sources with a Rated Power of 30 megawatts or less are eligible.
Hydrogen project.
A system that produces hydrogen from a Renewable Energy source or that uses hydrogen produced from a Renewable Energy source as an energy transport medium in the production of mechanical or electric power or thermal energy.
Immediate family.
Individuals who are closely related by blood, marriage, or adoption, or who live within the same household, such as a spouse, domestic partner, parent, child, brother, sister, aunt, uncle, grandparent, grandchild, niece, or nephew.
Inspector.
A Qualified Consultant with at least 3 year experience and who has completed at least five inspections on similar type projects. A project might require one or more inspectors to perform the required inspections.
Institution of higher education.
As defined in 20 U.S.C. 1002(a).
Instrumentality.
An organization recognized, established, and controlled by a State, Tribal, or local government, for a public purpose or to carry out special purposes (e.g., a Water District, Resource Conservation and Development Council, etc.).
Interconnection agreement.
A contract containing 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.
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).
A guarantee issued and executed by the Agency containing the terms and conditions of the guarantee.
Matching funds.
The funds needed to pay for the portion of the Total Project Costs not funded or guaranteed by the Agency. Unless authorized by statute, other Federal grant funds cannot be used to meet a Matching Funds requirement.
Ocean energy.
Energy created by use of various types of moving water in the ocean and other large bodies of water (e.g., Great Lakes) including, but not limited to, tidal, wave, current, and thermal changes.
Passive investor.
An equity investor that does not actively participate in management and operation decisions of the business entity as evidenced by a contractual agreement.
Power purchase agreement.
The terms and conditions governing the sale and transportation of electricity produced by the grantee or borrower to another party.
Public power entity.
Is defined using the definition of “state utility” as defined in section 217(A)(4) of the Federal Power Act (16 U.S.C. 824q(a)(4)). As of this writing, the definition “means a State or any political subdivision of a State, or any agency, authority, or instrumentality of any one or more of the foregoing, or a corporation that is wholly owned, directly or indirectly, by any one or more of the foregoing, competent to carry on the business of developing, transmitting, utilizing, or distributing power.”
Qualified consultant.
An independent third-party individual or entity possessing the knowledge, expertise, and experience to perform the specific task required.
Rated power.
The maximum amount of energy that can be created at any given time.
Refurbished.
Refers to a Renewable Energy System or equipment that has been brought into a facility, thoroughly inspected, and worn parts replaced. A refurbished system or equipment will typically have some type of warranty.
Renewable biomass.
(1) Materials, pre-commercial thinnings, or invasive species from National Forest System land or public lands (as defined in section 103 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1702)) that:
(i) Are byproducts of preventive treatments that are removed to reduce hazardous fuels; to reduce or contain disease or insect infestation; or to restore ecosystem health;
(ii) Would not otherwise be used for higher-value products; and
(iii) Are harvested in accordance with applicable law and land management plans and the requirements for old-growth maintenance, restoration, and management direction of paragraphs (e)(2), (e)(3), and (e)(4) and large-tree retention of subsection (f) of section 102 of the Healthy Forests Restoration Act of 2003 (16 U.S.C. 6512); or
(2) Any organic matter that is available on a renewable or recurring basis from non-Federal land or land belonging to an Indian or Indian Tribe that is held in trust by the United States or subject to a restriction against alienation imposed by the United States, including:
(i) Renewable plant material, including feed grains; other agricultural commodities; other plants and trees; and algae; and
(ii) Waste material, including crop residue; other vegetative waste material (including wood waste and wood residues); animal waste and byproducts (including fats, oils, greases, and manure); and food waste, yard waste, and other biodegradable waste. (Waste material does not include unsegregated solid waste.)
Renewable energy.
Energy derived from:
(1) A wind, solar, Renewable Biomass, ocean (including tidal, wave, current, and thermal), geothermal or Hydroelectric Source; or
(2) Hydrogen derived from Renewable Biomass or water using wind, solar, ocean (including tidal, wave, current, and thermal), geothermal or Hydroelectric Sources.
Renewable energy development assistance (REDA).
Assistance provided by eligible grantees to Agricultural Producers and Rural Small Businesses to become more energy efficient and to use Renewable Energy technologies and resources. The renewable energy development assistance may consist of Renewable Energy site assessment and/or Renewable Energy Technical Assistance.
Renewable energy site assessment.
