Renewable Energy Systems and Energy Efficiency Improvements Grant, Guaranteed Loan, and Direct Loan Program

Note: EPA no longer updates this information, but it may be useful as a reference or resource.

[Federal Register: October 5, 2004 (Volume 69, Number 192)]
[Proposed Rules]
[Page 59649-59695]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05oc04-22]

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DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
7 CFR Part 4280
RIN 0570-AA50

Renewable Energy Systems and Energy Efficiency Improvements
Grant, Guaranteed Loan, and Direct Loan Program

AGENCY: Rural Business-Cooperative Service, USDA.
ACTION: Proposed rule.

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SUMMARY: Rural Business-Cooperative Service proposes to implement a
program for making grants, loan guarantees, and direct loans to farmers
and ranchers (agricultural producers) or rural small businesses to
purchase renewable energy systems and make energy efficiency
improvements. The Farm Security and Rural Investment Act of 2002 (2002
Act) established the Renewable Energy Systems and Energy Efficiency
Improvements Program. This program will help farmers, ranchers, and
rural small businesses to reduce energy costs and consumption.

DATES: Written comments on this proposed rule must be received on or
before November 4, 2004 to be assured of consideration. The comment
period for the information collection under the Paperwork Reduction Act
of 1995 continues through November 4, 2004.

ADDRESSES: You may submit comments to this rule by any of the following
methods:
? Agency Web Site: http://rdinit.usda.gov/regs/.
Follow instructions for submitting comments on the Web Site.
? E-Mail: comments@usda.gov. Include the RIN No. 0570-0050
in the subject line of the message.
? 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 another 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 working hours at 300 7th Street, SW., 7th Floor, address listed
above.

FOR FURTHER INFORMATION CONTACT: Georg A. Shultz, Special Advisor for
Renewable Energy Policy and Programs, Office of the Deputy
Administrator Business Programs, U.S. Department of Agriculture, Mail
Stop 3220, 1400 Independence Ave., SW., Washington, DC 20250-3220,
Telephone: (202) 720-2976.

SUPPLEMENTARY INFORMATION: The information presented in this preamble
is organized as follows:

I. Background
A. Statutory Authority
B. Background Information
C. Request for Comments
II. General Criteria and Terms for Approval of Grants and Guaranteed
Loans
A. Applicant and Applicant/Borrower Eligibility
B. Project Eligibility
C. Eligible Project Costs
D. Project Funding
E. Appeals
F. Insurance
G. Construction Planning and Performing Development
H. Laws that Contain Other Requirements
III. Application and Documentation Requirements for Grants and
Guaranteed Loans
A. Application
B. Forms, Certifications, and Agreements
C. Studies and Reports
IV. Evaluation of Grant and Guaranteed Loan Applications
A. Criteria for Applications for Renewable Energy Systems
B. Criteria for Applications for Energy Efficiency Improvements
C. Selection of Evaluation Criteria and their Point Values
V. Processing and Servicing Grants and Guaranteed Loans
A. Processing and Servicing Grants
B. Processing and Servicing Guaranteed Loans
C. Processing and Servicing Combined Funding
VI. Economic Analysis
A. Benefit-Cost Analysis
B. Small Businesses
VII. Administrative Requirements
A. Paperwork Reduction Act
B. Intergovernmental Review
C. Regulatory Flexibility Act
D. Civil Justice Reform
E. National Environmental Policy Act
F. Unfunded Mandates Reform Act
G. Executive Order 13132, Federalism
H. Executive Order 12866, Regulatory Planning and Review

I. Background

A. Statutory Authority

The Farm Security and Rural Investment Act of 2002 (2002 Act)
established the Renewable Energy Systems and Energy Efficiency
Improvements Program under Title IX, Section 9006. The 2002 Act
mandates that the Secretary of Agriculture create a program to make
loans, loan guarantees, and grants to ``a farmer, rancher, or rural
small business'' to purchase renewable energy systems and make energy
efficiency improvements. The purpose of the program is to help
agricultural producers and rural small businesses to reduce energy
costs and consumption. The 2002 Act mandates the maximum percentage
that the Agency will provide in funding for these projects. Grant
funding is limited to 25 percent of the eligible project cost and will
be made only to those who demonstrate financial need. Guaranteed loans
and direct loans are each limited to 50 percent of the eligible project
costs. Lastly, the Agency may fund up to 50 percent of the eligible
cost for any combination of grants, guaranteed loans, and direct loans
per project under this program.
In determining the amount of a grant, guaranteed loan, or direct
loan for renewable energy systems and energy efficiency improvements,
the 2002 Act requires the Agency to take into consideration, as
applicable, the following factors:
1. The type of renewable energy system or energy efficiency
improvement to be purchased;
2. The estimated quantity of energy to be generated by the
renewable energy system or energy efficiency improvement;
3. The expected environmental benefits of the renewable energy
system or energy efficiency improvement;
4. The extent to which the renewable energy system or energy
efficiency improvement will be replicable;
5. The demonstrated amount of energy savings expected to be derived
from this activity or project;
6. The estimated length of time it would take for the energy
savings generated by the project to equal the cost of the activity or
project; and
7. Other appropriate factors.

B. Background Information

Due to time constraints for implementing this program, the Agency
decided to institute only the grant program for FY 2003. Therefore, a
NOFA inviting applications to purchase renewable energy systems and
make energy efficiency improvements under the grant program was
published in the Federal Register on April 8, 2003 (68 FR 17009). Of
the 147 applications for grant funds received, 114 were approved and
funded under this program for FY 2003. For FY 2004, the Agency
published a second NOFA (May 5, 2004; 69 FR 25234) for a grant program
for

[[Page 59651]]

renewable energy systems and energy efficiency improvements. For FY
2005, the Agency is in the process of developing a rule for a complete
grant, guaranteed loan, and direct loan program. This notice is the
first formal step of this process.
In developing the proposed rule, the Agency relied on several main
components. First, the rule needs to be consistent with the
requirements specified in the 2002 Act. Thus, some of the proposed
requirements are statutorily-based. Second, Rural Development is
proposing to implement the grant and guaranteed loan program based on
the requirements outlined in the NOFA published on April 8, 2003,
including stakeholder comments. Third, in proposing the guaranteed loan
program, the Agency is proposing requirements based on the experience
of other loan programs (e.g., the Business and Industry Loan program)
and the need to ensure that loan programs are based on sound financial
principles.
Based on experience, the Agency is proposing to require applicants
and borrowers as well as their proposed projects to meet certain
eligibility requirements to ensure that the funds available under this
program are disbursed to those who meet the target market in the 2002
Act. To assess the eligibility and viability of proposed projects,
applicants will be required to provide certain information.
Because of limitations of available funds, the Agency is proposing
criteria to score and rank eligible projects to determine those
projects that are funded first. To make funds available to more
agricultural producers and rural small businesses, the Agency is
proposing limits to maximum funding levels. In addition, minimum
funding levels are being proposed to help ensure that most projects
that have beneficial aspects of energy production and energy savings in
rural areas can be considered for assistance.
Finally, the Agency is proposing processing and servicing
requirements, which are necessary for any grant and guaranteed loan
program.
With regards to the direct loan program, the Agency has chosen not
to promulgate a regulation for the direct loan program under section
9006 at this time because we believe the government needs to have
options for dealing with change and innovation within the renewable
energy industry. By allowing the Agency to tailor the direct program to
specific needs that are not properly addressed by either the grant or
guarantee gives the government some flexibility in dealing with the
ever changing and evolving nature of the renewable energy industry. As
funding is provided for this purpose, the Agency will develop the
appropriate rules, terms, conditions and criteria for the direct loan
program that will address the specific direct loan needs for renewable
energy at that time. Finally, the implementation of a direct loan
program can require significant staffing and resources, which the
Agency does not currently have. By implementing a direct loan program
tailored to specific needs at a later time, the Agency will be in a
better position to allocate the necessary staff and resources to
implement a direct loan program. For these reasons, the Agency is not
proposing a specific direct loan program at this time, but is instead
identifying the process for developing a direct loan program and the
information that would be included in the direct loan program.

C. Request for Comments

The Agency is requesting comments on the overall program being
proposed. The Agency is especially interested in comments on the
following areas:
1. The rule sets a minimum funding amount of $2,500. How would this
minimum value affect the projects most likely to otherwise use this
program?
2. The rule does not allow non-traditional lenders to participate
in the program. Is this appropriate for renewable energy projects or
would some non-traditional lenders be likely to lend funds for this
type of activity if the rule did not prohibit their participation?
3. Are there ways to improve, streamline, or simplify the
application process for the program? The Agency is particularly
interested in the views of program applicants and other interested
stakeholders. The Agency will consider comments based on its need to
assess the eligibility and viability of proposed projects. Applicants
and the Agency must meet all applicable laws, regulations and executive
orders. The applicants must provide the Agency and other agencies with
appropriate information so that all compliance issues can be addressed
and competing applications can be evaluated in a fair and objective
process. The Agency will balance the above criteria, where possible,
with the need to establish information requirements commensurate with
the scale and complexity of the proposed renewable energy system or
energy efficiency improvement.
Comments are to be submitted as indicated in the DATES and
ADDRESSES sections above. The Agency will consider all comments,
although some may be addressed at a future date.
The Agency believes that a 30-day comment period, rather than a 60-
day comment period, is sufficient for soliciting public comments on
this proposed rulemaking. First, the stakeholders are already very
familiar with the grant and guaranteed loan program being proposed. The
Agency issued two Notices of Funds Availability (NOFAs) for grant
programs under section 9006, one in fiscal year (FY) 2003 and one in FY
2004, and requested public comments on both NOFAs. In addition, the
Agency's current Business and Industry (B&I) guaranteed loan program
forms the basis of the proposed guaranteed loan program. Second, in
developing the proposed program, the Agency considered all of the
comments received on the NOFAs and used its experience with the NOFAs
in developing the proposed rule. Third, the Agency hosted a national
public stakeholders forum for constituents on December 3, 2002, which
was simulcast nationwide over the Internet. At this forum, attendees
expressed their views on the implementation of section 9006. There was
significant participation with both oral and written comments, which
were also considered in the development of the proposed rule. Finally,
the grant program is identical to the latest NOFA and there are only a
few differences being proposed between the section 9006 guaranteed loan
program and the existing B&I guaranteed loan program. For these
reasons, the Agency believes that 30 days is sufficient for the
stakeholders to understand the proposed program and to provide comment
on it. If additional time is required, stakeholders can always request
an extension of the public comment period.

II. General Criteria and Terms for Approval of Grants and Guaranteed
Loans

There exist thousands of agricultural producers and rural small
businesses engaged in meeting the needs of the nation's growing
population. The potential contribution of this group toward meeting the
national goal of conserving and reducing energy usage nationwide is
great. In implementing this program, the Agency encourages agricultural
producers and rural small businesses to utilize commercially available
technologies.
Terminology
Throughout this preamble, we use the term ``applicant,''
``borrower,'' and ``grantee'' in describing the proposed grant and loan
program. The term ``applicant'' refers to the entity seeking

[[Page 59652]]

a grant or loan. For the grant program, this entity is the agricultural
producer or rural small business. For the direct loan program, this
entity is the agricultural producer. For the guaranteed loan program,
however, this entity is the lender. We use the term ``borrower'' when
referring to the agricultural producer or rural small business that is
seeking the guaranteed loan or to whom a loan has been made. We use the
term ``grantee,'' to refer to the agricultural producer or rural small
business that has received a grant.
In summary, when the phrase ``applicant or borrower'' is used in
the preamble, it refers to the agricultural producer or rural small
business seeking the grant, guaranteed loan, or direct loan. When just
the term ``applicant'' is used, it refers to the entity (agricultural
producer, rural small business, or lender) submitting the application,
as described in the above paragraph.

A. Applicant and Applicant/Borrower Eligibility

To be eligible to receive a grant or guaranteed loan, an applicant
or borrower must meet each of the five criteria, as applicable,
identified below. These criteria were selected because they are
identified in Section 9006 of the 2002 Act.
1. To receive a grant or guaranteed loan, the applicant or borrower
must be an agricultural producer (farmer or rancher) or a rural small
business;
2. If the applicant or borrower is an individual, the applicant or
borrower must be a citizen of the United States (U.S.) or reside in the
U.S. after being legally admitted for permanent residence;
3. Entities must be at least 51 percent owned, directly or
indirectly, by individuals who are either citizens of the U.S. or
reside in the U.S. after being legally admitted for permanent
residence;
4. If the applicant or borrower is applying as a rural small
business, both the applicant's or borrower's business headquarters and
the proposed project must be in a rural area; and
5. For grants only, the applicant must have demonstrated financial
need.
Any applicant, borrower, or owner that has an outstanding Federal
judgment, is delinquent in paying Federal income taxes, or is
delinquent on a Federal debt is ineligible to receive a grant or
guaranteed loan under this program. This condition is consistent with
standard Agency practice for funding programs.

B. Project Eligibility

The proposed rule contains criteria to determine if an applicant's
proposed project is eligible to receive funds or guarantees under the
Renewable Energy Systems and Energy Efficiency Improvements Program. To
be eligible, the proposed project is required to meet the following
criteria, as applicable:
1. The project must be for the purchase of a renewable energy
system or to make energy efficiency improvements;
2. The project must be for a replicable, pre-commercial or a
replicable, commercially available technology;
3. The project must be technically feasible;
4. The project must be located in a rural area;
5. The applicant or borrower must be the owner of the system and
control the operation and maintenance of the proposed project. However,
a qualified third-party operator will be allowed to manage the
operation and/or maintenance of the proposed project; and
6. All projects must be based on satisfactory sources of revenues
in an amount sufficient to provide for the operation and maintenance of
the system or project.
Projects that are still in the research and development stage are
not eligible for funds under this program, because the 2002 Act
requires projects to be ``replicable'' and the Agency does not believe
projects that are in the research and development stage meet this
statutory requirement. In addition, a project for which construction
has been initiated will not be considered by the Agency because the
necessary environmental assessment cannot be conducted in accordance
with the National Environmental Protection Act.
The technical feasibility of each proposed project will be based on
all of the information provided by the applicant and on other sources
of information, such as recognized industry experts in the applicable
technology field, as necessary. If the project is determined to be not
technically feasible, the applicant will be notified in writing of this
determination and the reasons therefore. The rule allows the applicant
or borrower to appeal such determinations.

C. Eligible Project Costs

Funds may be used only for certain specified project costs,
provided these costs are an integral and necessary part of the total
project. Funds received under 7 CFR part 4280, subpart B, cannot be
used for any other project costs. The eligible project costs are:
1. Post-application purchase and installation of equipment, except
agricultural tillage equipment and vehicles. Vehicles are considered to
be any powered mobile equipment, including but not limited to cars and
tractors;
2. Post-application construction or project improvements, except
residential;
3. Energy audits or assessments;
4. Permit fees;
5. Professional service fees, except for application preparation;
6. Feasibility studies;
7. Business plans;
8. Retrofitting;
9. Construction of a new facility only when the facility is used
for the same purpose; is approximately the same size; and, based on the
energy audit, will provide more energy savings than improving an
existing facility. Only costs identified in the energy audit for energy
efficiency projects are allowed;
10. Working capital (guaranteed loans only); and
11. Land acquisition (guaranteed loans only).
The Agency selected these items as eligible project costs because
they are integral to the acquisition or construction of eligible
projects and these items are necessary for the successful
implementation and quality assurance of the project; and allowing these
costs provides for support of actual purchase of a renewable energy
system and energy efficiency improvements. The Agency is allowing
working capital and land acquisition as an eligible project costs for
guaranteed loans because the Agency wants to ensure that the relatively
limited percentage of grant funds (25 percent for grants versus 50
percent for guaranteed loans) are used for the renewable energy system
or energy efficiency improvement project itself.

D. Project Funding

1. Funding Amounts. The minimum level of funding available for a
grant, guaranteed loan, or a combined grant and guaranteed loan is
$2,500. The Agency believes that including this minimum level of
funding will allow more agricultural producers and rural small
businesses to qualify and take advantage of this program. The Agency's
goal in implementing this program is to distribute all of the available
funds quickly and equitably to qualified applicants and borrowers.
To encourage wide participation and distribution of funds, the
Agency has established levels of available funding for both funding
programs. The following paragraphs discuss maximum

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funding levels and specific details related to funding for grants and
guaranteed loans, and percentages of eligible project costs available
under each funding program.
i. Grant Funding. The maximum funding level for grants for
renewable energy systems is $500,000. The maximum funding level for
grants for energy efficiency improvements is $250,000. The maximum
amount of grant assistance to one individual or entity is limited to
$750,000.
As required by the 2002 Act, the amount of grant funds made
available to an applicant for an eligible project must not exceed 25
percent of eligible project costs. The remaining funds needed to
complete the project must come from other sources. The applicant may
use third-party, in-kind contributions as part of the remaining funds.
Third-party, in-kind contributions, however, cannot exceed 10 percent
of the matching funds provided by other sources.
ii. Loan funding. For guaranteed loans, the maximum funding level
is $10 million. If a more than $10 million in loan guarantees is
sought, then the loan should be sought under the Agency's B&I program.
The amount of guaranteed loan funds made available to an applicant
or borrower for an eligible project will not exceed 50 percent of
eligible project costs.
For guaranteed loans, the total amount of Agency loans to one
borrower will be limited to no more than $10 million. The percentage of
the guarantee, which will be negotiated between the lender and the
borrower, cannot exceed 85 percent for loans of $600,000 or less; 80
percent for loans greater than $600,000 but up to $5 million; and 70
percent for loans greater than $5 million but up to $10 million.
c. Combined Grant and Guaranteed Loan Funding. As required by the
2002 Act, a combined grant and guaranteed loan under this program
cannot exceed 50 percent of eligible project costs and the applicant or
borrower is responsible for having other funding sources for the
remaining funds. Eligible project costs will be based on costs
identified for each type of funding being requested under a combination
funding request.
2. Interest rates on loans.
i. Guaranteed loans. The interest rate for a guaranteed loan will
be negotiated between the lender and the borrower and may be fixed,
variable, or a combination of fixed and variable as long as it is a
legal rate. If a variable interest rate is used, it must be tied to a
base rate agreed to by the lender and the borrower and may be varied no
more than once per quarter.
The interest rate for a guaranteed loan is to be based on indices,
such as money market indices, that are published in a recognized
banking industry source. As in the Agency's B&I program, the interest
rate can not be more than that rate customarily charged borrowers in
similar circumstances in the ordinary course of business and is subject
to Agency review and approval.
ii. Combination Funding. The interest rate for the loan portion of
a combined funding request will be determined based on the procedures
specified for guaranteed loans.
3. Terms of Loan. This rule sets maximum loan term limits for
guaranteed loans and also applies when they are part of a combination
funding request. These term limits vary according to the type of item
and will be utilized only when the loan cannot reasonably be repaid
over a shorter term. The maximum loan terms being proposed are
established loan terms used under the Agency's B&I program and are
familiar to commercial lenders. The maximum loan term limits in this
rule are as follows:
i. For real estate, 30 years.
ii. For machinery and equipment, 15 years, or the useful life,
whichever is less.
iii. For repayment for combined loans on real estate and equipment,
20 years.
iv. For working capital, 7 years.
The first installment of principal and interest will, if possible,
be scheduled for payment after the project is operational and has begun
to generate income.
4. Guaranteed Loan Fees. This rule sets the maximum guarantee fee
at 1 percent and the maximum annual renewal fee at 0.5 percent. The
Agency considered establishing a higher guarantee fee (2 percent),
which would help leverage funds. However, the Agency believes that the
lower fee is more appropriate because it provides a financial
incentive, relative to other programs, to agricultural producers and
rural small businesses to participate in this program. The maximum
annual renewal fee is based on Small Business Administration (SBA)
programs and is adopted for this program to provide additional funds to
supplement the available funds appropriate to the program, thereby
allowing the program to reach more potential applicants. The Agency
will publish each year in the Federal Register the fee levels in effect
for that year.

E. Appeals

Consistent with standard Agency policy, appeals will be handled in
accordance with 7 CFR part 11. Any party adversely affected by an
Agency decision under this subpart may request a determination of
appealability from the Director, National Appeals Division, USDA,
within 30 days of the adverse decision.

F. Insurance

This rule will require the applicant or borrower to carry certain
types of insurance. The insurance requirements are consistent with
other Rural Development programs and are applicable to this program.
All insurance must be maintained for the life of the grant or loan,
unless such requirement is waived or modified by the Agency.

G. Construction Planning and Performing Development

Consistent with Agency policies, construction planning and
performing development requirements of 7 CFR part 1924, subpart A, will
be used for grants.
Under the Guaranteed Loan program, lenders will be required to
ensure that all project facilities are designed utilizing accepted
architectural and engineering practices, conform to applicable Federal,
state, and local codes and requirements, and meet the requirements of
this regulation.

H. Laws That Contain Other Requirements

There are several laws that applicants and borrowers must comply
with under this program. These are:
? Executive Order 11246, ``Equal Employment Opportunity;''
? Americans with Disabilities Act of 1990;
? Title VI of the Civil Rights Act of 1964 (grants only);
? Section 504 of the Rehabilitation Act of 1973 (grants
only);
? Equal Credit Opportunity Act (Title V of Pub. L. 90-321,
as amended) (guaranteed loans only);
? 7 CFR part 1940, subpart G, which requires an
environmental impact analysis; and
? Executive Order 12898, ``Environmental Justice,'' under
which the Agency will conduct a Civil Rights Impact Analysis in regard
to environmental justice.

III. Application and Documentation Requirements for Grants and
Guaranteed Loans

The Agency is requiring the minimum amount of information that it
needs to evaluate an applicant's or borrower's

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eligibility, evaluate the proposed project's eligibility, evaluate the
applications and establish selection priorities among competing
projects, ensure compliance with applicable regulations, and
effectively monitor the applicant's or borrower's activities after the
loan is made or the grant is awarded. The following paragraphs describe
the Agency's proposed application and documentation requirements when
applying for a grant or guaranteed loan.
In applying for grant or guaranteed loan funds under this program,
the applicant will be required to submit an application; submit a
series of forms, certifications, and agreements; perform a feasibility
study for renewable energy systems projects of more than $100,000; and
prepare technical requirements reports.

A. Application

Separate applications must be submitted for renewable energy system
and for energy efficiency improvement projects from applicants applying
for both. Only one application per each type of project may be
submitted. Applicants applying for a combined grant and guaranteed loan
will submit a separate application for each grant and guaranteed loan,
with at least one set of documentation. The separate applications must
be submitted simultaneously.
Applications will consist of:
? A table of contents;
? A one page summary of the project;
? A description of applicant/borrower eligibility and
project eligibility;
? A description of agricultural producer's/rural small
business' business, farm, or ranch operation and ownership;
? Management information;
? Financial information including an explanation of
financial need (grants only), balance sheets and income statements or
equivalent, information to allow assessment of annual receipts (rural
small businesses only), historical financial statements, pro forma
balances sheets, and gross market value of agricultural products
(agricultural producers only); and
? A Dun and Bradstreet (D&B) Data Universal Numbering System
(DUNS) number (grants only).
For renewable energy systems, the applicant must also indicate
whether the technology to be employed is commercially or pre-
commercially available and is replicable, the information to support
this position, and a description of the availability of materials,
labor, and equipment for the facility. Also required is information on
the demand for the product and/or service; who will buy the product
and/or service, identification of the supply (past, present, and
future) of the product and/or service; identification of competitors;
and a description how the business will be able to sell enough of its
product/service to be profitable given the trends in demand and supply.
The Agency will then evaluate applications to determine if the
applicant or borrower is eligible and if the project is eligible to
receive funds and to score each application to assist in determining
those projects that are funded first.

B. Forms, Certifications, and Agreements

Applicants must submit a series of forms, certifications, and
agreements with each application. These forms, certifications, and
agreements are necessary for the Agency to evaluate applications and to
administer this program. Some of these are applicable to both funding
programs. Applicants applying for a combined grant and guaranteed loan
will be required to submit all applicable forms for both types of
funding.
Most of the forms being used for this program have been used in
other, similar programs. Rather than develop new forms, which would be
very time consuming, the Agency is amending these existing forms. For
example, Form 4279-4, ``Lender's Agreement,'' would be amended to note
that Section III, Item A.2, is only applicable to the Business and
Industry program.
1. Grants. For grants, an applicant will be required to submit the
following:
i. Form SF-424, ``Application for Federal Assistance.''
ii. Form SF-424C, ``Budget Information--Construction Programs.''
iii. Form SF-424D, ``Assurances--Construction Programs.''
iv. AD-1049, ``Certification Regarding Drug-Free Workplace
Requirements (Grants).''
v. AD-1048, ``Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion -Lower Tiered Covered
Transactions.''
vi. A copy of a bank statement or a copy of the commitment letter
from the funding source.
vii. Exhibit A-1 of RD Instruction 1940-Q, ``Certification for
Contracts, Grants and Loans,'' if the grant exceeds $100,000 (or
Exhibit A-2 of RD Instruction 1940-Q, ``Statement for Loan
Guarantees,'' if the guaranteed loan exceeds $150,000).
viii. Form SF-LLL, ``Disclosure of Lobbying Activities.''
ix. AD-1047, ``Certification Regarding Debarment, Suspension, and
Other Responsibility Matters--Primary Covered Transactions.''
x. Form RD 400-1, ``Equal Opportunity Agreement.''
xi. Form RD 400-4, ``Assurance Agreement.''
xii. Where applicable, a copy of a letter of intent to purchase
power, a power purchase agreement, a copy of a letter of intent for an
interconnection agreement, or an interconnection agreement will be
required from your utility company or other purchaser for renewable
energy systems.
xiii. Where applicable, intergovernmental consultation comments in
accordance with Executive Order 12372.
xiv. Certification indicating whether or not there is a known
relationship or association with an Agency employee.
xv. An environmental impact analysis prepared in accordance with 7
CFR part 1940, subpart G, using Form RD 1940-20, ``Request for
Environmental Information.''
2. Guaranteed loans. For guaranteed loans, an applicant will be
required to submit the items described above in paragraphs B.1.vii
through xv as well as the following items:
i. Form 4279-1, ``Application for Loan Guarantee.''
ii. A personal credit report for the borrower, a proprietor
(owner), and anyone owning 20 percent or more interest in the
borrower's business from a credit reporting company acceptable to the
Agency.
iii. Completed appraisals should be submitted when the application
is filed. If the appraisal has not been completed when the application
is filed, the applicant must submit an estimated appraisal. In all
cases, a completed appraisal must be submitted prior to the loan being
closed.
iv. Lender's complete comprehensive written analysis.
v. Commercial credit reports on the borrower and any parent,
affiliate, and subsidiary firms.
vi. Current personal and corporate financial statements of any
guarantors.
vii. A proposed Loan Agreement or a sample Loan Agreement with an
attached list of the proposed Loan Agreement provisions.
viii. A certification by the lender that it has completed a
comprehensive written analysis of the proposal, the borrower is
eligible, the loan is for authorized purposes, and there is reasonable
assurance of repayment ability based on the borrower's history,
projections and equity, and the collateral to be obtained.

