[Federal Register Volume 73, Number 219 (Wednesday, November 12, 2008)]
[Rules and Regulations]
[Pages 66721-66737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26832]
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DEPARTMENT OF ENERGY
10 CFR Part 611
RIN 1901-AB25
Advanced Technology Vehicles Manufacturing Incentive Program
AGENCY: Office of the Chief Financial Officer, Department of Energy
(Department or DOE).
ACTION: Interim final rule; request for comment.
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SUMMARY: Today's interim final rule establishes the Advanced Technology
Vehicles Manufacturing Incentive Program authorized by section 136 of
the Energy Independence and Security Act of 2007, as amended. Section
136 provides for grants and loans to eligible automobile manufacturers
and component suppliers for projects that reequip, expand, and
establish manufacturing facilities in the United States to produce
light-duty vehicles and components for such vehicles, which provide
meaningful improvements in fuel economy performance beyond certain
specified levels. Section 136 also provides that grants and loans may
cover engineering integration costs associated with such projects. This
interim final rule establishes applicant eligibility and project
eligibility requirements for both the grant and the loan program.
Today's interim final rule also establishes the application
requirements and the general terms for the loan program. At present,
Congress has appropriated funds through the Consolidated Security,
Disaster Assistance, and Continuing Appropriations Act, 2009, for only
the loan program. As such, DOE will be implementing the loan program
only at this time, though issuing rules for both the grant and loan
programs.
DATES: This interim final rule is effective November 12, 2008.
Applications for a direct loan will be reviewed by DOE in tranches. To
be eligible for the first tranche, applications may be submitted or
hand delivered to the Postal Mail address listed in ADDRESSES until
December 31, 2008. The deadline for loan applications for subsequent
tranches of loans will be the end of every calendar quarter thereafter
as funds and available loan authority permit. Comments must be received
by DOE no later than December 12, 2008. If you submit information that
you believe to be exempt by law from public disclosure, you should
submit one complete copy, as well as one copy from which the
information claimed to be exempt by law from public disclosure has been
deleted. DOE is responsible for the final determination with regard to
disclosure or nondisclosure of the information and for treating it
accordingly under the DOE Freedom of Information regulations at 10 CFR
1004.11.
ADDRESSES: You may submit comments, identified by any of the following
methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected].
Postal Mail: Advanced Technology Vehicles Manufacturing
Incentive Program, U.S. Department of Energy, 1000 Independence Avenue,
SW., Washington, DC 20585.
Hand Delivery/Courier: Advanced Technology Vehicles
Manufacturing Incentive Program, U.S. Department of Energy, 1000
Independence Avenue, SW., Washington, DC 20585.
Instructions: All submissions must include the agency name and
docket number or Regulatory Information Number (RIN) for this
rulemaking.
FOR FURTHER INFORMATION CONTACT: Lachlan Seward, Advanced Technology
Vehicles Manufacturing Incentive Program, U.S. Department of Energy,
1000 Independence Avenue, SW., Washington, DC 20585, 202-586-8146; or
Daniel Cohen, Assistant General Counsel for Legislation and Regulatory
Law, Office of the General Counsel, 1000 Independence Avenue, SW.,
Washington, DC 20585, 202-586-2918.
SUPPLEMENTARY INFORMATION:
I. Introduction and Background
II. Discussion of Interim Final Rule
A. Applicant Eligibility for Grant and Loan Programs--Statutory
Criteria
B. Applicant Eligibility for Direct Loan Program--Secretarial
Determinations
C. Project Eligibility for Grant and Loan Programs
D. Terms for Direct Loans
E. Application Process for Direct Loan Program
F. Credit Subsidy Cost for Direct Loans
G. Project Costs
H. Assessment of Fees for Direct Loan Program
I. Assessment of Applications and Program Priorities
III. Application Submission
IV. Regulatory Review
A. Review Under Executive Order 12866
B. Review Under National Environmental Policy Act of 1969
C. Review Under the Regulatory Flexibility Act
D. Review Under the Paperwork Reduction Act
E. Review Under the Unfunded Mandates Reform Act of 1995
F. Review Under the Treasury and General Government
Appropriations Act, 1999
G. Review Under Executive Order 13132
H. Review Under Executive Order 12988
I. Review Under the Treasury and General Government
Appropriations Act, 2001
J. Review Under Executive Order 13211
K. Congressional Notification
L. Approval by the Office of the Secretary of Energy
I. Introduction and Background
Section 136 of the Energy Independence and Security Act of 2007
(``EISA''), enacted on December 19, 2007, Public Law 110-140,
authorizes the Secretary of Energy (``Secretary'') to make grants and
direct loans to eligible applicants for projects that reequip, expand,
or establish manufacturing facilities in the United States to produce
qualified advanced technology vehicles, or qualifying components and
also for
[[Page 66722]]
engineering integration costs associated with such projects.
On September 30, 2008, President Bush signed into law the
Consolidated Security, Disaster Assistance, and Continuing
Appropriations Act, 2009. (Pub. L. 110-329; ``Continuing Resolution,
2009''). Section 129(a) of the Continuing Resolution, 2009,
appropriated $7,500,000,000 for the ``Advanced Technology Vehicles
Manufacturing Loan Program Account'' for the cost of direct loans as
authorized by EISA section 136(d) and states that commitments for
direct loans using such amount shall not exceed $25,000,000,000 in
total loan principal, and $10 million for DOE's administrative expenses
for implementing the program.
Further, section 129(c) of the Continuing Resolution, 2009, also
made several substantive amendments to section 136. Specifically,
section 136 was amended to provide:
1. That the Department will pay the full credit subsidy cost of the
loans;
2. The Department with limited flexibility from the general rules
applicable to the hiring of Federal staff and consultants necessary to
administer the program; and
3. That, not later than 60 days after enactment of the Continuing
Resolution, 2009, the Secretary shall promulgate an interim final rule
establishing regulations that the Secretary deems necessary to
administer section 136 and any loans made by the Secretary pursuant
thereto.
By directing the Department to issue an interim final rule,
Congress required the Department to issue a rule without having first
issued a proposed rule for public comment. Though under no obligation
to accept public comment prior to issuance, the Department received
comments at a series of meetings it held with a variety of
stakeholders. The comments received at those meetings were considered
in the development of this interim final rule. A list of the meetings
held and the written comments that were received can be viewed at:
http://www.atvmloan.energy.gov. Through publication of this interim
final rule, the Department is also providing a comment period until
December 12, 2008. Comments submitted during this period will be
reviewed and a final rule, responding to those comments as well as
reflecting the experience the Department gains in implementing this
interim final rule, will be issued at a later date.
Today's interim final rule establishes regulations necessary to
implement the loan and grant programs authorized by section 136 of
EISA, as amended by the Continuing Resolution, 2009 (hereinafter
referred to as ``section 136''). Additionally, concurrent with the
release of today's interim final rule, the Department is announcing
that applications for the first tranche of loans must be submitted to
the Department on or before the effective date of today's interim final
rule. The deadline for loan applications for subsequent tranches of
loans will be every 90 days thereafter as funds and available loan
authority permit.
II. Discussion of the Interim Final Rule
Section 136 authorizes the Secretary to issue grants and direct
loans to applicants for the costs of reequipping, expanding, or
establishing manufacturing facilities in the United States to produce
qualified advanced technology vehicles, or qualifying components.
Section 136 also authorizes the Secretary to issue grants and direct
loans for the costs of engineering integration performed in the United
States of qualifying advanced technology vehicles and qualifying
components. Section 136 sets forth certain specific conditions
pertaining to the grant and direct loan programs, but also leaves to
the Secretary's discretion the interpretation of other criteria. This
interim final rule sets forth eligibility criteria, application
procedures, outlines specific terms and conditions for the receipt of
grants and direct loans, and sets forth interpretations of other
provisions that section 136 requires the Department to address.
Section 136 defines ``advanced technology vehicle'' as a ``light
duty vehicle that meets--(A) the Bin 5 Tier II emission standard
established in regulations issued by the Administrator of the
Environmental Protection Agency under section 202(i) of the Clean Air
Act (42 U.S.C. 7521(i)), or a lower-numbered Bin emission standard; (B)
any new emission standard in effect for fine particulate matter
prescribed by the Administrator under that Act (42 U.S.C. 7401 et
seq.); and (C) at least 125 percent of the average base year combined
fuel economy for vehicles with substantially similar attributes.''
Section 136 defines the term ``qualifying components'' to mean
``components that the Secretary determines to be--(A) designed for
advanced technology vehicles; and (B) installed for the purpose of
meeting the performance requirements of advanced technology vehicles.''
Section 136 defines ``engineering integration costs'' to include
the cost of engineering tasks relating to ``(A) incorporating
qualifying components into the design of advanced technology vehicles;
and (B) designing tooling and equipment and developing manufacturing
processes and material suppliers for production facilities that produce
qualifying components or advanced technology vehicles.''
In today's interim final rule DOE adopts several definitions and
provisions contained in the corporate average fuel economy (CAFE)
regulations established by the National Highway Traffic Safety
Administration (NHTSA) (codified at 49 CFR Parts 523-538). DOE
recognizes that NHTSA has proposed to amend some of these definitions
and provisions, in part, in response to EISA. See, 73 FR 24352; May 2,
2008. It is anticipated that any amendments to the CAFE definitions
that may result from NHTSA issuing a final rule will not impact the
regulations established in today's interim final rule. However, if
necessary, DOE may amend, in a future rulemaking document, today's
interim final rule in response to future amendments to the CAFE
regulations.
A. Applicant Eligibility for Grant and Direct Loan Programs--Statutory
Criteria
Section 136, as amended, directs the Secretary to establish
``regulations that the Secretary deems necessary to administer this
section and any loans made by the Secretary pursuant to this section.''
The statute requires the Department's regulations to establish
eligibility requirements for both the grant and direct loan programs.
To that end, section 136 lays out specific criteria for the Secretary
to use to determine an applicant's eligibility, and directs the
Secretary to make other determinations relating to eligibility prior to
issuance of any loan or award of any grant.
Section 136 contains a requirement that the Department promulgate
regulations regarding eligibility of automobile manufacturers. There is
no similar statutory eligibility requirement for component
manufacturers. With regard to automobile manufacturers, section 136
requires the Department's regulations to establish that
[I]n order for an automobile manufacturer to be eligible for an
award or loan under this section during a particular year, the
adjusted average fuel economy of the manufacturer for light duty
vehicles produced by the manufacturer during the most recent year
for which data are available shall be not less than the average fuel
economy for all light duty vehicles of the manufacturer for model
year 2005.
(42 U.S.C. 17013(e))
[[Page 66723]]
To determine the relevant fuel economy baselines for a new
manufacturer or for a manufacturer that has not previously produced
equivalent vehicles, the statute allows the Secretary to substitute
industry averages. (42 U.S.C. 17013(e))
Today's interim final rule establishes the regulations necessary to
determine whether an automobile manufacturer meets the minimum fuel
economy improvement threshold. If the applicant is an automobile
manufacturer that manufactured vehicles in model year (MY) 2005 that
were subject to the CAFE standards (existing manufacturers), that
manufacturer must demonstrate that the fuel economy of its vehicle
fleet (the manufacturer's passenger and light-duty truck fleets) for
the most recent MY that data are available is no less than the fuel
economy of its MY 2005 fleet.