A report provided to an Agricultural Producer or Rural Small Business providing information regarding and recommendations for the use of Commercially Available Renewable Energy technologies in its operation. The report must be prepared by a Qualified Consultant and must contain the information specified in Sections A through C of Appendix B.
Renewable energy system (RES).
A system that produces or produces and delivers a usable energy from a Renewable Energy source, or is a Flexible Fuel Pump.
Renewable energy technical assistance.
Assistance provided to Agricultural Producers and Rural Small Businesses on how to use Renewable Energy technologies and resources in their operations.
Retrofitting.
The modification of a Renewable Energy System to incorporate features not included in the original design or for the replacement of existing components with ones that improve the original design.
Rural or rural area.
Any area of a State not in a city or town that has a population of more than 50,000 inhabitants, according to the latest decennial census of the United States, or in the urbanized area contiguous and adjacent to a city or town that has a population of more than 50,000 inhabitants, and any area that has been determined to be “rural in character” by the Under Secretary for Rural Development, or as otherwise identified in this definition.
(1) An area that is attached to the urbanized area of a city or town with more than 50,000 inhabitants by a contiguous area of urbanized census blocks that is not more than two census blocks wide. Applicants from such an area should work with their Rural Development State Office to request a determination of whether their project is located in a rural area under this provision.
(2) For the purposes of this definition, cities and towns are incorporated population centers with definite boundaries, local self government, and legal powers set forth in a charter granted by the State.
(3) For the Commonwealth of Puerto Rico, the island is considered rural and eligible except for the San Juan Census Designated Place (CDP) and any other CDP with greater than 50,000 inhabitants. CDPs with greater than 50,000 inhabitants, other than the San Juan CDP, may be determined to be eligible if they are “not urban in character.”
(4) For the State of Hawaii, all areas within the State are considered rural and eligible except for the Honolulu CDP within the County of Honolulu.
(5) For the purpose of defining a rural area in the Republic of Palau, the Federated States of Micronesia, and the Republic of the Marshall Islands, the Agency shall determine what constitutes rural and rural area based on available population data.
(6) The determination that an area is “rural in character” will be made by the Under Secretary of Rural Development. The process to request a determination under this provision is outlined in paragraph (6)(ii) of this definition.
(i) The determination that an area is “rural in character” under this definition will apply to areas that are within:
(A) An urbanized area that has two points on its boundary that are at least 40 miles apart, which is not contiguous or adjacent to a city or town that has a population of greater than 150,000 inhabitants or the urbanized area of such a city or town; or
(B) An urbanized area contiguous and adjacent to a city or town of greater than 50,000 inhabitants that is within one quarter mile of a rural area.
(ii) Units of local government may petition the Under Secretary of Rural Development for a “rural in character” designation by submitting a petition to both the appropriate Rural Development State Director and the Administrator on behalf of the Under Secretary. The petition shall document how the area meets the requirements of paragraph (6)(i)(A) or (B) of this definition and discuss why the petitioner believes the area is “rural in character,” including, but not limited to, the area's population density, demographics, and topography and how the local economy is tied to a rural economic base. Upon receiving a petition, the Under Secretary will consult with the applicable Governor or leader in a similar position and request comments to be submitted within 5 business days, unless such comments were submitted with the petition. The Under Secretary will release to the public a notice of a petition filed by a unit of local government not later than 30 days after receipt of the petition by way of publication in a local newspaper and posting on the Agency's Web site, and the Under Secretary will make a determination not less than 15 days, but no more than 60 days, after the release of the notice. Upon a negative determination, the Under Secretary will provide to the petitioner an opportunity to appeal a determination to the Under Secretary, and the petitioner will have 10 business days to appeal the determination and provide further information for consideration.
Rural Small Business.
A Small Business that is located in a Rural Area or that can demonstrate the proposed project for which assistance is being applied for under this subpart is located in a Rural Area.
Simple payback.
The estimated simple payback of a project funded under this subpart as calculated using paragraph (1), (2), or (3), as applicable, of this definition.
(1) For energy generation projects, Simple Payback is calculated as follows:
(i) Simple Payback = (Total Project Costs)/(Average Net Income + Interest Expense + Depreciation Expense (for the project))
(ii) Average Net Income:
(A) Is based on all energy related revenue streams which include monetary benefits from production tax credit, renewable energy credit, carbon credits, revenue from byproducts produced by the energy system, fair market value of byproducts produced by and used in the project or related enterprises, and other incentives that can be annualized.
(B) Is b
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