Consolidated Public Comments and DOE Responses

Comment Listing
U.S. Department of Energy
Loan Programs Office
Draft Advanced Fossil Energy Projects Solicitation
September 2013

1

Table 1 – Comment Matrix
Section
1.

Topic
Fees and Costs

2.

Technical Eligibility

3.
4.

Loan Repayment
Process Timing

5.
6.
7.
8.
9.
10.
11.
12.

Process Guidance
Loan Authority
Multiple Contracting
Credit and Equity
Federal Support
Prior Experience
Innovation
Statutory
Requirements
Scale and Viability
Weighting
Environmental
Review

13.
14.
15.

Commenter Number
Comments
5, 12, 14, 18, 20, 22, 5a, 12a, 14a,18a, 20b,
23, 27, 32
22b, 23b, 27a, 32b,
32c, 32d
3, 6, 10, 11, 15, 16,
3a, 6b, 10a, 11a, 12e,
17, 19, 21, 23, 26, 29,
15a, 16a, 17b, 19a,
30, 34, 35
21a, 23a, 26a, 29a,
30a, 34b, 34c, 35a
6
6a
1, 7, 8, 10, 12, 32
1a, 7a, 8a, 10d, 12b,
12f, 12h, 32a
9
9a
10
10b
10
10c
12, 25, 32
12c, 12d, 25b, 32e
12, 32, 36
12g, 32f, 36a
17, 20, 36
17a, 20c, 36b
22
22a
24, 28, 31
24a, 28a, 31a
25
32, 34
33

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25a
32g, 34a
33a

Table 2 – Comment Key
Commenter
Number
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Commenter
Name
Burdett L. Hallett
Charles Peterson
Max Williamson
Jon Marbaise
Bob Lerman
Mark Schoenfield
Robert Hickmott
Paul Kavinoky
J.R. Keeling
Keith Tracy
Farid Hekmat
Andrew Paterson

13.
14.
15.
16.

Steve Lindauer
Rodney Sobin
Gus Block
Keith Dennis

17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.

Douglas Cox
David Gardiner
David J. Zaziski
Angus King
Leonard Dolhert
Robert Thornton
Connor Dolan
Lineth Metcalf
Scott Fisher
Kelly Merritt
Lisa Ward
Tyler Krutzfeldt
Luke Hopkins
Bob Shefchik
Autumn Hanna
Walker Dimming

Affiliation

Comments

ADP Holdings, Ltd.
N/A
New Carbon Future LLC
Blackrock Energy
N/A
Jupiter Oxygen Corporation
Smith-Free Group
Rio Tinto
N/A
Chaparral CO2, L.L.C.
Holland & Knight
Environmental Business International

1a
2a**
3a
4a, 4b**
5a
6a, 6b
7a*
8a*
9a
10a, 10b, 10c, 10d
11a
12a, 12b, 12c, 12d,
12e, 12f, 12g, 12h
13a**
14a
15a
16a

Association of Union Constructors
Alliance to Save Energy
Nuvera Fuel Cells, Inc.
National Rural Electric Cooperative
Association
Primus Green Energy
Alliance for Industrial Efficiency
Siluria Technologies, Inc.
United States Senate
Aither Chemicals, LLC
Int’l District Energy Association
Fuel Cell and Hydrogen Energy Assn
Coal Utilization Research Council
NRG
Grannus LLC
Clear Edge Power
N/A
Fairbanks North Star Borough
Interior Gas Utility
Taxpayers for Common Sense
Netpower