The statute requires that an existing manufacturer's MY 2005
average fuel economy is to be compared to the adjusted average fuel
economy of that manufacturer's light-duty fleet from the most recent
year for which there is available data, but the statute does not
specify which data. DOE interprets the ``most recent year for which
data are available'' to mean the most recent model year for which a
manufacturer has final data for the purpose of compliance with the fuel
economy standards for passenger automobiles (49 CFR Part 531) and light
trucks (49 CFR Part 533).\1\ By relying on the most recent MY for which
final CAFE compliance data are available, the fuel economy comparison
for existing manufacturers will be based on data approved by the U.S.
Environmental Protection Agency (EPA) under 10 CFR Part 600.\1\
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\1\ Compliance with the fuel economy standards is based on data
approved by EPA. (See, 49 CFR 537.9).
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Section 136 directs that this fuel economy comparison is to be
based on an adjusted average fuel economy. Although the statute does
not define ``adjusted average fuel economy,'' DOE, for purposes of
today's interim final rule, has defined ``adjusted average fuel
economy'' to mean a harmonic production weighted average of the
combined fuel economy, as determined under the Energy Policy and
Conservation Act (Pub. L. 94-163; ``EPCA''), as amended, of the
vehicles within a manufacturer's vehicle fleet. In MY 2005, there was a
CAFE standard applicable to vehicles defined as passenger automobiles
\2\ and a CAFE standard applicable to vehicles defined as light
trucks.\3\ The adjusted average fuel economy combines a manufacturer's
passenger automobile fleet and light truck fleet, measured in miles per
gallon (mpg).
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\2\ ``Passenger automobile'' is defined for the purpose of CAFE
as essentially any 4-wheeled vehicle propelled by fuel which is
manufactured primarily for use on public roads, is rated at 10,000
pounds gross vehicle weight or less, is manufactured primarily for
the use in the transportation of 10 or fewer individuals, and is not
a ``light truck.'' (See, 42 FR 38362, July 28, 1977, as amended at
43 FR 12013, March 23, 1978; 44 FR 4493, Jan. 2, 1979)
\3\ ``Light truck'' is defined for the purpose of the CAFE
requirements, as
(a) an automobile other than a passenger automobile which is
either designed for off-highway operation, as described in paragraph
(b) of this section, or designed to perform at least one of the
following functions:
(1) Transport more than 10 persons;
(2) Provide temporary living quarters;
(3) Transport property on an open bed;
(4) Provide greater cargo-carrying than passenger-carrying
volume; or
(5) Permit expanded use of the automobile for cargo-carrying
purposes or other nonpassenger-carrying purposes through the removal
of seats by means installed for that purpose by the automobile's
manufacturer or with simple tools, such as screwdrivers and
wrenches, so as to create a flat, floor level surface extending from
the forward most point of installation of those seats to the rear of
the automobile's interior.
(b) An automobile capable of off-highway operation is an
automobile--
(1)(i) That has 4-wheel drive; or
(ii) Is rated at more than 6,000 pounds gross vehicle weight;
and
(2) That has at least four of the following characteristics [
]--
(i) Approach angle of not less than 28 degrees.
(ii) Breakover angle of not less than 14 degrees.
(iii) Departure angle of not less than 20 degrees.
(iv) Running clearance of not less than 20 centimeters.
(v) Front and rear axle clearances of not less than 18
centimeters each.
(See, 42 FR 38362, July 28, 1977, as amended at 43 FR 12013,
Mar. 23, 1978; 58 FR 18029, Apr. 7, 1993).
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The fuel economy improvement threshold for eligibility specified in
section 136(e) requires that automobile manufacturers applying under
either the loan or grant program demonstrate a history of maintaining
or improving the fuel economy of its fleet. Consistent with section
136, DOE is requiring that an existing manufacturer demonstrate that
the fuel economy of its passenger automobile and light duty truck fleet
is at least as efficient as that manufacturer's MY 2005 fleet.
To demonstrate compliance with the fuel economy level as required
by subsection (e) of section 136, the adjusted average fuel economy of
an existing automobile manufacturer's MY 2005 passenger automobile and
light truck fleet is compared to the adjusted average fuel economy of
that manufacturer's passenger automobile and light truck fleet for the
most recent year in which final CAFE compliance data are available. The
adjusted average fuel economy of an existing automobile manufacturer's
fleet in the most recent year for which CAFE compliance data are
available must be no less than the adjusted average fuel economy of
that manufacturer's fleet in MY 2005.
For example, if in MY 2005 a manufacturer produced vehicles as
follows:
------------------------------------------------------------------------
Production
Model MPG volume
------------------------------------------------------------------------
Passenger Automobile A............................. 27 150,000
Light Truck B...................................... 20 200,000
Light Truck C...................................... 17 100,000
------------------------------------------------------------------------
the adjusted average fuel economy for that manufacturer in MY 2005
would be calculated as:
[GRAPHIC] [TIFF OMITTED] TR12NO08.008
In this example, the manufacturer's adjusted fuel economy average for
the most recent year, at time of application, for which CAFE compliance
data are available, must be no less than 20.99 mpg. Otherwise the
manufacturer would not be eligible for a section 136 grant award or
direct loan.
[[Page 66724]]
If an automobile manufacturer is a new manufacturer, or has not
previously produced ``equivalent vehicles'' (new automobile
manufacturer), section 136 permits the Secretary to base the fuel
economy improvement comparison on ``industry averages.'' Section 136
does not define ``new manufacturer''' nor does it define ``equivalent
vehicles.'' Based on the statute's specification of MY 2005 as the MY
against which the fuel economy is compared, DOE interprets ``new
manufacturer'' to mean a manufacturer that did not manufacture vehicles
in MY 2005 that were subject to the CAFE standards.
Further, section 136 does not define the term ``equivalent
vehicles.'' The comparison for new automobile manufacturers is in terms
of ``equivalent vehicles,'' which indicates a comparison at a level
other than the fleet wide comparison required for existing
manufacturers, i.e., a comparison of ``light duty vehicles produced by
the manufacturer.'' However, use of ``equivalent vehicles'' in section
136(e) does not indicate that the fuel economy comparison should be at
a level as narrow as the comparison between vehicles with
``substantially similar attributes'' as the statute specifies for
criteria in determining whether a vehicle is an ``advanced technology
vehicle.'' DOE interprets ``equivalent vehicle'' to mean a vehicle
within the same class as is defined for the purpose of CAFE compliance,
i.e., a passenger automobile or a light truck.
For a new automobile manufacturer, eligibility under subsection (e)
of section 136 is based on the fuel economy of the vehicle or vehicles
that are the subject of the application. The projected combined fuel
economy of the vehicles that are the subject of the application must be
at least equal to the adjusted average fuel economy for all vehicles
that were in the same vehicle class as the subject vehicles in MY 2005.
It is likely that a new manufacturer will not have CAFE compliance data
for a vehicle that is the subject of an application. In demonstrating
the projected combined fuel economy of a vehicle for CAFE compliance
data are not available, a new manufacturer must rely on a peer reviewed
model (e.g., the Powertrain System Analysis Toolkit(copyright) (PSAT)
\4\). A new automobile manufacturer is eligible if the demonstrated
combined fuel economy of the subject vehicle is at least as efficient
as the industry average for that vehicle class in MY 2005.
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\4\ See, http://www.transportation.anl.gov/modeling_simulation/PSAT/index.html.
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As noted above, an applicant that is a manufacturer of a qualifying
component does not need to make a showing of improved fuel economy for
the purpose of threshold applicant eligibility for a section 136 grant
or loan. However, a component manufacturer will be required to
demonstrate the contributions to fuel economy improvements of the
qualifying component that is the subject of the grant or loan
application. The necessary demonstration of a qualifying component's
improvement to fuel economy is discussed later in this document.
B. Applicant Eligibility for Direct Loan Program--Secretarial
Determinations
Section 136 directs the Secretary to make certain determinations
with regard to applicants for direct loans. First, the Secretary must
determine that the applicant is ``financially viable without the
receipt of additional Federal funding associated with the proposed
project [.]'' In today's interim final rule, the Department interprets
the term ``financially viable'' to mean that an applicant must
demonstrate a reasonable prospect that the Applicant will be able to
make payments of principal and interest on the loan as and when such
payments become due under the terms of the loan documents, and that the
applicant has a net present value which is positive, taking all costs,
existing and future, into account. Determining whether an applicant has
met this criterion is a decision committed by law to the Secretary. In
making that determination, today's regulations provide that the
Secretary will consider a number of factors, including, but not limited
to:
(1) The applicant's debt-to-equity ratio as of the date of the loan
application;
(2) The applicant's earnings before interest, taxes, depreciation,
and amortization (EBITDA) for the applicant's most recent fiscal year
prior to the date of the loan application;
(3) The applicant's debt to EBITDA ratio as of the date of the loan
application;
(4) the applicant's interest coverage ratio (calculated as EBITDA
divided by interest expenses) for the applicant's most recent fiscal
year prior to the date of the loan application;
(5) the applicant's fixed charge coverage ratio (calculated as
EBITDA plus fixed charges divided by fixed charges plus interest
expenses) for the applicant's most recent fiscal year prior to the date
of the loan application;
(6) the applicant's liquidity as of the date of the loan
application;
(7) statements from applicant's lenders that the applicant is
current with all payments due under loans made by those lenders at the
time of the loan application; and
(8) financial projections demonstrating the applicant's solvency
through the period of time that the loan is outstanding.
As stated in section 136, the Secretary must find that the loan
recipient is financially viable without ``additional Federal funding
associated with the proposed project.'' In today's interim final rule,
the Department interprets the term ``additional Federal funding'' to
mean any loan, grant, guarantee, insurance, payment, rebate, subsidy,
credit, tax benefit, or any other form of direct or indirect assistance
from the Federal government, or any agency or instrumentality thereof,
other than the proceeds of a loan approved under section 136, that is,
or is expected to be made available with respect to, the project or
activities for which the loan is sought under section 136, and is to be
received by the applicant after entering into an Agreement with DOE.
Section 136 also requires the Secretary to ensure that the proceeds
of the direct loan are expended ``efficiently and effectively.'' The
Secretary will carry out this obligation by reviewing documents
required in 611.109 for purposes of loan monitoring and audit. Loan
funds will be considered as being expended ``efficiently and
effectively'' if that documentation demonstrates, in the sole judgment
of the Secretary, that the borrower is making appropriate progress
toward achieving the purpose for which the loan was originally made.
The Department anticipates that in order to meet this requirement, loan
proceeds will be disbursed through periodic drawdowns that correspond
to actual project expenses.
Section 136 also requires applicants to submit to the Secretary
written assurance that ``(A) all laborers and mechanics employed by
contractors or subcontractors during construction, alteration, or
repair that is financed, in whole or in part, by a loan under this
section shall be paid wages at rates not less than those prevailing on
similar construction in the locality, as determined by the Secretary of
Labor in accordance with sections 3141-3144, 3146, and 3147 of title
40, United States Code; and (B) the Secretary of Labor shall, with
respect to the labor standards described in this paragraph, have the
authority and functions set forth in Reorganization Plan Numbered 14 of
1950 (5 U.S.C. App.) and section 3145 of title 40, United States
Code.'' Accordingly, section 611.101(m) of
[[Page 66725]]
today's interim final rule requires applicants to submit this required
assurance as part of any direct loan application.