[[Page 59655]]

C. Studies and Reports

1. Feasibility Study for Renewable Energy Systems. Because of
factors of cost and complexity for renewable energy system projects of
more than $100,000, a project-specific feasibility study prepared by a
qualified independent consultant will be required. The feasibility
study will have to include an analysis of the market, financial,
economic, technical, and management feasibility of the proposed
project. The feasibility study will also have to include an opinion and
a recommendation by the independent consultant. Applicants for
renewable energy system projects of $100,000 or less and for all energy
efficiency improvement projects will not be required to conduct a
feasibility study.
2. Technical Requirements Reports. This rule contains technical
requirements for renewable energy systems and energy efficiency
improvement projects. The rule identifies the following project
technology categories:
? Biomass, bioenergy.
? Biomass, digesters.
? Geothermal, electric.
? Geothermal, direct use.
? Hydrogen.
? Solar, small.
? Solar, large.
? Wind, small.
? Wind, large.
? Energy efficiency improvements.
The purpose of these technical requirements reports is to ensure
that the renewable energy system or energy efficiency improvement
operates or performs as expected over its design life in a reliable and
cost effective manner. To this end, the applicant must provide
information on project design, procurement, startup, operation, and
maintenance.
The technical requirements vary for each different system and
project. In general, smaller projects will require less information
than larger projects, projects using mature technologies will require
less information than pre-commercial technologies or technologies with
limited commercial operational history; projects using pre-engineered
systems or kits will require less information than projects that
require system design engineering; and systems or improvements using
design-build project delivery methods where the supplier assumes all
project delivery risks will require less information than those
projects utilizing design-bid-construction methods where the risks of
project delivery fall on the applicant or borrower. Small projects
using pre-engineered kits or appliances utilizing a mature technology
with significant commercial operational history will require the least
information.
The type of information to be provided includes the qualifications
of the project team, agreements and permits, resource assessment,
preliminary design and engineering, project development schedules,
economic/feasibility modeling, equipment procurement, equipment
installation, operations and maintenance, and project decommissioning.
Energy efficiency improvement projects of more than $100,000 would be
required to conduct an energy audit. The specific inputs for each of
the ten technologies are identified in the proposed rule. The Agency
allows for the use of an abbreviated set of requirements for small
projects using a pre-engineered kits or complete integrated appliances
utilizing a mature technology.
Projects costing more than $100,000 will be required to employ the
services of a professional engineer (PE). The applicant or borrower may
be required to use the services of a PE for projects of $100,000 or
less, depending on the level of engineering required for the specific
project or if necessary to ensure public safety.
To facilitate the review of proposed projects, all technical
information provided will be required to follow a specific format,
which is set forth in Sec. 4280.111(d). However, supporting
information may be submitted in other formats as determined by the
applicant. Although not required in the proposed rule, the Agency
recommends that the narrative portion of the technical requirements
portion of the application for small solar and small wind projects be
less than 10 pages. For all proposed projects, the applicant will be
required to submit the original technical requirements report plus one
copy to the State Rural Development Office.

IV. Evaluation of Grant and Guaranteed Loan Applications

The Agency will evaluate each application and make a determination
as to whether the applicant or borrower is eligible, whether the
proposed project is eligible, and whether the proposed grant or
guaranteed loan or combined funding request complies with all
applicable statutes and regulations. The Agency will also evaluate the
technical feasibility of each grant, while the lender will make this
evaluation for guaranteed loans. The evaluation will be based on the
information provided by the applicant and on other sources of
information, such as recognized industry experts in the applicable
technology field, as necessary.
If the Agency determines that either the applicant or borrower or
the project is ineligible, the Agency will notify the applicant in
writing of the decision, reasons therefore, and any appeal rights, and
no further evaluation will take place.
If the Agency determines that the application is incomplete, the
Agency will return it to the applicant to provide the applicant the
opportunity to resubmit the application. The Agency will identify those
parts of the application that are incomplete. Upon receipt of a
complete application, the Agency will complete its evaluation of the
application and forward a copy of the technical requirements to outside
qualified industry experts for review.
The Agency will score each application in order to prioritize each
proposed project. The evaluation criteria that the Agency will use to
score renewable energy systems and energy efficiency improvement
projects are discussed in Sections IV.A and IV.B, respectively. The
rationale for the selection criteria and their point values is
presented in Sections IV.C.1 and IV.C.2, respectively.

A. Criteria for Applications for Renewable Energy Systems

1. Quantity of Energy Produced. Points are earned for the amount of
energy replaced or the amount of energy generated, not both.
i. Energy replacement. If the proposed renewable energy system is
intended primarily for self use by the agricultural producer or rural
small business and will provide energy replacement of greater than 75
percent, 20 points will be awarded; greater than 50 percent, but equal
to or less than 75 percent, 15 points will be awarded; or greater than
25 percent, but equal to or less than 50 percent, 10 points will be
awarded. The energy replacement should be determined by dividing the
estimated quantity of energy to be generated by at least the past 12
months' energy profile of the agricultural producer or rural small
business or anticipated energy use.
ii. Energy generation. If the proposed renewable energy system is
intended primarily for production of energy for sale, 20 points will be
awarded.
2. Environmental Benefits. If the purpose of the proposed renewable
energy system is to upgrade an existing facility or construct a new
facility required to meet applicable health or sanitary standards, 10
points will be awarded. The applicant must supply appropriate
documentation.

[[Page 59656]]

3. Commercial Availability. If the renewable energy system is
currently commercially available and replicable, an additional 10
points will be awarded.
4. Cost Effectiveness. If the proposed renewable energy system will
return the cost of the investment in 5 years or less, 25 points will be
awarded; up to 10 years, 20 points will be awarded; up to 15 years, 15
points will be awarded; or up to 20 years, 10 points will be awarded.
The estimated return on investment will be determined by dividing the
total project cost by the estimated projected net annual income and/or
energy savings of the renewable energy system.
5. Matching Funds (for Grants only). If the agricultural producer
or rural small business has provided eligible matching funds of over 90
percent, 15 points will be awarded; 85-90 percent, 10 points will be
awarded; or at least 80 and up to but not including 85 percent, 5
points will be awarded.
6. Management. If the renewable energy system will be monitored and
managed by a qualified third-party operator, an additional 10 points
will be awarded.
7. Small Agricultural Producer. If the applicant (for grants) or
borrower (for guaranteed loans) is an agricultural producer producing
agricultural products with a gross market value of less than $1 million
in the preceding year, an additional 10 points will be awarded.
8. Loan Rate (Guaranteed loans only). If the rate of the loan is
below the Prime Rate (as published in The Wall Street Journal) plus
1.75 percent, 5 points will be awarded. If the rate of the loan is
below the Prime Rate (as published in The Wall Street Journal) plus 1
percent, an additional 5 points will be awarded.

B. Criteria for Applications for Energy Efficiency Improvements

1. Energy savings. If the estimated energy expected to be saved, as
determined by an energy assessment or audit, will be 35 percent or
greater, 20 points will be awarded; 30 and up to but not including 35
percent, 15 points will be awarded; 25 and up to but not including 30
percent, 10 points will be awarded; or 20 and up to but not including
25 percent, 5 points will be awarded.
2. Cost Effectiveness. If the proposed energy efficiency
improvements will return the cost of the investment in 2 years or less,
25 points will be awarded; greater than 2 and up to and including 5
years, 20 points will be awarded; greater than 5 and up to and
including 9 years, 15 points will be awarded; or greater than 9 and up
to and including 11 years, 10 points will be awarded.
3. Matching Funds (for Grants only). If the agricultural producer
or rural small business has provided eligible matching funds of over 90
percent, 15 points will be awarded; 85-90 percent, 10 points will be
awarded; or 80 and up to but not including 85 percent, 5 points will be
awarded.
4. Small Agricultural Producer. If the applicant (for grants) or
borrower (for guaranteed loans) is an agricultural producer producing
agricultural products with a gross market value of less than $1 million
in the preceding year, an additional 10 points will be awarded.
5. Loan Rate (Guaranteed loans only). If the rate of the loan is
below the Prime Rate (as published in The Wall Street Journal) plus
1.75 percent, 5 points will be awarded. If the rate of the loan is
below the Prime Rate (as published in The Wall Street Journal) plus 1
percent an additional 5 points will be awarded.

C. Selection of Evaluation Criteria and Their Point Values

1. Selection of Evaluation Criteria. The 2002 Act requires the
Agency to consider the following factors in determining the amount of a
grant or loan to be awarded or approved under this program:
i. The type of renewable energy systems to be purchased;
ii. The estimated quantity of energy to be generated by the
renewable energy system;
iii. The expected environmental benefits of the renewable energy
system;
iv. The extent to which the renewable energy system is replicable.
v. The amount of energy savings expected to be derived from the
activity, as determined by an energy audit comparable to an energy
audit conducted under section 9004;
vi. The estimated length of time it would take for the energy
savings generated by the activity to equal the cost of the activity;
and
vii. Other factors as appropriate.
The Agency has incorporated Items C.1.ii through vi into the
evaluation criteria for renewable energy systems and Items C.1.v and vi
into the evaluation criteria for energy efficiency improvements (Items
C.1.i through iv are not applicable to energy efficiency improvements).
The Agency did not use Item C.1.i, the type of renewable energy system,
as an evaluation criteria because the rule specifies the types of
renewable energy systems that are approvable and no reason was found to
``favor'' one technology over another.
The Agency identified up to four additional factors that were
considered appropriate. These factors, the programs to which they are
applicable, and the reasons for their selection, are:
? Matching funds, which is applicable to both renewable
energy systems and energy efficiency improvements. One of the Agency's
goals for this program is to fund as many projects as possible. To
enable more projects to be funded, the Agency elected to include as a
criterion the amount of funds being requested. Those projects
requesting less assistance will be awarded more points than those
projects requesting more assistance. As there are no matching funds
associated with guaranteed loans, this criterion is applicable only to
grants.
? Management, which is applicable to renewable energy
systems only. One of the Agency's goals for this program is to fund
projects that have a high likelihood of success. One key component to a
successful project is the quality of the management team. Therefore,
the Agency believes it appropriate to include management as an
evaluation criterion for renewable energy projects. This criterion is
applicable for grants and guaranteed loans.
? Small agricultural producers, which is applicable to
renewable energy systems and energy efficiency improvements. The 2002
Act specifies the target market as rural small businesses and
agricultural producers, but does not limit the size associated with
agricultural producers. Another of the Agency's goals for this program
is to help ensure additional income to small agricultural producers,
thereby assisting in their economic sustainability. In order to help
meet this goal, the Agency has elected to include as an evaluation
criterion the size of the agricultural producer. This criterion is
applicable to grants and guaranteed loans.
? Loan rate, which is only appropriate for guaranteed loans,
because there are no loan rates associated with grants. The Agency is
adopting loan rate as a criterion because it is consistent with Agency
procedures under the B&I program and are applicable to this program.
2. Evaluation Criteria Point Values. The Agency has assigned point
values or point value ranges to each of the criterion identified above.
Generally, the Agency considers all of the evaluation criteria to be of
similar value for scoring applications and, therefore, most have
similar point values. It is possible, and likely, that many
applications will receive no points for some of the criteria because
the application does not meet the conditions for being awarded points.

[[Page 59657]]

For example, a guaranteed loan with an interest at the Prime Rate plus
2 percent would receive no points for the Loan Rate criterion.
The criterion that the Agency believes should have the highest
potential weight is cost effectiveness, because this criterion
evaluates the overall return on investment for each project. Point
values for this criterion range from 10 to 25.
After this criterion, the Agency believes the criterion for the
amount of energy generated or saved is the second most important
criterion because it reflects the basic goals of the program's
projects--to create new renewable energy systems and to improve energy
efficiency. Point values for this criterion range from 10 to 20 for
energy replacement and 20 points for energy generation for renewable
energy systems, and from 5 to 20 points for energy savings for energy
improvement projects.
The remaining criteria all have point values of about 10 points,
although some have the potential to be slightly higher (e.g., 15 points
under matching funds for those seeking the lowest percentage
assistance) or lower (e.g., 5 points under loan rate for higher
interest rates).

V. Processing and Servicing Grants and Guaranteed Loans

A. Processing and Servicing Grants

The Agency will prepare a Letter of Conditions, which establishes
conditions that must be understood and agreed to by the applicant
before the Agency will obligate any funds. The applicant must sign the
Letter of Intent to Meet Conditions, if they accept the conditions of
the grant. The grantee must sign a Grant Agreement (Form RD 4280-2) and
abide by all requirements contained in the Grant Agreement as well as
other requirements specified.
Grants will be serviced in accordance with 7 CFR part 1951, subpart
E and the Grant Agreement. The Agency is using 7 CFR part 1951, subpart
E, for this program because it is the Agency's regulations for
servicing Agency grant programs.

B. Processing and Servicing Guaranteed Loans

Under the proposed program, guaranteed loans will be processed and
serviced in essentially the same manner as guaranteed loans are
processed and serviced under the Agency's B&I program. The Agency
determined that the requirements in the B&I program for processing and
servicing guaranteed loans under the renewable energy systems and
energy efficiency improvements program are applicable and therefore
have essentially adopted the B&I requirements. Two exceptions to note
are:
? Under the proposed program, the Agency is not utilizing
the ``Certified Lender'' aspect of the B&I program because the Agency
believes that there are few, if any, lenders who would pre-qualify as
``certified'' lenders for making guaranteed loans for renewable energy
systems and energy efficiency improvements.
? Under the proposed program, the Agency is only allowing a
single note system and is not incorporating the multi-note system from
the B&I program. The Agency is doing this because the size of the loans
associated with the renewable energy systems and energy efficiency
improvements program are likely to be small enough that there is
minimal benefit to allowing multi-notes and the program becomes simpler
to implement without multi-notes.
The following paragraphs discuss the processing and servicing
requirements of the guaranteed loan program.
1. Eligible Lenders. Lenders eligible to make guaranteed loans
under this program are the ``traditional'' lenders, as identified under
the B&I guaranteed loan program. Such lenders include, but are not
limited to: Federal or State chartered banks, Farm Credit Banks, other
Farm Credit System institutions with direct lending authority, Banks
for Cooperatives, or Savings and Loan Associations. These lenders have
a broad range of experience and expertise to make, secure, service, and
collect loans. In addition, these lenders allow the Agency to implement
this program quickly because of the similarities between this program
and the B&I program.
2. Lender's Functions and Responsibilities. As under the B&I
program, lenders are responsible for properly implementing the
guaranteed loan program, making sound loans, and conducting all
servicing in a reasonable and prudent manner, in accordance with Agency
regulations and approvals, as required. Lender's responsibilities in
fulfilling this requirement include, but are not limited to:
i. Processing applications;
ii. Developing and maintaining loan files. Both the lender and
borrower must permit representatives of the Agency to inspect and make
copies of any records of the lender or borrower pertaining to the loan;
iii. Obtaining valid evidence of debt and collateral. Complete,
self, contained appraisals are required for loans of $600,000 or more.
Complete summary appraisals are required for loans less than $600,000.
Unconditional personal and corporate guarantees for those owning or
having a beneficial interest greater than 20 percent of the borrower
will be required where legally permissible;
iv. Supervising and monitoring project construction and ensuring
all projects are designed according to accepted practices;
v. Distributing loan funds;
vi. Conducting credit evaluations. For each proposed project,
lenders will be required to conduct a credit analysis in order to
determine credit quality of the borrower. Elements of credit quality to
be addressed include adequacy of equity, cash flow, collateral,
history, management, and the current status of the industry for which
credit is to be extended. In determining the adequacy of equity, the
lender must ensure that, for loans over $600,000, evidence of cash
equity injection in the project of not less than 25 percent of eligible
project costs is demonstrated and that, for loans of $600,000 or less,
evidence of cash equity injection in the project of not less than 15
percent of eligible project costs is demonstrated;
vii. Ensuring that borrowers furnish all required environmental
information and reporting any environmental issues to the Agency; and
viii. Closing loans. When loan closing plans are established, the
lender must notify the Agency in writing. At the same time, or
immediately after loan closing, the lender must provide to the Agency
the lender's certifications (as required by Sec. 4280.146), an
executed Form 4279-4, ``Lender's Agreement,'' an executed Form RD 1980-
19, ``Guaranteed Loan Closing Report,'' and appropriate guarantee fee,
copies of legal loan documents, and disbursement plan if working
capital is a purpose of the project. Note that, if a valid Lender's
Agreement already exists, the lender will not be required to execute a
new Lender's Agreement with each loan guarantee.
3. Loan Note Guarantee. A loan guarantee will be evidenced by Form
4279-5, ``Loan Note Guarantee,'' which is prepared and issued by the
Agency. The entire loan must be evidenced by one note, and the Agency
will issue only one Loan Note Guarantee. The lender may assign all or
part of the guaranteed portion of the loan to one or more holders.
The Agency will not issue the Loan Note Guarantee until the lender
certifies certain conditions have been met (e.g., all required
insurance is in effect, the loan has been properly closed). If the

[[Page 59658]]

Agency determines that it cannot execute the Loan Note Guarantee, the
Agency will inform the lender of the reasons and give the lender a
reasonable period within which to satisfy the objections. If the lender
satisfies the objections within the time allowed, the guarantee will be
issued.
Any changes in borrower ownership or organization prior to the
issuance of the Loan Note Guarantee must meet the eligibility
requirements of the program and be approved by the Agency loan approval
official.
Upon approval of a loan guarantee, the Agency will issue a
Conditional Commitment, which contains the conditions under which a
Loan Note Guarantee will be issued. If certain conditions cannot be
met, the lender and/or borrower may propose alternate conditions and
the Agency may negotiate with the lender and/or borrower regarding any
proposed changes to the Conditional Commitment.
4. Additional actions. This rule also provides procedures for
actions that may be made in connection to a guaranteed loan. Actions
covered include:
i. Sale or assignment. A lender may sell all or part of the
guaranteed portion of the loan on the secondary market or retain the
entire loan, provided the loan is not in default. Sale or assignment
cannot be made to the borrower or members of the borrower's immediate
families, officers, directors, stockholders, other owners, or a parent,
subsidiary or affiliate.
ii. Participation. The lender may obtain participation in the loan
under its normal operating procedures. However, the lender must retain
title to the note and retain its interest in the collateral.
iii. Minimum retention. The lender must hold in its own portfolio a
minimum of 5 percent of the total loan amount. The amount required to
be maintained must be of the unguaranteed portion of the loan and
cannot be participated to another. The lender may sell the remaining
amount of the unguaranteed portion of the loan only through
participation. Sale of this part of the unguaranteed portion, while
allowable, will not be guaranteed.
iv. Repurchase from holder. A holder may submit a written demand
for repurchase of the unpaid guaranteed portion of the loan to the
lender or to the Agency under certain conditions. The lender has the
option to repurchase. The lender must notify, in writing, the holder
and the Agency of its decision. If the lender declines, the Agency will
purchase from the holder the unpaid principal balance of the guaranteed
portion according to the conditions set forth in the regulations and
instruments.
Purchase by the Agency does not change, alter, or modify any of the
lender's obligations to the Agency arising from the loan or guarantee
nor does it waive any of the Agency's rights against the lender. The
Agency has the right to set-off against the lender all rights inuring
to the Agency as the holder of the instrument against the Agency's
obligation to the lender under the guarantee.
Alternatively to the holder requesting repurchase, if the lender
determines that repurchase of the guaranteed portion of the loan is
necessary to adequately service the loan, the holder must sell the
guaranteed portion of the loan to the lender for an amount equal to the
unpaid principal and interest on such portion less the lender's
servicing fee according to the requirements of the regulations and
instruments.
v. Transfer of lenders. The Agency may approve the substitution of
a new eligible lender provided there are no changes in the borrower's
ownership or control, loan purposes, or scope of project, and loan
conditions in the Conditional Commitment and the Loan Agreement remain
the same. The Agency will analyze the new lender's servicing
capability, eligibility, and experience prior approving the
substitution.
5. Servicing guaranteed loans. The lender is responsible for
servicing the entire loan and for taking all servicing actions that a
reasonable, prudent lender would perform in servicing its own portfolio
of loans that are not guaranteed. The lender must remain mortgagee and
secured party of record. The entire loan must be secured by the same
security with equal lien priority for the guaranteed and unguaranteed
portions of the loan.
i. Servicing. Servicing responsibilities include, but are not
limited to, the collection of payments, obtaining compliance with the
covenants and provisions in the Loan Agreement obtaining and analyzing
financial statements, checking on payment of taxes and insurance
premiums, and maintaining liens on collateral. Lenders will be
responsible for:
A. Submitting semiannual reports on the outstanding principal and
interest balance on each guaranteed loan using Form RD 1980-41,
``Guaranteed Loan Status Report.''
B. Notifying the Agency, in writing, of the loan's classification
or rating under its regulatory standards.
C. Attending meetings with the Agency to ascertain how the
guaranteed loan is being serviced and that the conditions and covenants
of the Loan Agreement are being enforced; and
D. Submitting annual financial statements and a written summary of
the lender's analysis and conclusions, including trends, strengths,
weaknesses, extraordinary transactions, and other indications of the
financial condition of the borrower.
The lender will not be allowed to make additional loans to the
borrower without first obtaining the prior written approval of the
Agency, even though such loans will not be guaranteed.
ii. Changes to the loan. This rule allows changes in the interest
rate, the release of collateral, subordination of lien position,
alterations of the loan instrument, and loan transfer and assumption.
A. Under certain circumstances, interest rates may be temporarily
or permanently reduced or increased, and fixed rates can be changed to
variable rates.
B. All releases of collateral with a value exceeding $100,000 must
be supported by a current appraisal. The remaining collateral must be
sufficient to provide for repayment of the Agency's guaranteed loan.
Sale or release of collateral must be based on an arm's-length
transaction as specified in the regulations and instruments.
C. The Agency will only consider a parity or junior lien position.
After the subordination, collateral must be adequate to secure the
loan.
D. Agency approval is required before the lender can alter or
approve changes to any loan instrument.
E. All transfers and assumptions must be approved by the Agency, in
writing, and must be to borrowers eligible under this program and any
new loan terms must be within the terms authorized by Sec. 4280.125.
Other transfer and assumption conditions include: loan terms can only
be changed with Agency approval and concurrence of any holder and the
transferor (including guarantors); loans to provide additional funds in
connection with a transfer and assumption will be considered as a new
loan application under Sec. 4280.128; the lender must make a complete
credit analysis, which is subject to Agency review and approval; and
document and ensure that the transaction can be and is properly and
legally transferred, and the conveyance instruments will be and are
filed, registered, or recorded as appropriate.
iii. Other servicing requirements. This rule also contains
requirements for:
A. Substitution of Lender. Agency written approval is required. The
Agency will not pay any loss or share

[[Page 59659]]

in any costs with a new lender unless a relationship is established
through a substitution of lender that has been approved by the Agency.
The proposed substitute lender must be an eligible lender under this
program, must be able to service the loan in accordance with the
original loan documents, and must agree in writing to acquire and must
acquire title to the unguaranteed portion of the loan held by the
original lender and to assume all original loan requirements, including
liabilities and servicing responsibilities.
B. Default by Borrower. This rule outlines options a borrower can
use to resolve a default. These include, but are not limited to,
deferment of principal, reamortization and rescheduling, and
liquidation.
C. Protective Advances. If a borrower cannot meet its obligations,
the lender will be required to make protective advances for the purpose
of preserving and protecting the collateral as required in the
regulations and instruments. Protective advances, however, cannot be
made in lieu of additional loans.
D. Liquidation. Liquidation of the loan may be considered by the
lender under certain circumstances and must be concurred with by the
Agency. Conditions and requirements associated with many aspects of
liquidation are specified in the regulations and instruments,
including, but not limited to, those for the decision to liquidate,
liquidation plans, accounting and reports, abandonment of collateral,
and settlements. The procedures and requirements are the same as those
associated with the B&I guaranteed loan program.
E. Bankruptcy. The lender will be required to protect the
guaranteed loan and all collateral securing the loan in bankruptcy
proceedings. This rule specifies procedures to be followed in
reorganization proceedings and in liquidation proceeding covering such
items, as applicable, as estimated loss, interest loss, and final loss
payments; payment application, overpayments; and protective advances.
F. Requirements After Project Construction. Once the project has
been constructed, the lender must provide the Agency periodic reports
from the borrower. For renewable energy systems, this report will be
required beginning the first full calendar year following the year in
which project construction was completed and continuing for 3 full
years. Information in this report will include the actual amount of
energy produced in BTUs, kilowatts, or similar energy equivalents; if
applicable, documentation that identified health and/or sanitation
problem has been solved; the annual income and/or energy savings of the
renewable energy system; a summary of the cost of operating and
maintaining the facility; a description of any maintenance or
operational problems associated with the facility; and recommendations
for development of future similar projects.
For energy efficiency improvement projects, this report will be
required beginning the first full calendar year following the year in
which project construction was completed and continuing for 2 full
years. This report will specify the actual amount of energy saved due
to the energy efficiency improvements.
G. Replacement of Documents. The Agency may issue a replacement
Loan Note Guarantee or Assignment Guarantee Agreement, which has been
lost, stolen, destroyed, mutilated, or defaced, to the lender or holder
upon receipt of an acceptable certificate of loss and an indemnity
bond. This rule identifies responsibilities for replacing documents and
the information required for their replacement.

C. Processing and Servicing Combined Funding

Where the Agency approves a combined funding request, the grant
portion will be processed and serviced according to the procedures
described in paragraph A for grants. The guaranteed loan portion will
be processed and serviced according to the procedures described in
paragraph B for guaranteed loans.

VI. Economic Analysis

To support the development of this rule, a benefit-cost analysis
was performed. In addition, an assessment of the potential impacts on
small businesses was made. The following paragraphs summarize the
benefit-cost analysis that was performed and the results. This summary
is then followed by a brief discussion of the benefit-cost analysis as
it applies to small businesses. Because this rule is not an
economically significant rule under Executive Order 12866, the economic
analysis conducted by USDA in support of this rule does not necessarily
conform to OMB Circular A-4, Regulatory Analysis.

A. Benefit-Cost Analysis

1. Scope of the Analysis. This analysis looks at the social
benefits and costs from the implementation of the proposed rule. The
social benefits examined are:
i. The value of the energy produced or saved, including green tag
values. ``Green tag'' refers to the positive environmental attributes
of renewable energy compared to ``dirtier'' generation power sources.
The green tag value refers to the additional amount an electricity
service provider will pay to ``green'' their energy supply or to the
additional amount a retail customer is willing to pay to purchase
``green'' power.
ii. The amount of carbon emissions reduced as the result of
electricity generation being displaced or reduced.
The social costs examined are the costs of participating in the
proposed program and the amount of USDA funds used in the program.
Other effects examined included:
i. The number of agricultural producers and rural small businesses
that are served by the program.
ii. The number of jobs created.
iii. The amount of electricity generated or saved (energy cost
savings).
iv. The amount of energy displaced (e.g., the number of barrels of
oil no longer needed).
2. Scenarios Analyzed. The analysis examines a baseline case and
several policy alternatives. In addition, the analysis varied several
of the parameters to assess the sensitivity of the results. The basic
inputs into the analysis are:
i. The total amount of program funding in FYs 2003 through 2007;
ii. The amount of program funding obligated for grants, guaranteed
loans, and direct loans;
iii. The amount of program funding for renewable energy projects
and for energy efficiency improvements;
iv. The subsidy rate;
v. The discount rate; and
vi. The useful life of projects.
3. Results--Baseline Case
Table 1 summarizes the social benefits and costs of the proposed
rule.

[[Page 59660]]

Table 1.--Summary of Social Benefits and Costs by FY for Baseline Case
[Million dollars]
----------------------------------------------------------------------------------------------------------------
FY
Item --------------------------------------------------
2003 2004 2005 2006 2007
----------------------------------------------------------------------------------------------------------------
Social Costs:
Participation............................................ 2.4 2.4 2.4 2.4 2.4
USDA Funds............................................... 19.8 15.7 20.0 20.0 20.0
Social Benefits:
Green Tag Value.......................................... 1.2 3.5 6.8 6.9 7.1
Carbon Emission Reduction (million tons per year)........ 0.055 0.22 0.44 0.44 0.44
----------------------------------------------------------------------------------------------------------------

As seen in Table 1, the annual estimated social cost (in year 2000
dollars) for each of the five FYs ranges from $18 to $22.4 million. In
return, the annual estimated social benefits (in year 2000 dollars) of
the green tag values for each of the five FYs ranges from $1 million to
$7 million, while carbon emission reductions range from 55,000 tons in
FY 2003 up to 440,000 tons in the last three FYs.
In addition to the social benefits, the proposed program is also
projected to provide other benefits, as noted earlier. These other
benefits are summarized in Table 2 for each of the five FYs. Once the
program is fully implemented, approximately 300 agricultural producers
and rural small businesses are estimated to participate in the program.
The projects that these participants would implement are estimated to
create approximately 1,800 jobs per year, provide energy cost savings
up to $131 million in FY 2007, and save approximately 3 million barrels
of oil each year.

