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Show Me the Money: Notice of Proposed Rulemaking Related to Loan Guarantees for Projects That Employ Innovative Technologies

Aug 7, 2009 - Stoel Rives

On August 6, 2009, the Department of Energy ("DOE") issued a notice of proposed rulemaking to amend 10 CFR Part 609, the rule regulating the loan guarantee program authorized by section 1703 of Title XVII of the Energy Policy Act of 2005 (hereinafter the �Section 1703 Loan Guarantee Program�). The two principal goals of the Section 1703 Loan Guarantee Program are to encourage commercial use of new or significantly improved energy-related technologies and to achieve substantial environmental benefits. (See these recent alerts regarding the DOE loan guarantee program and the related application process.)

Many parties connected to the energy industry have informed DOE that the Section 1703 Loan Guarantee Program is too rigid in its requirement that DOE be in first lien position over all assets of the financed project. DOE has reported requests for more flexibility in the determination of an appropriate collateral package to secure guaranteed loan obligations, facilitate collateral sharing and related intercreditor arrangements with other project lenders, and provide a more workable interpretation of the statutory provisions regarding DOE�s treatment of collateral. Currently the Section 1703 Loan Guarantee Program requires that DOE take a first position lien over all project assets and does not allow other project lenders to take a pari passu interest in such collateral.

Furthermore, DOE has found that other parties are interested in participating as co-lenders, co-guarantors, or insurers of Title XVII loans. However, these other parties expect to share, on a pari passu basis, in any collateral securing such loans.

Consequently, DOE proposes two amendments to the current rules:

  1. Delete the requirement of a first priority lien on all project assets and leave to the Secretary (of DOE) the determination of an appropriate collateral package, as well as intercreditor arrangements; and
  2. Allow the Secretary (of DOE) to determine if pari passu lending is in the best interests of the United States

Interested parties have 30 days to provide comments to the proposed rule. Comments may be submitted in the following manner:

  • Through the Federal Rulemaking Portal
  • Email to
  • Postal Mail / Hand Delivery / Courier to:
    David G. Franz, Director, Loan Guarantee Program Office
    Office of the Chief Financial Officer
    1000 Independence Avenue, SW
    Washington, DC 20585-0121

For more information, contact David Franz at the above address or by calling (202) 586-8336.

If you have questions about these or other renewable energy issues, or if you would like to discuss the possibility of your project applying for these or other government funds, please contact:

Seattle, Washington
David Benson at (206) 386-7584 or
Janet F. Jacobs at (206) 386-7582 or
J. Graham Noyes at (206) 386-7615 or
John Laney at (206) 386-7559 or

Portland, Oregon
Marcus Wood at (503) 294-9434 or
Bill Holmes at (503) 294-9207 or
Dina Dubson at (503) 294-9675 or

Minneapolis, Minnesota
Greg Jenner at (612) 373-8857 or
Debra Frimerman at (612) 373-8819 or

Sacramento, California
John McKinsey at (916) 319-4746 or
Seth Hilton at (916) 319-4749 or

Boise, Idaho
John Eustermann at (208) 387-4218 or


Updated: 2003/07/28