C. Project Eligibility for Grant and Loan Programs
Under section 136, grants and direct loans may be provided for the
costs of reequipping, expanding, or establishing manufacturing
facilities in the United States to produce qualified advanced
technology vehicles, or qualifying components. Section 136 also
authorizes the Secretary to issue grants and direct loans for the costs
of engineering integration performed in the United States of qualifying
advanced technology vehicles and qualifying components. Specifically,
subsection (b) of section 136 directs that for the grant program \5\--
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\5\ At this time, no funds have been appropriated for the
purpose of making grant awards under section 136(b).
The Secretary shall provide facility funding awards under this
section to automobile manufacturers and component suppliers to pay
not more than 30 \6\ percent of the cost of--
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\6\ As discussed later in this document, section 136 does not
place a restriction on the percent of costs eligible under the
direct loan program.
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(1) reequipping, expanding, or establishing a manufacturing
facility in the United States to produce--
(A) qualifying advanced technology vehicles; or
(B) qualifying components; and
(2) engineering integration performed in the United States of
qualifying vehicles and qualifying components.
(42 U.S.C. 17013(b))
Under the loan provisions of section 136, the Secretary is directed
``to provide a total of not more than $25,000,000,000 in loans to
eligible individuals and entities (as determined by the Secretary) for
the costs of activities described in subsection (b).'' (42 U.S.C.
17013(d)(1)). Section 136 provides two categories of projects eligible
for direct loans: (1) Manufacturing facilities in the United States
designed to produce qualified advanced technology vehicles or qualified
components; and (2) engineering integration performed in the United
States of qualifying advanced technology vehicles and qualifying
components. Eligible costs of such projects are: (a) Those costs that
are reasonably related to the reequipping, expanding, or establishing a
manufacturing facility in the United States to produce qualifying
advanced technology vehicles or qualifying components; (b) costs of
engineering integration performed in the United States for qualifying
vehicles or qualifying components. Costs eligible for payment with loan
proceeds are costs incurred, but not yet paid by the borrower, after a
substantially complete application has been submitted to DOE and costs
incurred after the closing of the loan.
The statute defines ``advanced technology vehicle'' as--
[L]ight duty vehicle that meets--
(A) the Bin 5 Tier II emission standard established in
regulations issued by the Administrator of the Environmental
Protection Agency under section 202(i) of the Clean Air Act (42
U.S.C. 7521(i)), or a lower-numbered Bin emission standard;
(B) any new emission standard in effect for fine particulate
matter prescribed by the Administrator under that Act (42 U.S.C.
7401 et seq.); and
(C) at least 125 percent of the average base year combined fuel
economy for vehicles with substantially similar attributes.
(42 U.S.C. 17013(a)(1))
As stated above, the statute does not define ``light duty
vehicle.'' DOE interprets ``light duty vehicles'' to be vehicles
currently subject to the CAFE requirements under EPCA, (i.e., passenger
automobiles and light trucks).
The first two provisions of the statutory definition of ``advanced
technology vehicle'' ensure that such a vehicle has low emissions.
Pursuant to its authority under the Clean Air Act, on February 10,
2000, the EPA published a final rule establishing new Federal emission
standards for passenger cars and light trucks (see 65 FR 6698). Known
as the Tier II Program, the emissions standards in EPA's final rule
cover light-duty vehicles (i.e., passenger cars and light trucks with a
gross vehicle weight rating (GVWR) of 6,000 pounds or less, as well as
``medium-duty passenger vehicles'' (MDPVs)).\7\
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\7\ An MDPV is defined as a light truck rated at more than 8,500
lbs GVWR, or that has a vehicle curb weight of more than 6,000
pounds, or that has a basic vehicle frontal area in excess of 45
square feet. MDPV does not include a vehicle that:
Is an ``incomplete truck''; or
Has a seating capacity of more than 12 persons; or
Is designed for more than 9 persons in seating rearward of the
driver's seat; or
Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A
covered box not readily accessible from the passenger compartment
will be considered an open cargo area for purposes of this
definition.
40 CFR 86-1803-01.
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The Tier II standards are designed to reduce the emissions most
responsible for the ozone and particulate matter impact from these
vehicles (e.g., nitrous oxides and non-methane organic gases) and
contributing to ambient volatile organic compounds.
The Tier II emission standards are based on a system of emission
bins in which light-duty vehicles are certified in one of eight bins;
Bin 1 represents the cleanest or lowest emitting vehicles, and Bin 8
represents the highest emitting vehicles of the Tier II bins. The
emission standards for a manufacturer's vehicle fleet must comply on
average with the Tier II Bin 5 level. Thus, the Tier II Bin 5 emission
certification levels are the average of the Tier II emission levels
with lower bins (i.e., 4, 3, 2, or 1) representing lower emitting
vehicles and higher bins (i.e., 6, 7, or 8) representing vehicles that
are more polluting. 72 FR 29102, 29103 (May 24, 2007). Section 136
limits ``advanced technology vehicles'' to those vehicles that, at a
minimum, comply with Bin 5 levels at the time an application is
submitted to DOE.
The grant and loan programs provide assistance for the production
of vehicles and components that demonstrate advanced fuel economy
improvements. In order to qualify as an ``advanced technology vehicle''
a vehicle must meet at least 125 percent of the average base year
combined fuel economy for vehicles with substantially similar
attributes.\8\ It should be noted that the at least 25 percent
improvement in fuel economy performance necessary for a vehicle to
qualify as an advanced technology vehicle is the minimum improvement
necessary for eligibility under the section 136 grant and loan
programs. As discussed later in this notice, in prioritizing projects
to receive either a grant or a loan, DOE will consider the extent to
which an advanced technology vehicle exceeds the 125 percent minimum.
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\8\ In calculating the percent improvement in average base year
combined fuel economy, if the vehicle at issue is an all electric
drive, a range extended electric vehicle, or a plug in hybrid
vehicle, then the applicant will need to submit information that
allows the Department to determine that the vehicle meets the 125%
average combined fuel economy test.
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For the purpose of demonstrating the at least 25 percent
improvement, vehicle fuel economies are compared without consideration
of whether the vehicles are dual fueled automobiles under CAFE. A
``dual fueled automobile'' is an automobile that is capable of
operating on alternative fuel or a mixture of biodiesel and diesel, and
on gasoline or diesel. 49 U.S.C. 32901(a)(9). Dual fueled vehicles are
commonly referred to as flexible fuel vehicles.
The CAFE statute specifies special calculations for determining the
fuel economy of dual fueled automobiles that give those vehicles higher
fuel economy ratings than automobiles that
[[Page 66726]]
are identical except that they are not dual fueled.\9\ 49 U.S.C.
32905(b). The incentive provided to dual fueled vehicles was enacted to
encourage the production of vehicles that would promote consumer
acceptance and ultimately lead to the development of infrastructure to
distribute and make alternative fuel available. (See 69 FR 7689, 7691;
February 19, 2004.) While DOE supports the development and increased
distribution of dual fueled vehicles, we have determined not to
consider dual fueled capabilities under the criteria for identifying an
advanced technology vehicle. For the purpose of determining whether a
vehicle achieves a fuel economy performance of at least 125 percent of
the average base year combined fuel economy for vehicles with
substantially similar attributes, DOE will consider the fuel economy
performance of vehicles as calculated for non-dual fueled vehicles.
---------------------------------------------------------------------------
\9\ Through MY 2014, manufacturers may use this ``dual-fuel''
incentive to raise their average fuel economy up to 1.2 miles a
gallon higher than it would otherwise be; after MY 2014, Congress
has set a schedule by which the dual-fuel incentive diminishes
ratably until it is extinguished after MY 2019. 49 U.S.C. 32906(a).
---------------------------------------------------------------------------
Section 136 does not define the term ``base year'' and therefore
DOE may exercise its sound policy discretion in defining that term. DOE
is defining ``base year'' as MY 2005.
DOE recognizes that the fuel economy standard for light trucks
increases in stringency through MY 2010, and that NHTSA has proposed to
increase the stringency of both the passenger car and further increase
the light truck fuel economy standard beginning MY 2011. See 49 CFR
533.5 and 73 FR 24352, respectively. Given the potential for a vehicle
that is the subject of an application to begin being manufactured in a
future MY, DOE considered using a future MY for the base year. However,
the definition of ``advanced technology vehicle'' requires a fuel
economy performance comparison to be in terms of vehicles with
``substantially similar attributes.''
At present, DOE does not have sufficient data on the types of
vehicles to be manufactured in future MYs, including the fuel economy
performance of vehicles yet to be manufactured. Although manufacturers
have product plans for future years, that information is subject to
change. DOE considered relying on fuel economy targets established for
specific vehicle footprint values (i.e., area calculated by multiplying
vehicle width by vehicle length). In the MYs 2008-2010, standards for
light trucks, NHTSA assigns a fuel economy target for each light truck
based on vehicle footprint. 49 CFR 533.5. There are currently no
similar targets established for passenger automobiles.
As a result of the lack of sufficient data for future MYs and the
lack of attribute-based fuel economy targets for passenger cars, DOE
has decided that the ``base year'' should be a year for which CAFE
compliance data are available. To date, NHTSA has not received all of
the approved compliance data from EPA for MY 2007.\10\ DOE notes that
the total fleet fuel economy for MY 2006 is higher than in MY 2005
(25.8 mpg as compared to 25.4 mpg), the industry average for passenger
automobile fuel economy is higher in MY 2005 than in MY 2006 (30.3 mpg
as compared to 30.1 mpg).\11\ However, relying on MY 2006 as a base
year would not necessarily result in a more stringent fuel economy
comparison for determining whether a particular vehicle is an advanced
technology vehicle. Furthermore, MY 2005 CAFE data are fully available
and known at the present time, and using MY 2005 would promote
efficient and effective administration of the section 136 program.
Thus, and consistent with the model year for which Congress established
automobile manufacturer eligibility under section 136(e), DOE has
interpreted base year for the purpose of defining an ``advanced
technology vehicle'' to mean MY 2005.
---------------------------------------------------------------------------
\10\ For CAFE compliance purposes the average fuel economy of
passenger automobiles and light trucks is determined in accordance
with procedures established by EPA. 49 CFR 531.6(a) and 533.6(b),
respectively. To date, EPA has not approved the data for Ford's
domestic passenger automobile fleet.
\11\ Summary of Fuel Economy Performance, NHTSA (March 2008).
---------------------------------------------------------------------------
A determination of whether a vehicle has sufficiently improved fuel
economy to qualify as an advanced technology vehicle is further refined
by section 136's reference to vehicles with ``substantially similarly
attributes.'' To identify those vehicles with substantially similar
attributes, DOE first relied on the vehicle classes used for EPA's fuel
economy guidelines. EPA, in conjunction with DOE, publishes information
on the fuel economy performance of the vehicle fleet for each model
year.\12\ EPA segments the vehicle fleet by size classes to permit more
practicable comparisons of fuel economy performance between vehicles.
The size class for cars is based on interior passenger and cargo
volumes as described below. The size class for trucks is defined by
GVWR, which is the weight of the vehicle and its carrying capacity. For
MY 2005, EPA has identified the various classes as follows.
---------------------------------------------------------------------------
\12\ http://www.fueleconomy.gov/feg/info.shtml (last visited
October 30, 2008).