Table 2.--Other Benefits--Baseline Case
----------------------------------------------------------------------------------------------------------------
FY
Item Units -----------------------------------------------------------
2003 2004 2005 2006 2007
----------------------------------------------------------------------------------------------------------------
Agricultural producers and rural Number............ 113 238 300 300 300
small businesses served.
Jobs Created.................... Number of full 243 887 1,770 1,830 1,890
time equivalents.
Energy Cost Savings............. Million dollars... 8.4 35.6 78.4 108.6 131.7
Energy Displaced................ Million barrels... 0.5 1.7 3.3 3.1 3.1
----------------------------------------------------------------------------------------------------------------

4. Results--Other Scenarios. As noted earlier, several alternative
policy scenarios and sensitivity analysis scenarios were examined to
evaluate the effect of variations in several of the parameters. The
following paragraphs summarize the effects of three of these other
scenarios on green tag values. For more details, please refer to the
complete analysis document.
i. Grants Only. Under this alternative policy scenario, the Agency
would only provide grants in FY 2004 through FY 2007; no guaranteed or
direct loans would be made. The effect under this scenario is estimated
to be a reduction in green tag benefits of over 75 percent for both the
five year period and the useful life of the projects.
ii. Change in Subsidy Rate. A 1 percent drop in the subsidy rate
(from 5.18 percent to 4.18 percent) in FY 2005 through FY 2007 is
estimated to increase green tag benefits by over 30 percent. On the
other hand, a 1 percent increase in the subsidy rate (to 6.18 percent)
is estimated to result in a 10 percent decrease in green tag benefits.
iii. Change in Discount Rate. A decrease in the discount rate from
7 percent to 3 percent increases the present value of the green tag
benefits by about 16 percent over the five year period and by over 55
percent over the useful life of the projects.

B. Small Businesses

This program is targeted to agricultural producers and rural small
businesses. Based on data compiled by the USDA Economic Research
Service and the Small Business Administration, over 3 million entities
would be eligible for this program. The vast majority of agricultural
producers also fit the definition of small businesses. Excluding the
small percentage of agricultural producers that do not qualify as small
entities, the almost 3 million entities would qualify as small
businesses under this program. Given this situation, the benefit-cost
analysis discussed above can be considered as the relevant analysis for
analyzing the impacts of the proposed program on small businesses.

VII. Administrative Requirements

A. Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995, Rural
Development will seek OMB approval of the reporting and recordkeeping
requirements contained in this proposed rule. Rural Development is
committed to compliance with the Government Paperwork Elimination Act,
which requires Government agencies, in general, to provide the public
the option of submitting information or transacting business
electronically to the maximum extent possible.
The following estimates are based on the average over the first
three years the program is in place.
Estimate of Burden: Public reporting burden for this collection of
information is estimated to average 6 hours per response.
Respondents: Agricultural producers and rural small businesses.
Estimated Number of Respondents: 388.
Estimated Number of Responses per Respondent: 14.
Estimated Number of Responses: 5,335.
Estimated Total Annual Burden on Respondents: 32,149.
Type of Request: New collection.
Abstract: The Farm Security and Rural Investment Act of 2002 (2002
Act) established the Renewable Energy Systems and Energy Efficiency
Improvements Program under Title IX, Section 9006. The 2002 Act
requires the

[[Page 59661]]

Secretary of Agriculture to create a program to make grants, loan
guarantees, and direct loans to agricultural producers and rural small
businesses to purchase renewable energy systems and make energy
efficiency improvements. The program will help agricultural producers
and rural small businesses to reduce energy costs and consumption and
help meet the nation's energy needs.
The information requirements contained in this proposed rule
require information from grant, guaranteed loan, and direct loan
applicants and borrowers. The information is vital for Rural
Development to make wise decisions regarding the eligibility of
applicants and borrowers, establish selection priorities among
competing applicants, ensure compliance with applicable Rural
Development regulations, and effectively monitor the grantees and
borrowers activities to protect the Government's financial interest and
ensure that funds obtained from the Government are use appropriately.
This collection of information is necessary in order to implement the
grant, guaranteed loan, and direct loan program for Renewable Energy
Systems and Energy Efficiency Improvements established under the 2002
Act.
Copies of this information collection can be obtained from Cheryl
Thompson, Regulations and Paperwork Management Burden at (202) 692-
0043.
Comments are invited on (1) 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; (2) 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; (3)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (4) 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: Cheryl Thompson, 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 notice will be summarized and included in the request
for OMB approval. All comments will also become a matter of public
record.

B. Intergovernmental Review

The Rural Development Grant, Guaranteed Loan, and Direct Loan
Program is subject to the provisions of Executive Order 12372, which
requires intergovernmental consultation with State and local officials.
Rural Development will conduct intergovernmental consultation in the
manner delineated in RD Instruction 1940-J, ``Intergovernmental Review
of Rural Development Programs and Activities,'' and in the notice
related to 7 CFR part 3015, subpart V.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) requires Federal agencies to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedures
Act or any other statute unless the Agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. Small entities include small businesses, small organizations,
and small governments. The major purpose of the RFA is to keep
paperwork and regulatory requirements from getting out of proportion to
the scale of the entities being regulated, without compromising the
objectives of the Act.
For purposes of assessing the impacts of today's proposed rule on
small entities, small entity is defined as: (1) A small business
according to the Small Business Administration (SBA) size standards by
NAICS code ranging from 500 to 1,000 employees; (2) a small
governmental jurisdiction that is a government of a city, county, town,
school district or special district with a population of less than
50,000; and (3) a small organization that is any not-for-profit
enterprise that is independently owned and operated and is not dominant
in its field.
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
602), the undersigned has determined and certified by signature of this
document that this proposed rule would not have a significant economic
impact on a substantial number of small entities. This action impacts
those who choose to participate in the grant, guaranteed loan, and
direct loan program and requires only minimum information/paperwork to
evaluate an application. Therefore, a regulatory flexibility analysis
was not performed.
Although a regulatory flexibility analysis was not performed, the
Agency conducted a benefit-cost analysis and an initial regulatory
flexibility analysis (IRFA) that examines the impact on small entities.
The benefit-cost analysis and the IRFA (referred to as the Unified
Analysis) are available for review in the docket and the results are
summarized below.
The program targets rural small businesses plus agricultural
producers. The vast majority of these agricultural producers qualify as
small businesses too. Based on data compiled by the USDA Economic
Research Service and the SBA, there are approximately 3 million of the
entities who would qualify under this program.
The benefit-cost analysis reflects a large net beneficial impact.
The expenditure of slightly less than $100 million in nominal USDA
funds over five years (approximately $20 million per year) from FY 2003
through FY 2007 represents a present value cost in constant year 2000
dollars of approximately $71 million. This sum in turn supports total
program funding (USDA funds and private funds) of over $1 billion. The
cumulative cash flow benefits through 2007 are $360 million in
comparison to the $71 million cost. The cash flow benefits based upon
life cycle analysis are $1.5 billion, again based upon this $71 million
cost.
Given that almost the entire program is directed at small
businesses, the burden analysis is a representative measure for small
businesses of the reporting, recordkeeping, and other compliance costs.
The burden analysis estimated an annual (three-year average) cost of
$1.9 million for an estimated 388 applicants per year.
As noted above, the proposed rule is directed almost entirely at
small businesses. Therefore, the benefit-cost analysis represents the
results as it affects small businesses.

D. Civil Justice Reform

This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this rule: (1) All State and
local laws and regulations that are in conflict with this proposed rule
will be preempted, (2) no retroactive effect will be given to this
rule, and (3) administrative proceedings in accordance with 7 CFR part
11 must be exhausted before bringing suit in court challenging action
taken under this rule, unless those regulations specifically allow
bringing suit at an earlier time.

E. National Environmental Policy Act

This document has been reviewed in accordance with 7 CFR part 1940,
subpart G. Rural Development has determined that this action does not
constitute a major Federal action significantly affecting the quality
of the

[[Page 59662]]

human environment, and, in accordance with the National Environmental
Policy Act of 1969, Pub.L 91-190, an Environmental Impact Statement is
not required.

F. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA,
Rural Development must prepare a written statement, including a
benefit-cost analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local or tribal
governments, in the aggregate, or to the private sector of $100 million
or more in any 1 year. When such a statement is needed for a rule,
section 205 of UMRA generally requires Rural Development to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, more cost-effective, or least burdensome alternative
that achieves the objectives of the rule.
This 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 UMRA.

G. Executive Order 13132, Federalism

It has been determined under Executive Order 13132, Federalism,
that this proposed rule does not have sufficient federalism
implications to warrant the preparation of a Federalism assessment. The
provisions contained in this 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 levels of
government.

H. Executive Order 12866, Regulatory Planning and Review

Under Executive Order 12866, this proposed rule has been determined
to be ``significant'' and, therefore, has been reviewed by the Office
of Management and Budget (OMB). The Order defines ``significant''
regulatory action as one that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety in State, local or tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.

List of Subjects in 7 CFR Part 4280

Business and industry, Direct loan programs, Economic development,
Energy, Energy efficiency improvements, Grant programs, Guaranteed loan
programs, Renewable energy systems, Rural areas.

For the reasons stated in the preamble, title 7, chapter XLII of
the Code of Federal Regulations is amended as follows:

CHAPTER XLII--RURAL BUSINESS--COOPERATIVE SERVICE AND RURAL UTILITIES
SERVICE, DEPARTMENT OF AGRICULTURE

1. Part 4280 is added to read as follows:

PART 4280--LOANS AND GRANTS

Subpart A--[Reserved]
Subpart B--Renewable Energy Systems and Energy Efficiency Improvements
Grant, Guaranteed Loan, and Direct Loan Program
Sec.
4280.101 Purpose.
4280.102 General.
4280.103 Definitions.
4280.104 Exception authority.
4280.105 Appeals.
4280.106 Conflict of interest.

Grants

4280.107 Applicant eligibility.
4280.108 Project eligibility.
4280.109 Grant funding.
4280.110 [Reserved]
4280.111 Application and documentation.
4280.112 Evaluation of grant applications.
4280.113 Insurance requirements.
4280.114 Laws that contain other compliance requirements.
4280.115 Construction planning and performing development.
4280.116 Grantee requirements.
4280.117 Servicing grants.
4280.118-.120 [Reserved]

Guaranteed Loans

4280.121 Borrower eligibility.
4280.122 Project eligibility.
4280.123 Guaranteed loan funding.
4280.124 Interest rates.
4280.125 Terms of loan.
4280.126 Guarantee/annual renewal fee percentages.
4280.127 [Reserved]
4280.128 Application and documentation.
4280.129 Evaluation of guaranteed loan applications.
4280.130 Eligible lenders.
4280.131 Lender's functions and responsibilities.
4280.132 Access to records.
4280.133 Conditions of guarantee.
4280.134 Sale or assignment of guaranteed loan.
4280.135 Participation.
4280.136 Minimum retention.
4280.137 Repurchase from holder.
4280.138 Replacement of document.
4280.139 Credit quality.
4280.140 Financial statements.
4280.141 Appraisals.
4280.142 Personal and corporate guarantees.
4280.143 Loan approval and obligation of funds.
4280.144 Transfer of lenders.
4280.145 Changes in borrower.
4280.146 Conditions precedent to issuance of Loan Note Guarantee.
4280.147 Issuance of the guarantee.
4280.148 Refusal to execute Loan Note Guarantee.
4280.149 Requirements after project construction.
4280.150 Insurance requirements.
4280.151 Laws that contain other compliance requirements.
4280.152 Servicing guaranteed loans.
4280.153 Substitution of lender.
4280.154 Default by borrower.
4280.155 Protective advances.
4280.156 Liquidation.
4280.157 Determination of loss and payment.
4280.158 Future recovery.
4280.159 Bankruptcy.
4280.160 Termination of guarantee.

Direct Loans

4280.161 Direct Loan Process
4280.162-.192 [Reserved]

Combined Funding

4280.193 Combined funding.
4280.194-.199 [Reserved]
4280.200 OMB control number. [Reserved]

Authority: 7 U.S.C. 8106.

Subpart A--[Reserved]

Subpart B--Renewable Energy Systems and Energy Efficiency
Improvements Grant, Guaranteed Loan, and Direct Loan Program

Sec. 4280.101 Purpose.

This subpart contains a program of procedures and requirements for
making grants and guaranteed loans, or a combination thereof, to
agricultural producers and rural small businesses for the purchase of
renewable energy systems and energy efficiency improvements in rural
areas. This subpart also presents the process that will be used to
provide funds for direct loans.

Sec. 4280.102 General.

Sections 4280.103 through 4280.105 contain definitions, exception
authority,

[[Page 59663]]

and appeals, which are applicable to all of the funding programs under
this subpart. Sections 4280.107 through 4280.117 contain the procedures
and requirements for obtaining a grant, and processing and servicing of
grants by the Agency. Sections 4280.121 through 4280.151 contain the
procedures and requirements for making and processing loans guaranteed
by the Agency. Sections 4280.152 through 4280.160 contain the
requirements for servicing loans guaranteed by the Agency. These
requirements apply to lenders, holders, and other parties involved in
making, guaranteeing, holding, servicing, or liquidating such loans.
Section 4280.161 presents the process the Agency will use to make
direct loans available. Section 4280.193 contains the requirements for
obtaining and servicing a combined grant and guaranteed loan.

Sec. 4280.103 Definitions.

The following definitions are applicable to this subpart.
Agency. Rural Development or successor Agency assigned by the
Secretary of Agriculture to administer the program.
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.
Annual receipts. The total income or gross income (sole
proprietorship) plus cost of goods sold.
Applicant. For grant programs, the applicant is the agricultural
producer or rural small business that is seeking a grant under this
subpart. For guaranteed loan programs, the applicant is the lender that
is seeking a loan guarantee under this subpart.
Arm's-length transaction. The sale, release, or disposition of
assets in which the title to the property passes to a ready, willing,
and able disinterested third party that is not affiliated with or
related to and has no security, monetary or stockholder interest in the
borrower or transferor at the time of the transaction.
Assignment guarantee agreement. Form 4279-6. 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.
Assumption of debt. The signed agreement by one party to legally
bind itself to pay the debt incurred by another.
Biogas. Biomass converted to gaseous fuels.
Biomass. Any organic material that is available on a renewable or
recurring basis including agricultural crops; trees grown for energy
production; wood waste and wood residues; plants, including aquatic
plants and grasses; fibers; animal waste and other waste materials; and
fats, oils, and greases, including recycled fats, oils, and greases. It
does not include paper that is commonly recycled or unsegregated solid
waste.
Borrower. All parties liable for the loan except for guarantors.
Capacity. The load that a power generation unit or other electrical
apparatus or heating unit is rated by the manufacturer to be able to
meet or supply.
Commercially available. Systems that have a proven operating
history and an established design, installation, equipment, and service
industry.
Conditional commitment (Form 4279-3). 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.
Default. The condition where a borrower is not in compliance with
one or more loan covenants as stipulated in the Letter of Conditions,
Conditional Commitment, or Loan Agreement.
Deficiency balance. The balance remaining on a loan after all
collateral has been liquidated.
Deficiency judgment. A monetary judgment rendered by a court of
competent jurisdiction after foreclosure and liquidation of all
collateral securing the loan.
Delinquent loan. A loan where a scheduled loan payment has not been
received within the due date and any grace period as stipulated in the
promissory note and loan agreement.
Demonstrated financial need. The demonstration by an applicant that
the applicant is unable to finance the project from its own resources
or other funding sources without grant assistance.
Eligible project cost. The total project costs that are eligible to
be paid with grant and/or guaranteed loan funds.
Energy audit. A written report by an independent, qualified entity
or individual that documents current energy usage, recommended
improvements and their costs, energy savings from these improvements,
dollars saved per year, and the weighted-average payback period in
years.
Energy efficiency improvement. Improvements to a facility or
process that reduce energy consumption.
Existing business. A business that has completed at least one full
business cycle.
Existing lender debt. A debt not guaranteed by the Agency, but owed
by a borrower to the same lender that is applying for or has received
the Agency guarantee.
Fair market value. The price that could reasonably be expected for
an asset in an arm's-length transaction between a willing buyer and a
willing seller under ordinary economic and business conditions.
Fair market value of equity in real property. Fair market value of
real property as established by appraisal; less the outstanding balance
of any mortgages, liens, or enhancements.
Financial feasibility. The ability of the business to achieve the
projected income and cash flow. The concept includes assessments of the
cost-accounting system, the availability of short-term credit for
seasonal business, and the adequacy of raw materials and supplies,
where necessary.
Grant close-out. When all required work is completed,
administrative actions relating to the completion of work and
expenditures of funds have been accomplished, and the Agency accepts
final expenditure information.
Holder. A person or entity, other than the lender, who owns all or
part of the guaranteed portion of the loan, with no servicing
responsibilities.
In-kind contributions. Applicant or third-party real or personal
property or services benefiting the Federally assisted project or
program that are contributed by the applicant or a third party. The
identifiable value of goods and services must directly benefit the
project.
Interconnection agreement. The terms and conditions governing the
interconnection and parallel operation of the grantee's or borrower's
electric generation equipment and the utility's electric power system.
Interim financing. A temporary or short-term loan made with the
clear intent that it will be repaid through another loan. Interim
financing is frequently used to pay construction and other costs
associated with a planned project, with permanent financing to be
obtained after project completion.
Lender. The organization making, servicing, and collecting the loan
that is guaranteed under the provisions of this subpart.
Lender's agreement, Form 4279-4. Agreement between the Agency and
the lender setting forth the lender's loan responsibilities when the
Loan Note Guaranteed is issued.

[[Page 59664]]

Loan agreement. For guaranteed loans, the agreement between the
borrower and lender containing the terms and conditions of the
guaranteed loan and the responsibilities of the borrower and lender.
Loan Note Guarantee, Form 4279-5. The terms and conditions of the
guarantee issued and executed by the Agency.
Loan-to-value. The ratio of the dollar amount of a loan to the
dollar value of the discounted collateral pledged as security for the
loan.
Matching funds. The funds needed to pay for the portion of the
eligible project costs not funded or guaranteed by the Agency through a
grant or guaranteed loan under this program. Matching funds can not
include grants from any Federal grant program.
Negligent servicing. The failure to perform those services which a
reasonable, prudent lender would perform in servicing (including
liquidation of) its own portfolio of loans that are not guaranteed. The
term includes not only the concept of a failure to act, but also not
acting in a timely manner, or acting in a manner contrary to the manner
in which a reasonable, prudent lender would act.
Nonprogram (NP) loan. An NP loan exists when credit is extended to
an ineligible applicant and/or transferee in connection with a loan
assumption or sale of inventory property; in cases of unauthorized
assistance; or a borrower whose legal organization has changed,
resulting in the borrower being ineligible for program benefits.
Other waste materials. Inorganic or organic materials that are used
as inputs for energy production or are by-products of the energy
production process.
Parity. A lien position whereby two or more lenders share a
security interest of equal priority in collateral. In the event of
default, each lender will be affected on a pro rata basis.
Participation. Sale of an interest in a loan by the lender wherein
the lender retains the note, collateral securing the note, and all
responsibility for loan servicing and liquidation.
Power purchase arrangement. The terms and conditions governing the
sale and transportation of electricity produced by the grantee or
borrower to another party.
Pre-commercial technology. Technologies that have emerged through
the research and development process and have technical and economic
potential for application in commercial energy markets but are not yet
commercially available.
Promissory Note. Evidence of debt. A note that a loan recipient
signs promising to pay a specific amount of money at a stated time or
on demand.
Renewable energy. Energy derived from a wind, solar, biomass, or
geothermal source; or hydrogen derived from biomass or water using
wind, solar, or geothermal energy sources.
Renewable energy system. A process that produces energy from a
renewable energy source.
Rural. Any area other than a city or town that has a population of
greater than 50,000 inhabitants and the urbanized area contiguous and
adjacent to such a city or town according to the latest decennial
census of the United States.
Small business. A private entity including a sole proprietorship,
partnership, corporation, and a cooperative (including a cooperative
qualified under section 501(c)(12) of the Internal Revenue Code) but
excluding any private entity formed solely for a charitable purpose,
and which private entity is considered a small business concern in
accordance with the Small Business Administration's (SBA) Small
Business Size Standards by North American Industry Classification
System (NAICS) Industry found in 13 CFR part 121; provided the entity
has 500 or fewer employees and $20 million or less in total annual
receipts including all parent, affiliate, or subsidiary entities at
other locations.
Spreadsheet. A table containing data from a series of financial
statements of a business over a period of time. Financial statement
analysis normally contains spreadsheets for balance sheet items and
income statements and may include funds flow statement data and
commonly used ratios. The spreadsheets enable a reviewer to easily scan
the data, spot trends, and make comparisons.
State. Any of the 50 States, the Commonwealth of Puerto Rico, the
Virgin Islands of the United States, Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands, the Republic of Palau,
the Federated States of Micronesia, and the Republic of the Marshall
Islands.
Subordination. An agreement whereby lien priorities on certain
assets pledged to secure payment of a loan will be reduced to a
position junior to, or on parity with, the lien position of another
loan in order for the borrower to obtain additional financing, not
guaranteed by the Agency, from the lender or a third party.
Total project cost. The sum of all costs associated with a
completed, operational project.

Sec. 4280.104 Exception authority.

The Administrator may, in individual cases, make an exception to
any requirement or provision of this subpart that is not inconsistent
with any authorizing statute or applicable law if the Administrator
determines that application of the requirement or provision would
adversely affect the USDA's interest.

Sec. 4280.105 Appeals.

Only the grantee, borrower, lender, or holder can appeal an Agency
decision made under this subpart. In cases where the Agency has denied
or reduced the amount of final loss payment to the lender, the adverse
decision may be appealed by the lender only. An adverse decision that
only impacts the holder may be appealed by the holder only. A decision
by a lender adverse to the interest of the borrower is not a decision
by the Agency, whether or not concurred in by the Agency. Appeals will
be handled in accordance with 7 CFR part 11. Any party adversely
affected by an Agency decision under this subpart may request a
determination of appealability from the Director, National Appeals
Division, USDA, within 30 days of the adverse decision.

Sec. 4280.106 Conflict of interest.

No conflict of interest or appearance of conflict of interest will
be allowed. For purposes of this subpart, conflict of interest
includes, but is not limited to, distribution or payment to an
individual owner, partner, stockholder, or beneficiary of the applicant
or borrower or a close relative of such an individual when such
individual will retain any portion of the ownership of the applicant or
borrower.

Grants

Sec. 4280.107 Applicant eligibility.

To receive a grant under this subpart, an applicant must meet each
of the criteria, as applicable, as set forth in paragraphs (a) through
(f) of this section.
(a) The applicant or borrower must be an agricultural producer or
rural small business.
(b) Individuals must be citizens of the United States (U.S.) or
reside in the U.S. after being legally admitted for permanent
residence.
(c) Entities must be at least 51 percent owned, directly or
indirectly, by individuals who are either citizens of the U.S. or
reside in the U.S. after being legally admitted for permanent
residence.
(d) If the applicant or borrower or an owner has an outstanding
judgment obtained by the United States in a

[[Page 59665]]

Federal Court (other than in the United States Tax Court), is
delinquent in the payment of Federal income taxes, or is delinquent on
a Federal debt, the applicant or borrower is not eligible to receive a
grant or guaranteed loan until the judgment is paid in full or
otherwise satisfied or the delinquency is resolved.
(e) In the case of an applicant or borrower that is applying as a
rural small business, the business headquarters must be in a rural area
and the project to be funded also must be in a rural area.
(f) The applicant must have demonstrated financial need.

Sec. 4280.108 Project eligibility.

For a project to be eligible to receive a grant under this subpart,
the proposed project must meet each of the criteria, as applicable, in
paragraphs (a) through (f) of this section.
(a) The project must be for the purchase of a renewable energy
system or to make energy efficiency improvements.
(b) The project must be for a pre-commercial or commercially
available and replicable technology.
(c) The project must be technically feasible, as determined using
the procedures specified in Sec. 4280.112(c).
(d) The project must be located in a rural area.
(e) The applicant (for grants) or borrower (for guaranteed loans)
must be the owner of the system and control the operation and
maintenance of the proposed project. A qualified third-party operator
may be used to manage the operation and/or maintenance of the proposed
project.
(f) All projects financed under this subpart must be based on
satisfactory sources of revenues in an amount sufficient to provide for
the operation and maintenance of the system or project.

Sec. 4280.109 Grant funding.

(a) The amount of grant funds that will be made available to an
eligible project under this subpart will not exceed 25 percent of
eligible project costs.
(1) The only eligible project costs are those costs associated with
the items identified in paragraphs (a)(1)(i) through (ix) of this
section, as long as the items are an integral and necessary part of the
total project:
(i) Post-application purchase and installation of equipment, except
agricultural tillage equipment and vehicles;
(ii) Post-application construction or project improvements, except
residential;
(iii) Energy audits or assessments;
(iv) Permit fees;
(v) Professional service fees, except for application preparation;
(vi) Feasibility studies;
(vii) Business plans;
(viii) Retrofitting; and
(ix) Construction of a new facility only when the facility is used
for the same purpose, is approximately the same size, and based on the
energy audit will provide more energy savings than improving an
existing facility. Only costs identified in the energy audit for energy
efficiency projects are allowed.
(2) The applicant must provide at least 75 percent of eligible
project costs to complete the project. Applicant in-kind and other
Federal grant awards cannot be used to meet the matching fund
requirement. However, the Agency will allow third-party, in-kind
contributions to be used in meeting the matching fund requirement.
Third-party, in-kind contributions will be limited to 10 percent of the
matching fund requirement of the grantee. The Agency will advise if the
third-party, in-kind contributions are acceptable in accordance with 7
CFR part 3015.
(b) The maximum amount of grant assistance to one individual or
entity will not exceed $750,000.
(c) Applications for renewable energy systems must be for a minimum
grant request of $2,500, but no more than $500,000.
(d) Applications for energy efficiency improvements must be for a
minimum grant request of $2,500, but no more than $250,000.

Sec. 4280.110 [Reserved]

Sec. 4280.111 Application and documentation.

