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2007 Policy Positions
of the Southern Legislative Conference

POLICY POSITION REGARDING THE NOTICE OF PROPOSED RULEMAKING (NOPR) IMPLEMENTING THE LOAN GUARANTEE PROGRAM AUTHORIZED BY THE ENERGY POLICY ACT OF 2005


BACKGROUND

The Energy Policy Act of 2005 recognizes the need to promote and support the deployment of advanced energy technologies to enhance the nation's electric generation mix, as it recognizes the need to encourage the commercialization and increased use of a variety of energy projects, including renewable energy, advanced nuclear energy, advanced coal plants, efficient transmission and distribution technologies, carbon capture and sequestration projects, and other technologies to meet the growth of electricity demand and to avoid , reduce, or sequester air pollutants and anthropogenic greenhouse gas emission.

The Act further authorizes the Department of Energy (DOE) to make loan guarantees for projects to encourage the commercialization and increased use of such technologies and, on May 16, 2007, the DOE issued a Notice of Proposed Rulemaking (NOPR) to implement the loan guarantee program as authorized by the Act. The loan guarantee program authorized by the Act has the potential to lower the cost of electricity produced by such technologies and thus reduce costs to consumers, if it is properly implemented; however, there are certain provisions in the DOE NOPR implementing the loan guarantee authority which compromise the value of the loan guarantee program as a means of promoting such technologies and reducing costs to consumers.

RECOMMENDATION

The Southern Legislative Conference (SLC) of The Council of State Governments urges the U.S. Department of Energy to adopt rules for a loan guarantee program that will ensure the program is a meaningful tool in encouraging the commercialization and use of energy technologies that reduce, avoid, or sequester air pollutants and greenhouse gases. The SLC urges the DOE to revise their proposed rules in the following manner so as to assure full compliance with the intent and purposes of Title XVII of the 2005 Energy Policy Act:

  • Assure that loan guarantees may be used to cover 80 percent of the full project cost of the facility, as specified by Section 1702 of Public Law 109-58, thereby enabling the borrower to carry out the project;
  • Allow any un-guaranteed debt of the proposed project to be marketed separately from guaranteed debt to assure least cost financing is achievable; and
  • Assure proportional treatment of all debt holders, including holders of debt not guaranteed by the federal government, should a project default occur.

Further, the Southern Legislative Conference of The Council of State Governments endorses workable loan guarantee regulations that will enable the deployment of advanced energy technologies to help the nation meet its future energy needs in a manner that reduces costs to consumers while reducing greenhouse gas emissions and facilitating greater energy independence and forwards its position to the president of the United States and the secretary of energy.

 

Adopted by the Southern Legislative Conference, July 17, Williamsburg, Virginia.

Southern Legislative Conference and SLC are trademarks registered in the U.S. Patent and Trademark Office.