------------------------------------------------------------------------
Class Passenger & cargo volume (cu. ft.)
------------------------------------------------------------------------
Cars
------------------------------------------------------------------------
Two-Seaters....................... Any (cars designed to seat only two
adults).
Sedans
Minicompact................... < 85.
Subcompact.................... 85-99.
Compact....................... 100-109.
Mid-Size...................... 110-119.
Large......................... 120 or more.
Station Wagons
Small......................... <130.
Mid-Size...................... 130-159.
Large......................... 160 or more.
------------------------------------------------------------------------
Class........................... Gross Vehicle Weight Rating (GVWR)
------------------------------------------------------------------------
Trucks
------------------------------------------------------------------------
Pickup Trucks
Small......................... < 4,500 pounds.
[[Page 66727]]
Standard...................... 4,500-8,500 pounds.
Vans
Passenger..................... < 8,500 pounds.
Cargo......................... < 8,500 pounds.
Minivans.......................... < 8,500 pounds.
Sport Utility Vehicles (SUVs)..... < 8,500 pounds.
------------------------------------------------------------------------
DOE notes that in MY 2005 not every EPA vehicle class was populated
by vehicle models manufactured in that model year (i.e., small pickups
and large wagons). If an EPA class did not have a representative MY
2005 model, DOE combined that class with another EPA class in a manner
consistent with the grouping of vehicles by ``substantially similar
attributes.''
DOE further categorized vehicles by performance. Performance
vehicles generally have lower fuel economy ratings than non-performance
vehicles in the same EPA class. Also, different fuel economy
technologies may be applicable to performance as opposed to non-
performance vehicles (i.e., additional aerodynamic improvements may not
be available for performance vehicles). In order to distinguish between
vehicles that are manufactured to achieve higher performance from other
similarly sized non-performance vehicles, DOE evaluated the peak
horsepower to curb weight ratio of each vehicle in a size class. DOE
plotted the peak horsepower to curb weight ratio for each vehicle by
EPA class. Generally, if there was at least a doubling of the peak
horsepower to curb weight ratio along the plotted line, as compared to
the lowest plotted value, DOE then looked at the plotted data to see if
there was a reasonably identifiable point beyond the doubling that
divided the vehicles, i.e., a break point. For those classes in which
DOE was able to identify a break point, DOE created an additional
``performance'' class. DOE identified a point in several of the EPA
classes at which there was a substantial increase in the ratio. In
those instances in which there was a marked increase, the more powerful
vehicles were placed into a ``performance class.'' This additional
analysis resulted in a total of 17 classes.
------------------------------------------------------------------------
Class of vehicles with
substantially similar attributes Example of MY 2005 vehicles
------------------------------------------------------------------------
Two-seater........................ Mazda MX-5 Miata, Chrysler Crossfire
Roadster, Porsche Boxter.
Two Seater Performance............ GMC Corvette, Mercedes SL65 AMG,
Chrysler Viper Coupe.
Minicompact sedan................. Mini Cooper, Volkswagen Beetle
Convertible, Mitsubishi Eclipse
Spyder.
Minicompact sedan Performance..... Porsche 911, Ford Jaguar XKR
Convertible, Mercedes CLK55 AMG.
Subcompact sedan.................. GMC Aveo, Toyota Celica, Honda
Acura.
Subcompact performance sedan...... Mercedes CLK500, BMW M3.
Compact sedan..................... Volkswagen Jetta, Toyota Corolla,
Ford Focus, Chrysler Sebring
convertible.
Compact performance sedan......... Mercedes CL 55 AMG, Bentley
Continental GT.
Mid-size sedan.................... Mercury Sable, Chevrolet Malibu,
Honda Accord, GM Monte Carlo,
Hyundai Sonata, Toyota Camry,
Nissan Altima.
Mid-size performance sedan........ Ford Jaguar S-Type, Mercedes E55
AMG, Nissan Infiniti G35.
Large sedan....................... Mercedes S C lass, Cadillac Deville,
Kia Amanti, Dodge 300 Base, Ford
Five Hundred, General Motors
Impala.
Small wagon....................... Toyota Corolla Matrix, GMC Vibe,
Chrysler PT Cruiser, Toyota Scion.
Mid-size and large wagons......... Volkswagen Passat Wagon, Ford Taurus
wagon, Mercedes E320, GM Saab 9-5
Wagon.
Small and standard pickup......... Ford F150, GM Silverado, Nissan
Frontier, Dodge Dakota, Toyota
Tundra, GM Sierra.
Minivan........................... Dodge Caravan, Chrysler Town &
Country, Toyota Sienna, GMC
Montana, Nissan Quest, Honda
Odyssey, Ford Monterey Wagon.
Cargo van......................... Chevrolet Astro, Ford E150.
Sport Utility Vehicle............. Jeep Wrangler, Ford Escape,
Chevrolet Blazer, Range Rover,
Mercedes M-class, GM Equinox,
Toyota Sequoia, GMC Envoy.
------------------------------------------------------------------------
In order to determine the average combined fuel economy for each
class, DOE will calculate the harmonic production weighted average for
each class. As previously stated, DOE relied on the MY 2005 CAFE
compliance data that are available, and assumed each vehicle was a non-
dual fueled vehicle.
----------------------------------------------------------------------------------------------------------------
2005 Fuel
Vehicle class Power \1\/ economy 2005 mpg x
weight \2\ average \3\ 125%
----------------------------------------------------------------------------------------------------------------
Two-Seater...................................................... < 0.121 25.3 31.6
Two-Seater Performance.......................................... >= 0.121 22.2 27.8
Minicompact Sedan............................................... < 0.088 29.3 36.7
Minicompact Performance Sedan................................... >= 0.088 22.4 28.0
Subompact Sedan................................................. < 0.082 29.6 37.0
Subcompact Performance Sedan.................................... >= 0.082 22.8 28.5
Compact Sedan................................................... < 0.073 33.8 42.2
Compact Performance Sedan....................................... >= 0.073 23.6 29.5
Mid-Size Sedan.................................................. < 0.085 29.4 36.7
Mid-Size Performance Sedan...................................... >= 0.085 23.1 28.9
[[Page 66728]]
Large Sedan..................................................... n/a 26.2 32.7
Small Wagon..................................................... n/a 32.7 40.8
Mid-Size and Large Wagons....................................... n/a 26.7 33.4
Small and Standard Pickup....................................... n/a 19.7 24.6
Minivan......................................................... n/a 24.3 30.4
Passenger Van................................................... n/a 19.0 23.8
Cargo Van....................................................... n/a 24.2 30.2
Sport Utility Vehicle........................................... n/a 21.8 27.2
----------------------------------------------------------------------------------------------------------------
\1\ Peak horsepower (hp).
\2\ Curb weight (lbs).
\3\ Harmonic production weighted average of combined fuel economy.
A project eligible for a grant or loan under section 136 may
include a project for ``reequipping, expanding, or establishing a
manufacturing facility in the United States to produce'' a ``qualifying
component.'' (42 U.S.C. 17031(b)(1)) Section 136 defines ``qualifying
component'' as a component that
[T]he Secretary determines to be--
(A) designed for advanced technology vehicles; and
(B) installed for the purpose of meeting the performance
requirements of advanced technology vehicles.
(42 U.S.C. 17013(a)(4))
Although a component needs to be designed for an advanced
technology vehicle and installed to assist meeting performance
requirements of an advanced technology vehicle, DOE does not interpret
the statutory definition to mean that the use of these components in
either other conventional vehicles or in aftermarket sales is
precluded. In making a determination on component eligibility, the
Secretary will consider factors such as the overall impact of the
component and extent to which the component contributes to the
efficiency of advanced technology vehicles.
Eligible costs for facilities that manufacture qualified components
may include the costs of ``engineering integration performed in the
United States of qualifying vehicles and qualifying components.'' (42
U.S.C. 17013(b)(2)) ``Engineering integration'' is defined to include--
[T]he cost of engineering tasks relating to--
(A) incorporating qualifying components into the design of
advanced technology vehicles; and
(B) designing tooling and equipment and developing manufacturing
processes and material suppliers for production facilities that
produce qualifying components or advanced technology vehicles.
(49 U.S.C. 17013(a)(3))
In both the specification of eligible activities and the definition
of ``engineering integration,'' eligible engineering integration costs
relate to those costs associated with advanced technology vehicles and
qualifying components. Subsection (b) of section 136 states that
facility funding awards are for the cost of engineering integration
performed in the United States for qualifying vehicles and qualifying
components. (42 U.S.C. 17013(b)(2)) ``Engineering integration'' is
statutorily defined to include the cost of incorporating qualifying
components into the design of an advanced technology vehicle and the
costs of design and development for production facilities producing
qualifying components or advanced technology vehicles. Engineering
costs not associated with the production of an advanced technology
vehicle or the production of a qualifying component, are not eligible
costs under section 136.
D. Terms for Direct Loans
Section 136 prescribes certain specific terms for loan documents.
First, the statute establishes that the loans will have an interest
rate that, ``as of the date on which the loan is made, is equal to the
cost of funds to the Department of the Treasury for obligations of
comparable maturity[.]'' In determining the date upon which the
interest rate will be calculated, the Department of the Treasury will
set the loan rate at the time the loan funds are disbursed.
Additionally, the statute prescribes that the loans shall have a term
``equal to the lesser of--(i) the projected life, in years, of the
eligible project to be carried out using funds from the loan, as
determined by the Secretary; and (ii) 25 years[.]''
The statute also states that loans may be subject to a deferral in
repayment for ``not more than 5 years after the date on which the
eligible project carried out using funds from the loan first begins
operations, as determined by the Secretary[.]'' Section 136 is silent
as to whether a deferral is available for interest on the loan. In
today's interim final rule, the Department interprets the deferral of
repayment option to apply to only loan principal, not interest.
Allowing a deferral of interest would have the effect of increasing the
principal amount of the loan, perhaps beyond the authority provided by
Congress for this program. Moreover, the statute allows only for
deferral of ``repayment'' of a loan. The principal amount of a loan is
the amount that is actually being ``repaid'' to the Government.
Finally, the statute requires that all loans be made by the Federal
Financing Bank.
In addition to the minimum terms prescribed in section 136, today's
interim final rule sets forth other parameters for loan terms intended
to protect the significant taxpayer costs for this program.
Accordingly, the rule states that the Secretary must have a first lien
or security interest in all property acquired with loan funds. This
requirement may be waived only by the Secretary on a non-delegable
basis. Additionally, DOE must also have a lien on any other property of
the applicant pledged to secure the loan.
E. Application Process for Direct Loan Program
Section 136 states that applicants for direct loans shall submit
applications ``at such time, in such manner, and containing such
information as the Secretary may require[.]'' To further the statutory
purpose of providing funding to assist in the development and
production of advanced technology vehicles and qualifying components,
applications for the first tranche of direct loans will be due on the
date the interim final rule becomes effective. The deadline for loan
applications for subsequent tranches of loans will be every 90 days
thereafter as funds and available loan authority permit. The Department
will evaluate and make decisions on a tranche of loan applications
before proceeding to evaluate and make decisions on a subsequent
tranche of loan applications. Application requirements are set forth in
section 611.101. These application
[[Page 66729]]
materials are intended to provide adequate information for the
Department to comply with the requirements and goals of section 136 and
other applicable legal and regulatory requirements. One such
requirement, written assurance that all laborers and mechanics are paid
prevailing wages, explicitly appears in section 136(d)(2) and appears
in today's interim final rule. Other requirements in section 136 relate
to Secretarial determinations of applicant eligibility such as: (i)
Financial viability absent receipt of additional Federal funding
associated with the proposed project and (ii) the efficient and
effective expenditure of loan proceeds. Today's interim final rule
specifies the information to be submitted by an applicant in order for
the Secretary to be able to make such determinations.