The following requirements apply to all grant applications under
this subpart.
(a) Application. Separate applications must be submitted for
renewable energy system and energy efficiency improvement projects. For
each type of project, only one application may be submitted.
(1) Table of Contents. The first item in each application will be a
detailed Table of Contents in the order presented below. Include page
numbers for each component of the proposal. Begin pagination
immediately following the Table of Contents.
(2) Project Summary. A summary of the project proposal, not to
exceed one page, must include the following: Title of the project,
description of the project including goals and tasks to be
accomplished, names of the individuals responsible for conducting and
completing the tasks, and the expected timeframes for completing all
tasks, including an operational date. The applicant must also clearly
state whether the application is for the purchase of a renewable energy
system or to make energy efficiency improvements.
(3) Eligibility. Each applicant must describe how the grantee or
borrower meets the requirements of Sec. 4280.107.
(4) Agricultural producer/rural small business information. All
applications must contain the following information on the agricultural
producer or rural small business seeking funds under this program:
(i) Business/farm/ranch operation.
(A) A description of the ownership, including a list of individuals
and/or entities with ownership interest, names of any corporate
parents, affiliates, and subsidiaries, as well as a description of the
relationship, including products, between these entities.
(B) A description of the operation.
(ii) Management. The resume of key managers focusing on relevant
business experience. If a third-party operator is used to monitor and
manage the project, provide a discussion on the benefits and burdens of
such monitoring and management as well as the qualifications of the
third party.
(iii) Financial Information.
(A) Explanation of demonstrated financial need.
(B) For rural small businesses, a current balance sheet and income
statement prepared in accordance with generally accepted accounting
principles (GAAP) and dated within 90 days of the application.
Agricultural producers should present financial information in the
format that is generally required by commercial agriculture lenders.
Financial information is required on the total operations of the
agricultural producer/rural small business and its parent, subsidiary,
or affiliates at other locations.
(C) Rural small businesses must provide sufficient information to
determine total annual receipts of the business and any parent,
subsidiary, or affiliates at other locations. Voluntarily providing tax
returns is one means of satisfying this requirement. Information
provided must be sufficient for the Agency to make a determination of
total income and cost of goods sold by the business.
(D) If available, historical financial statements prepared in
accordance with GAAP for the past 3 years, including income statements
and balance sheets. If agricultural producers are unable to

[[Page 59666]]

present this information in accordance with GAAP, they may instead
present financial information for the past 3 years in the format that
is generally required by commercial agriculture lenders.
(E) Pro forma balance sheet at startup of the agricultural
producer's/rural small business' business that reflects the use of the
loan proceeds or grant award; and 3 additional years, indicating the
necessary start-up capital, operating capital, and short-term credit;
and projected cash flow and income statements for 3 years supported by
a list of assumptions showing the basis for the projections.
(F) For agricultural producers, identify the gross market value of
your agricultural products for the calendar year preceding the year in
which you submit your application.
(iv) Production information for renewable energy system projects.
(A) Provide a statement as to whether the technology to be employed
by the facility is commercially or pre-commercially available and
replicable. Provide information to support this position.
(B) Describe the availability of materials, labor, and equipment
for the facility.
(v) Business market information for renewable energy system
projects.
(A) Demand. Identify the demand (past, present, and future) for the
product and/or service and who will buy the product and/or service.
(B) Supply. Identify the supply (past, present, and future) of the
product and/or service and your competitors.
(C) Market niche. Given the trends in demand and supply, describe
how the business will be able to sell enough of its product/service to
be profitable.
(vi) A Dun and Bradstreet Universal Numbering System (DUNS) number.
(b) Forms, certifications, and agreements. Each application
submitted under paragraph (a) of this section must contain, as
applicable, the items identified in paragraphs (b)(1) through (15) of
this section.
(1) Form SF-424, ``Application for Federal Assistance.''
(2) Form SF-424C, ``Budget Information--Construction Programs.''
Each cost classification category listed on the form must be filled out
if it applies to your project. Any cost category item not listed on the
form that applies to your project can be put under the miscellaneous
category. Attach a separate sheet if you are using the miscellaneous
category and list each miscellaneous cost by not allowable and
allowable costs in the same format as on Form 424C, ``Budget
Information--Construction Programs.'' All project costs must be
categorized as either allowable or not allowable.
(3) Form SF-424D, ``Assurances--Construction Programs.''
(4) AD-1049, ``Certification Regarding Drug-Free Workplace
Requirements.''
(5) AD-1048, ``Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion--Lower Tiered Covered
Transactions.''
(6) A copy of a bank statement or a copy of the confirmed funding
commitment from the funding source. Matching funds must be included on
the Application for Federal Assistance (SF 424) and Budget
Information--Construction Programs (SF 424C).
(7) Exhibit A-1 of RD Instruction 1940-Q, ``Certification for
Contracts, Grants and Loans,'' required by Section 319 of Public Law
101-121 if the grant exceeds $100,000 or Exhibit A-2 of RD Instruction
1940-Q, ``Statement for Loan Guarantees,'' required by Section 319 of
Public Law 101-121 if the guaranteed loan exceeds $150,000.
(8) If the applicant or borrower has made or agreed to make payment
using funds other than Federal appropriated funds to influence or
attempt to influence a decision in connection with the application,
Form SF-LLL, ``Disclosure of Lobbying Activities,'' must be completed.
(9) AD-1047, ``Certification Regarding Debarment, Suspension, and
Other Responsibility Matters--Primary Covered Transactions.''
(10) Form RD 400-1, ``Equal Opportunity Agreement.''
(11) Form RD 400-4, ``Assurance Agreement.''
(12) If the project involves interconnection to an electric
utility, a copy of a letter of intent to purchase power, a power
purchase agreement, a copy of a letter of intent for an interconnection
agreement, or an interconnection agreement will be required from your
utility company or other purchaser for renewable energy systems.
(13) If applicable, intergovernmental consultation comments in
accordance with Executive Order 12372.
(14) Applicants and borrowers must provide a certification
indicating whether or not there is a known relationship or association
with an Agency employee.
(15) Each applicant must prepare an environmental impact analysis
as specified in Sec. 4280.114(d).
(c) Feasibility study for renewable energy systems. Each
application for a renewable energy system project, except for requests
of $100,000 or less, must include a project-specific feasibility study
prepared by a qualified independent consultant. The feasibility study
must include an analysis of the market, financial, economic, technical,
and management feasibility of the proposed project. The feasibility
study must also include an opinion and a recommendation by the
independent consultant.
(d) Technical requirements reports. The technical report must
demonstrate that the project design, procurement, installation,
startup, operation and maintenance of the renewable energy system or
energy efficiency improvement will operate or perform as specified over
its design life in a reliable and a cost effective manner. The
technical report must also identify all necessary project agreements,
demonstrate that those agreements will be in place, and that necessary
project equipment and services are available over the design life. All
technical information provided must follow the format specified in
paragraphs (d)(1) through (10) of this section. Supporting information
may be submitted in other formats. Design drawings and process flow
charts are encouraged as exhibits. A discussion of each topic
identified in paragraphs (d)(1) through (10) of this section is not
necessary if the topic is not applicable to the specific project.
Questions identified in the Agency's technical review of the project
must be answered to the Agency's satisfaction before the application
will be approved. The applicant must submit the original technical
requirements report plus one copy to the State Rural Development
Office. For small solar and small wind projects, the narrative portion
of technical requirements portion of the proposals, excluding
supporting documentation and drawings, should be less than ten pages.
Projects costing more than $100,000 require the services of a
professional engineer (PE). Depending on the level of engineering
required for the specific project or if necessary to ensure public
safety, the services of a PE may be required for smaller projects.
(1) Biomass, bioenergy. The technical requirements specified in
paragraphs (d)(1)(i) through (x) of this section apply to renewable
energy projects that produce fuel, thermal energy, or electric power
from a lignocellulosic biomass source, including wood, agricultural
residue excluding animal wastes, or other energy crops considered
biomass or bioenergy projects. The major components of bioenergy
systems will vary significantly depending on the type of feedstock,
product, type of process, and size of the process but in general

[[Page 59667]]

includes components around which the balance of the system is designed.
(i) Qualifications of project team. The biomass project team will
vary according to the complexity and scale of the project. For
engineered systems, the project team should consist of a system
designer, a project manager, an equipment supplier, a project engineer,
a construction contractor or system installer, and a system operator
and maintainer. One individual or entity may serve more than one role.
The project team must have demonstrated expertise in similar biomass
systems development, engineering, installation, and maintenance. The
applicant must provide authoritative evidence that project team service
providers have the necessary professional credentials or relevant
experience to perform the required services. The applicant must also
provide authoritative evidence that vendors of proprietary components
can provide necessary equipment and spare parts for the system to
operate over its design life. The application must:
(A) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developer's
risk;
(B) Discuss the biomass system equipment manufacturers of major
components being considered in terms of the length of time in business
and the number of units installed at the capacity and scale being
considered;
(C) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor qualifications
for engineering, designing, and installing biomass energy systems
including any relevant certifications by recognized organizations or
bodies. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating and with references if
available; and
(D) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining biomass renewable energy
equipment or projects. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating and with
references if available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(1)(ii)(A) through (G)
of this section.
(A) Biomass systems must be installed in accordance with applicable
local, State, and national codes and regulations. Identify zoning and
code issues, and required permits and the schedule for meeting those
requirements and securing those permits.
(B) Identify licenses where required and the schedule for obtaining
those licenses.
(C) Identify land use agreements required for the project and the
schedule for securing the agreements and the term of those agreements.
(D) Identify any permits or agreements required for solid, liquid,
and gaseous emissions or effluents and the schedule for securing those
permits and agreements.
(E) Identify available component warranties for the specific
project location and size.
(F) Systems interconnected to the electric power system will need
arrangements to interconnect with the utility. Identify utility system
interconnection requirements, power purchase arrangements, or licenses
where required and the schedule for meeting those requirements and
obtaining those agreements. This is required even if the system is
installed on the customer side of the utility meter. For systems
planning to utilize a local net metering program, describe the
applicable local net metering program.
(G) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the type,
quantity, quality, and seasonality of the biomass resource including
harvest and storage, where applicable. Where applicable, also indicate
shipping or receiving method and required infrastructure for shipping.
For proposed projects with an established resource, provide a summary
of the resource.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Projects shall be engineered by a qualified entity.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive including
site selection, system and component selection, and system monitoring
equipment. Systems must be constructed by a qualified entity.
(A) The application must include a concise but complete description
of the biomass project including location of the project, resource
characteristics, system specifications, electric power system
interconnection, and monitoring equipment. Identify possible vendors
and models of major system components. Describe the expected electric
power, fuel production, or thermal energy production of the proposed
system as rated and as expected in actual field conditions. For systems
with a capacity more than 20 tons per day of biomass, address
performance on a monthly and annual basis. For small projects such as a
commercial biomass furnace or pelletizer of up to 5 tons daily
capacity, proven, commercially available devices need not be addressed
in detail. Describe the uses of or the market for electricity, heat, or
fuel produced by the system. Discuss the impact of reduced or
interrupted biomass availability on the system process.
(B) The application must include a description of the project site
and address issues such as site access, foundations, backup equipment
when applicable, and environmental concerns with emphasis on
visibility, odor, noise, construction, and installation issues.
Identify any unique construction and installation issues.
(C) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or for the financing term
of any associated federal loans or loan guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including resource assessment, system and site design, permits and
agreements, equipment procurement, and system installation from
excavation through startup and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including project management, resource
assessment, project design, project permitting, land agreements,
equipment, site preparation, system installation,

[[Page 59668]]

startup and shakedown, warranties, insurance, financing, professional
services, and operations and maintenance costs. Provide a detailed
analysis and description of annual project revenues and expenses.
Provide a detailed description of applicable investment incentives,
productivity incentives, loans, and grants.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Biomass
systems may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, receiving, and on-site
storage or inventory. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment needed for project construction, and provide a
description of the startup and shakedown specification and process and
the conditions required for startup and shakedown for each equipment
item individually and for the system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Provide information regarding available system and component
warranties and availability of spare parts;
(B) For systems having a biomass input capacity exceeding 10 tons
of biomass per day,
(1) Describe the routine operations and maintenance requirements of
the proposed system, including maintenance schedule for the mechanical,
piping, and electrical systems and system monitoring and control
requirements. Provide information that supports expected design life of
the system and timing of major component replacement or rebuilds; and
(2) Discuss the costs and labor associated with operations and
maintenance of system and plans for in or outsourcing. Describe
opportunities for technology transfer for long term project operations
and maintenance by a local entity or owner/operator; and
(C) Provide and discuss the risk management plan for handling
large, unanticipated failures or major components. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for in-sourcing or out-sourcing.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(2) Anaerobic digester projects. The technical requirements
specified in paragraphs (d)(2)(i) through (x) of this section apply to
renewable energy projects, called anaerobic digester projects, that use
animal waste and other organic substrates to produce thermal or
electrical energy via anaerobic digestion. The major components of an
anaerobic digester system include the digester, the gas handling and
transmission systems, and the gas use system.
(i) Qualifications of project team. The anaerobic digester project
team should consist of a system designer, a project manager, an
equipment supplier, a project engineer, a construction contractor, and
a system operator or maintainer. One individual or entity may serve
more than one role. The project team must have demonstrated commercial-
scale expertise in anaerobic digester systems development, engineering,
installation, and maintenance as related to the organic materials and
operating mode of the system. The applicant must provide authoritative
evidence that project team service providers have the necessary
professional credentials or relevant experience to perform the required
services. The applicant must also provide authoritative evidence that
vendors of proprietary components can provide necessary equipment and
spare parts for the system to operate over its design life. The
applicant must:
(A) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developer's
risk;
(B) Discuss the anaerobic digester system equipment manufacturers
of major components being considered in terms of the length of time in
business and the number of units installed at the capacity and scale
being considered;
(C) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor qualifications
for engineering, designing, and installing anaerobic digester systems
including any relevant certifications by recognized organizations or
bodies. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating consistent with the
substrate material and with references if available; and
(D) For regional or centralized digester plants, describe the
system operator's qualifications and experience for servicing,
operating, and maintaining similar projects. Farm scale systems may not
require operator experience as the developer is typically required to
provide operational training during system startup and shakedown.
Provide a list of the same or similar projects designed, installed, or
supplied and currently operating consistent with the substrate material
and with references if available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(2)(ii)(A) through (G)
of this section.
(A) Anaerobic digester systems must be installed in accordance with
applicable local, State, and national codes and regulations. Anaerobic
digesters must also be designed and constructed in accordance with USDA
anaerobic digester standards. Identify zoning and code issues, and
required permits and the schedule for meeting those requirements and
securing those permits.
(B) Identify licenses where required and the schedule for obtaining
those licenses.
(C) For regional or centralized digester plants, identify feedstock
access agreements required for the project and the schedule for
securing those agreements and the term of those agreements.
(D) Identify any permits or agreements required for transport and
ultimate waste disposal and the schedule for securing those agreements
and permits.
(E) Identify available component warranties for the specific
project location and size.
(F) Systems interconnected to the electric power system will need
arrangements to interconnect with the

[[Page 59669]]

utility. Identify utility system interconnection requirements, power
purchase arrangements, or licenses where required and the schedule for
meeting those requirements and obtaining those agreements. This is
required even if the system is installed on the customer side of the
utility meter. For systems planning to utilize a local net metering
program, describe the applicable local net metering program.
(G) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the substrates
used as digester inputs including animal wastes, food processing
wastes, or other organic wastes in terms of type, quantity,
seasonality, and frequency of collection. Describe any special handling
of feedstock that may be necessary. Describe the process for
determining the feedstock resource. Provide either tabular values or
laboratory analysis of representative samples that include
biodegradability studies to produce gas production estimates for the
project on daily, monthly, and seasonal basis.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Projects shall be engineered by a qualified entity.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive including
site selection, digester component selection, gas handling component
selection, and gas use component selection. Systems must be constructed
by a qualified entity.
(A) The application must include a concise but complete description
of the anaerobic digester project including location of the project,
farm description, feedstock characteristics, a step-by-step flowchart
of unit operations, electric power system interconnection equipment,
and any required monitoring equipment. Identify possible vendors and
models of major system components. Provide the expected system energy
production, heat balances, material balances as part of the unit
operations flowchart.
(B) The application must include a description of the project site
and address issues such as site access, foundations, backup equipment
when applicable, and environmental concerns with emphasis on
visibility, odor, noise, construction and installation issues. Identify
any unique construction and installation issues.
(C) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or for the financing term
of any associated federal loans or loan guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including feedstock assessment, system and site design, permits and
agreements, equipment procurement, system installation from excavation
through startup and shakedown, and operator training.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including project management, feedstock
assessment, project design, project permitting, land agreements,
equipment, site preparation, system installation, startup and
shakedown, warranties, insurance, financing, professional services,
training and operations, and maintenance costs of both the digester and
the gas use systems. Provide a detailed analysis and description of
annual project revenues and expenses. Provide a detailed description of
applicable investment incentives, productivity incentives, loans, and
grants.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Anaerobic
digester systems may be constructed of components manufactured in more
than one location. Provide a description of any unique equipment
procurement issues such as scheduling and timing of component
manufacture and delivery, ordering, warranties, shipping, receiving,
and on-site storage or inventory. Procurement must be made in
accordance with the requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment needed for project construction, and provide a
description of the startup and shakedown specification and process and
the conditions required for startup and shakedown for each equipment
item individually and for the system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 3-year warranty for
equipment and a 10-year warranty on design. Provide information
regarding system warranties and availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed project, including maintenance for the digester, the gas
handling equipment, and the gas use systems. Describe any maintenance
requirements for system monitoring and control equipment;
(C) Provide information that supports expected design life of the
system and the timing of major component replacement or rebuilds;
(D) Provide and discuss the risk management plan for handling
large, unanticipated failures of major components. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for insourcing or outsourcing; and
(E) Describe opportunities for technology transfer for long-term
project operations and maintenance by a local entity or owner/operator.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(3) Geothermal, electric generation. The technical requirements
specified in paragraphs (d)(3)(i) through (x) of this section apply to
geothermal projects that produce electric power from the thermal
potential of a geothermal source. The major components of an electric
generating geothermal system include the production well, the separator
or heat exchanger, the turbine, the generator, condenser, and the
balance of station elements including the field piping, roads, fencing
and grading, plant buildings, transformers and other electrical
infrastructure such as interconnection equipment.
(i) Qualifications of project team. The electric generating
geothermal plant project team should consist of a system designer, a
project manager, an equipment supplier, a project engineer,

[[Page 59670]]

a construction contractor, and a system operator and maintainer. One
individual or entity may serve more than one role. The project team
must have demonstrated expertise in geothermal electric generation
systems development, engineering, installation, and maintenance. The
applicant must provide authoritative evidence that project team service
providers have the necessary professional credentials or relevant
experience to perform the required services. The applicant must also
provide authoritative evidence that vendors of proprietary components
can provide necessary equipment and spare parts for the system to
operate over its design life. The applicant must:
(A) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developer's
risk;
(B) Discuss the geothermal plant equipment manufacturers of major
components being considered in terms of the length of time in business
and the number of units installed at the capacity and scale being
considered;
(C) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor qualifications
for engineering, designing, and installing geothermal electric
generation systems including any relevant certifications by recognized
organizations or bodies. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating and with
references if available; and
(D) Describe system operator's qualifications and experience for
servicing, operating, and maintaining electric generating geothermal
projects. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating and with references if
available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(3)(ii)(A) through (F)
of this section.
(A) Electric generating geothermal systems must be installed in
accordance with applicable local, State, and national codes and
regulations. Identify zoning and code issues, and required permits and
the schedule for meeting those requirements and securing those permits.
(B) Identify any permits or agreements required for well
construction and for disposal or re-injection of cooled geothermal
waters and the schedule for securing those agreements and permits.
(C) Identify land use or access to the resource agreements required
for the project and the schedule for securing the agreements and the
term of those agreements.
(D) Identify available component warranties for the specific
project location and size.
(E) Systems interconnected to the electric power system will need
arrangements to interconnect with the utility. Identify utility system
interconnection requirements, power purchase arrangements, or licenses
where required and the schedule for meeting those requirements and
obtaining those agreements.
(F) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the quality of
the geothermal resource including temperature, flow, and sustainability
and what conversion system is to be installed. Describe any special
handling of cooled geothermal waters that may be necessary. Describe
the process for determining the geothermal resource including
measurement setup for the collection of the geothermal resource data.
For proposed projects with an established resource, provide a summary
of the resource and the specifications of the measurement setup.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Projects shall be engineered by a qualified entity.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive including
site selection, system and component selection, conversion system
component and selection, design of the local collection grid,
interconnection equipment selection, and system monitoring equipment.
Systems must be constructed by a qualified entity.
(A) The application must include a concise but complete description
of the geothermal project including location of the project, resource
characteristics, thermal system specifications, electric power system
interconnection equipment and project monitoring equipment. Identify
possible vendors and models of major system components. Provide the
expected system energy production on a monthly and annual basis.
(B) The application must include a description of the project site
and address issues such as site access, proximity to the electrical
grid, environmental concerns with emphasis on visibility, noise,
construction, and installation issues. Identify any unique construction
and installation issues.
(C) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or for the financing term
of any associated federal loans or loan guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including resource assessment, system and site design, permits and
agreements, equipment procurement, and system installation from
excavation through startup and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including project management, resource
assessment, project design, project permitting, land agreements,
equipment, site preparation, system installation, startup and
shakedown, warranties, insurance, financing, professional services, and
operations and maintenance costs. Provide a detailed analysis and
description of annual project revenues including electricity sales,
production tax credits, revenues from green tags, and any other
production incentive programs throughout the life of the project.
Provide a detailed description of applicable investment incentives,
productivity incentives, loans, and grants.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Geothermal
systems may be constructed of

[[Page 59671]]

components manufactured in more than one location. Provide a
description of any unique equipment procurement issues such as
scheduling and timing of component manufacture and delivery, ordering,
warranties, shipping, receiving, and on-site storage or inventory.
Procurement must be made in accordance with the requirements of 7 CFR
part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment needed for project construction, and provide a
description of the startup and shakedown specification and process and
the conditions required for startup or shakedown for each equipment
item individually and for the system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 3-year warranty for
equipment. Provide information regarding turbine warranties and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed project, including maintenance for the mechanical and
electrical systems and system monitoring and control requirements;
(C) Provide information that supports expected design life of the
system and timing of major component replacement or rebuilds;
(D) Provide and discuss the risk management plan for handling
large, unanticipated failures of major components such as the turbine.
Include in the discussion, costs and labor associated with operations
and maintenance of system and plans for insourcing or outsourcing; and
(E) Describe opportunities for technology transfer for long term
project operations and maintenance by a local entity or owner/operator.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(4) Geothermal, direct use. The technical requirements specified in
paragraphs (d)(4)(i) through (x) of this section apply to geothermal
projects that directly use thermal energy from a geothermal source. The
major components of a direct use geothermal system include the
production well, the heat exchanger, pumps, and the balance of station
elements including the, field piping, re-injection wells or other
disposal equipment as required, and final point-of-use heat exchangers
and control systems.
(i) Qualifications of project team. The geothermal project team
should consist of a system designer, a project manager, an equipment
supplier, a project engineer, a construction contractor, and a system
operator and maintainer. One individual or entity may serve more than
one role. The project team must have demonstrated expertise in
geothermal heating systems development, engineering, installation, and
maintenance. The applicant must provide authoritative evidence that
project team service providers have the necessary professional
credentials or relevant experience to perform the required services.
The applicant must also provide authoritative evidence that vendors of
proprietary components can provide necessary equipment and spare parts
for the system to operate over its design life. The applicant must:
(A) Discuss the proposed project delivery method. Such method
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developer's
risk;
(B) Discuss the geothermal system equipment manufacturers of major
components being considered in terms of the length of time in business
and the number of units installed at the capacity and scale being
considered;
(C) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor qualifications
for engineering, designing, and installing direct use geothermal
systems including any relevant certifications by recognized
organizations or bodies. Provide a list of the same or similar projects
designed, installed, or supplied and currently operating and with
references if available; and
(D) Describe system operator's qualifications and experience for
servicing, operating, and maintaining direct use generating geothermal
projects. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating and with references if
available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(4)(ii)(A) through (F)
of this section.
(A) Direct use geothermal systems must be installed in accordance
with applicable local, State, and national codes and regulations.
Identify zoning and code issues, and required permits and the schedule
for meeting those requirements and securing those permits.
(B) Identify licenses where required and the schedule for obtaining
those licenses.
(C) Identify land use or access to the resource agreements required
for the project and the schedule for securing the agreements and the
term of those agreements.
(D) Identify any permits or agreements required for well
construction and for disposal or re-injection of cooled geothermal
waters and the schedule for securing those permits and agreements.
(E) Identify available component warranties for the specific
project location and size.
(F) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the quality of
the geothermal resource including temperature, flow, and sustainability
and what direct use system is to be installed. Describe any special
handling of cooled geothermal waters that may be necessary. Describe
the process for determining the geothermal resource including
measurement setup for the collection of the geothermal resource data.
For proposed projects with an established resource, provide a summary
of the resource and the specifications of the measurement setup.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Projects shall be engineered by a qualified entity.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive including
site selection, system and component selection, thermal system
component

[[Page 59672]]

selection, and system monitoring equipment. Systems must be constructed
by a qualified entity.
(A) The application must include a concise but complete description
of the geothermal project including location of the project, resource
characteristics, thermal system specifications, and monitoring
equipment. Identify possible vendors and models of major system
components. Provide the expected system energy production on a monthly
and annual basis.
(B) The application must include a description of the project site
and address issues such as, site access, thermal backup equipment,
environmental concerns with emphasis on visibility, noise,
construction, and installation issues. Identify any unique construction
and installation issues.
(C) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or for the financing term
of any associated federal loans or loan guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including resource assessment, system and site design, permits and
agreements, equipment procurement, and system installation from
excavation through startup and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including project management, resource
assessment, project design, project permitting, land agreements,
equipment, site preparation, system installation, startup and
shakedown, warranties, insurance, financing, professional services, and
operations and maintenance costs. Provide a detailed analysis and
description of annual project revenues and expenses. Provide a detailed
description of applicable investment incentives, productivity
incentives, loans, and grants.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Geothermal
systems may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, receiving, and on-site
storage or inventory. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment needed for project construction, and provide a
description of the startup and shakedown specification and process and
the conditions required for startup and shakedown for each equipment
item individually and for the system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 3-year warranty for
equipment. Provide information regarding system warranties and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed project, including maintenance for the mechanical and
electrical systems and system monitoring and control requirements;
(C) Provide information that supports expected design life of the
system and timing of major component replacement or rebuilds;
(D) Provide and discuss the risk management plan for handling
large, unanticipated failures of major components. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for insourcing or outsourcing; and
(E) Describe opportunities for technology transfer for long term
project operations and maintenance by a local entity or owner/operator.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(5) Hydrogen. The technical requirements specified in paragraphs
(d)(5)(i) through (x) of this section apply to renewable energy
projects that produce hydrogen and renewable energy projects that use
mechanical or electric power or thermal energy from a renewable
resource using hydrogen as an energy transport medium. The major
components of hydrogen systems include reformers, electrolyzers,
hydrogen compression and storage components, and fuel cells.
(i) Qualifications of project team. The hydrogen project team will
vary according to the complexity and scale of the project. For
engineered systems, the project team should consist of a system
designer, a project manager, an equipment supplier, a project engineer,
a construction contractor or system installer, and a system operator
and maintainer. One individual or entity may serve more than one role.
The project team must have demonstrated expertise in similar hydrogen
systems development, engineering, installation, and maintenance. The
applicant must provide authoritative evidence that project team service
providers have the necessary professional credentials or relevant
experience to perform the required services. The applicant must also
provide authoritative evidence that vendors of proprietary components
can provide necessary equipment and spare parts for the system to
operate over its design life. The applicant must:
(A) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developer's
risk;
(B) Discuss the hydrogen system equipment manufacturers of major
components for the hydrogen system being considered in terms of the
length of time in the business and the number of units installed at the
capacity and scale being considered;
(C) Discuss the project manager, equipment supplier, system
designer, project engineer, and construction contractor qualifications
for engineering, designing, and installing hydrogen systems including
any relevant certifications by recognized organizations or bodies.
Provide a list of the same or similar projects designed, installed, or
supplied and currently operating and with references if available; and
(D) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining hydrogen system equipment or
projects. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating and with references if
available.
(ii) Agreements and permits. The applicant must identify all
necessary

[[Page 59673]]

agreements and permits required for the project and the status and
schedule for securing those agreements and permits, including the items
specified in paragraphs (d)(5)(ii)(A) through (G) of this section.
(A) Hydrogen systems must be installed in accordance with
applicable local, State, and national codes and regulations. Identify
zoning and building code issues, and required permits and the schedule
for meeting those requirements and securing those permits.
(B) Identify licenses where required and the schedule for obtaining
those licenses.
(C) Identify land use agreements required for the project and the
schedule for securing the agreements and the term of those agreements.
(D) Identify any permits or agreements required for solid, liquid,
and gaseous emissions or effluents and the schedule for securing those
permits and agreements.
(E) Identify available component warranties for the specific
project location and size.
(F) Systems interconnected to the electric power system will need
arrangements to interconnect with the utility. Identify utility system
interconnection requirements, power purchase arrangements, or licenses
where required and the schedule for meeting those requirements and
obtaining those agreements. This is required even if the system is
installed on the customer side of the utility meter. For systems
planning to utilize a local net metering program, provide a description
of the applicable local net metering program.
(G) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the type,
quantity, quality, and seasonality of the biomass resource. For solar,
wind, or geothermal sources of energy used to generate hydrogen,
indicate the local renewable resource where the hydrogen system is to
be installed. Local resource maps may be used as an acceptable
preliminary source of renewable resource data. For proposed projects
with an established renewable resource, provide a summary of the
resource.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Projects shall be engineered by a qualified entity.
Systems must be engineered as a complete, integrated system with
matched components. The engineering must be comprehensive including
site selection, system and component selection, and system monitoring
equipment. Systems must be constructed by a qualified entity.
(A) The application must include a concise but complete description
of the hydrogen project including location of the project, resource
characteristics, system specifications, electric power system
interconnection equipment, and monitoring equipment. Identify possible
vendors and models of major system components. Describe the expected
electric power, fuel production, or thermal energy production of the
proposed system. Address performance on a monthly and annual basis.
Describe the uses of or the market for electricity, heat, or fuel
produced by the system. Discuss the impact of reduced or interrupted
resource availability on the system process.
(B) The application must include a description of the project site
and address issues such as site access, foundations, backup equipment
when applicable, and any environmental and safety concerns. Identify
any unique construction and installation issues.
(C) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or for the financing term
of any associated federal loans or loan guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including resource assessment, system and site design, permits and
agreements, equipment procurement, and system installation from
excavation through startup and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including project management, resource
assessment, project design and engineering, project permitting, land
agreements, equipment, site preparation, system installation, startup
and shakedown, warranties, insurance, financing, professional services,
and operations and maintenance costs. Provide a detailed analysis and
description of annual project revenues and expenses. Provide a detailed
description of applicable investment incentives, productivity
incentives, loans, and grants.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Hydrogen
systems may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues, such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, and receiving, and on-site
storage or inventory. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment needed for project construction, and provide a
description of the startup and shakedown specification and process and
the conditions required for startup and shakedown for each equipment
item individually and for the system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Provide information regarding system warranties and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed project, including maintenance of the reformer,
electrolyzer, or fuel cell as appropriate, and other mechanical,
piping, and electrical systems and system monitoring and control
requirements;
(C) Provide information that supports expected design life of the
system and timing of major component replacement or rebuilds;
(D) Provide and discuss the risk management plan for handling
large, unanticipated failures of major components. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for in or outsourcing; and
(E) Describe opportunities for technology transfer for long term
project operations and maintenance by a local entity or owner/operator.

