[Federal Register Volume 73, Number 219 (Wednesday, November 12, 2008)]
[Rules and Regulations]
[Pages 66721-66737]
From the Federal Register Online via the Government Printing 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: ATVMLoan@hq.doe.gov.
     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

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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