F. Credit Subsidy Cost for Direct Loans
To date, Congress has appropriated $7,500,000,000 to cover the
subsidy cost of the direct loans issued under section 136, and provided
an overall cap of $25,000,000,000 on the principal amount of the loans
that may be issued. Under the Federal Credit Reform Act of 1990, the
subsidy cost reflects ``the estimated long-term cost to the Government
of the direct loan, calculated on a net present value basis, excluding
administrative costs and any incidental effects on governmental
receipts or outlays.'' 2 U.S.C. 661a(5)(A). This amount will be unique
for each loan issued under section 136, and is dependent on the
particular circumstances of the borrower and the project for which the
loan will be issued. While Congress has appropriated funds at
approximately a 30 percent subsidy rate, the subsidy cost for
individual borrowers and projects may be valued at more or less than 30
percent. If the subsidy costs are estimated to be higher than 30
percent the Department will only be able to issue loans which may be
covered by the actual amount appropriated for use as the subsidy, an
amount which will not reach the $25,000,000,000 cap. Thus, while there
is a limit on the total amount of loans the Department is able to make,
the value of the loans the Department is able to make with the credit
subsidy amount appropriated may be less than $25,000,000,000.
G. Project Costs
Section 136 states that awards under the grant program for eligible
projects shall pay ``not more than 30 percent'' of project cost. On the
other hand, section 136 does not impose a maximum percentage of funding
associated with a particular project for the direct loan program. In
accordance with Federal credit policies under OMB Circular A-129, the
Department will adhere to requirements for a significant borrower
stake. Under the interim final rule, the Federal loan may only
constitute up to 80% of a project's cost. Section 611.102 sets forth
the types of costs the Department will consider to be eligible project
costs--i.e., costs for which grant or loan proceeds may be expended.
Eligible costs are: (a) Those costs that are reasonably related to the
reequipping, expanding, or establishing a manufacturing facility in the
United States to produce qualifying advanced technology vehicles or
qualifying components; (b) costs of engineering integration performed
in the United States for qualifying vehicles or qualifying components.
Costs eligible for payment with loan proceeds are costs incurred, but
not yet paid by the borrower, after a substantially complete
application has been submitted to DOE and costs incurred after the
closing of the loan. In determining the overall total cost of an
Eligible Project, DOE and the applicant may include significant costs
already incurred and capitalized by the applicant in accordance with
Generally Accepted Accounting Principles and these costs may be
considered by DOE in determining the Borrower's contribution to total
project costs.
H. Assessment of Fees for Direct Loans
Section 136(f) states that administrative costs ``shall be no more
than $100,000 or 10 basis points of the loan.'' The Department
interprets this subsection as authorizing DOE to charge borrowers an
administrative fee, which shall be deposited into the U.S. Treasury,
and as providing DOE with the flexibility to choose either monetary
option set forth in the statute. DOE has decided that administrative
costs for a particular loan will be 10 basis points of the loan to be
paid by the borrower on the closing date of the loan. No application
fee will be charged, and therefore applicants that do not receive a
loan will pay no administrative fee. The Department bases its decision
on the need for fairness among applicants and the belief that
administrative costs for a loan will be in excess of 10 basis points.
By including a fee provision in section 136, Congress demonstrated an
intent that applicants should pay a fee in connection with a loan. By
selecting 10 basis points as the fee for all loans, the Department
assures that applicants for smaller loans will pay smaller fees.
I. Assessment of Applications and Priorities
All applications received will be reviewed to determine whether the
applicant is eligible and that the application contains all information
required of an applicant by section 136, this interim final rule and
other applicable law. Applications that are determined to be eligible
and substantially complete will undergo a substantive review by DOE
based upon certain evaluation factors. These factors include, but are
not limited to, the technical merit of the proposed advanced technology
vehicles or qualifying components, with greater weight given for
improved vehicle fuel economy above the minimum required for an
advanced technology vehicle, potential contributions to improved fuel
economy of the U.S. light-duty vehicle fleet, promotion of the use of
advanced fuel (e.g., E85, ultra-low sulfur diesel), and potential
reductions in petroleum use by the U.S. light-duty fleet. DOE will also
assess the adequacy of the proposed provisions to protect the
Government, including offers of participation in project gains,
sufficiency of Security, the priority of the lien position in the
Security, and the percentage of the project to be financed with the
loan.
III. Application Submission
Section 611.101 of this interim final rule sets forth the
information DOE will need an applicant to submit in order to make the
determinations required in section 136 and this interim final rule for
issuance of a loan or award. Applicants may submit loan requests for
multiple eligible projects in a single application provided that the
application provides a way to segregate each proposed eligible project
in such a way that permits DOE to evaluate each project in the
application. Applications for the first tranche of loans may be
submitted or hand delivered to the Postal Mail address listed in
ADDRESSES. DOE will consider and evaluate substantially complete
applications as and when they are submitted during the first tranche
period, which will close December 31, 2008. DOE may make decisions on
such applications and close loans with respect to such applications at
any time. After December 31, 2008, subsequent tranche periods will
close on the last day of each calendar year quarter (i.e., March 31,
2009; June 30, 2009, etc.) For applications submitted during those
subsequent periods, no final decisions will be made with respect to
such
[[Page 66730]]
applications until after the close of the particular tranche period.
IV. Regulatory Review
A. Executive Order 12866
Today's interim final rule has been determined to be an
economically significant regulatory action under Executive Order 12866,
``Regulatory Planning and Review,'' 58 FR 51735 (October 4, 1993).
Accordingly, this action was subject to review under that Executive
Order by the Office of Information and Regulatory Affairs at the Office
of Management and Budget (OMB).
B. National Environmental Policy Act
Through the issuance of this rule, DOE is making no decision
relative to the approval of a loan or grant for a particular project.
DOE has, therefore, determined that publication of this rule is covered
under the Categorical Exclusion found at paragraph A.6 of Appendix A to
Subpart D, 10 CFR Part 1021, which applies to the establishment of
procedural rulemakings. Accordingly, neither an environmental
assessment nor an environmental impact statement is required at this
time. However, appropriate NEPA project review will be conducted in
connection with a section 136 loan or grant.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis for any rule
that by law must be proposed for public comment, unless the agency
certifies that the rule, if promulgated, will not have a significant
economic impact on a substantial number of small entities. As required
by Executive Order 13272, ``Proper Consideration of Small Entities in
Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published
procedures and policies on February 19, 2003, to ensure that the
potential impacts of its rules on small entities are properly
considered during the rulemaking process (68 FR 7990). DOE has made its
procedures and policies available on the Office of the General
Counsel's Web site: http://www.gc.doe.gov.
Because a notice of proposed rulemaking is not required pursuant to
5 U.S.C. 553, EISA section 136, as amended, or any other law, prior to
issuance of this interim final rule, the analytical requirements of the
Regulatory Flexibility Act are inapplicable. As such, DOE is not
obliged to prepare a regulatory flexibility analysis for this
rulemaking.
D. Paperwork Reduction Act
This rule contains a collection-of-information requirement subject
to the Paperwork Reduction Act (PRA) and which has been submitted to
OMB with a request for emergency processing. DOE will publish a notice
of approval once received from OMB.
Public reporting burden for this collection of information is
estimated to average 256.5 hours per response, including time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden
estimate, or any other aspect of the data collection, including
suggestions for reducing the burden, to DOE (see Postal Mail in
ADDRESSES) or to the Office of Management and Budget, Office of
Information and Regulatory Affairs, 725 17th Street, NW., Washington,
DC 20503.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a penalty
for failure to comply with, a collection of information subject to the
requirements of the PRA, unless that collection of information displays
a currently valid OMB Control Number.
E. Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (Act) (2
U.S.C. 1531 et seq.) requires each federal agency, to the extent
permitted by law, to prepare a written assessment of the effects of any
federal mandate in an agency rule that may result in the expenditure by
state, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any one year. The Act also requires a federal agency to
develop an effective process to permit timely input by elected
officials of state, tribal, or local governments on a proposed
``significant intergovernmental mandate,'' and requires an agency plan
for giving notice and opportunity to provide timely input to
potentially affected small governments before establishing any
requirements that might significantly or uniquely affect small
governments.
The term ``federal mandate'' is defined in the Act to mean a
federal intergovernmental mandate or a federal private sector mandate
(2 U.S.C. 658(6)). Although the rule will impose certain requirements
on non-federal governmental and private sector applicants for loans,
the Act's definitions of the terms ``federal intergovernmental
mandate'' and ``federal private sector mandate'' exclude, among other
things, any provision in legislation, statute, or regulation that is a
condition of federal assistance or a duty arising from participation in
a voluntary program (2 U.S.C. 658(5) and (7), respectively). Today's
interim final rule establishes requirements that persons voluntarily
seeking loans for projects that would use certain advanced vehicle
technologies must satisfy as a condition of a federal loan. Thus, the
interim final rule falls under the exceptions in the definitions of
``federal intergovernmental mandate'' and ``federal private sector
mandate'' for requirements that are a condition of federal assistance
or a duty arising from participation in a voluntary program.
Accordingly, the Unfunded Mandates Reform Act of 1995 does not apply to
this rulemaking.
F. Treasury and General Government Appropriations Act, 1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any proposed rule that may affect family
well being. This rule would not have any impact on the autonomy or
integrity of the family as an institution. Accordingly, DOE has
concluded that it is not necessary to prepare a Family Policymaking
Assessment.
G. Executive Order 13132
Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 4, 1999)
imposes certain requirements on agencies formulating and implementing
policies or regulations that preempt State law or that have federalism
implications. Agencies are required to examine the constitutional and
statutory authority supporting any action that would limit the
policymaking discretion of the States and carefully assess the
necessity for such actions. DOE has examined this interim final rule
and has determined that it would not preempt State law and would not
have a substantial direct effect on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.
Accordingly, no further action is required by Executive Order 13132.
H. Executive Order 12988
With respect to the review of existing regulations and the
promulgation of
[[Page 66731]]
new regulations, section 3(a) of Executive Order 12988, ``Civil Justice
Reform,'' 61 FR 4729 (February 7, 1996), imposes on Executive agencies
the general duty to adhere to the following requirements: (1) Eliminate
drafting errors and ambiguity; (2) write regulations to minimize
litigation; and (3) provide a clear legal standard for affected conduct
rather than a general standard and promote simplification and burden
reduction. With regard to the review required by section 3(a), section
3(b) of Executive Order 12988 specifically requires that Executive
agencies make every reasonable effort to ensure that the regulation:
(1) Clearly specifies the preemptive effect, if any; (2) clearly
specifies any effect on existing Federal law or regulation; (3)
provides a clear legal standard for affected conduct while promoting
simplification and burden reduction; (4) specifies the retroactive
effect, if any; (5) adequately defines key terms; and (6) addresses
other important issues affecting clarity and general draftsmanship
under any guidelines issued by the Attorney General. Section 3(c) of
Executive Order 12988 requires Executive agencies to review regulations
in light of applicable standards in section 3(a) and section 3(b) to
determine whether they are met or it is unreasonable to meet one or
more of them. DOE has completed the required review and determined
that, to the extent permitted by law, this rule meets the relevant
standards of Executive Order 12988.