[[Page 59674]]

(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(6) Solar, small. The technical requirements specified in
paragraphs (d)(6)(i) through (x) of this section apply to small solar
electric projects and small solar thermal projects. Small solar
electric projects are those for which the rated power of the system is
10kW or smaller. The major components of a small solar electric system
are the solar panels, the support structure, the foundation, the power
conditioning equipment, the interconnection equipment, surface or
submersible water pumps, energy storage equipment and supporting
documentation including operations and maintenance manuals. Small solar
electric projects are either stand-alone (off grid) or interconnected
to the grid at less than 600 volts (on grid). Small solar thermal
projects are those for which the rated storage volume of the system is
240 gallons, or smaller. The major components of a small solar thermal
system are the solar collector(s), the support structure, the
foundation, the circulation pump(s) and piping, heat exchanger (if
required), energy storage equipment and support
(i) Qualifications of project team. The small solar project team
should consist of a system designer, a project manager or general
contractor, an equipment supplier of major components, a system
installer, a system maintainer, and, in some cases, the owner of the
application or load served by the system. One individual or entity may
serve more than one role. The applicant must provide authoritative
evidence that project team service providers have the necessary
professional credentials or relevant experience to perform the required
services. The applicant must also provide authoritative evidence that
vendors of proprietary components can provide necessary equipment and
spare parts for the system to operate over its design life. The
applicant must:
(A) Discuss the qualifications of the suppliers of major components
being considered;
(B) Describe the knowledge, skills, and abilities needed to
service, operate, and maintain the system for the proposed application;
and
(C) Discuss the project manager, system designer, and system
installer qualifications for engineering, designing, and installing
small solar systems including any relevant certifications by recognized
organizations or bodies. Provide a list of the same or similar systems
designed or installed by the design and installation team and currently
operating and with references if available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(6)(ii)(A) through (D)
of this section.
(A) Small solar systems must be installed in accordance with local,
State, and national building and electrical codes and regulations.
Identify zoning, building and electrical code issues, and required
permits and the schedule for meeting those requirements and securing
those permits.
(B) Identify available component warranties for the specific
project location and size.
(C) Small solar electric systems interconnected to the electric
power system will need arrangements to interconnect with the utility.
Identify utility system interconnection requirements, power purchase
arrangements, or licenses where required and the schedule for meeting
those requirements and obtaining those agreements. This is required
even if the system is installed on the customer side of the utility
meter. For systems planning to utilize a local net metering program,
describe the applicable local net metering program.
(D) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Describe the local
solar resource where the solar system is to be installed. Acceptable
sources of solar resource data include state solar maps and nearby
weather station data. Incorporate information from state solar resource
maps when possible. Indicate the source of the solar data and
assumptions made when applying nearby solar data to the site.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. For small solar electric systems, the engineering must
be comprehensive, including solar collector design and selection,
support structure design and selection, power conditioning design and
selection, surface or submersible water pumps and energy storage
requirements as applicable, and selection of cabling, disconnects and
interconnection equipment. For small solar thermal systems, the
engineering must be comprehensive, including solar collector design and
selection, support structure design and selection, pump and piping
design and selection, and energy storage design and selection.
(A) The application must include a concise but complete description
of the small solar system including location of the project and
proposed equipment specifications. Identify possible vendors and models
of major system components. Provide the expected system energy
production based on available solar resource data on a monthly (when
possible) and annual basis and how the energy produced by the system
will be used.
(B) The application must include a description of the project site
and address issues such as solar access, orientation, proximity to the
load or the electrical grid, environmental concerns, unique safety
concerns, construction, and installation issues, and whether special
circumstances exist.
(C) Sites and application load must be controlled by the
agricultural producer or rural small business for the proposed project
life or for the financing term of any associated federal loans or loan
guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including system and site design, permits and agreements, equipment
procurement, and system installation from excavation through startup
and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including design, permitting, equipment,
site preparation, system installation, system startup and shakedown,
warranties, insurance, financing, professional services, and operations
and maintenance costs. Provide a detailed description of applicable
investment incentives, productivity incentives, loans, and grants.
Provide a detailed description of historic or expected energy use and
expected energy offsets or sales on monthly and annual bases.
(vii) Equipment procurement. The applicant must demonstrate that

[[Page 59675]]

equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Small solar
systems may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, receiving, and on-site
storage or inventory. Provide a detailed description of equipment
certification. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment needed for project construction, and provide a
description of the startup and shakedown specification and process and
the conditions required for startup and shakedown for each equipment
item individually and for the system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 5-year warranty for
equipment. Provide information regarding system warranty and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed system, including maintenance schedules for the mechanical
and electrical and software systems;
(C) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations or
maintenance; and
(D) Provide information regarding expected system design life and
timing of major component replacement or rebuilds. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for in or outsourcing.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(7) Solar, large. The technical requirements specified in
paragraphs (d)(7)(i) through (x) of this section apply to large solar
electric projects and large solar thermal projects. Large solar
electric systems are those for which the rated power of the system is
larger than 10kW. The major components of a large solar electric system
are the solar panels, the support structure, the foundation, the power
conditioning equipment, the interconnection equipment, surface or
submersible water pumps and energy storage equipment and supporting
documentation including operations and maintenance manuals. Large solar
electric systems are either stand-alone (off grid) or interconnected to
the grid (on grid.) Large solar thermal systems are those for which the
rated storage volume of the system is greater than 240 gallons. The
major components of a small solar thermal system are the solar
collector(s), the support structure, the foundation, the circulation
pump(s) and piping, heat exchanger (if required), energy storage
equipment and supporting documentation including operations and
maintenance manuals.
(i) Qualifications of project team. The large solar project team
should consist of an equipment supplier of major components, a project
manager, general contractor, a system engineer, a system installer, and
system maintainer. One individual or entity may serve more than one
role. The applicant must provide authoritative evidence that project
team service providers have the necessary professional credentials or
relevant experience to perform the required services. The applicant
must also provide authoritative evidence that vendors of proprietary
components can provide necessary equipment and spare parts for the
system to operate over its design life. The applicant must:
(A) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developer's
risk;
(B) Discuss the qualifications of the suppliers of major components
being considered;
(C) Discuss the project manager, general contractor, system
engineer, and system installer qualifications for engineering,
designing, and installing large solar systems including any relevant
certifications by recognized organizations or bodies. Provide a list of
the same or similar systems designed or installed by the design,
engineering, and installation team and currently operating and with
references if available; and
(D) Describe the system operator's qualifications and experience
for servicing, operating, and maintaining the system for the proposed
application. Provide a list of the same or similar systems designed or
installed by the design, engineering, and installation team and
currently operating and with references if available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(7)(ii)(A) through (D)
of this section.
(A) Large solar systems must be installed in accordance with local,
State, and national building and electrical codes and regulations.
Identify zoning, building and electrical code issues, and required
permits and the schedule for meeting those requirements and securing
those permits.
(B) Identify available component warranties for the specific
project location and size.
(C) Large solar electric systems interconnected to the electric
power system will need arrangements to interconnect with the utility.
Identify utility system interconnection requirements, power purchase
arrangements, or licenses where required and the schedule for meeting
those requirements and obtaining those agreements. This is required
even if the system is installed on the customer side of the utility
meter. For systems planning to utilize a local net metering program,
describe the applicable local net metering program.
(D) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Describe the local
solar resource where the solar system is to be installed. Acceptable
sources of solar resource data include state solar maps and nearby
weather station data. Incorporate information from state solar resource
maps when possible. Indicate the source of the solar data and
assumptions made when applying nearby solar data to the site.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable

[[Page 59676]]

laws, regulations, agreements, permits, codes, and standards.
(A) For large solar electric systems, the engineering must be
comprehensive, including solar collector design and selection, support
structure design and selection, power conditioning design and
selection, surface or submersible water pumps and energy storage
requirements as applicable, and selection of cabling, disconnects and
interconnection equipment. A complete set of engineering drawings,
stamped by a professional engineer must be provided.
(B) For large solar thermal systems, the engineering must be
comprehensive, including solar collector design and selection, support
structure design and selection, pump and piping design and selection,
and energy storage design and selection. Provide a complete set of
engineering drawings, stamped by a professional engineer.
(C) For either type of system, provide a concise but complete
description of the large solar system including location of the project
and proposed equipment and system specifications. Identify possible
vendors and models of major system components. Provide the expected
system energy production based on available solar resource data on a
monthly (when possible) and annual basis and how the energy produced by
the system will be used.
(D) For either type of system, provide a description of the project
site and address issues such as, solar access, orientation, proximity
to the load or the electrical grid, environmental concerns, unique
safety concerns, construction, and installation issues and whether
special circumstances exist.
(E) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or for the financing term
of any associated federal loans or loan guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including system and site design, permits and agreements, equipment
procurement, and system installation from excavation through startup
and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including design and engineering,
permitting, equipment, site preparation, system installation, system
startup and shakedown, warranties, insurance, financing, professional
services, and operations and maintenance costs. Provide a detailed
description of applicable investment incentives, productivity
incentives, loans, and grants. Provide a detailed description of
historic or expected energy use and expected energy offsets or sales on
a monthly and annual basis.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Large solar
systems may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, receiving, and on-site
storage or inventory. Provide a detailed description of equipment
certification. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment, including cranes and other devices, needed for
project construction, and provide a description of the startup and
shakedown specification and process and the conditions required for
startup and shakedown for each equipment item individually and for the
system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 5-year warranty for
equipment. Provide information regarding system warranty and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed system, including maintenance schedules for the mechanical
and electrical and software systems;
(C) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations or
maintenance; and
(D) Provide information regarding expected system design life and
timing of major component replacement or rebuilds. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for insourcing or outsourcing.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(8) Wind, small. The technical requirements specified in paragraphs
(d)(8)(i) through (x) apply to wind energy systems for which the rated
power of the wind turbine is 100kW or smaller and with a generator hub
height of 120 ft or less. Such systems are considered small wind
systems. The major components of a small wind system are the wind
turbine, the tower, the foundation, the inverter, the interconnection
equipment and energy storage when applicable. A small wind system is
either stand-alone or connected to the local electrical system at less
than 600 volts.
(i) Qualifications of project team. The small wind project team
should consist of a system designer, a project manager or general
contractor, an equipment supplier of major components, a system
installer, a system maintainer, and, in some cases, the owner of the
application or load served by the system. One individual or entity may
serve more than one role. The applicant must provide authoritative
evidence that project team service providers have the necessary
professional credentials or relevant experience to perform the required
services. The applicant must also provide authoritative evidence that
vendors of proprietary components can provide necessary equipment and
spare parts for the system to operate over its design life. The
applicant must:
(A) Discuss the small wind turbine manufacturers and other
equipment suppliers of major components being considered in terms of
the length of time in business and the number of units installed at the
capacity and scale being considered;
(B) Describe the knowledge, skills, and abilities needed to
service, operate, and maintain the system for the proposed application;
and
(C) Discuss the project manager, system designer, and system
installer qualifications for engineering, designing, and installing
small wind systems including any relevant certifications by recognized
organizations or bodies. Provide a list of the same or similar systems
designed, installed, or supplied and currently operating and with
references if available.
(ii) Agreements and permits. The applicant must identify all
necessary

[[Page 59677]]

agreements and permits required for the project and the status and
schedule for securing those agreements and permits, including the items
specified in paragraphs (d)(8)(ii)(A) through (D) of this section.
(A) Small wind systems must be installed in accordance with
applicable local, State, and national building and electrical codes and
regulations. Identify zoning, building and electrical code issues, and
required permits and the schedule for meeting those requirements and
securing those permits.
(B) Identify available component warranties for the specific
project location and size.
(C) Small wind systems interconnected to the electric power system
will need arrangements to interconnect with the utility. Identify
utility system interconnection requirements, power purchase
arrangements, or licenses where required and the schedule for meeting
those requirements and obtaining those agreements. This is required
even if the system is installed on the customer side of the utility
meter. For systems planning to utilize a local net metering program,
describe the applicable local net metering program.
(D) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the local wind
resource where the small wind turbine is to be installed. Acceptable
sources of wind resource data include state wind maps and nearby
weather station data. Incorporate information from state wind resource
maps when possible. Indicate the source of the wind data and the
conditions of the wind monitoring when collected at the site or
assumptions made when applying nearby wind data to the site.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Small wind systems must be engineered by either the wind
turbine manufacturer or other qualified party. Systems must be offered
as a complete, integrated system with matched components. The
engineering must be comprehensive including turbine design and
selection, tower design and selection, specification of guy wire
anchors and tower foundation, inverter/controller design and selection,
energy storage requirements as applicable, and selection of cabling,
disconnects and interconnection equipment as well as the engineering
data needed to match the wind system output to the application load, if
applicable.
(A) The application must include a concise but complete description
of the small wind system including location of the project, proposed
turbine specifications, tower height and type of tower, type of energy
storage and location of storage if applicable, proposed inverter
manufacturer and model, electric power system interconnection
equipment, and application load and load interconnection equipment as
applicable. Identify possible vendors and models of major system
components. Provide the expected system energy production based on
available wind resource data on monthly (when possible) and annual
basis and how the energy produced by the system will be used.
(B) The application must include a description of the project site
and address issues such as access to the wind resource, proximity to
the electrical gird or application load, environmental concerns with
emphasis on visibility, noise, and avian impacts, construction, and
installation issues and whether special circumstances such as proximity
to airports exist. Provide a 360-degree panoramic photograph of the
proposed site including indication of prevailing winds when possible.
(C) Sites and application loads must be controlled by the
agricultural producer or rural small business for the proposed project
life or for the financing term of any associated federal loans or loan
guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including system and site design, permits and agreements, equipment
procurement, and system installation from excavation through startup
and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed project to demonstrate the
financial performance of the project. Provide a detailed analysis and
description of project costs including design, permitting, equipment,
site preparation, system installation, system startup and shakedown,
warranties, insurance, financing, professional services, and operations
and maintenance costs. Provide a detailed description of applicable
investment incentives, productivity incentives, loans, and grants.
Provide a detailed description of historic or expected energy use and
expected energy offsets or sales on a monthly and annual basis.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Small wind
systems may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, receiving, and on-site
storage or inventory. Provide a detailed description of equipment
certification. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment, including cranes and other devices, needed for
project construction, and provide a description of the startup and
shakedown specification and process and the conditions required for
startup and shakedown for each equipment item individually and for the
system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 5-year warranty for
equipment and a commitment from the supplier to have spare parts
available. Provide information regarding system warranty and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed system, including maintenance schedules for the mechanical
and electrical and software systems;
(C) Provide historical or engineering information that supports
expected design life of the system and timing of major component
replacement or rebuilds. Include in the discussion, costs and labor
associated with operations and maintenance of system and plans for in
or outsourcing; and
(D) For owner maintained portions of the system, describe any
unique

[[Page 59678]]

knowledge, skills, or abilities needed for service operations or
maintenance.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(9) Wind, large. The technical requirements specified in paragraphs
(d)(9)(i) through (x) of this section apply to wind energy systems for
which the rated power of the individual wind turbine(s) is larger than
100kW. Such systems are considered large wind systems. The major
components of a large wind system are the wind turbine rotor, the
gearbox, the generator, the tower, the power electronics, the local
collection grid, and the interconnection equipment.
(i) Qualifications of project team. The large wind project team
should consist of a project manager, a meteorologist, an equipment
supplier, a project engineer, a primary or general contractor,
construction contractor, and a system operator and maintainer and in
some cases the owner of the application or load served by the system.
One individual or entity may serve more than one role. The applicant
must provide authoritative evidence that project team service providers
have the necessary professional credentials or relevant experience to
perform the required services. The applicant must also provide
authoritative evidence that vendors of proprietary components can
provide necessary equipment and spare parts for the system to operate
over its design life. The applicant must:
(A) Discuss the proposed project delivery method. Such methods
include a design, bid, build where a separate engineering firm may
design the project and prepare a request for bids and the successful
bidder constructs the project at the applicant's risk, and a design
build method, often referred to as turn key, where the applicant
establishes the specifications for the project and secures the services
of a developer who will design and build the project at the developers
risk;
(B) Discuss the large wind turbine manufacturers and other
equipment suppliers of major components being considered in terms of
the length of time in business and the number of units installed at the
capacity and scale being considered;
(C) Discuss the project manager, equipment supplier, project
engineer, and construction contractor qualifications for engineering,
designing, and installing large wind systems including any relevant
certifications by recognized organizations or bodies. Provide a list of
the same or similar projects designed, installed, or supplied and
currently operating and with references if available;
(D) Discuss the qualifications of the meteorologist, including
references; and
(E) Describe system operator's qualifications and experience for
servicing, operating, and maintaining the system for the proposed
application. Provide a list of the same or similar projects designed,
installed, or supplied and currently operating and with references if
available.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the project and the
status and schedule for securing those agreements and permits,
including the items specified in paragraphs (d)(9)(ii)(A) through (E)
of this section.
(A) Large wind systems must be installed in accordance with local,
State, and national building and electrical codes and regulations.
Identify zoning, building and electrical code issues, and required
permits and the schedule for meeting those requirements and securing
those permits.
(B) Identify land use agreements required for the project and the
schedule for securing the agreements and the term of those agreements.
(C) Identify available component warranties for the specific
project location and size.
(D) Large wind systems interconnected to the electric power system
will need arrangements to interconnect with the utility. Large wind
systems interconnected to the electric power system will need
arrangements to interconnect with the utility. Identify utility system
interconnection requirements, power purchase arrangements, or licenses
where required and the schedule for meeting those requirements and
obtaining those agreements.
(E) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Resource assessment. The applicant must provide adequate and
appropriate evidence of the availability of the renewable resource
required for the system to operate as designed. Indicate the local wind
resource where the wind turbine is to be installed. Wind resource maps
may be used as an acceptable preliminary source of wind resource data.
Projects greater than 500kW must obtain wind data from the proposed
project site. For such projects, describe the proposed measurement
setup for the collection of the wind resource data. For proposed
projects with an established wind resource, provide a summary of the
wind resource and the specifications of the measurement setup. Large
wind systems larger than 500kW in size will typically require at least
one year of on-site monitoring. If less than one year of data is used,
the qualified meteorological consultant must provide a detailed
analysis of correlation between the site data and a near-by long-term
measurement site.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the system will be designed and engineered
so as to meet its intended purpose, will ensure public safety, and will
comply with applicable laws, regulations, agreements, permits, codes,
and standards. Large wind systems must be engineered by a qualified
entity. Systems must be engineered as a complete, integrated system
with matched components. The engineering must be comprehensive
including site selection, turbine selection, tower selection, tower
foundation, design of the local collection grid, interconnection
equipment selection, and system monitoring equipment. For stand alone,
non-grid applications, engineering information must be provided that
demonstrates appropriate matching of wind turbine and load.
(A) The application must include a concise but complete description
of the large wind project including location of the project, proposed
turbine specifications, tower height and type of tower, the collection
grid, interconnection equipment, and monitoring equipment. Identify
possible vendors and models of major system components. Provide the
expected system energy production based on available wind resource data
on monthly and annual bases. For wind projects larger than 500kW in
size, provide the expected system energy production over the life of
the project including a discussion on inter-annual variation using a
comparison of the on-site monitoring data with long-term meteorological
data from a nearby monitored site.
(B) The application must include a description of the project site
and address issues such as site access, proximity to the electrical
grid or application load, environmental concerns with emphasis on
visibility, noise, and avian impacts, construction, and installation
issues and whether special circumstances such as proximity to airports
exist.
(C) Sites must be controlled by the agricultural producer or rural
small business for the proposed project life or

[[Page 59679]]

for the financing term of any associated federal loans or loan
guarantees.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including resource assessment, system and site design, permits and
agreements, equipment procurement, and system installation from
excavation through startup and shakedown.
(vi) Financial feasibility. The applicant must provide a study that
describes costs and revenues of the proposed energy efficiency
improvement(s) to demonstrate the financial performance of the energy
efficiency improvement(s). Provide a detailed analysis and description
of project costs including project management, resource assessment,
project design, project permitting, land agreements, equipment, site
preparation, system installation, startup and shakedown, warranties,
insurance, financing, professional services, and operations and
maintenance costs. Provide a detailed description of applicable
investment incentives, productivity incentives, loans, and grants.
Provide a detailed analysis and description of annual project revenues
including electricity sales, production tax credits, revenues from
green tags, and any other production incentive programs throughout the
life of the project. Provide a description of planned contingency fees
or reserve funds to be used for unexpected large component replacement
or repairs and for low productivity periods.
(vii) Equipment procurement. The applicant must demonstrate that
equipment required by the system is available and can be procured and
delivered within the proposed project development schedule. Large wind
turbines may be constructed of components manufactured in more than one
location. Provide a description of any unique equipment procurement
issues such as scheduling and timing of component manufacture and
delivery, ordering, warranties, shipping, receiving, and on-site
storage or inventory. Provide a detailed description of equipment
certification. Procurement must be made in accordance with the
requirements of 7 CFR part 1924, subpart A.
(viii) Equipment installation. The applicant must fully describe
the management of and plan for site development and system
installation, provide details regarding the scheduling of major
installation equipment, including cranes or other devices, needed for
project construction, and provide a description of the startup and
shakedown specification and process and the conditions required for
startup and shakedown for each equipment item individually and for the
system as a whole.
(ix) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the system necessary for the
system to operate as designed over the design life. The applicant must:
(A) Ensure that systems must have at least a 3-year warranty for
equipment. Provide information regarding turbine warranties and
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed project, including maintenance schedules for the
mechanical and electrical systems and system monitoring and control
requirements;
(C) Provide information that supports expected design life of the
system and timing of major component replacement or rebuilds;
(D) Provide and discuss the risk management plan for handling
large, unanticipated failures of major components such as the turbine
gearbox or rotor. Include in the discussion, costs and labor associated
with operations and maintenance of system and plans for insourcing or
outsourcing;
(E) Describe opportunities for technology transfer for long term
project operations and maintenance by a local entity or owner/operator;
and
(F) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations or
maintenance.
(x) Decommissioning. When uninstalling or removing the project,
describe the decommissioning process. Describe any issues,
requirements, and costs for removal and disposal of the system.
(10) Energy efficiency improvements. The technical requirements
specified in paragraphs (d)(10)(i) through (ix) of this section apply
to projects that involve improvements to a facility, building or
process resulting in reduced energy consumption or reduced amount of
energy required per unit of production are regarded as energy
efficiency projects. Projects in excess of $100,000 require a full
energy audit as specified in paragraph (d)(10)(iii)(B) of this section.
The system engineering for such projects must be performed by a
qualified entity certified Professional Engineer as specified in
paragraph (d)(10)(iv)(A) of this section.
(i) Qualifications of project team. The energy efficiency project
team is expected to consist of an energy auditor, a project manager, an
equipment supplier of major components, a project engineer, and a
construction contractor or system installer. One individual or entity
may serve more than one role. The applicant must provide authoritative
evidence that project team service providers have the necessary
professional credentials or relevant experience to perform the required
services. The applicant must also provide authoritative evidence that
vendors of proprietary components can provide necessary equipment and
spare parts for the system to operate over its design life. The
applicant must:
(A) Discuss the qualifications of the various project team members
including any relevant certifications by recognized organizations or
bodies;
(B) Describe qualifications or experience of the team as related to
installation, service, operation and maintenance of the project;
(C) Provide a list of the same or similarly engineered projects
designed, installed, or supplied by the team or by team members and
currently operating. Provide references if available; and
(D) Discuss the manufacturers of major energy efficiency equipment
being considered including length of time in business.
(ii) Agreements and permits. The applicant must identify all
necessary agreements and permits required for the energy efficiency
improvement(s) and the status and schedule for securing those
agreements and permits, including the items specified in paragraphs
(d)(10)(ii)(A) through (C) of this section.
(A) Energy efficiency improvements must be installed in accordance
with local, State, and national building and electrical codes and
regulations. Identify building code, electrical code, and zoning issues
and required permits, and the schedule for meeting those requirements
and securing those permits.
(B) Identify available component warranties for the specific
project location and size.
(C) Identify all environmental issues, including environmental
compliance issues, associated with the project.
(iii) Energy assessment. The applicant must provide adequate and
appropriate evidence of energy savings expected when the system is
operated as designed.
(A) The application must include information on baseline energy
usage (preferably including energy bills for at least one year),
expected energy savings based on manufacturers specifications

[[Page 59680]]

or other estimates, estimated dollars saved per year, and payback
period in years (total investment cost equal to cumulative total
dollars of energy savings). Calculation of energy savings should follow
accepted methodology and practices. System interactions should be
considered and discussed.
(B) For energy efficiency improvement projects in excess of
$100,000, an energy audit is required. An energy audit is a written
report by an independent, qualified entity that documents current
energy usage, recommended potential improvements and their costs,
energy savings from these improvements, dollars saved per year, and
simple payback period in years (total costs divided by annual dollars
of energy savings). The methodology of the energy audit must meet
professional and industry standards. The energy audit must cover the
following:
(1) Situation report. Provide a narrative description of the
facility or process, its energy system(s) and usage, and activity
profile. Also include price per unit of energy (electricity, natural
gas, propane, fuel oil, renewable energy, etc.) paid by the customer on
the date of the audit. Any energy conversion should be based on use
rather than source.
(2) Potential improvements. List specific information on all
potential energy-saving opportunities and their costs.
(3) Technical analysis. Give consideration to the interactions
among the potential improvements and other energy systems:
(i) Estimate the annual energy and energy costs savings expected
from each improvement identified in the potential project.
(ii) Calculate all direct and attendant indirect costs of each
improvement.
(iii) Rank potential improvements measures by cost-effectiveness.
(4) Potential improvement description. Provide a narrative summary
of the potential improvement and its ability to provide needed
benefits, including a discussion of non-energy benefits such as project
reliability and durability.
(i) Provide preliminary specifications for critical components.
(ii) Provide preliminary drawings of project layout, including any
related structural changes.
(iii) Document baseline data compared to projected consumption,
together with any explanatory notes. When appropriate, show before-and-
after data in terms of consumption per unit of production, time or
area. Include at least 1 year's bills for those energy sources/fuel
types affected by this project. Also submit utility rate schedules, if
appropriate.
(iv) Identify significant changes in future related operations and
maintenance costs.
(v) Describe explicitly how outcomes will be measured.
(iv) Design and engineering. The applicant must provide
authoritative evidence that the energy efficiency improvement(s) will
be designed and engineered so as to meet its intended purpose, will
ensure public safety, and will comply with applicable laws,
regulations, agreements, permits, codes, and standards.
(A) Energy efficiency improvement projects in excess of $100,000
must be engineered by a qualified entity. Systems must be engineered as
a complete, integrated system with matched components.
(B) For all energy efficiency improvement projects, identify and
itemize major energy efficiency improvements including associated
project costs. Specifically delineate which costs of the project are
directly associated with energy efficiency improvements. Describe the
components, materials or systems to be installed and how they improve
the energy efficiency of the process or facility being modified.
Discuss passive improvements that reduce energy loads, such as
improving the thermal efficiency of a storage facility, and active
improvements that directly reduce energy consumption, such as replacing
existing energy consuming equipment with high efficiency equipment, as
separate topics. Discuss any anticipated synergy between active and
passive improvements or other energy systems. Include in the discussion
any change in on-site effluents, pollutants, or other by-products.
(C) Identify possible suppliers and model of major pieces of
equipment.
(v) Project development schedule. The applicant must identify each
significant task, its beginning and end, and its relationship to the
time needed to initiate and carry the project through startup and
shakedown. Provide a detailed description of the project timeline
including energy audit (if applicable), system and site design, permits
and agreements, equipment procurement, and system installation from
site preparation through startup and shakedown.
(vi) Equipment procurement. The applicant must demonstrate that
equipment required for the energy efficiency improvement(s) is
available and can be procured and delivered within the proposed project
development schedule. Energy efficiency improvements may be constructed
of components manufactured in more than one location. Provide a
description of any unique equipment procurement issues such as
scheduling and timing of component manufacture and delivery, ordering,
warranties, shipping, receiving, and on-site storage or inventory.
Provide a detailed description of equipment certification. Procurement
must be made in accordance with the requirements of 7 CFR part 1924,
subpart A.
(vii) Equipment installation. The applicant must fully describe the
management of and plan for installation of the energy efficiency
improvement(s), identify specific issues associated with installation,
provide details regarding the scheduling of major installation
equipment needed for project discussion, and provide a description of
the startup and shakedown specification and process and the conditions
required for startup and shakedown for each equipment item individually
and for the system as a whole. Include in this discussion any unique
concerns, such as the effects of energy efficiency improvements on
system power quality.
(viii) Operations and maintenance. The applicant must identify the
operations and maintenance requirements of the energy efficiency
improvement(s) necessary for the energy efficiency improvement(s) to
operate as designed over the design life. The applicant must:
(A) Provide information regarding component warranties and the
availability of spare parts;
(B) Describe the routine operations and maintenance requirements of
the proposed project, including maintenance schedules for the
mechanical and electrical systems and system monitoring and control
requirements;
(C) Provide information that supports expected design life of the
system and timing of major component replacement or rebuilds;
(D) Provide and discuss the risk management plan for handling
large, unanticipated failures of major components. Include in the
discussion, costs and labor associated with operations and maintenance
of system and plans for in or outsourcing; and
(E) For owner maintained portions of the system, describe any
unique knowledge, skills, or abilities needed for service operations or
maintenance.
(ix) Decommissioning. Where appropriate, describe the
decommissioning process. Describe the

[[Page 59681]]

decommissioning budget and any unique concerns to the decommissioning
process.

