[Federal Register: May 27, 2005 (Volume 70, Number 102)]
[Notices]
[Page 30707-30708]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27my05-48]
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DEPARTMENT OF ENERGY
Alaska Natural Gas Pipeline Loan Guarantee
AGENCY: Department of Energy.
ACTION: Notice of inquiry.
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SUMMARY: The Department of Energy (DOE) is seeking comments and
information from the public to assist DOE in developing a possible
advance notice of proposed rulemaking or notice of proposed rulemaking
concerning the loan guarantee provisions of the ``Alaska Natural Gas
Pipeline Act.'' The Act authorizes the Secretary of Energy (Secretary)
to issue Federal loan guarantees to facilitate the construction of a
pipeline or liquefied natural gas project to bring natural gas from the
Alaska North Slope to the continental United States.
DATES: Interested persons must submit written comments by July 26,
2005. Comments may be mailed to the address given in the ADDRESSES
section below. Comments also may be submitted electronically by e-
mailing them to: bettie.corey@hq.doe.gov. We note that e-mail
submissions will avoid delay currently associated with security
screening of U.S. Postal Service mail.
ADDRESSES: Office of the General Counsel, GC-72, Attention: Lawrence R.
Oliver, U.S. Department of Energy, Forrestal Building, Room 6B-256,
1000 Independence Avenue, SW., Washington, DC 20585. DOE requires, in
hard copy, a signed original and three copies of all comments.
FOR FURTHER INFORMATION CONTACT: Lawrence R. Oliver, Esq., Assistant
General Counsel, U.S. Department of Energy, Office of the General
Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 20585,
(202) 586-9507, lawrence.oliver@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
Background
On October 13, 2004, the ``Alaska Natural Gas Pipeline Act,''
Division C of Pub. L. 108-324 (the ``Act''), was enacted as part of the
Military Construction Appropriations and Emergency Hurricane
Supplemental Appropriations Act, 2005. The Act, as amended, generally
is intended to expedite regulatory consideration, approval and
construction of a pipeline or liquefied natural gas (LNG) project that
would be used to transport Alaska North Slope natural gas to the
continental United States, and provide financial incentives in the form
of Federal loan guarantees for construction of such a pipeline or
project.
Section 116 of the Act authorizes the Secretary to enter into
Federal loan guarantee agreements (LGAs) for a ``Qualified
Infrastructure Project'' (1) with one or more holders of a final
certificate issued by the Federal Energy Regulatory Commission (FERC)
under either section 103(b) of the Act or section 9 of the Alaska
Natural Gas Transportation Act of 1976 (15 U.S.C. 719g), and (2) with
one or more owners of the Canadian portion of a ``Qualified
Infrastructure Project,'' for up to $18 billion total, but no more than
80 percent of the capital costs of a project. Section 114 of Title I of
Division J of the Consolidated Appropriations Act, 2005 (Pub. L. 108-
447) amended section 116 of the Act to add authority for the Secretary
to enter into LGAs with an entity the Secretary determines is qualified
to construct and operate an LNG project to transport LNG from
``Southcentral Alaska to West Coast States.'' The Act also authorizes
the Secretary to issue loan guarantee regulations. The definition of
``qualified lender'' in the Act does not include the Federal Financing
Bank.
Questions for Public Comment
DOE may issue regulations implementing the Act's loan guarantee
authority and is currently analyzing this authority in the context of
the Act's other provisions. Since the Act is silent on many of the
customary loan guarantee requirements, DOE is considering the
development and issuance of regulations that would establish certain
minimum requirements or terms for such LGAs. In an effort to identify
issues potentially affecting implementation of the loan guarantee
authority, DOE invites interested members of the public, including
lending and other financial institutions, potential project sponsors,
and individuals to comment, in writing, on the following questions and
to provide DOE with other information or analyses potentially relevant
to the development of loan guarantee regulations and the implementation
of the loan guarantee provisions in the Act.
1. Conditional Commitment. Section 116(a)(3) of the Act provides
that ``[t]he authority of the Secretary to issue Federal guarantee
instruments under this section for a qualified infrastructure project
shall expire on the date that is 2 years after the date on which the
final certificate of public convenience and necessity (including any
Canadian certificates of public convenience and necessity) is issued
for the project.'' Section 116(b)(1) of the Act provides that ``[t]he
Secretary may issue a Federal guarantee instrument for a qualified
infrastructure project only after a certificate of public convenience
and necessity * * * has been issued for the project, or after the
Secretary certifies there exists a qualified entity to construct and
operate a liquefied natural gas project to transport liquefied natural
gas from Southcentral Alaska to West Coast States.''
Under these provisions the Secretary may not enter into an LGA (a
negotiated document which sets forth in writing
[[Page 30708]]
the terms and conditions that must be met before the Secretary will
issue the loan guarantees) until a certificate of public convenience
and necessity has been issued by FERC or the Secretary has issued an
appropriate certification in the case of an LNG project. DOE is
considering whether it can or should negotiate a conditional commitment
with one or more potential project sponsors prior to the time that a
final certificate is issued by FERC or the Secretary issues the
required certifications with respect to an LNG project. A conditional
commitment would, after the terms and conditions specified therein have
been satisfied, lead to the execution of an LGA after the required
subsequent conditions occur. DOE is requesting comments on potential
advantages and disadvantages of this approach including whether it
would expedite the loan guarantee application process and at what point
in the certificate application and/or project consideration process the
loan guarantee application and/or negotiation process with DOE should
begin.