I. Treasury and General Government Appropriations Act, 2001
The Treasury and General Government Appropriations Act, 2001 (44
U.S.C. 3516 note) provides for agencies to review most disseminations
of information to the public under guidelines established by each
agency pursuant to general guidelines issued by OMB.
OMB's guidelines were published at 67 FR 8452 (February 22, 2002),
and DOE's guidelines were published at 67 FR 62446 (October 7, 2002).
DOE has reviewed today's final rule under the OMB and DOE guidelines
and has concluded that it is consistent with applicable policies in
those guidelines.
J. Executive Order 13211
Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001) requires Federal agencies to prepare and submit to the
OMB, a Statement of Energy Effects for any proposed significant energy
action. A ``significant energy action'' is defined as any action by an
agency that promulgated or is expected to lead to promulgation of a
final rule, and that: (1) Is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any proposed significant energy action,
the agency must give a detailed statement of any adverse effects on
energy supply, distribution, or use should the proposal be implemented,
and of reasonable alternatives to the action and their expected
benefits on energy supply, distribution, and use. Today's regulatory
action would not have a significant adverse effect on the supply,
distribution, or use of energy and is therefore not a significant
energy action. Accordingly, DOE has not prepared a Statement of Energy
Effects.
K. Congressional Notification
As required by 5 U.S.C. 801, DOE will submit to Congress a report
regarding the issuance of today's interim final rule. The report will
state that it has been determined that the interim final rule is a
``major rule'' as defined by 5 U.S.C. 804(2). Pursuant to 5 U.S.C.
808(2), DOE finds good cause that the effective date of this major rule
need not be delayed because notice and public procedure thereon are
unnecessary, impracticable, and contrary to the public interest. In the
Continuing Resolution, 2009, Congress amended section 136 of EISA to
require DOE to act with extreme expedition in the establishment and
implementation of the Advanced Technology Vehicle Manufacturing
Incentive Program. Specifically, Congress mandated that the Secretary
issue an interim final rule--a rule that is issued and becomes
effective without prior public notice and comment. Furthermore,
Congress mandated that this interim final rule be promulgated no later
than 60 days after enactment of the Continuing Resolution 2009. In
addition, the Department is cognizant of the current extraordinary and
adverse credit market conditions, and believes it would be contrary to
the public interest to delay the effective date of regulations
implementing a program that may help respond to those conditions. Thus,
it would be inconsistent with that Congressional mandate, and thereby
unnecessary, impracticable and contrary to the public interest, for the
effective date of this interim final rule to be delayed beyond the date
of its publication. For the reasons stated above, DOE also finds good
cause, pursuant to 5 U.S.C. 553(d)(3), to waive the 30-delay in
effective date required by the rulemakings provisions of the
Administrative Procedure Act.
L. Approval by the Office of the Secretary of Energy
The Secretary of Energy has approved the issuance of this interim
final rule.
List of Subjects in 10 CFR Part 611
Administrative practice and procedure, Energy, Loan programs, and
Reporting and recordkeeping requirements.
Issued in Washington, DC, on November 5, 2008.
Owen Barwell,
Deputy Chief Financial Officer.
0
For the reasons stated in the Preamble, chapter II of title 10 of the
Code of Federal Regulations is amended by adding a new part 611 as set
forth below.
PART 611--ADVANCED TECHNOLOGY VEHICLES MANUFACTURER ASSISTANCE
PROGRAM
Subpart A--General
Sec. 611.1 Purpose.
Sec. 611.2 Definitions.
Sec. 611.3 Advanced technology vehicle.
Subpart B--Direct Loan Program
Sec. 611.100 Eligible applicant.
Sec. 611.101 Application.
Sec. 611.102 Eligible project costs.
Sec. 611.103 Application evaluation.
Sec. 611.104 [Reserved].
Sec. 611.105 Agreement.
Sec. 611.106 Environmental requirements.
Sec. 611.107 Loan terms.
Sec. 611.108 Perfection of liens and preservation of collateral.
Sec. 611.109 Audit and access to records.
Sec. 611.110 Assignment or transfer of loans.
Sec. 611.111 Default, demand, payment, and collateral liquidation.
Sec. 611.112 Termination of obligations.
Subpart C--Facility Funding Awards
Sec. 611.200 Purpose and scope.
Sec. 611.201 Applicability.
Sec. 611.202 Advanced Technology Vehicle Manufacturing Facility
Award Program.
Sec. 611.203 Eligibility.
Sec. 611.204 Awards.
Sec. 611.205 Period of award availability.
Sec. 611.206 Existing facilities.
Sec. 611.207 Small automobile and component manufacturers.
Sec. 611.208 [Reserved].
Sec. 611.209 [Reserved].
Authority: Pub. L. 110-140 (42 U.S.C. 17013), Pub. L. 110-329.
Subpart A--General
Sec. 611.1 Purpose.
This part is issued by the Department of Energy (DOE) pursuant to
section 136
[[Page 66732]]
of the Energy Independence and Security Act of 2007, Public Law 110-
140, as amended by section 129 of Public Law 110-329. Specifically,
section 136(e) directs DOE to promulgate an interim final rule
establishing regulations that specify eligibility criteria and that
contain other provisions that the Secretary deems necessary to
administer this section and any loans made by the Secretary pursuant to
this section.
Sec. 611.2 Definitions.
The definitions contained in this section apply to provisions
contained in both Subpart A and Subpart B.
Adjusted average fuel economy means a harmonic production weighted
average of the combined fuel economy of all vehicles in a fleet, which
were subject to CAFE.
Advanced technology vehicle means a passenger automobile or light
truck that meets--
(1) The Bin 5 Tier II emission standard established in regulations
issued by the Administrator of the Environmental Protection Agency
under section 202(i) of the Clean Air Act (42 U.S.C. 7521(i)), as of
the date of application, or a lower-numbered Bin emission standard;
(2) Any new emission standard in effect for fine particulate matter
prescribed by the Administrator under that Act (42 U.S.C. 7401 et
seq.), as of the date of application; and
(3) At least 125 percent of the harmonic production weighted
average combined fuel economy, for vehicles with substantially similar
attributes in model year 2005.
Agreement means the contractual loan arrangement between DOE and a
Borrower for a loan made by and through the Federal Financing Bank with
the full faith and credit of the United States government on the
principal and interest.
Applicant means a party that submits a substantially complete
application pursuant to this Part.
Application means the compilation of the materials required by this
Part to be submitted to DOE by an Applicant. One Application can
include requests for one or more loans and one or more projects.
However, an Application covering more than one project must contain
complete and separable information with respect to each project.
Automobile is used as that term is defined in 49 CFR Part 523.
Borrower means an Applicant that receives a loan under this
Program.
CAFE means the Corporate Average Fuel Economy program of the Energy
Policy and Conservation Act, 49 U.S.C. 32901 et seq.
Combined fuel economy means the combined city/highway miles per
gallon values, as are reported in accordance with section 32904 of
title 49, United States Code. If CAFE compliance data is not available,
the combined average fuel economy of a vehicle must be demonstrated
through the use of a peer-reviewed model.
DOE or Department means the United States Department of Energy.
Eligible Facility means a manufacturing facility in the United
States that produces qualifying advanced technology vehicles, or
qualifying components.
Eligible Project means:
(1) Reequipping, expanding, or establishing a manufacturing
facility in the United States to produce qualifying advanced technology
vehicles, or qualifying components; or
(2) Engineering integration performed in the United States for
qualifying advanced technology vehicles and qualifying components.
Engineering integration costs are the costs of engineering tasks
relating to--
(1) Incorporating qualifying components into the design of advanced
technology vehicles; and
(2) Designing tooling and equipment and developing manufacturing
processes and material suppliers for production facilities that produce
qualifying components or advanced technology vehicles.
Equivalent vehicle means a light-duty vehicle of the same vehicle
classification as specified in 10 CFR Part 523.
Financially viable means a reasonable prospect that the Applicant
will be able to make payments of principal and interest on the loan as
and when such payments become due under the terms of the loan
documents, and that the applicant has a net present value that is
positive, taking all costs, existing and future, into account.
Grantee means an entity awarded a grant made pursuant to section
136 and this Part.
Light-duty vehicle means passenger automobiles and light trucks.
Light truck is used as that term is defined in 49 CFR Part 523.
Loan Documents mean the Agreement and all other instruments, and
all documentation among DOE, the borrower, and the Federal Financing
Bank evidencing the making, disbursing, securing, collecting, or
otherwise administering the loan [references to loan documents also
include comparable agreements, instruments, and documentation for other
financial obligations for which a loan is requested or issued].
Model year is defined as that term is defined in 49 U.S.C. 32901.
Passenger automobile is used as that term is defined in 49 CFR Part
523.
Qualifying components means components that the DOE determines are
(1) Designed for advanced technology vehicles; and
(2) Installed for the purpose of meeting the performance
requirements of advanced technology vehicles.
Secretary means the United States Secretary of Energy.
Security means all property, real or personal, tangible or
intangible, required by the provisions of the Loan Documents to secure
repayment of any indebtedness of the Borrower under the Loan Documents.
Sec. 611.3 Advanced technology vehicle.
In order to demonstrate that a vehicle is an ``advanced technology
vehicle'', an automobile manufacturer must provide the following:
(a) Emissions certification. An automobile manufacturer must
written certify that the vehicle meets, or will meet, the emissions
requirements specified in the definition of ``advanced technology
vehicle''; and
(b) Demonstration of fuel economy performance. An automobile
manufacturer must demonstrate that the vehicle has a combined average
fuel economy of at least 125 percent of the average combined fuel
economy for vehicles with substantially similar attributes for model
year 2005.
(1) A combined average fuel economy calculation required under this
paragraph for a vehicle that is a dual fueled automobile for the
purpose of CAFE is calculated as if the vehicle were not a dual fueled
automobile.
(2) The average combined fuel economy for vehicles with
substantially similar attributes is a harmonic production weighted
average of the combined average fuel economy of all vehicles with
substantially similar attributes in model year 2005, as published by
DOE.
(3) In the case of an electric drive vehicle with the ability to
recharge from an off-board source, an automobile manufacturer must
provide DOE with a test procedure and sufficient data to demonstrate
that the vehicle meets or exceeds the applicable average combined fuel
economy of vehicles with substantially similar attributes.
[[Page 66733]]
Subpart B--Direct Loan Program
Sec. 611.100 Eligible applicant.
(a) In order to be eligible to receive a loan under this part, an
applicant
(1) Must be either--
(i) An automobile manufacturer that can demonstrate an improved
fuel economy as specified in paragraph (b) of this section, or
(ii) A manufacturer of a qualifying component; and
(2) Must be financially viable without receipt of additional
Federal funding associated with the proposed eligible project.
(b) Improved fuel economy. (1) If the applicant is an automobile
manufacturer that manufactured in model year 2005, vehicles subject to
the CAFE requirements, the applicant must demonstrate that its adjusted
average fuel economy for its light-duty vehicle fleet produced in the
most recent year for which final CAFE compliance data is available, at
the time of application, is greater than or equal to the adjusted
average fuel economy of the applicant's fleet for MY 2005, based on the
MY 2005 final CAFE compliance data.