Sec. 4280.112 Evaluation of grant applications.

(a) General review. The Agency will evaluate each application and
make a determination whether the applicant is eligible, the proposed
grant is for an eligible project, and the proposed grant complies with
all applicable statutes and regulations.
(b) Ineligible or incomplete applications. If either the applicant
or the project is ineligible, the Agency will inform the applicant in
writing of the decision, reasons therefore, and any appeal rights, and
no further evaluation of the application will occur. If the application
is incomplete, the Agency will return it to the applicant to provide
the applicant the opportunity to resubmit the application. The Agency
will identify those parts of the application that are incomplete. Upon
receipt of a complete application, the Agency will complete its
evaluation of the application.
(c) Technical feasibility determination. The Agency's determination
of a project's technical feasibility will be based on the information
provided by the applicant and on other sources of information, such as
recognized industry experts in the applicable technology field, as
necessary, to determine technical feasibility of the proposed project.
(d) Evaluation criteria. Agency personnel will score and fund each
application based on the evaluation criteria specified in paragraph
(d)(1) of this section for renewable energy systems and in paragraph
(d)(2) of this section for energy efficiency improvements. These
criteria must be individually addressed in narrative form on a separate
sheet of paper.
(1) Criteria for applications for renewable energy systems.
Criteria for applications for renewable energy systems are:
(i) Quantity of energy produced. Points may only be awarded for
either energy replacement or energy generation, but not for both;
(A) Energy replacement. If the proposed renewable energy system is
intended primarily for self use by the farm, ranch, or rural small
business and will provide energy replacement of greater than 75
percent, 20 points will be awarded; greater than 50 percent, but equal
to or less than 75 percent, 15 points will be awarded; or greater than
25 percent, but equal to or less than 50 percent, 10 points will be
awarded. The energy replacement should be determined by dividing the
estimated quantity of energy to be generated by at least the past 12
months' energy profile of the agricultural producer or rural small
business or anticipated energy use. The estimated quantity of energy
may be described in Btu's, kilowatts, or similar energy equivalents.
Energy profiles can be obtained from the utility company;
(B) Energy generation. If the proposed renewable energy system is
intended primarily for production of energy for sale, 20 points will be
awarded;
(ii) Environmental benefits. If the purpose of the proposed
renewable energy system is to upgrade an existing facility or construct
a new facility required to meet applicable health or sanitary
standards, 10 points will be awarded. Documentation must be obtained by
the applicant from the appropriate regulatory agency with jurisdiction
to establish the standard, to verify that a bona fide standard exists,
what that standard is, and that the proposed project is needed and
required to meet the standard;
(iii) Commercial availability. If the renewable energy system is
currently commercially available and replicable, an additional 10
points will be awarded;
(iv) Cost effectiveness. If the proposed renewable energy system
will return the cost of the investment in 5 years or less, 25 points
will be awarded; up to 10 years, 20 points will be awarded; up to 15
years, 15 points will be awarded; or up to 20 years, 10 points will be
awarded. The estimated return on investment is calculated by dividing
the total project cost by the estimated projected net annual income
and/or energy savings of the renewable energy system;
(v) Matching funds. If the agricultural producer or rural small
business has provided eligible matching funds of over 90 percent, 15
points will be awarded; 85-90 percent, 10 points will be awarded; or at
least 80 and up to but not including 85 percent, 5 points will be
awarded;
(vi) Management. If the renewable energy system will be monitored
and managed by a qualified third-party operator, such as pursuant to a
service contract, maintenance contract, or remote telemetry, an
additional 10 points will be awarded; and
(vii) Small agricultural producer. If the applicant (for grants) or
borrower (for guaranteed loans) is an agricultural producer producing
agricultural products with a gross market value of less than $1 million
in the preceding year, an additional 10 points will be awarded.
(2) Criteria for applications for energy efficiency improvements.
Criteria for applications for energy efficiency improvements are:
(i) Energy savings. If the estimated energy expected to be saved by
the installation of the energy efficiency improvements will be 35
percent or greater, 20 points will be awarded; 30 and up to but not
including 35 percent, 15 points will be awarded; 25 and up to but not
including 30 percent, 10 points will be awarded; or 20 and up to but
not including 25 percent, 5 points will be awarded. Energy savings will
be determined by the projections in an energy assessment or audit;
(ii) Cost effectiveness. If the proposed energy efficiency
improvements will return the cost of the investment in 2 years or less,
25 points will be awarded; greater than 2 and up to and including 5
years, 20 points will be awarded; greater than 5 and up to and
including 9 years, 15 points will be awarded; or greater than 9 and up
to and including 11 years, 10 points will be awarded. The estimated
return on investment is calculated by dividing the total project cost
by the project net annual energy savings of the energy efficiency
improvements;
(iii) Matching funds. If the agricultural producer or rural small
business has provided eligible matching funds of over 90 percent, 15
points will be awarded; 85-90 percent, 10 points will be awarded; or 80
and up to but not including 85 percent, 5 points will be awarded; and
(iv) Small agricultural producer. If the applicant (for grants) or
borrower (for guaranteed loans) is an agricultural producer producing
agricultural products with a gross market value of less than $1 million
in the preceding year, an additional 10 points will be awarded.

Sec. 4280.113 Insurance requirements.

Insurance is required to protect the interest of the recipient of
funds under this subpart and the Agency. The coverage must be
maintained for the life of the grant unless this requirement is waived
or modified by the Agency in writing.
(a) Worker compensation insurance is required in accordance with
State law.
(b) National flood insurance is required in accordance with 7 CFR
part 1806, subpart B (RD Instructions 426.2).
(c) Business interruption insurance will be required.

Sec. 4280.114 Laws that contain other compliance requirements.

(a) Equal employment opportunity. For all construction contracts
and grants

[[Page 59682]]

in excess of $10,000, the contractor must comply with Executive Order
11246, as amended by Executive Order 11375, and as supplemented by
applicable Department of Labor regulations (41 CFR part 60). The
applicant and borrower are responsible for ensuring that the contractor
complies with these requirements.
(b) Americans with Disabilities Act (ADA). Loans and grants that
involve the construction of or addition to facilities that accommodate
the public and commercial facilities, as defined by the ADA, must
comply with the ADA. The applicant and borrower are responsible for
compliance.
(c) Civil rights compliance. Recipients of grants must comply with
the Americans with Disabilities Act of 1990, Title VI of the Civil
Rights Act of 1964, and Section 504 of the Rehabilitation Act of 1973.
This may include collection and maintenance of data on the race, sex,
and national origin on the recipient's membership/ownership and
employees. These data should be available to conduct compliance reviews
in accordance with 7 CFR part 1901, subpart E, Sec. 1901.204,
Compliance Review. Initial reviews will be conducted after Form RD 400-
4, ``Assurance Agreement,'' is signed and all subsequent reviews every
three years thereafter. The Agency should be contacted to provide
further guidance on collection of information and compliance with Civil
Rights laws.
(d) Environmental analysis. Each applicant must prepare an
environmental impact analysis using Form 1940-20, ``Request for
Environmental Information,'' pursuant to Rural Development
environmental regulations found at 7 CFR part 1940, subpart G. The
applicant will contact the appropriate State Agency office located in
the applicant's State for assistance in completing this form. A site
visit by the Agency will be scheduled, if necessary, to determine the
scope of the review. The applicant will be notified of all specific
compliance requirements, such as the publication of public notices. Any
required environmental review must be completed by the Agency prior to
the Agency obligating any grant or loan funds. The taking of any
actions or incurring any obligations during the time of application or
application review and processing that would either limit the range of
alternatives to be considered or that would have an adverse effect on
the environment, such as the initiation of construction, will result in
project ineligibility.
(e) Executive Order 12898, Environmental Justice. When grant and
loans are proposed, Rural Development employees are to conduct a Civil
Rights Impact Analysis in regard to environmental justice. The CIRA
must be conducted and the analysis documented utilizing Form RD 2006-
38, Civil Rights Impact Analysis Certification. This must be done prior
to loan approval, obligation of funds, or other commitments of agency
resources, including issuance of a Letter of Conditions or a
Conditional Commitment (Form 4279-3) of guarantee, whichever occurs
first.

Sec. 4280.115 Construction planning and performing development.

The requirements of 7 CFR part 1924, except as identified in
paragraph (a) of this section, apply for construction of renewable
energy systems and energy efficiency improvement projects as
applicable.
(a) The following sections and paragraphs either do not apply to
this subpart or are modified for the purposes of this subpart as
described:
(1) Under Sec. 1924.4,
(i) For the purposes of this subpart, ``County Supervisor,''
``Assistant County Supervisor,'' ``District Director,'' and ``Assistant
District Director'' means the Agency. Wherever those terms are used in
7 CFR part 1924, subpart A, read ``the Agency.''
(ii) The definition for ``manufactured housing'' does not apply;
and
(iii) The definition for ``modular/panelized housing'' does not
apply;
(2) Sec. 1924.5(c) does not apply;
(3) Sec. 1924.5(d)(1)(i), (ii), and (vi) do not apply;
(4) Sec. 1924.5(d)(2) does not apply;
(5) Sec. 1924.5(d)(4)(i) and (iv) do not apply;
(6) Sec. 1924.5(f)(1)(i), (ii), (iii)(A), (iii)(B), (iii)(D), and
(iii)(F) do not apply;
(7) Sec. 1924.5(f)(2) does not apply;
(8) Sec. 1924.5(i) does not apply;
(9) Sec. 1924.6(a)(1), (2), and (3) do not apply;
(10) Sec. 1924.6(b) does not apply;
(11) Sec. 1924.6(c) does not apply;
(12) Sec. 1924.6(d) does not apply;
(13) Sec. 1924.8 does not apply;
(14) Sec. 1924.10(c)(1) does not apply;
(15) Sec. 1924.12 does not apply;
(16) Sec. 1924.13(c) does not apply;
(17) Sec. 1924.13(e)(1) does not apply; and
(18) Sec. 1924, Exhibits A through E and I through M do not apply.
(b) Recipients of grants under this subpart are not authorized to
construct the facility, project, or improvement in total, or in part,
or utilize their own personnel and/or equipment.

Sec. 4280.116 Grantee requirements.

(a) Letter of Conditions, which is prepared by the Agency,
establishes conditions that must be understood and agreed to by the
applicant before any obligation of funds can occur. The applicant must
sign Letter of Intent to Meet Conditions and Form 1940-1, ``Request for
Obligation of Funds,'' if they accept the conditions of the grant.
These forms will be enclosed with the Letter of Conditions. The grant
will be obligated when the Agency receives an executed Letter of Intent
and Request for Obligation of Funds from the applicant agreeing to all
provisions in the Letter of Conditions.
(b) The grantee must sign and abide by all requirements contained
in Form 4280-2, ``Grant Agreement,'' and this subpart.

Sec. 4280.117 Servicing grants.

Grants will be serviced in accordance with 7 CFR part 1951, subpart
E and the Grant Agreement.

Sec. Sec. 4280.118-4280.120 [Reserved]

Guaranteed Loans

Sec. 4280.121 Borrower eligibility.

To receive a guaranteed loan under this subpart, a borrower must
meet each of the criteria, as applicable, identified in Sec.
4280.107(a) through (e).

Sec. 4280.122 Project eligibility.

For a project to be eligible to receive a guaranteed loan under
this subpart, the project must meet each of the criteria, as
applicable, in Sec. 4280.108.

Sec. 4280.123 Guaranteed loan funding.

(a) The amount of guaranteed loan funds that will be made available
to an eligible project under this subpart will not exceed 50 percent of
eligible project costs. Eligible project costs are only those costs
associated with the items listed in paragraphs (a)(1) through (11) of
this section, as long as the items are an integral and necessary part
of the total project.
(1) Post-application purchase and installation of equipment, except
agricultural tillage equipment and vehicles;
(2) Post-application construction or project improvements, except
residential;
(3) Energy audits or assessments;
(4) Permit fees;
(5) Professional service fees, except for application preparation;
(6) Feasibility studies;
(7) Business plans;
(8) Retrofitting;
(9) Construction of a new facility only when the facility is used
for the same purpose, is approximately the same size, and, based on the
energy audit, will provide more energy savings than

[[Page 59683]]

improving an existing facility. Only costs identified in the energy
audit for energy efficiency projects are allowed;
(10) Working capital; and
(11) Land acquisition.
(b) The minimum amount of a guaranteed loan made to a borrower is
$2,500. The maximum amount of a guaranteed loan made to a borrower is
$10 million.
(c) The percentage of guarantee, up to the maximum allowed by this
section, will be negotiated between the lender and the Agency. The
maximum percentage of guarantee is 85 percent for loans of $600,000 or
less; 80 percent for loans greater than $600,000 but up to $5 million;
70 percent for loans greater than $5 million but up to $10 million.
(d) The total amount of Agency loans under this program to one
borrower, including the guaranteed and unguaranteed portions, the
outstanding principal and interest balance of any existing Agency
guaranteed loans, and new loan request, must not exceed $10 million.

Sec. 4280.124 Interest rates.

(a) The interest rate for the guaranteed loan will be negotiated
between the lender and the borrower and may be either fixed or variable
as long as it is a legal rate. The variable rate will be based on
published indices, such as money market indices. In no case, however,
shall the rate be more than the rate customarily charged borrowers in
similar circumstances in the ordinary course of business. The interest
rate charged is subject to Agency review and approval.
(b) A variable interest rate agreed to by the lender and borrower
must be a rate that is tied to a base rate agreed to by the lender and
the Agency. The variable interest rate may be adjusted at different
intervals during the term of the loan, but the adjustments may not be
more often than quarterly and must be specified in the Loan Agreement.
The lender must incorporate, within the variable rate Promissory Note
at loan closing, the provision for adjustment of payment installments
coincident with an interest-rate adjustment. The lender must ensure
that the outstanding principal balance is properly amortized within the
prescribed loan maturity to eliminate the possibility of a balloon
payment at the end of the loan.
(c) Any change in the interest rate between the date of issuance of
the Conditional Commitment and before the issuance of the Loan Note
Guarantee must be approved in writing by the Agency approval official.
Approval of such a change will be shown as an amendment to the
Conditional Commitment.
(d) A combination of fixed and variable rates will be allowed.

Sec. 4280.125 Terms of loan.

(a) The maximum loan term limits will be utilized only when the
loan cannot reasonably be repaid over a shorter term. The repayment
term for a loan for:
(1) Real estate must not exceed 30 years.
(2) Machinery and equipment must not exceed 15 years, or the useful
life, whichever is less.
(3) Repayment for combined loans on real estate and equipment must
occur before 20 years.
(4) Working capital must not exceed 7 years.
(b) The first installment of principal and interest will, if
possible, be scheduled for payment after the project is operational and
has begun to generate income.
(c) Only loans that require a periodic payment schedule that will
fully retire the debt over the term of the loan without a balloon
payment will be guaranteed.
(d) A loan's maturity will take into consideration the use of
proceeds, the useful life of assets being financed, and the borrower's
ability to repay the loan.
(e) All loans guaranteed through this program must be sound, with
reasonably assured repayment.

Sec. 4280.126 Guarantee/annual renewal fee percentages.

(a) Fee ceilings. The maximum guarantee fee that may be charged is
1 percent. The maximum annual renewal fee that may be charged is 0.5
percent. The Agency will establish each year the guarantee fee and
annual renewal fee and a notice will be published in the Federal
Register.
(b) Guarantee fee. The guarantee fee will be paid to the Agency by
the lender and is nonrefundable. The guarantee fee may be passed on to
the borrower. The guarantee fee must be paid at the time the Loan Note
Guarantee is issued.
(c) Annual renewal fee. The annual renewal fee will be calculated
on the unpaid principal balance and billed to the lender in accordance
with the Federal Register publication. The annual renewal fee may not
be passed on to the borrower.

Sec. 4280.127 [Reserved]

Sec. 4280.128 Application and documentation.

The following requirements apply to all guaranteed loan
applications under this subpart.
(a) Applications. Applications must be filed with the Agency by
submitting the application information required in Sec. 4280.111(a)
(except for Sec. Sec. 4280.111(a)(4)(iii)(A) and 4280.111(a)(4)(vi)).
(b) Forms, certifications, and agreements. Each application
submitted under paragraph (a) of this section must contain, as
applicable, the items described in Sec. 4280.111(b)(7) through (15)
and in paragraphs (b)(1) through (8) of this section.
(1) A completed Form 4279-1, ``Application for Loan Guarantee.''
(2) A personal credit report for the borrower, a proprietor
(owner), each partner, officer, director, key employee, and stockholder
owning 20 percent or more interest in the borrower's business from a
credit reporting company acceptable to the Agency.
(3) Appraisals completed in accordance with Sec. 4280.141.
Completed appraisals should be submitted when the application is filed.
If the appraisal has not been completed when the application is filed,
the applicant must submit an estimated appraisal. In all cases, a
completed appraisal must be submitted prior to the loan being closed.
(4) Lender's complete comprehensive written analysis in accordance
with Sec. 4280.139.
(5) Commercial credit reports obtained by the lender on the
borrower and any parent, affiliate, and subsidiary firms.
(6) Current personal and corporate financial statements of any
guarantors.
(7) A proposed Loan Agreement or a sample Loan Agreement with an
attached list of the proposed Loan Agreement provisions. The following
requirements must be addressed in the proposed or sample Loan
Agreement:
(i) Prohibition against assuming liabilities or obligations of
others.
(ii) Restriction on dividend payments.
(iii) Limitation on the purchase or sale of equipment and fixed
assets.
(iv) Limitation on compensation of officers and owners.
(v) Minimum working capital or current ratio requirement.
(vi) Maximum debt-to-net worth ratio.
(vii) Restrictions concerning consolidations, mergers, or other
circumstances.
(viii) Limitations on selling the business without the concurrence
of the lender.
(ix) Repayment and amortization of the loan.
(x) List of collateral and lien priority for the loan including a
list of persons and corporations guaranteeing the loan with a schedule
for providing the lender with personal and corporate financial

[[Page 59684]]

statements. Financial statements on the corporate and personal
guarantors must be updated at least annually.
(xi) Type and frequency of financial statements to be required for
the duration of the loan.
(xii) The final Loan Agreement between the lender and borrower must
contain any additional requirements imposed by the Agency in its
Conditional Commitment (Form 4279-3).
(xiii) When submitting the proposed Loan Agreement, a section
within the loan agreement reserved for the later insertion of any
necessary measures by the borrower to avoid or reduce adverse
environmental impacts from this proposal's construction or operation.
Such measures, if necessary, will be determined by the Agency through
the completion of the environmental review process.
(xiv) Allow the Agency access to the project and its performance
information during its useful life and permit periodic inspection of
the project by a representative of the Agency.
(8) A certification by the lender that it has completed a
comprehensive written analysis of the proposal, the borrower is
eligible, the loan is for authorized purposes, and there is reasonable
assurance of repayment ability based on the borrower's history,
projections and equity, and the collateral to be obtained.
(c) Feasibility study for renewable energy systems. Each applicant
must submit the information required under Sec. 4280.111(c), as
applicable.
(d) Technical requirements reports. Each applicant must submit the
information required under Sec. 4280.111(d), as applicable.

Sec. 4280.129 Evaluation of guaranteed loan applications.

(a) General review. The Agency will evaluate each application and
make a determination whether the borrower is eligible, the proposed
loan is for an eligible project, there is reasonable assurance of
repayment ability, there is sufficient collateral and equity, and the
proposed loan complies with all applicable statutes and regulations. If
the Agency determines it is unable to guarantee the loan, the lender
will be informed in writing. Such notification will include the reasons
for denial of the guarantee.
(b) Ineligible or incomplete applications. If either the borrower
or the project is ineligible, the Agency will inform the lender in
writing of the decision, reasons therefore, and any appeal rights, and
no further evaluation of the application will occur. If the application
is incomplete, the Agency will return it to the lender to provide the
lender the opportunity to resubmit the application. The Agency will
identify those parts of the application that are incomplete. Upon
receipt of a complete application, the Agency will complete its
evaluation of the application.
(c) Evaluation criteria. Agency personnel will score each
application based on the evaluation criteria specified in Sec.
4280.112(d) (except for the criteria specified in Sec.
4280.112(d)(1)(v) and (d)(2)(iii)) and in paragraphs (c)(1) and (2) of
this section:
(1) If the rate of the loan is below the Prime Rate (as published
in The Wall Street Journal) plus 1.75 percent (5 points); and
(2) If the rate of the loan is below the Prime Rate (as published
in The Wall Street Journal) plus 1 percent (an additional 5 points).
(d) Technical feasibility determination. The Agency's determination
of a project's technical feasibility will be based on the information
provided by the applicant and on other sources of information, such as
recognized industry experts in the applicable technology field, as
necessary, to determine technical feasibility of the proposed project.

Sec. 4280.130 Eligible lenders.

An eligible lender is any Federal or State chartered bank, Farm
Credit Bank, other Farm Credit System institution with direct lending
authority, Bank for Cooperatives, or Savings and Loan Association.
These entities must be subject to credit examination and supervision by
either an agency of the United States or a State. Eligible lenders will
also include credit unions, provided they are subject to credit
examination and supervision by either the National Credit Union
Administration or a State agency, and insurance companies, provided
they are regulated by a State or National insurance regulatory agency.
Eligible lenders include the National Rural Utilities Cooperative
Finance Corporation.

Sec. 4280.131 Lenders' functions and responsibilities.

(a) General. Lenders are responsible for implementing the
guaranteed loan program under this subpart. All lenders requesting or
obtaining a loan guarantee must perform the requirements specified in
paragraphs (a)(1) through (9) in this section:
(1) Process applications for guaranteed loans;
(2) Develop and maintain adequately documented loan files;
(3) Recommend only loan proposals that are eligible and financially
feasible;
(4) Obtain valid evidence of debt and collateral in accordance with
sound lending practices;
(5) Supervise construction;
(6) Distribute loan funds; A lender that is considering advancing
an interim loan is advised that the Agency assumes no responsibility or
obligation to take out an interim loan advanced prior to the
Conditional Commitment being issued;
(7) Service guaranteed loans in a reasonable and prudent manner;
including liquidation, if necessary;
(8) Follow Agency regulations; and
(9) Obtain Agency approvals or concurrence as required.
(b) Credit evaluation. The lender must analyze all credit factors
associated with each proposed loan and apply its professional judgment
to determine that the credit factors, considered in combination, ensure
loan repayment. The lender must have an adequate underwriting process
to ensure that loans are reviewed by someone other than the originating
officer. There must be good credit documentation procedures.
(c) Environmental information. Lenders must ensure that borrowers
furnish all environmental information required under 7 CFR part 1940,
subpart G. Lenders have a responsibility to become familiar with
Federal environmental requirements; to consider, in consultation with
the prospective borrower, the potential environmental impacts of their
proposals at the earliest planning stages; and to develop proposals
that minimize the potential to adversely impact the environment.
Lenders must alert the Agency to any controversial environmental issues
related to a proposed project or items that may require extensive
environmental review. Lenders must help the borrower prepare Form RD
1940-20 (when required by 7 CFR part 1940, subpart G); assist in the
collection of additional data when the Agency needs such data to
complete its environmental review of the proposal; and assist in the
resolution of environmental problems. Lenders must alert the Agency to
any controversial environmental issues related to a proposed project or
items that may require extensive environmental review.
(d) Construction planning and performing development.
(1) Design policy. The lender must ensure that all project
facilities are designed utilizing accepted architectural and
engineering practices

[[Page 59685]]

and must conform to applicable Federal, state, and local codes and
requirements as well as all requirements of this regulation. The lender
must also ensure that the project will be completed with available
funds and, once completed, will be used for its intended purpose and
produce products in the quality and quantity proposed in the completed
application approved by the Agency.
(2) Project control. The lender must monitor the progress of
construction and undertake the reviews and inspections necessary to
ensure that construction conforms with applicable Federal, state, and
local code requirements; proceeds are used in accordance with the
approved plans, specifications, and contract documents; and that funds
are used for eligible project costs.
(e) Loan closing. The lender must conduct loan closings.

Sec. 4280.132 Access to records.

Both the lender and borrower must permit representatives of the
Agency (or other agencies of the United States) to inspect and make
copies of any records of the lender or borrower pertaining to the
Agency guaranteed loans during regular office hours of the lender or
borrower or at any other time upon agreement between the lender, the
borrower, and the Agency, as appropriate.

Sec. 4280.133 Conditions of guarantee.

A loan guarantee under this subpart will be evidenced by a Loan
Note Guarantee issued by the Agency. Each lender must execute a
Lender's Agreement (Form 4279-4). If a valid Lender's Agreement already
exists, it is not necessary to execute a new Lender's Agreement with
each loan guarantee. The provisions of this subpart apply to all
outstanding guarantees. In the event of a conflict between the
guarantee documents and this subpart as they exist at the time the
documents are executed, this subpart will control.
(a) Full faith and credit. A guarantee under this subpart
constitutes an obligation supported by the full faith and credit of the
United States and is incontestable except for fraud or
misrepresentation of which a lender or holder has actual knowledge at
the time it becomes such lender or holder or which a lender or holder
participates in or condones. The guarantee will be unenforceable to the
extent that any loss is occasioned by a provision for interest on
interest. In addition, the guarantee will be unenforceable by the
lender to the extent any loss is occasioned by the violation of usury
laws, negligent servicing, or failure to obtain the required security
regardless of the time at which the Agency acquires knowledge thereof.
Any losses occasioned will be unenforceable to the extent that loan
funds are used for purposes other than those specifically approved by
the Agency in its Conditional Commitment. The Agency will guarantee
payment as follows:
(1) To any holder, 100 percent of any loss sustained by the holder
on the guaranteed portion of the loan and on interest due on such
portion.
(2) To the lender, the lesser of:
(i) Any loss sustained by the lender on the guaranteed portion,
including principal and interest evidenced by the notes or assumption
agreements and secured advances for protection and preservation of
collateral made with the Agency's authorization; or
(ii) The guaranteed principal advanced to or assumed by the
borrower and any interest due thereon.
(b) Rights and liabilities. When a guaranteed portion of a loan is
sold to a holder, the holder will succeed to all rights of the lender
under the Loan Note Guarantee to the extent of the portion purchased.
The lender must remain bound to all obligations under the Loan Note
Guarantee, Lender's Agreement, and the Agency program regulations. A
guarantee and right to require purchase will be directly enforceable by
a holder notwithstanding any fraud or misrepresentation by the lender
or any unenforceability of the guarantee by the lender, except for
fraud or misrepresentation of which the holder had actual knowledge at
the time it became the holder or in which the holder participates or
condones. In the event of material fraud, negligence or
misrepresentation by the lender or the lender's participation in or
condoning of such material fraud, negligence or misrepresentation, the
lender will be liable for payments made by the Agency to any holder.
(c) Payments. A lender will receive all payments of principal and
interest on account of the entire loan and will promptly remit to the
holder its pro rata share thereof, determined according to its
respective interest in the loan, less only the lender's servicing fee.