2. Determinations and Findings by the Secretary. DOE is considering
the desirability of requiring by rule the following findings and
determinations as conditions for approval of an application for loan
guarantees for a ``Qualified Infrastructure Project'': (A) That the
applicant has received a final certificate from FERC or, with respect
to an LNG project, that the Secretary has made a determination that the
entity applying for loan guarantees is qualified to construct and
operate a liquefied natural gas project ``to transport liquefied
natural gas from Southcentral Alaska to West Coast States''; (B) That
the project submitted for approval is a ``Qualified Infrastructure
Project'' as defined in section 116(g)(4) of the Act; (C) That there is
a reasonable assurance of repayment of the guaranteed debt; (D) That
the guaranteed loan funds and the equity contribution of the project
sponsors will be sufficient to complete the construction and start-up
of the ``Qualified Infrastructure Project'' and fund any cost overruns;
and (E) That the terms and conditions of the LGA provide adequate terms
and security to appropriately protect the financial interests of the
United States Government. DOE is requesting comments on what
determinations and/or findings the Secretary should make prior to
approving an LGA for one or more parts of a ``Qualified Infrastructure
Project.''
3. Special Terms and Conditions. DOE is also requesting comments on
what other terms and conditions, other than the usual project financing
requirements, that are unique to construction of a natural gas pipeline
or LNG facility, should be included in the regulations and whether the
regulations should include requirements for such unique terms and
conditions in the LGAs.
4. Lender Risk. Section 116(g)(3) of the Act provides that ``the
term `Federal guarantee instrument' means any guarantee or other pledge
by the Secretary to pledge the full faith and credit of the United
States to pay all of the principal and interest on any loan or other
debt obligation entered into by a holder of a certificate of public
convenience and necessity.'' DOE requests comments on whether this
provision precludes any ``lender risk'' on the project debt that
receives a Federal guarantee and also the potential impact of 100
percent guaranteed debt on project evaluation and servicing
requirements.
5. Guarantee Fee. DOE is considering the imposition of a loan
guarantee fee on the portion of the loan that is guaranteed by DOE. DOE
requests comments on how the amount of any loan guarantee fee should be
determined and whether the fee should be an origination or an annual
fee.
6. Equity Funding Commitment. Section 116(c)(1) provides that
``[t]he amount of loans and other debt obligations guaranteed under
this section for a qualified infrastructure project shall not exceed 80
percent of the total capital costs of the project, including interest
during construction.'' Section 116(b)(3) provides that ``[t]he
Secretary shall not require as a condition of issuing a Federal
guarantee instrument under this section any contractual commitment or
other form of credit support of the sponsors (other than equity
contribution commitments and completion guarantees).'' These provisions
may be interpreted as in effect requiring the project sponsor to make
at least a twenty (20) percent equity contribution to the project. At
the time of the execution of the LGA and related documents DOE must be
satisfied that necessary equity contributions can and will be made
during the construction and startup phase of the project consistent
with an established equity contribution schedule. DOE requests comments
as to what type and form of assurance DOE should require from the
project sponsors to assure that the scheduled equity contributions to
the project will be available and will be made when needed.
7. Thirty year loan guarantee term. Section 116(d)(1) of the Act
provides, in part, that ``[t]he term of any loan guarantee under this
section shall not exceed 30 years.'' DOE requests comments on whether
the calculation of the maximum loan guarantee ``term'', for purposes of
this provision, should commence with the first construction loan
borrowing and include the sum of both the construction period and long-
term debt period.
8. Collateral/Recourse/Default. The Act is silent with regard to
requirements and procedures relating to collateral for the Federally
guaranteed debt. What recourse or options should the Secretary have in
the event of a default. For instance, should security other than the
project assets be pledged to secure the guarantee, credit and related
agreements and should DOE have a first lien on all project assets? DOE
requests comments on what should be included in any regulations, should
DOE decide to promulgate regulations, regarding collateral
requirements, recourse and default procedures.
9. Cost Overruns. The Act is silent on how LGAs might address cost
overruns on a Qualified Infrastructure Project, or how a debt
instrument guaranteed pursuant to an LGA might be used to fund cost
overruns. The Act, therefore, provides no guidance on whether cost
overruns can or should be funded through the authorized guaranteed
debt, other debt, equity or some combination. DOE is requesting
comments on how cost overruns can or should be funded and the
appropriate mechanism or formula for addressing cost overruns in the
LGAs and any appropriate regulations.
10. Monitoring and Reporting Requirements. DOE is requesting
comments on appropriate required reporting to DOE to assist DOE in its
monitoring responsibilities including the content and timing of such
reporting generally, whether reports should address the status of loan
disbursement requests, whether loan repayment status reports should be
required, and the timing and content of construction status reports and
other appropriate information submissions from the project sponsors.
Dated: May 23, 2005.
Mark R. Maddox,
Principal Deputy Assistant Secretary for Fossil Energy.
[FR Doc. 05-10629 Filed 5-26-05; 8:45 am]
BILLING CODE 6450-01-P