(2) If the applicant is an automobile manufacturer that did not
manufacture in model year 2005, vehicles subject to the CAFE
requirements, the applicant must demonstrate that the projected
combined fuel economy for the relevant the advanced technology vehicle
that is the subject of the application is greater than or equal to the
industry adjusted average fuel economy for model year 2005 of
equivalent vehicles, based on final CAFE compliance data.
(3) The CAFE values under this paragraph are to be calculated using
the CAFE procedures applicable to the model year being evaluated.
(4) An applicant must provide fuel economy data, at the model
level, relied upon to make the demonstration required by this section.
(5) An applicant that is a manufacturer of a qualifying component
under paragraph (a)(1)(ii) of this section does not need to make a
showing of improved fuel economy under this paragraph.
(c) In determining under paragraph (a)(2) of this section whether
an applicant is financially viable, the Department will consider a
number of factors, including, but not limited to:
(1) The applicant's debt-to-equity ratio as of the date of the loan
application;
(2) The applicant's earnings before interest, taxes, depreciation,
and amortization (EBITDA) for the applicant's most recent fiscal year
prior to the date of the loan application;
(3) The applicant's debt to EBITDA ratio as of the date of the loan
application;
(4) The applicant's interest coverage ratio (calculated as EBITDA
divided by interest expenses) for the applicant's most recent fiscal
year prior to the date of the loan application;
(5) The applicant's fixed charge coverage ratio (calculated as
EBITDA plus fixed charges divided by fixed charges plus interest
expenses) for the applicant's most recent fiscal year prior to the date
of the loan application;
(6) The applicant's liquidity as of the date of the loan
application;
(7) Statements from applicant's lenders that the applicant is
current with all payments due under loans made by those lenders at the
time of the loan application; and
(8) Financial projections demonstrating the applicant's solvency
through the period of time that the loan is outstanding.
(d). For purposes of making a determination under paragraph (a)(2)
of this section, additional Federal funding includes any loan, grant,
guarantee, insurance, payment, rebate, subsidy, credit, tax benefit, or
any other form of direct or indirect assistance from the Federal
government, or any agency or instrumentality thereof, other than the
proceeds of a loan approved under this Part, that is, or is expected to
be made available with respect to, the project for which the loan is
sought under this Part.
Sec. 611.101 Application.
An application must include, at a minimum, the following
information and materials:
(a) A certification by the applicant that it meets each of the
requirements of the program as set forth in statute, the regulations in
this part, and any supplemental requirements issued by DOE;
(b) A description of the nature and scope of the proposed project
for which a loan or award is sought under this part, including key
milestones and location of the project;
(c) A detailed explanation of how the proposed project qualifies
under applicable law to receive a loan or award under this part,
including vehicle simulations using industry standard model (need to
add name and location of this open source model) to show projected fuel
economy;
(d) A detailed estimate of the total project costs together with a
description of the methodology and assumptions used to produce that
estimate;
(e) A detailed description of the overall financial plan for the
proposed project, including all sources and uses of funding, equity,
and debt, and the liability of parties associated with the project;
(f) Applicant's business plan on which the project is based and
applicant's financial model presenting project pro forma statements for
the proposed term of the obligations including income statements,
balance sheets, and cash flows. All such information and data must
include assumptions made in their preparation and the range of revenue,
operating cost, and credit assumptions considered;
(g) An analysis of projected market use for any product (vehicle or
component) to be produced by or through the project, including relevant
data and assumptions justifying the analysis, and copies of any
contractual agreements for the sale of these products or assurance of
the revenues to be generated from sale of these products;
(h) Financial statements for the past three years, or less if the
applicant has been in operation less than three years, that have been
audited by an independent certified public accountant, including all
associated notes, as well as interim financial statements and notes for
the current fiscal year, of the applicant and parties providing the
applicant's financial backing, together with business and financial
interests of controlling or commonly controlled organizations or
persons, including parent, subsidiary and other affiliated corporations
or partners of the applicant;
(i) A list showing the status of and estimated completion date of
applicant's required project-related applications or approvals for
Federal, state, and local permits and authorizations to site,
construct, and operate the project, a period of 5 years preceding the
submission of an application under this Part;
(j) Information sufficient to enable DOE to comply with the
National Environmental Policy Act of 1969, as required by Sec. 611.106
of this part;
(k) A listing and description of assets associated, or to be
associated, with the project and any other asset that will serve as
collateral for the Loan, including appropriate data as to the value of
the assets and the useful life of any physical assets. With respect to
real property assets listed, an appraisal that is consistent with the
``Uniform Standards of Professional Appraisal Practice,'' promulgated
by the Appraisal Standards Board of the Appraisal Foundation, and
performed by licensed or certified appraisers, is required;
(l) An analysis demonstrating that, at the time of the application,
the applicant is financially viable without
[[Page 66734]]
receipt of additional Federal funding associated with the proposed
project, and that there is a reasonable prospect that the Applicant
will be able to make payments of principal and interest on the loan as
and when such payments become due under the terms of the loan
documents, and that the applicant has a net present value which is
positive, taking all costs, existing and future, into account. This
information must include, from publicly traded companies, relevant
filings with the Securities and Exchange Commission;
(m) Written assurance that all laborers and mechanics employed by
contractors or subcontractors during construction, alteration, or
repair that is financed, in whole or in part, by a loan under this Part
shall be paid wages at rates not less than those prevailing on similar
construction in the locality, as determined by the Secretary of Labor
in accordance with 40 U.S.C. sections 3141-3144, 3146, and 3147;
(n) Completed Form SF-LLL, as required by 10 CFR Part 601; and
(o) Other information, as determined necessary by DOE.
Sec. 611.102 Eligible project costs.
(a) Eligible costs are:
(1) Those costs that are reasonably related to the reequipping,
expanding, or establishing a manufacturing facility in the United
States to produce qualifying advanced technology vehicles or qualifying
components;
(2) Costs of engineering integration performed in the United States
for qualifying vehicles or qualifying components;
(3) Costs for payment with loan proceeds that are incurred, but not
yet paid by the borrower, after a substantially complete application
has been submitted to DOE; and
(4) Costs incurred after closing of the loan.
(b) In determining the overall total cost of an Eligible Project,
DOE and the applicant may include significant costs already incurred
and capitalized by the applicant in accordance with Generally Accepted
Accounting Principles and these costs may be considered by DOE in
determining the Borrower's contribution to total project costs.
Sec. 611.103 Application evaluation.
(a) Eligibility screening. Applications will be reviewed to
determine whether the applicant is eligible, the information required
under Sec. 611.101 is complete, and the proposed loan complies with
applicable statutes and regulations. DOE can at any time reject an
application, in whole or in part, that does not meet these
requirements.
(b) Evaluation criteria. Applications that are determined to be
eligible pursuant to paragraph (a) of this section shall be subject to
a substantive review by DOE based upon factors that include, but are
not limited to, the following:
(1) The technical merit of the proposed advanced technology
vehicles or qualifying components, with greater weight given for
factors including, but not limited to:
(i) Improved vehicle fuel economy above that required for an
advanced technology vehicle;
(ii) Potential contributions to improved fuel economy of the U.S.
light-duty vehicle fleet;
(iii) Likely reductions in petroleum use by the U.S. light-duty
fleet; and
(iv) Promotion of use of advanced fuel (e.g., E85, ultra-low sulfur
diesel).
(2) Technical Program Factors such as economic development and
diversity in technology, company, risk, and geographic location.
(3) The adequacy of the proposed provisions to protect the
Government, including sufficiency of Security, the priority of the lien
position in the Security, and the percentage of the project to be
financed with the loan.
(4) In making loans to those manufacturers that have existing
facilities, priority will be given to those facilities that are oldest
or have been in existence for at least 20 years even if such facilities
are idle at the time of application.
Sec. 611.104 [Reserved]
Sec. 611.105 Agreement.
(a) Only an Agreement executed by a duly authorized DOE Contracting
Officer can contractually obligate the government to make a loan made
by and through the Federal Financing Bank with the full faith and
credit of the United States government on the principal and interest.
(b) DOE is not bound by oral representations made during the
Application stage, or during any negotiation process.
(c) No funds obtained from the Federal Government, or from a loan
or other instrument guaranteed by the Federal Government, may be used
to pay administrative fees, or other fees charged by or paid to DOE
relating to the section 136 loan program.
(d) Prior to the execution by DOE of an Agreement, DOE must ensure
that the following requirements and conditions, which must be specified
in the Agreement, are satisfied:
(1) The Borrower is a Eligible Applicant as defined in this Part;
(2) The Agreement is for an Eligible Project as defined in this
Part;
(3) The principal amount of the loan is limited to no more than 80
percent of reasonably anticipated total Project Costs;
(4) Loan funds will be disbursed only to meet immediate cash
disbursement needs of the Borrower and not for investment purposes, and
any investment earnings obtained in excess of accrued interest expense
will be returned to United States Government; and
(5) Such documents, representations, warrants and covenants as DOE
may require.
Sec. 611.106 Environmental requirements.
(a)(1) In general. Environmental review of the proposed projects
under this part will be conducted in accordance with applicable
statutes, regulations, and Executive Orders.
(2) The applicant must submit a comprehensive environmental report.
The comprehensive environmental report shall consist of the specific
reports and related material set forth in paragraphs (d) through (f) of
this section.
(3) The regulations of the Council on Environmental Quality
implementing NEPA require DOE to provide public notice of the
availability of project specific environmental documents such as
environmental impact statements, environmental assessments, findings of
no significant impact, records of decision etc., to the affected
public. See 40 CFR 1506.6(b). The comprehensive environmental report
will provide substantial basis for any required environmental impact
statement or environmental assessment and findings of no significant
impact, pursuant to the procedures set forth in 10 CFR 1021.215. DOE
may also make a determination as to whether a categorical exclusion is
available with regard to an Application.
(b) The detail of each specific report must be commensurate with
the complexity of the proposal and its potential for environmental
impact. Each topic in each specific report shall be addressed or its
omission justified, unless the specific report description indicates
that the data is not required for that type of project. If material
required for one specific report is provided in another specific report
or in another exhibit, it may be incorporated by reference. If any
specific report topic is required for a particular project but is not
provided at the time the application is filed, the comprehensive
environmental report shall explain why it is missing and when the
applicant anticipates it will be filed.
[[Page 66735]]
(c) As appropriate, each specific report shall:
(1) Address conditions or resources that might be directly or
indirectly affected by the project;
(2) Identify significant environmental effects expected to occur as
a result of the project;
(3) Identify the effects of construction, operation (including
maintenance and malfunctions), and termination of the project, as well
as cumulative effects resulting from existing or reasonably foreseeable
projects;
(4) Identify measures proposed to enhance the environment or to
avoid, mitigate, or compensate for adverse effects of the project; and
(5) Provide a list of publications, reports, and other literature
or communications that were cited or relied upon to prepare each
report.
(d) Specific Report 1--Project impact and description. This report
must describe the environmental impacts of the project, facilities
associated with the project, special construction and operation
procedures, construction timetables, future plans for related
construction, compliance with regulations and codes, and permits that
must be obtained.