Sec. 4280.134 Sale or assignment of guaranteed loan.

(a) The lender may sell all or part of the guaranteed portion of
the loan on the secondary market or retain the entire loan. The lender
must not sell or assign any amount of the guaranteed or unguaranteed
portion of the loan to the borrower or members of the borrower's
immediate families, officers, directors, stockholders, other owners, or
a parent, subsidiary or affiliate. If the lender desires to market all
or part of the guaranteed portion of the loan at or subsequent to loan
closing, such loan must not be in default. Loans made with the proceeds
of any obligation, the interest on which is excludable from income
under 26 U.S.C. Sec. 103 (interest on State and local banks) or any
successor section, will not be guaranteed.
(b) The entire loan must be evidenced by one note, and only one
Loan Note Guarantee will be issued. The lender may assign all or part
of the guaranteed portion of the loan to one or more holders only by
using the Agency's Assignment Guarantee Agreement. The holder, upon
written notice to the lender and the Agency, may reassign the unpaid
guaranteed portion of the loan sold under the Assignment Guarantee
Agreement. Upon notification and completion of the assignment, the
assignee will succeed to all rights and obligations of the holder
thereunder.
(c) The lender's servicing fee will stop when the Agency purchases
the guaranteed portion of the loan from the secondary market. No such
servicing fee may be charged to the Agency and all loan payments and
collateral proceeds received will be applied first to the guaranteed
loan and, when applied to the guaranteed loan, will be applied on a pro
rata basis.

Sec. 4280.135 Participation.

The lender may obtain participation in the loan under its normal
operating procedures; however, the lender must retain title to the note
and retain its interest in the collateral.

Sec. 4280.136 Minimum retention.

The lender must hold in its own portfolio a minimum of 5 percent of
the total loan amount. The amount required to be maintained must be of
the unguaranteed portion of the loan and cannot be participated to
another. The lender may sell the remaining amount of the unguaranteed
portion of the loan only through participation.

Sec. 4280.137 Repurchase from holder.

(a) Repurchase by lender. A lender has the option to repurchase the
unpaid guaranteed portion of the loan from a holder within 30 days of
written demand by the holder when the borrower is in default not less
than 60 days on principal or interest due on the loan; or the lender
has failed to remit to the holder its pro rata share of any payment
made by the borrower within 30 days of the lender's receipt thereof.
The repurchase by the lender will be for an amount equal to the unpaid

[[Page 59686]]

guaranteed portion of principal and accrued interest less the lender's
servicing fee. The holder must concurrently send a copy of the demand
letter to the Agency. The guarantee will not cover the note interest to
the holder on the guaranteed loan accruing after 90 days from the date
of the demand letter to the lender requesting the repurchase. The
lender will accept an assignment without recourse from the holder upon
repurchase. The lender is encouraged to repurchase the loan to
facilitate the accounting of funds, resolve the problem, and prevent
default, where and when reasonable. The lender must notify, in writing,
the holder and the Agency of its decision.
(b) Agency repurchase.
(1) If the lender does not repurchase the unpaid guaranteed portion
of the loan as provided in paragraph (a) of this section, the Agency
will purchase from the holder the unpaid principal balance of the
guaranteed portion together with accrued interest to date of
repurchase, less the lender's servicing fee, within 30 days after
written demand to the Agency from the holder. (This is in addition to
the copy of the written demand on the lender.) The guarantee will not
cover the note interest to the holder on the guaranteed loan accruing
after 90 days from the date of the original demand letter of the holder
to the lender requesting the repurchase.
(2) The holder's demand to the Agency must include a copy of the
written demand made upon the lender. The holder must also include
evidence of its right to require payment from the Agency. Such evidence
must consist of either the original of the Loan Note Guarantee properly
endorsed to the Agency or the original of the Assignment Guarantee
Agreement properly assigned to the Agency without recourse including
all rights, title, and interest in the loan. The holder must include in
its demand the amount due including unpaid principal, unpaid interest
to date of demand, and interest subsequently accruing from date of
demand to proposed payment date. The Agency will be subrogated to all
rights of the holder.
(3) The Agency will notify, in writing, the lender of its receipt
of the holder's demand for payment. The lender must promptly provide
the Agency with the information necessary for the Agency to determine
the appropriate amount due the holder. Upon request by the Agency, the
lender will furnish a current statement certified by an appropriate,
authorized officer of the lender of the unpaid principal and interest
then owed by the borrower on the loan and the amount then owed to any
holder. Any discrepancy between the amount claimed by the holder and
the information submitted by the lender must be resolved between the
lender and the holder before payment will be approved. Such conflict
will suspend the running of the 30-day payment requirement.
(4) Purchase by the Agency neither changes, alters, nor modifies
any of the lender's obligations to the Agency arising from the loan or
guarantee nor does it waive any of the Agency's rights against the
lender. The Agency has the right to set-off against the lender all
rights inuring to the Agency as the holder of the instrument against
the Agency's obligation to the lender under the guarantee.
(c) Repurchase for servicing. If, in the opinion of the lender,
repurchase of the guaranteed portion of the loan is necessary to
adequately service the loan, the holder must sell the guaranteed
portion of the loan to the lender for an amount equal to the unpaid
principal and interest on such portion less the lender's servicing fee.
The guarantee will not cover the note interest to the holder on the
guaranteed loan accruing after 90 days from the date of the demand
letter of the lender or the Agency to the holder requesting the holder
to tender its guaranteed portion. The lender must not repurchase from
the holder for arbitrage or other purposes to further its own financial
gain. Any repurchase must be made only after the lender obtains the
Agency's written approval. If the lender does not repurchase the
portion from the holder, the Agency may, at its option, purchase such
guaranteed portion for servicing purposes.

Sec. 4280.138 Replacement of document.

(a) The Agency may issue a replacement Loan Note Guarantee or
Assignment Guarantee Agreement which was lost, stolen, destroyed,
mutilated, or defaced to the lender or holder upon receipt of an
acceptable certificate of loss and an indemnity bond.
(b) When a Loan Note Guarantee or Assignment Guarantee Agreement is
lost, stolen, destroyed, mutilated, or defaced while in the custody of
the lender or holder, the lender must coordinate the activities of the
party who seeks the replacement documents and will submit the required
documents to the Agency for processing. The requirements for
replacement are as follows:
(1) A certificate of loss, notarized and containing a jurat, which
includes:
(i) Name and address of owner;
(ii) Name and address of the lender of record;
(iii) Capacity of person certifying;
(iv) Full identification of the Loan Note Guarantee or Assignment
Guarantee Agreement including the name of the borrower, the Agency's
case number, date of the Loan Note Guarantee or Assignment Guarantee
Agreement, face amount of the evidence of debt purchased, date of
evidence of debt, present balance of the loan, percentage of guarantee,
and, if an Assignment Guarantee Agreement, the original named holder
and the percentage of the guaranteed portion of the loan assigned to
that holder. Any existing parts of the document to be replaced must be
attached to the certificate;
(v) A full statement of circumstances of the loss, theft,
mutilation, defacement, or destruction of the Loan Note Guarantee or
Assignment Guarantee Agreement; and
(vi) For the holder, evidence demonstrating current ownership of
the Loan Note Guarantee and Note or the Assignment Guarantee Agreement.
If the present holder is not the same as the original holder, a copy of
the endorsement of each successive holder in the chain of transfer from
the initial holder to present holder must be included if in existence.
If copies of the endorsement cannot be obtained, best available records
of transfer must be submitted to the Agency (e.g., order confirmation,
canceled checks, etc.).
(2) An indemnity bond acceptable to the Agency must accompany the
request for replacement except when the holder is the United States, a
Federal Reserve Bank, a Federal corporation, a State or territory, or
the District of Columbia. The bond must be with surety except when the
outstanding principal balance and accrued interest due the present
holder is less than $1 million, verified by the lender in writing in a
letter of certification of balance due. The surety must be a qualified
surety company holding a certificate of authority from the Secretary of
the Treasury and listed in Treasury Department Circular 570.
(3) All indemnity bonds must be issued and payable to the United
States of America acting through the USDA. The bond must be in an
amount not less than the unpaid principal and interest. The bond must
hold USDA harmless against any claim or demand which might arise or
against any damage, loss, costs, or expenses which might be sustained
or incurred by reasons of the loss or replacement of the instruments.

[[Page 59687]]

Sec. 4280.139 Credit quality.

The lender must determine credit quality and must address all of
the elements of credit quality in a written credit analysis including
adequacy of equity, cash flow, collateral, history, management, and the
current status of the industry for which credit is to be extended.
(a) Cash flow. All efforts will be made to structure debt so that
the business has adequate debt coverage and the ability to accommodate
expansion.
(b) Collateral. Collateral must have documented value sufficient to
protect the interest of the lender and the Agency and the discounted
collateral value will normally be at least equal to the loan amount.
Lenders will discount collateral consistent with sound loan-to-value
policy.
(c) Equity. In determining the adequacy of equity, the lender must
meet the criteria specified in paragraph (c)(1) of this section for
loans over $600,000 and the criteria in paragraph (c)(2) of this
section for loans of $600,000 or less.
(1) For loans over $600,000, borrowers shall demonstrate evidence
of cash equity injection in the project of not less than 25 percent of
eligible project costs. The fair market value of equity in real
property that is to be pledged as collateral for the loan may be
substituted in whole or in part to meet the cash equity requirement.
However, the appraisal completed to establish the fair market value of
the real property must not be more than one year old and must meet the
Agency appraisal standards.
(2) For loans of $600,000 or less, borrowers shall demonstrate
evidence of cash equity injection in the project of not less than 15
percent of eligible project costs. However, the appraisal completed to
establish the fair market value of the real property must not be more
than one year old and must meet the Agency appraisal standards.
(d) Lien priorities. The entire loan must be secured by the same
security with equal lien priority for the guaranteed and unguaranteed
portions of the loan. The unguaranteed portion of the loan will neither
be paid first nor given any preference or priority over the guaranteed
portion. A parity or junior position may be considered by the Agency
provided discounted collateral values are adequate to secure the loan
in accordance with paragraph (b) of this section after considering
prior liens.

Sec. 4280.140 Financial statements.

(a) Except for the requirement to demonstrate financial need for
the funding, the financial information required in Sec.
4280.111(a)(4)(iii) is required for the guaranteed loan program.
(b) If the proposed guaranteed loan exceeds $3 million, the Agency
will require annual audited financial statements.

Sec. 4280.141 Appraisals.

(a) Loans of $600,000 or more. A complete self-contained appraisal
must be conducted. Lenders will be responsible for ensuring that
appraisal values adequately reflect the actual value of the collateral.
All real property appraisals associated with Agency guaranteed
loanmaking and servicing transactions must meet the requirements
contained in the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA) of 1989 and the appropriate guidelines
contained in Standards 1 and 2 of the Uniform Standards of Professional
Appraisal Practices (USPAP). All appraisals will include consideration
of the potential effects from a release of hazardous substances or
petroleum products or other environmental hazards on the market value
of the collateral. Lenders must complete at least a Transaction Screen
Questionnaire environmental site assessment for any new sites and a
Phase I environmental site assessment on existing business sites, which
should be provided to the appraiser for completion of the self-
contained appraisal. Chattels will be evaluated in accordance with
normal banking practices and generally accepted methods of determining
value.
(b) Loans for less than $600,000. A complete summary appraisal may
be conducted in lieu of a complete self-contained appraisal as required
under paragraph (a) of this section. Summary appraisals must be
conducted in accordance with USPAP.
(c) Specialized appraisers. Specialized appraisers will be required
to complete appraisals in accordance with paragraphs (a) and (b) of
this section. The Agency may approve a waiver of this requirement only
if a specialized appraiser does not exist in a specific industry or
hiring one would cause an undue financial burden to the borrower.

Sec. 4280.142 Personal and corporate guarantees.

(a) Personal and corporate guarantees, when obtained, are part of
the collateral for the loan. However, the value of such guarantee is
not considered in determining whether a loan is adequately secured for
loanmaking purposes.
(b) Unconditional personal and corporate guarantees for those
owning or having a beneficial interest greater than 20 percent of the
borrower will be required where legally permissible.

Sec. 4280.143 Loan approval and obligation of funds.

(a) Upon approval of a loan guarantee, the Agency will issue a
Conditional Commitment to the lender containing conditions under which
a Loan Note Guarantee will be issued
(b) If certain conditions of the Conditional Commitment cannot be
met, the lender and/or borrower may propose alternate conditions.
Within the requirements of the applicable regulations and instructions
and reasonable and prudent lending practices, the Agency may negotiate
with the lender and/or borrower regarding any proposed changes to the
Conditional Commitment.

Sec. 4280.144 Transfer of lenders.

(a) The Agency may approve the substitution of a new eligible
lender in place of a former lender who holds an outstanding Conditional
Commitment when the Loan Note Guarantee has not yet been issued
provided, that there are no changes in the borrower's ownership or
control, loan purposes, or scope of project, and loan conditions in the
Conditional Commitment and the Loan Agreement remain the same.
(b) The new lender's servicing capability, eligibility, and
experience will be analyzed by the Agency prior to approval of the
substitution. The original lender will provide the Agency with a letter
stating the reasons it no longer desires to be a lender for the
project. The substituted lender must execute a new part B of Form 4279-
1, ``Application for Loan Guarantee.''

Sec. 4280.145 Changes in borrower.

Any changes in borrower ownership or organization prior to the
issuance of the Loan Note Guarantee must meet the eligibility
requirements of the program and be approved by the Agency loan approval
official.

Sec. 4280.146 Conditions precedent to issuance of Loan Note
Guarantee.

The Loan Note Guarantee will not be issued until the lender
certifies to the following:
(a) No major changes have been made in the lender's loan conditions
and requirements since the issuance of the Conditional Commitment,
unless such changes have been approved by the Agency.
(b) All planned property acquisition has been completed, all
development has been completed in accordance with

[[Page 59688]]

plans and specifications, conforms with applicable Federal, state, and
local codes, performed at a steady state operating level in accordance
with the technical requirements, and costs have not exceeded the amount
approved by the lender and the Agency.
(c) Hazard, flood, liability, worker compensation, and personal
life insurance, when required, are in effect.
(d) Truth-in-lending requirements have been met.
(e) All equal credit opportunity requirements have been met.
(f) The loan has been properly closed, and the required security
instruments have been obtained.
(g) The borrower has marketable title to the collateral then owned
by the borrower, subject to the instrument securing the loan to be
guaranteed and to any other exceptions approved in writing by the
Agency.
(h) When required, the entire amount of the loan for working
capital has been disbursed except in cases where the Agency has
approved disbursement over an extended period of time.
(i) When required, personal, partnership, or corporate guarantees
have been obtained.
(j) All other requirements of the Conditional Commitment have been
met.
(k) Lien priorities are consistent with the requirements of the
Conditional Commitment. No claims or liens of laborers, subcontractors,
suppliers of machinery and equipment, or other parties have been or
will be filed against the collateral, and no suits are pending or
threatened that would adversely affect the collateral when the security
instruments are filed.
(l) The loan proceeds have been or will be disbursed for purposes
and in amounts consistent with the Conditional Commitment and the
Application for Loan Guarantee (Form 4279-1). A copy of the detailed
loan settlement of the lender must be attached to support this
certification.
(m) There has been neither any material adverse change in the
borrower's financial condition nor any other material adverse change in
the borrower, for any reason, during the period of time from the
Agency's issuance of the Conditional Commitment to issuance of the Loan
Note Guarantee, regardless of the cause or causes of the change and
whether or not the change or causes of the change were within the
lender's or borrower's control. The lender must address any assumptions
or reservations in the requirement and must address all adverse changes
of the borrower, any parent, affiliate, or subsidiary of the borrower,
and guarantors.
(n) None of the lender's officers, directors, stockholders, or
other owners (except stockholders in an institution that has normal
stockshare requirements for participation) has a substantial financial
interest in the borrower and neither the borrower nor its officers,
directors, stockholders, or other owners has a substantial financial
interest in the lender. If the borrower is a member of the board of
directors or an officer of a Farm Credit System (FCS) institution that
is the lender, the lender will certify that an FCS institution on the
next highest level will independently process the loan request and act
as the lender's agent in servicing the account.
(o) The Loan Agreement includes all measures identified in the
Agency's environmental impact analysis for this proposal (measures with
which the borrower must comply) for the purpose of avoiding or reducing
adverse environmental impacts of the proposal's construction or
operation.

Sec. 4280.147 Issuance of the guarantee.

(a) When loan closing plans are established, the lender must notify
the Agency in writing. At the same time, or immediately after loan
closing, the lender must provide the following to the Agency:
(1) Lender's certifications as required by Sec. 4280.146,
(2) Executed Form 4279-4, ``Lender's Agreement,'' and
(3) Executed Form RD 1980-19, ``Guaranteed Loan Closing Report''
and appropriate guarantee fee.
(b) When the Agency is satisfied that all conditions for the
guarantee have been met, the Loan Note Guarantee and the following
documents, as appropriate, will be issued:
(1) Assignment Guarantee Agreement. If the lender assigns the
guaranteed portion of the loan to a holder, the lender, holder, and the
Agency must execute the Assignment Guarantee Agreement;
(2) Certificate of Incumbency. If requested by the lender, the
Agency will provide the lender with a copy of Form 4279-7,
``Certificate of Incumbency and Signature,'' with the signature and
title of the Agency official who signs the Loan Note Guarantee,
Lender's Agreement, and Assignment Guarantee Agreement;
(3) Copies of legal loan documents; and
(4) Disbursement plan if working capital is a purpose of the
project.

Sec. 4280.148 Refusal to execute Loan Note Guarantee.

If the Agency determines that it cannot execute the Loan Note
Guarantee, the Agency will promptly inform the lender of the reasons
and give the lender a reasonable period within which to satisfy the
objections. If the lender requests additional time in writing and
within the period allowed, the Agency may grant the request. If the
lender satisfies the objections within the time allowed, the guarantee
will be issued.

Sec. 4280.149 Requirements after project construction.

Once the project has been constructed, the lender must provide the
Agency periodic reports from the borrower. The borrower's reports will
include, but not be limited to, the information specified in paragraphs
(a) and (b) of this section, as applicable.
(a) For renewable energy systems, commencing the first full
calendar year following the year in which project construction was
completed and continuing for 3 full years, provide a report detailing
the following will be provided:
(1) Report the actual amount of energy produced in BTUs, kilowatts,
or similar energy equivalents.
(2) If applicable, provide documentation that identified health
and/or sanitation problem has been solved.
(3) Provide the annual income and/or energy savings of the
renewable energy system.
(4) Summarize the cost of operating and maintaining the facility.
(5) Description of any maintenance or operational problems
associated with the facility.
(6) Recommendations for development of future similar projects.
(b) For energy efficiency improvement projects, commencing the
first full calendar year following the year in which project
construction was completed and continuing for 2 full years, report the
actual amount of energy saved due to the energy efficiency
improvements.

Sec. 4280.150 Insurance requirements.

(a) Each borrower must obtain the insurance required in Sec.
4280.113(a) through (c) and in paragraphs (b) and (c) in this section.
The coverage required by this section must be maintained for the life
of the loan unless this requirement is waived or modified by the Agency
in writing.
(b) Hazard insurance with a standard mortgage clause naming the
lender as beneficiary will be required on every

[[Page 59689]]

loan in an amount that is at least the lesser of the depreciated
replacement value of the collateral or the amount of the loan. Hazard
insurance includes fire, windstorm, lightning, hail, explosion, riot,
civil commotion, aircraft, vehicle, marine, smoke, builder's risk
during construction by the business, and property damage.
(c) The lender may require life insurance on every loan to insure
against the risk of death of persons critical to the success of the
business. When required, coverage will be in amounts necessary to
provide for management succession or to protect the business. The cost
of insurance and its effect on the borrower's working capital must be
considered as well as the amount of existing insurance which could be
assigned without requiring additional expense.

Sec. 4280.151 Laws that contain other compliance requirements.

(a) Each applicant and borrower must comply with the requirements
specified in Sec. 4280.114(a), (b), and (d), as applicable, and with
paragraph (b) of this section.
(b) Equal Credit Opportunity Act. In accordance with the Equal
Credit Opportunity Act (Title V of Pub. L. 90-321, as amended), with
respect to any aspect of a credit transaction, neither the lender nor
the Agency will discriminate against any borrower on the basis of race,
color, religion, national origin, sex, marital status or age (providing
the borrower has the capacity to contract), or because all or part of
the borrower's income derives from a public assistance program, or
because the borrower has, in good faith, exercised any right under the
Consumer Protection Act. The lender will comply with the requirements
of the Equal Credit Opportunity Act as contained in the Federal Reserve
Board's Regulation implementing that Act (see 12 CFR part 202). Such
compliance will be accomplished prior to loan closing.

Sec. 4280.152 Servicing guaranteed loans.

The lender must service the entire loan and must remain mortgagee
and secured party of record notwithstanding the fact that another party
may hold a portion of the loan. The entire loan must be secured by the
same security with equal lien priority for the guaranteed and
unguaranteed portions of the loan. The unguaranteed portion of a loan
will neither be paid first nor given any preference or priority over
the guaranteed portion of the loan.
(a) Servicing. The lender is responsible for servicing the entire
loan and for taking all servicing actions that a reasonable, prudent
lender would perform in servicing its own portfolio of loans that are
not guaranteed. The Loan Note Guarantee is unenforceable by the lender
to the extent any loss is occasioned by violation of usury laws, use of
loan funds for unauthorized purposes, negligent servicing, or failure
to obtain the required security interest regardless of the time at
which the Agency acquires knowledge of the foregoing. This
responsibility includes but is not limited to the collection of
payments, obtaining compliance with the covenants and provisions in the
Loan Agreement, obtaining and analyzing financial statements, checking
on payment of taxes and insurance premiums, and maintaining liens on
collateral.
(1) Lender reports. The lender must report the outstanding
principal and interest balance on each guaranteed loan semiannually
using Form RD 1980-41, ``Guaranteed Loan Status Report.''
(2) Loan classification. Within 90 days of receipt of the Loan Note
Guarantee, the lender must notify the Agency, in writing, of the loan's
classification or rating under its regulatory standards. Should the
classification be changed at a future time, the lender must notify, in
writing, the Agency immediately.
(3) Agency and lender conference. At the Agency's request, the
lender must meet with the Agency to ascertain how the guaranteed loan
is being serviced and that the conditions and covenants of the Loan
Agreement are being enforced.
(4) Financial reports. The lender must obtain and forward to the
Agency the financial statements required by the Loan Agreement. The
lender must submit annual financial statements to the Agency within 120
days of the end of the borrower's fiscal year. The lender must analyze
the financial statements and provide the Agency with a written summary
of the lender's analysis and conclusions, including trends, strengths,
weaknesses, extraordinary transactions, and other indications of the
financial condition of the borrower. Spreadsheets of the new financial
statements must also be included.
(5) Additional expenditures. The lender must not make additional
loans to the borrower without first obtaining the prior written
approval of the Agency, even though such loans will not be guaranteed.
(b) Interest rate adjustments. The lender must use the procedures
described in paragraphs (b)(1) and (2) of this section when adjusting
the interest rate on a guaranteed loan.
(1) Reductions. The borrower, lender, and holder (if any) may
collectively initiate a permanent or temporary reduction in the
interest rate of the guaranteed loan at any time during the life of the
loan upon written agreement among these parties. The lender must notify
the Agency, in writing, within 10 calendar days of the change. If any
of the guaranteed portion has been purchased by the Agency, then the
Agency will affirm or reject interest rate change proposals in writing.
The Agency will concur in such interest-rate changes only when it is
demonstrated to the Agency that the change is a more viable alternative
than initiating or proceeding with liquidation of the loan or
continuing with the loan in its present state.
(i) Fixed rates can be changed to variable rates to reduce the
borrower's interest rate only when the variable rate has a ceiling
which is less than or equal to the original fixed rate.
(ii) Variable rates can be changed to a fixed rate which is at or
below the current variable rate.
(iii) The interest rates, after adjustments, must comply with the
requirements for interest rates on new loans as established by Sec.
4280.124.
(iv) The lender is responsible for the legal documentation of
interest-rate changes by an endorsement or any other legally effective
amendment to the promissory note; however, no new notes may be issued.
Copies of all legal documents must be provided to the Agency.
(2) Increases. No increases in interest rates will be permitted
except the normal fluctuations in approved variable interest rates
unless a temporary interest-rate reduction occurred.
(c) Release of collateral. The lender must use the procedures
described in paragraphs (c)(1) through (3) of this section in order to
release collateral associated with the guaranteed loan.
(1) All releases of collateral with a value exceeding $100,000 must
be supported by a current appraisal on the collateral released. The
appraisal will be at the expense of the borrower and must meet the
requirements of Sec. 4280.141. The remaining collateral must be
sufficient to provide for repayment of the Agency's guaranteed loan.
The Agency may, at its discretion, require an appraisal of the
remaining collateral in cases where it is determined that the Agency
may be adversely affected by the release of collateral. Sale or release
of collateral must be based on an arm's-length transaction and adequate
consideration.

[[Page 59690]]

(2) Within the parameters of paragraph (c)(1) of this section,
lenders may, over the life of the loan, release collateral (other than
personal and corporate guarantees) with a cumulative value of up to 20
percent of the original loan amount without Agency concurrence, if the
proceeds generated are used to reduce the guaranteed loan or to buy
replacement collateral or buy real estate equal to or greater than the
collateral being replaced.
(3) Within the parameters of paragraph (c)(1) of this section,
release of collateral with a cumulative value in excess of 20 percent
of the original loan or when the proceeds will not be used to reduce
the guaranteed loan or to buy replacement collateral must be requested
in writing by the lender and concurred in by the Agency in writing in
advance of the release. A written evaluation will be completed by the
lender to justify the release.
(d) Subordination of lien position. A subordination of the lender's
lien position must be requested in writing by the lender and concurred
by the Agency in writing in advance of the subordination. The Agency
will only consider a parity or junior lien position. After the
subordination, collateral must be adequate to secure the loan. The lien
to which the guaranteed loan is subordinated must be for a fixed dollar
limit. The subordination must be for a fixed period of time, after
which the guaranteed loan lien priority will be restored. Subordination
to a revolving line of credit will not exceed 1 year. There must be
adequate consideration for the subordination.
(e) Alterations of loan instruments. The lender must not alter or
approve any alterations of any loan instrument without the prior
written approval of the Agency.
(f) Loan transfer and assumption. When a loan is transferred and
assumed, the procedures described in paragraphs (f)(1) through (11) of
this section must be followed.
(1) Documentation of request. All transfers and assumptions must be
approved in writing by the Agency and must be to eligible borrowers in
accordance with Sec. 4280.121. An individual credit report must be
provided for transferee proprietors, partners, officers, directors, and
stockholders with 20 percent or more interest in the business, along
with such other documentation as the Agency may request to determine
eligibility.
(2) Terms. Loan terms must not be changed unless the change is
approved in writing by the Agency with the concurrence of any holder
and the transferor (including guarantors) if they have not been or will
not be released from liability. Any new loan terms must be within the
terms authorized by Sec. 4280.125. The lender's request for approval
of new loan terms will be supported by an explanation of the reasons
for the proposed change in loan terms.
(3) Release of liability. The transferor, including any guarantor,
may be released from liability only with prior Agency written
concurrence and only when the value of the collateral being transferred
is at least equal to the amount of the loan being assumed and is
supported by a current appraisal and a current financial statement. The
Agency will not pay for the appraisal. If the transfer is for less than
the debt, the lender must demonstrate to the Agency that the transferor
and guarantors have no reasonable debt-paying ability considering their
assets and income in the foreseeable future.
(4) Proceeds. Any proceeds received from the sale of collateral
before a transfer and assumption will be credited to the transferor's
guaranteed loan debt in inverse order of maturity before the transfer
and assumption are closed.
(5) Additional loans. Loans to provide additional funds in
connection with a transfer and assumption must be considered as a new
loan application under Sec. 4280.128.
(6) Credit quality. The lender must make a complete credit analysis
which is subject to Agency review and approval.
(7) Documents. Prior to Agency approval, the lender must advise the
Agency, in writing, that the transaction can be properly and legally
transferred, and the conveyance instruments will be filed, registered,
or recorded as appropriate.
(i) The assumption will be done on the lender's assumption
agreement and will contain the Agency case number of the transferor and
transferee. The lender must provide the Agency with a copy of the
transfer and assumption agreement. The lender must ensure that the
transfer and assumption is noted on the original Loan Note Guarantee.
(ii) A new Loan Agreement, consistent in principle with the
original Loan Agreement, must be executed to establish the terms and
conditions of the loan being assumed. An assumption agreement can be
used to establish the loan covenants.
(iii) The lender must provide to the Agency a written certification
that the transfer and assumption is valid, enforceable, and complies
with all Agency regulations.
(8) Loss resulting from transfer. If a loss should occur upon
consummation of a complete transfer and assumption for less than the
full amount of the debt and the transferor (including personal
guarantors) is released from liability, the lender, if it holds the
guaranteed portion, may file an estimated report of loss, using Form RD
449-30, ``Loan Note Guaranteed Loss Report,'' to recover its pro rata
share of the actual loss. If a holder owns any of the guaranteed
portion, such portion must be repurchased by the lender or the Agency
in accordance with Sec. 4280.137(c). In completing the report of loss,
the amount of the debt assumed will be entered as net collateral
(recovery). Approved protective advances and accrued interest thereon
made during the arrangement of a transfer and assumption must be
included in the calculations.
(9) Related party. If the transferor and transferee are affiliated
or related parties, any transfer and assumption must be for the full
amount of the debt.
(10) Payment requests. Requests for a loan guarantee to provide
equity for a transfer and assumption must be considered as a new loan
under this subpart.
(11) Cash down payment. When the transferee will be making a cash
down payment as part of the transfer and assumption:
(i) The lender must have an appropriate appraiser, acceptable to
both the transferee and transferor and currently authorized to perform
appraisals to determine the value of the collateral securing the loan.
The Agency will not pay the appraisal fee or any other costs.
(ii) The market value of the collateral, plus any additional
property the transferee proposes to offer as collateral, must be
adequate to secure the balance of the guaranteed loans.
(iii) Cash down payments may be paid directly to the transferor
provided:
(A) The lender recommends that the cash be released, and the Agency
concurs prior to the transaction being completed. The lender may wish
to require that an amount be retained for a defined period of time as a
reserve against future defaults. Interest on such account may be paid
periodically to the transferor or transferee as agreed;
(B) The lender determines that the transferee has the repayment
ability to meet the obligations of the assumed guaranteed loan as well
as any other indebtedness;
(C) Any payments by the transferee to the transferor will not
suspend the transferee's obligations to continue to meet the guaranteed
loan payments as they come due under the terms of the assumption; and

[[Page 59691]]

(D) The transferor agrees not to take any action against the
transferee in connection with the assumption without prior written
approval of the lender and the Agency.

Sec. 4280.153 Substitution of lender.

After the issuance of a Loan Note Guarantee, the lender must not
sell or transfer the entire loan without the prior written approval of
the Agency. The Agency will not pay any loss or share in any costs
(i.e., appraisal fees, environmental studies, or other costs associated
with servicing or liquidating the loan) with a new lender unless a
relationship is established through a substitution of lender in
accordance with paragraph (a) of this section. This includes cases
where the lender has failed and been taken over by a regulatory agency
such as the Federal Deposit Insurance Corporation (FDIC) and the loan
is subsequently sold to another lender.
(a) The Agency may approve the substitution of a new lender if:
(1) The proposed substitute lender:
(i) Is an eligible lender in accordance with Sec. 4280.130;
(ii) Is able to service the loan in accordance with the original
loan documents; and
(iii) Agrees in writing to acquire and must acquire title to the
unguaranteed portion of the loan held by the original lender and
assumes all original loan requirements, including liabilities and
servicing responsibilities.
(2) The substitution of the lender is requested in writing by the
borrower, the proposed substitute lender, and the original lender if
still in existence.
(b) Where the lender has failed and been taken over by FDIC and the
guaranteed loan is liquidated by FDIC rather than being sold to another
lender, the Agency will pay losses and share in costs as if FDIC were
an approved substitute lender.

Sec. 4280.154 Default by borrower.

(a) The lender must notify the Agency, in writing, when a borrower
is 30 days past due on a payment or is otherwise in default of the Loan
Agreement. Form RD 1980-44, ``Guaranteed Loan Borrower Default Status''
must be used and the lender must continue to submit this form bi-
monthly until such time as the loan is no longer in default. If a
monetary default exceeds 60 days, the lender must arrange a meeting
with the Agency and the borrower to resolve the problem.
(b) In considering options, the prospects for providing a permanent
cure without adversely affecting the risk to the Agency and the lender
is the paramount objective.
(1) Curative actions include but are not limited to:
(i) Deferment of principal (subject to rights of any holder);
(ii) An additional unguaranteed temporary loan by the lender to
bring the account current;
(iii) Reamortization of or rescheduling the payments on the loan
(subject to rights of any holder);
(iv) Transfer and assumption of the loan in accordance with Sec.
4280.152(f);
(v) Reorganization;
(vi) Liquidation;
(vii) Subsequent loan guarantees; and
(viii) Changes in interest rates with the Agency's, the lender's,
and the holder's approval, provided that the interest rate is adjusted
proportionately between the guaranteed and unguaranteed portion of the
loan and the type of rate remains the same.
(2) In the event a deferment, rescheduling, reamortization, or
moratorium is accomplished, it will be limited to the remaining life of
the collateral or loan terms, whichever is less.

Sec. 4280.155 Protective advances.

Protective advances are advances made by the lender for the purpose
of preserving and protecting the collateral where the debtor has failed
to, will not, or cannot meet its obligations. Sound judgment must be
exercised in determining that the protective advance preserves
collateral and recovery is actually enhanced by making the advance.
Protective advances will not be made in lieu of additional loans.
(a) The maximum loss to be paid by the Agency will never exceed the
original principal plus accrued interest regardless of any protective
advances made.
(b) Protective advances and interest thereon at the note rate will
be guaranteed at the same percentage of loss as provided in the Loan
Note Guarantee.
(c) Protective advances must constitute an indebtedness of the
borrower to the lender and be secured by the security instruments.
Agency written authorization is required when cumulative protective
advances exceed $5,000.

Sec. 4280.156 Liquidation.

In the event of one or more incidents of default or third party
actions that the borrower cannot or will not cure or eliminate within a
reasonable period of time, liquidation of the loan may be considered by
the lender. If the lender concludes that liquidation is necessary, it
must request the Agency's concurrence. The lender will liquidate the
loan unless the Agency, at its option, carries out liquidation. When
the decision to liquidate is made, if the loan has not already been
repurchased, provisions will be made for repurchase in accordance with
Sec. 4280.137.
(a) Decision to liquidate. A decision to liquidate must be made
when it is determined that the default cannot be cured through actions
contained in Sec. 4280.154 or it has been determined that it is in the
best interest of the Agency and the lender to liquidate. The decision
to liquidate or continue with the borrower must be made as soon as
possible when any of the following exist:
(1) A loan has been delinquent 90 days and the lender and borrower
have not been able to cure the delinquency through one of the actions
contained in Sec. 4280.154;
(2) It has been determined that delaying liquidation will
jeopardize full recovery on the loan; and
(3) The borrower or lender has been uncooperative in resolving the
problem and the Agency or the lender has reason to believe the borrower
is not acting in good faith, and it would enhance the position of the
guarantee to liquidate immediately.
(b) Liquidation by the Agency. The Agency may require the lender to
assign the security instruments to the Agency if the Agency, at its
option, decides to liquidate the loan. When the Agency liquidates,
reasonable liquidation expenses will be assessed against the proceeds
derived from the sale of the collateral.
(c) Submission of liquidation plan. The lender must, within 30 days
after a decision to liquidate, submit to the Agency in writing its
proposed detailed method of liquidation. Upon approval by the Agency of
the liquidation plan, the lender will commence liquidation.
(d) Lender's liquidation plan. The liquidation plan must include,
but is not limited to, the following:
(1) Such proof as the Agency requires to establish the lender's
ownership of the guaranteed loan promissory note and related security
instruments and a copy of the payment ledger, if available, which
reflects the current loan balance and accrued interest to date and the
method of computing the interest;
(2) A full and complete list of all collateral including any
personal and corporate guarantees;
(3) The recommended liquidation methods for making the maximum
collection possible on the indebtedness and the justification for such
methods, including recommended action:

[[Page 59692]]

(i) For acquiring and disposing of all collateral; and
(ii) To collect from guarantors;
(4) Necessary steps for preservation of the collateral;
(5) Copies of the borrower's latest available financial statements;
(6) Copies of the guarantor's latest available financial
statements;
(7) An itemized list of estimated liquidation expenses expected to
be incurred along with justification for each expense;
(8) A schedule to periodically report to the Agency on the progress
of liquidation;
(9) Estimated protective advance amounts with justification;
(10) Proposed protective bid amounts on collateral to be sold at
auction and a breakdown to show how the amounts were determined;
(11) A voluntary conveyance, if one is considered, including the
proposed amount to be credited to the guaranteed debt;
(12) Legal opinions, if needed; and
(13) If the outstanding balance of principal and accrued interest
is less than $100,000, the lender will obtain an estimate of fair
market and potential liquidation value of the collateral. If the
outstanding balance of principal and accrued interest is $100,000 or
more, the lender will obtain an independent appraisal report meeting
the requirements of Sec. 4280.141 on all collateral securing the loan
that will reflect the fair market value and potential liquidation
value. In order to formulate a liquidation plan which maximizes
recovery, collateral must be evaluated for the release of hazardous
substances, petroleum products, or other environmental hazards which
may adversely impact the market value of the collateral. Both the
estimate and the appraisal must consider this aspect. The independent
appraiser's fee, including the cost of the environmental site
assessment, will be shared equally by the Agency and the lender.
(e) Approval of liquidation plan. The Agency will inform the lender
in writing whether it concurs in the lender's liquidation plan. Should
the Agency and the lender not agree on the liquidation plan,
negotiations will take place between the Agency and the lender to
resolve the disagreement. When the liquidation plan is approved by the
Agency, the lender must proceed expeditiously with liquidation.
(1) A transfer and assumption of the borrower's operation can be
accomplished before or after the loan goes into liquidation. However,
if the collateral has been purchased through foreclosure or the
borrower has conveyed title to the lender, no transfer and assumption
is permitted.
(2) A protective bid may be made by the lender, with prior Agency
written approval, at a foreclosure sale to protect the lender's and the
Agency's interest. The protective bid must not exceed the amount of the
loan, including expenses of foreclosure, and should be based on the
liquidation value considering estimated expenses for holding and
reselling the property. These expenses include, but are not limited to,
expenses for resale, interest accrual, length of time necessary for
resale, maintenance, guard service, weatherization, and prior liens.
(f) Acceleration. The lender, or the Agency if it liquidates, will
proceed to accelerate the indebtedness as expeditiously as possible
when acceleration is necessary including giving any notices and taking
any other legal actions required. A copy of the acceleration notice or
other acceleration document will be sent to the Agency (or lender if
the Agency liquidates). The guaranteed loan will be considered in
liquidation once the loan has been accelerated and a demand for payment
has been made upon the borrower.
(g) Filing an estimated loss claim. When the lender is conducting
the liquidation and owns any or all of the guaranteed portion of the
loan, the lender must file an estimated loss claim once a decision has
been made to liquidate if the liquidation will exceed 90 days. The
estimated loss payment will be based on the liquidation value of the
collateral. For the purpose of reporting and loss claim computation,
the lender will discontinue interest accrual on the defaulted loan in
accordance with Agency procedures, and the loss claim will be promptly
processed in accordance with applicable Agency regulations.
(h) Accounting and reports. When the lender conducts liquidation,
it must account for funds during the period of liquidation and must
provide the Agency with reports at least quarterly on the progress of
liquidation including disposition of collateral, resulting costs, and
additional procedures necessary for successful completion of the
liquidation.
(i) Transmitting payments and proceeds to the Agency. When the
Agency is the holder of a portion of the guaranteed loan, the lender
must transmit to the Agency its pro rata share of any payments received
from the borrower, liquidation payments, or payments of other proceeds,
using Form RD 1980-43, ``Lender's Guaranteed Loan Payment to USDA.''
(j) Abandonment of collateral. There may be instances when the cost
of liquidation would exceed the potential recovery value of the
collection. The lender, with proper documentation and concurrence of
the Agency, may abandon the collateral in lieu of liquidation. A
proposed abandonment will be considered a servicing action requiring an
environmental review by the Agency. Examples where abandonment may be
considered include, but are not limited to:
(1) The cost of liquidation is increased or the value of the
collateral is decreased by environmental issues;
(2) The collateral is functionally or economically obsolete;
(3) There are superior liens held by other parties in excess of the
value of the collateral;
(4) The collateral has deteriorated; or
(5) The collateral is specialized and there is little or no demand
for it.
(k) Disposition of personal or corporate guarantees. The lender
must take action to maximize recovery from all collateral, including
personal and corporate guarantees. The lender must seek a deficiency
judgment when there is a reasonable chance of future collection of the
judgment. The lender must make a decision whether or not to seek a
deficiency judgment when:
(1) A borrower voluntarily liquidates the collateral, but the sale
fails to pay the guaranteed indebtedness;
(2) The collateral is voluntarily conveyed to the lender, but the
borrower and personal and corporate guarantors are not released from
liability; or
(3) A liquidation plan is being developed for forced liquidation.
(l) Compromise settlement. A compromise settlement may be
considered at any time.
(1) The lender and the Agency must receive complete financial
information on all parties obligated for the loan and must be satisfied
that the statements reflect the true and correct financial position of
the debtor including all assets. Adequate consideration must be
received before a release from liability is issued. Adequate
consideration includes money, additional security, or other benefit to
the goals and objectives of the Agency.
(2) Before a personal guarantor can be released from liability, the
following factors must be considered.
(i) Cash, either lump sum or over a period of time, or other
consideration offered by the guarantor;
(ii) Age and health of the guarantor;
(iii) Potential income of the guarantor;
(iv) Inheritance prospects of the guarantor;

[[Page 59693]]

(v) Availability of the guarantor's assets.
(vi) Possibility that the guarantor's assets have been concealed or
improperly transferred; and
(vii) Effect of other guarantors on the loan.
(3) Once the Agency and the lender agree on a reasonable amount
that is fair and adequate, the lender can proceed to effect the
settlement compromise.
(4) A compromise will only be accepted if it is in the best
interest of the Agency.

Sec. 4280.157 Determination of loss and payment.

In all liquidation cases, final settlement will be made with the
lender after the collateral is liquidated, unless otherwise designated
as a future recovery or after settlement and compromise of all parties
has been completed. The Agency will have the right to recover losses
paid under the guarantee from any party that may be liable.
(a) Report of loss form. Loan Note Guarantee Report of Loss will be
used for calculations of all estimated and final loss determinations.
Estimated loss payments may only be approved by the Agency after the
Agency has approved a liquidation plan.
(b) Estimated loss. In accordance with the requirements of Sec.
4280.156(g), an estimated loss claim based on liquidation appraisal
value may be prepared and submitted by the lender.
(1) The estimated loss payment must be applied as of the date of
such payment. The total amount of the loss payment remitted by the
Agency will be applied by the lender on the guaranteed portion of the
loan debt. Such application does not release the borrower from
liability.
(2) An estimated loss will be applied first to reduce the principal
balance on the guaranteed loan and the balance, if any, to accrued
interest. Interest accrual on the defaulted loan will be discontinued.
(3) A protective advance claim will be paid only at the time of the
final report of loss payment except in certain transfer and assumption
situations as specified in Sec. 4280.152(f).
(c) Final loss. Within 30 days after liquidation of all collateral,
except for certain unsecured personal or corporate guarantees as
provided for in this section, is completed, a final report of loss must
be prepared and submitted by the lender to the Agency. The Agency will
not guarantee interest beyond this 30-day period other than for the
period of time it takes the Agency to process the loss claim. Before
approval by the Agency of any final loss report, the lender must
account for all funds during the period of liquidation, disposition of
the collateral, all costs incurred, and any other information necessary
for the successful completion of liquidation. Upon receipt of the final
accounting and report of loss, the Agency may audit all applicable
documentation to determine the final loss. The lender must make its
records available and otherwise assist the Agency in making any
investigation. The documentation accompanying the report of loss must
support the amounts shown on the Loan Note Guarantee Report of Loss.
(1) A determination must be made regarding the collectibility of
unsecured personal and corporate guarantees. If reasonably possible,
such guarantees should be promptly collected or otherwise disposed of
in accordance with Sec. 4280.156(k) prior to completion of the final
loss report. However, in the event that collection from the guarantors
appears unlikely or will require a prolonged period of time, the report
of loss will be filed when all other collateral has been liquidated,
and unsecured personal or corporate guarantees will be treated as a
future recovery with the net proceeds to be shared on a pro rata basis
by the lender and the Agency.
(2) The lender must document that all of the collateral has been
accounted for and properly liquidated and that liquidation proceeds
have been properly accounted for and applied correctly to the loan.
(3) The lender must show a breakdown of any protective advance
amount as to the payee, purpose of the expenditure, date paid, and
evidence that the amount expended was proper and that payment was
actually made.
(4) The lender will show a breakdown of liquidation expenses as to
the payee, purpose of the expenditure, date paid, and evidence that the
amount expended was proper and that payment was actually made.
Liquidation expenses are recoverable only from collateral proceeds.
Attorney fees may be approved as liquidation expenses provided the fees
are reasonable and cover legal issues pertaining to the liquidation
that could not be properly handled by the lender and its in-house
counsel.
(5) Accrued interest must be supported by documentation as to how
the amount was accrued. If the interest rate was a variable rate, the
lender must include documentation of changes in both the selected base
rate and the loan rate.
(6) Loss payments will be paid by the Agency within 60 days after
the review of the final loss report and accounting of the collateral.
(d) Loss limit. The amount payable by the Agency to the lender
cannot exceed the limits set forth in the Loan Note Guarantee.
(e) Rent. Any net rental or other income that has been received by
the lender from the collateral will be applied on the guaranteed loan
debt.
(f) Liquidation costs. Liquidation costs must be deducted from the
proceeds of the disposition of collateral. If changed circumstances
after submission of the liquidation plan require a substantial revision
of liquidation costs, the lender will procure the Agency's written
concurrence prior to proceeding with the proposed changes. No in-house
expenses of the lender will be allowed. In-house expenses include, but
are not limited to, employee's salaries, staff lawyers, travel, and
overhead.
(g) Payment. When the Agency finds the final report of loss to be
proper in all respects, it will approve Form RD 449-30, ``Loan Note
Guaranteed Report of Loss,'' and proceeds as follows:
(1) If the loss is greater than any estimated loss payment, the
Agency will pay the additional amount owed by the Agency to the lender.
(2) If the loss is less than the estimated loss payment, the lender
must reimburse the Agency for the overpayment plus interest at the note
rate from the date of payment.
(3) If the Agency has conducted the liquidation, it will pay the
lender in accordance with the Loan Note Guarantee.

Sec. 4280.158 Future recovery.

After a loan has been liquidated and a final loss has been paid by
the Agency, any future funds which may be recovered by the lender must
be pro rated between the Agency and the lender based on the original
percentage of guarantee.

Sec. 4280.159 Bankruptcy.

The lender must protect the guaranteed loan and all collateral
securing the loan in bankruptcy proceedings.
(a) Lender's responsibilities. It is the lender's responsibility to
protect the guaranteed loan debt and all of the collateral securing it
in bankruptcy proceedings. These responsibilities include, but are not
limited to the following:
(1) The lender must file a proof of claim where necessary and all
the necessary papers and pleadings concerning the case;
(2) The lender must attend and, where necessary, participate in
meetings of the creditors and all court proceedings;

[[Page 59694]]

(3) When permitted by the Bankruptcy Code, the lender must request
modification of any plan of reorganization whenever it appears that
additional recoveries are likely;
(4) The Agency must be kept informed on a regular basis in writing
of all aspects of the proceedings; and
(5) In a Chapter 11 reorganization, if an independent appraisal of
collateral is necessary in the Agency's opinion, the Agency and the
lender will share such appraisal fee equally.
(b) Reports of loss during bankruptcy. When the loan is involved in
reorganization proceedings, payment of loss claims may be made as
provided in this section. For a liquidation proceeding, only paragraphs
(b)(3) and (5) of this section are applicable.
(1) Estimated loss payments.
(i) If a borrower has filed for protection under Chapter 11 of
Title 11 of the United States Code for a reorganization (but not
Chapter 13) and all or a portion of the debt has been discharged, the
lender must request an estimated loss payment of the guaranteed portion
of the accrued interest and principal discharged by the court. Only one
estimated loss payment is allowed during the reorganization. All
subsequent claims of the lender during reorganization will be
considered revisions to the initial estimated loss. A revised estimated
loss payment may be processed by the Agency, at its option, in
accordance with any court-approved changes in the reorganization plan.
Once the reorganization plan has been completed, the lender is
responsible for submitting the documentation necessary for the Agency
to review and adjust the estimated loss claim to reflect any actual
discharge of principal and interest and to reimburse the lender for any
court-ordered interest-rate reduction under the terms of then
reorganization plan.
(ii) The lender must use the Loan Note of Guarantee Report of Loss
to request an estimated loss payment and to revise any estimated loss
payments during the course of the reorganization plan. The estimated
loss claim, as well as any revisions to this claim, will be accompanied
by documentation to support the claim.
(iii) Upon completion of a reorganization plan, the lender must
complete and forward Form RD 1980-44, ``Guaranteed Loan Borrower
Default Status,'' to the Agency.
(2) Interest loss payments.
(i) Interest losses sustained during the period of the
reorganization plan will be processed in accordance with paragraph
(b)(1) of this section.
(ii) Interest losses sustained after the reorganization plan is
completed will be processed annually when the lender sustains a loss as
a result of a permanent interest rate reduction which extends beyond
the period of the reorganization plan.
(iii) If an estimated loss claim is paid during the operation of
the Chapter 11 reorganization plan and the borrower repays in full the
remaining balance without an additional loss sustained by the lender, a
final report of loss is not necessary.
(3) Final loss payments. Final loss payments will be processed when
the loan is liquidated.
(4) Payment application. The lender must apply estimated loss
payments first to the unsecured principal of the guaranteed portion of
the debt and then to the unsecured interest of the guaranteed portion
of the debt. In the event a bankruptcy court attempts to direct the
payments to be applied in a different manner, the lender will
immediately notify the Agency servicing office in writing.
(5) Overpayments. Upon completion of the reorganization plan, the
lender will provide the Agency with the documentation necessary to
determine whether the estimated loss paid equals the actual loss
sustained. If the actual loss sustained as a result of the
reorganization is less than the estimated loss, the lender must
reimburse the Agency for the overpayment plus interest at the note rate
from the date of payment of the estimated loss. If the actual loss is
greater than the estimated loss payment, the lender must submit a
revised estimated loss in order to obtain payment of the additional
amount owed by the Agency to the lender.
(6) Protective advances. If approved protective advances were made
prior to the borrower having filed bankruptcy, these protective
advances and accrued interest will be considered in the loss
calculations.
(c) Legal expenses during bankruptcy proceedings. The lender must
follow the procedures described in paragraphs (c)(1) and (2) of this
section for handling legal expenses during bankruptcy proceedings.
(1) When a bankruptcy proceeding results in a liquidation of the
borrower by a trustee, legal expenses will be handled as directed by
the court.
(2) Chapter 11 generally pertains to a reorganization of a business
contemplating an ongoing business, rather than a termination and
dissolution of the business, where legal protection is afforded to the
business as defined under Chapter 11 of the Bankruptcy Code.
Consequently, expenses incurred by the lender in a Chapter 11
reorganization can never be liquidation expenses unless the proceeding
becomes a Chapter 11 liquidation. If the proceeding should become a
liquidating Chapter 11, reasonable and customary liquidation expenses
may be deducted from proceeds of collateral as provided in Form 4279-4,
``Lender's Agreement.'' Chapter 7 pertains to a liquidation of the
borrower's assets. If, and when, liquidation of the borrower's assets
under Chapter 7 is conducted by the bankruptcy trustee, then the lender
cannot claim expenses.

Sec. 4280.160 Termination of guarantee.

A guarantee under this part will terminate automatically when any
of the circumstances specified in paragraphs (a) through (c) of this
section occurs.
(a) Upon full payment of the guaranteed loan;
(b) Upon full payment of any loss obligation; or
(c) Upon written notice from the lender to the Agency that the
guarantee will terminate 30 days after the date of notice, provided
that the lender holds all of the guaranteed portion and the Loan Note
Guarantee is returned to the Agency to be canceled.

Direct Loans

Sec. 4280.161 Direct loan process.

(a) The Agency will determine each year whether or not direct loan
funds are available. For each year in which direct loan funds are
available, the Agency will publish a Notice of Funds Availability
(NOFA) in the Federal Register.
(b) In each direct loan NOFA, the Agency will identify the
following:
(1) the amount of funds available for direct loans;
(2) applicant and project eligibility criteria;
(3) minimum and maximum loan amounts;
(4) interest rates;
(5) terms of loan;
(6) application and documentation requirements;
(7) evaluation of applications;
(8) actions required of the applicant/borrower (e.g., appraisals,
land and property acquisition);
(9) insurance requirements;
(10) laws that contain other compliance requirements;
(11) construction planning and performing development;
(12) requirements after project construction;
(13) letter of conditions, loan agreement, and loan closing
process;
(14) processing and servicing of direct loans by the Agency; and
(15) any applicable definitions.

[[Page 59695]]

Sec. 4280.162--4280.192 [Reserved]

Combined Funding

Sec. 4280.193 Combined funding.

This section identifies the requirements for a project for which an
applicant is seeking a combined grant and guaranteed loan.
(a) Eligibility. Applicants must meet the applicability
requirements specified in Sec. Sec. 4280.107 and 4280.121. Projects
must meet the applicability requirements specified in Sec. Sec.
4280.108 and 4280.122.
(b) Funding. Funding provided under this section is subject to the
limits described in paragraphs (b)(1) and (2) of this section.
(1) The amount of any combined grant and guaranteed loan must not
exceed 50 percent of eligible project costs. For purposes of combined
funding requests, total eligible project costs are based on the total
costs associated with those items specified in Sec. Sec. 4280.109(a)
and 4280.123(a). The applicant must provide the remaining total funds
needed to complete the project.
(2) Third-party, in-kind contributions will be limited to 10
percent of the matching fund requirement of the grantee/borrower.
(c) Application and documentation. When applying for a combined
funding request, the applicant must submit applications as specified in
paragraph (c)(1) of this section and documentation as specified in
paragraph (c)(2) of this section.
(1) Separate applications for both types of assistance (grant and
guaranteed loan) are required. Each application must meet the
requirements specified in Sec. Sec. 4280.111 and 4280.128. The
separate applications must be submitted simultaneously.
(2) The documentation required for grants and guaranteed loans, as
specified in Sec. Sec. 4280.111 and 4280.128, respectively, must be
submitted, as applicable, with the applications specified in paragraph
(c) of this section. The applicant must submit at least one set of
documentation.
(d) Evaluation of combined funding requests. The Agency will
evaluate each application according to applicable procedures specified
in Sec. Sec. 4280.112 and 4280.129.
(e) Interest rates and terms of loan. The interest rate and terms
of loan for the loan portion of the combined funding request will be
determined based on the procedures specified in Sec. Sec. 4280.124 and
4280.125 for guaranteed loans.
(f) Other provisions. In addition to the requirements specified in
paragraphs (a) through (e) of this section, the combined funding
request shall be subject to the other requirements specified in this
subpart, including, but not limited to, the processing and servicing
requirements, as applicable and as described in paragraphs (f)(1) and
(2) of this section.
(1) All other provisions of Section A of this subpart shall apply
to the grant portion of the combined funding request.
(2) All other provisions of Section B of this subpart shall apply
to the guaranteed loan portion of the combined funding request.

Sec. Sec. 4280.194--4280.199 [Reserved]

Sec. 4280.200 OMB control number. [Reserved]

Dated: September 23, 2004.
Gilbert G. Gonzalez, Jr.,
Acting Under Secretary.
[FR Doc. 04-22093 Filed 10-4-04; 8:45 am]

Notices For
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Renewable Energy Systems and Energy Efficiency Improvements Grant, Guaranteed Loan, and Direct Loan Program

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