(e) Specific Report 2--Socioeconomics. This report must identify
and quantify the impacts of constructing and operating the proposed
project on factors affecting towns and counties in the vicinity of the
project. The report must:
(1) Describe the socioeconomic impact area;
(2) Evaluate the impact of any substantial immigration of people on
governmental facilities and services and plans to reduce the impact on
the local infrastructure;
(3) Describe on-site manpower requirements and payroll during
construction and operation, including the number of construction
personnel who currently reside within the impact area, would commute
daily to the site from outside the impact area, or would relocate
temporarily within the impact area;
(4) Determine whether existing housing within the impact area is
sufficient to meet the needs of the additional population;
(5) Describe the number and types of residences and businesses that
would be displaced by the project, procedures to be used to acquire
these properties, and types and amounts of relocation assistance
payments; and
(6) Conduct a fiscal impact analysis evaluating incremental local
government expenditures in relation to incremental local government
revenues that would result from construction of the project.
Incremental expenditures include, but are not limited to, school
operating costs, road maintenance and repair, public safety, and public
utility costs.
(f) Specific Report 3--Alternatives. This report must describe
alternatives to the project and compare the environmental impacts of
such alternatives to those of the proposal. The discussion must
demonstrate how environmental benefits and costs were weighed against
economic benefits and costs, and technological and procedural
constraints. The potential for each alternative to meet project
deadlines and the environmental consequences of each alternative shall
be discussed. The report must discuss the ``no action'' alternative and
the potential for accomplishing the proposed objectives through the use
of other means. The report must provide an analysis of the relative
environmental benefits and costs for each alternative.
Sec. 611.107 Loan terms.
(a) All loans provided under this part shall be due and payable in
full at the earlier of:
(1) the projected life, in years, of the Eligible facility that is
built or installed as a result of the Eligible Project carried out
using funds from the loan, as determined by the Secretary; or
(2) Twenty-five (25) years after the date the loan is closed.
(b) Loans provided under the Part must bear a rate of interest that
is equal to the rate determined by the Secretary of the Treasury,
taking into consideration current market yields outstanding marketable
obligations of the United States of comparable maturity. This rate will
be determined separately for each drawdown of the loan.
(c) A loan provided under this part may be subject to a deferral in
repayment of principal for not more than 5 years after the date on
which the Eligible facility that is built or installed as a result of
the Eligible Project first begins operations, as determined by the
Secretary.
(d)(1) The performance of all of the Borrower's obligations under
the Loan Documents shall be secured by, and shall have the priority in,
such Security as provided for within the terms and conditions of the
Loan Documents.
(2) Accordingly, the rule states that the Secretary must have a
first lien or security interest in all property acquired with loan
funds. This requirement may be waived only by the Secretary on a non-
delegable basis. DOE must also have a lien on any other property of the
applicant pledged to secure the loan.
(3) In the event of default, if recoveries from the property and
revenues pledged to the repayment of the loan are insufficient to fully
repay all principal and interest on the loan, then the Federal
Government will have recourse to the assets and revenues of the
Borrower to the same extent as senior unsecured general obligations of
the Borrower.
(e) The Borrower will be required to pay at the time of the closing
of the loan a fee equal to 10 basis points of the principal amount of
the loan.
Sec. 611.108 Perfection of liens and preservation of collateral.
(a) The Agreement and other documents related thereto shall provide
that:
(1) DOE and the Applicant, in conjunction with the Federal
Financing Bank if necessary, will take those actions necessary to
perfect and maintain liens, as applicable, on assets which are pledged
as collateral for the loan; and
(2) Upon default by the Borrower, the holder of pledged collateral
shall take such actions as DOE may reasonably require to provide for
the care, preservation, protection, and maintenance of such collateral
so as to enable the United States to achieve maximum recovery from the
pledged assets. DOE shall reimburse the holder of collateral for
reasonable and appropriate expenses incurred in taking actions required
by DOE.
(b) In the event of a default, DOE may enter into such contracts as
the Secretary determines are required to preserve the collateral. The
cost of such contracts may be charged to the Borrower.
Sec. 611.109 Audit and access to records.
(a) The Agreement and related documents shall provide that:
(1) DOE in conjunction with the Federal Financing Bank, as
applicable, and the Borrower, shall keep such records concerning the
project as are necessary, including the Application, Term Sheet,
Conditional Commitment, Agreement, mortgage, note, disbursement
requests and supporting documentation, financial statements, audit
reports of independent accounting firms, lists of all project assets
and non-project assets pledged as security for the loan, all off-take
and other revenue producing agreements, documentation for all project
indebtedness, income tax returns, technology agreements, documentation
for all permits and regulatory approvals and all other
[[Page 66736]]
documents and records relating to the Eligible Project, as determined
by the Secretary, to facilitate an effective audit and performance
evaluation of the project; and
(2) The Secretary and the Comptroller General, or their duly
authorized representatives, shall have access, for the purpose of audit
and examination, to any pertinent books, documents, papers and records
of the Borrower or DOE, as applicable. Such inspection may be made
during regular office hours of the Borrower or DOE, as applicable, or
at any other time mutually convenient.
(b) The Secretary may from time to time audit any or all statements
or certificates submitted to the Secretary. The Borrower will make
available to the Secretary all books and records and other data
available to the Borrower in order to permit the Secretary to carry out
such audits. The Borrower should represent that it has within its
rights access to all financial and operational records and data
relating to the project financed by the loan, and agrees that it will,
upon request by the Secretary, exercise such rights in order to make
such financial and operational records and data available to the
Secretary. In exercising its rights hereunder, the Secretary may
utilize employees of other Federal agencies, independent accountants,
or other persons.
(c) Loan funds are being expended efficiently and effectively if
documentation submitted and audits conducted under this section
demonstrate that the borrower is making appropriate progress toward
achieving the purpose for which the loan was originally made.
Sec. 611.110 Assignment or transfer of loans.
(a) The Loan Documents may not be modified, in whole or in part,
without the prior written approval of DOE.
(b) Upon prior written approval by DOE and the Federal Financing
Bank, a certification by the assignor that the assignee is an Eligible
Applicant as described in Sec. 611.100 of this part, and subject to
paragraph (c) of this section and other provisions of this part, a
Borrower may assign or transfer its interest in a loan provided under
this part, including the loan documents, to a party that qualifies as
an Eligible Applicant.
(c) The provisions of paragraph (b) of this section shall not apply
to transfers which occur by operation of law.
Sec. 611.111 Default, demand, payment, and collateral liquidation.
(a) In the event that the Borrower has defaulted in the making of
required payments of principal or interest, and such default has not
been cured within the period of grace provided in the Agreement, DOE
may cause the principal amount of the loan, together with accrued
interest thereon, and all amounts owed to the United States by Borrower
pursuant to the Agreement, to become immediately due and payable by
giving the Borrower written notice to such effect.
(b) In the event that the Borrower is in default as a result of a
breach of one or more of the terms and conditions of the Agreement,
note, mortgage, or other contractual obligations related to the
transaction, other than the Borrower's obligation to pay principal or
interest on the loan, and DOE determines, in writing, that such a
default has materially affected the rights of the parties, the Borrower
shall be given the period of grace provided in the Agreement to cure
such default. If the default is not cured during the period of grace,
DOE may cause the principal amount of the loan, together with accrued
interest thereon, and all amounts owed to the United States by Borrower
pursuant to the Agreement, to become immediately due and payable by
giving the Borrower written notice to such effect.
(c) In the event that the Borrower has defaulted as described in
paragraphs (a) or (b) of this section and such default is not cured
during the grace period provided in the Agreement, DOE shall notify the
U.S. Attorney General. DOE, acting through the U.S. Attorney General,
may seek to foreclose on the collateral assets and/or take such other
legal action as necessary for the protection of the Government.
(d) If DOE is awarded title to collateral assets pursuant to a
foreclosure proceeding, DOE may take action to complete, maintain,
operate, or lease the Eligible Facilities, or otherwise dispose of any
property acquired pursuant to the Agreement or take any other necessary
action which DOE deems appropriate.
(e) In addition to foreclosure and sale of collateral pursuant
thereto, the U.S. Attorney General shall take appropriate action in
accordance with rights contained in the Agreement to recover costs
incurred by the Government as a result of the defaulted loan or other
defaulted obligation. Any recovery so received by the U.S. Attorney
General on behalf of the Government shall be applied in the following
manner: First to the expenses incurred by the U.S. Attorney General and
DOE in effecting such recovery; second, to reimbursement of any amounts
paid by DOE as a result of the defaulted obligation; third, to any
amounts owed to DOE under related principal and interest assistance
contracts; and fourth, to any other lawful claims held by the
Government on such process. Any sums remaining after full payment of
the foregoing shall be available for the benefit of other parties
lawfully entitled to claim them.
(f) In the event that DOE considers it necessary or desirable to
protect or further the interest of the United States in connection with
the liquidation of collateral or recovery of deficiencies due under the
loan, DOE will take such action as may be appropriate under the
circumstances.
Sec. 611.112 Termination of obligations.
DOE, the Federal Financing Bank, and the Borrower shall have such
rights to terminate the Agreement as are set forth in the loan
documents.
Subpart C--Facility/Funding Awards
Sec. 611.200 Purpose and scope.
This subpart sets forth the policies and procedures applicable to
the award and administration of grants by DOE for advanced technology
vehicle manufacturing facilities as authorized by section 136(b) of the
Energy Independence and Security Act (Pub. L. 110-140).
Sec. 611.201 Applicability.
Except as otherwise provided by this subpart, the award and
administration of grants shall be governed by 10 CFR part 600 (DOE
Financial Assistance Rules).
Sec. 611.202 Advanced Technology Vehicle Manufacturing Facility Award
Program.
DOE may issue, under the Advanced Technology Vehicle Manufacturing
Facility Award Program, 10 CFR part 611, subpart C, awards for eligible
projects.
Sec. 611.203 Eligibility.
In order to be eligible for an award, an applicant must be either--
(a) An automobile manufacturer that can demonstrate an improved
fuel economy as specified in paragraph (b) of section 611.3, or
(b) A manufacturer of a qualifying component.
Sec. 611.204 Awards.
Awards issued for eligible projects shall be for an amount of no
more than 30 percent of the eligible project costs.
Sec. 611.205 Period of award availability.
An award under section 611.204 shall apply to--
(a) Facilities and equipment placed in service before December 30,
2020; and
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(b) Engineering integration costs incurred during the period
beginning on December 19, 2007 and ending on December 30, 2020.
Sec. 611.206 Existing facilities.
The Secretary shall, in making awards to those manufacturers that
have existing facilities, give priority to those facilities that are
oldest or have been in existence for at least 20 years. Such facilities
can currently be sitting idle.
Sec. 611.207 Small automobile and component manufacturers.
(a) In this section, the term ``covered firm'' means a firm that--
(1) Employs less than 500 individuals; and
(2) Manufactures automobiles or components of automobiles.
(b) Set Aside.--Of the amount of funds that are used to provide
awards for each fiscal year under this subpart, not less than 10
percent shall be used to provide awards to covered firms or consortia
led by a covered firm.
Sec. 611.208 [Reserved]
Sec. 611.209 [Reserved]
[FR Doc. E8-26832 Filed 11-6-08; 4:15 pm]
BILLING CODE 6450-01-P