17a,17b
18a
19a
20a**, 20b, 20c
21a
22a, 22b
23a, 23b
24a
25a, 25b, 25c**
26a, 26b**, 26c**
27a
28a
29a
30a
31a
32a, 32b, 32c, 32d,
32e, 32f, 32g
33.
Fred Carey
Potomac-Hudson Engineering, Inc.
33a
34.
Michael Ducker
Mitsubishi Power Systems
34a*, 34b*, 34c*
35.
John McNamara
Caithness Energy
35a
36.
Robert Johnsen
Primus Energy
36a, 36b
*These individuals provided comments in person at the LPO Public Meetings.
**These comments were deemed purely administrative
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1. Fees and Costs
a. Commenters: 5, 12, 14, 18, 20, 22, 23, 27, 32
b. Comments: 5a, 12a, 14a,18a, 20b, 22b, 23b, 27a, 32b, 32c, 32d
One commenter (Lerman) noted that the application fees are too high. The commenter noted
that the application fees are too high for small companies and projects, effectively shutting them
out of the process. A second commenter (Paterson) asked what can be done to manage due
diligence costs. A third commenter (Sobin) requested that the solicitation consider smaller
project developers when assigning the fee structure. A fourth commenter (Gardiner) believed
the fees were excessive and could deter many projects (especially smaller projects) from
applying for the loan guarantee. The fourth commenter (Gardiner) suggested that the
application fee should be proportionate to the size of the loan (rather than establishing a flat fee
for all projects) and also suggested that DOE modify the program so that the full fee is not due
until the loan is approved.
The fourth commenter (Gardiner) suggested the following fee structure:
• 25 percent of the application fee can continue to be due upon filing Part I of the
application;
• An additional 25 percent (rather than 75 percent) can be due upon filing Part II of the
application;
• The remaining 50 percent should be due only after (and only if) the loan is approved.
A fifth commenter (Thornton) suggested that DOE significantly restructure the fees to make
them more commensurate with both the size of projects and the risk profiles. A sixth
commenter (Dolan) said that DOE should consider changing the fee structure to accommodate
support of smaller scale distributed generation systems. A seventh commenter (Ward) noted
that DOE should limit the amount of all fees associated with the loan guarantee solicitation;
specifically for stationary fuel cell projects, which the commenter believes to qualify under this
solicitation, the fees should not exceed 0.5% of the total project cost. According to the seventh
commenter (Ward), when the fees surpass this amount, customers tend to abandon the project
because the financial feasibility deteriorates exponentially. An eighth commenter (Dimming)
noted that an Application Fee of $1,000,000 has the potential to create a barrier to entry for small
and medium sized enterprises that might otherwise apply with strong technologies and eligible
projects. The same commenter noted that other fees (outside consultants, credit subsidy, and
outside counsel) should be capped to provide more financial certainty and clarity to applicants at
the start of the program. The same commenter also noted that the DOE Loan Programs Office
website suggests the maintenance fee for Section 1703 Programs “will generally be in the range
of $25,000 to $150,000.”, but that the proposed program maintenance fee of $500,000 is far in
excess of this stated expected range. A ninth commenter (King) asked that the solicitation be
modified to reduce the application fee for small companies.
Answer:
We understand that the fees associated with applying for and receiving a guarantee appear high
and could be difficult for smaller projects and/or sponsors to pay. However, Section 1702(h) of
the Energy Policy Act of 2005 requires that DOE “charge and collect fees for guarantees in
amounts the Secretary determines are sufficient to cover applicable administrative expenses,”
which includes both direct and third-party costs.
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DOE has designed the three different types of fees (application, facility, and maintenance) listed
below to fairly distribute the direct administrative costs among the different periods in the
application process. However, we continue to examine the structure of the fees, to ensure that
they allow DOE to pay its administrative costs, while not discouraging potentially eligible
projects.
1) The application fee in the draft Advanced Fossil Solicitation is $1,000,000, 25% payable
in connection with the submission of Part I of the application, and the remaining 75%
payable in connection with the submission of Part II of the application. The application
fee, as a whole, is designed to cover the direct administrative costs of the application
process and has been calculated based on the historical average cost of processing similar
types of applications. The 2008 fossil solicitation (issued 5 years ago) required an
application fee of $800,000, payable in two parts, just as the draft Advanced Fossil
Solicitation requires.
However, based on the feedback we have received, we are intending that the final
Advanced Fossil Solicitation will provide for the Part I application fee to be $75,000 and
the Part II application fee to be $925,000.
2) The facility fee in the draft Advanced Fossil Solicitation is ½ of 1.0% (or 0.5%) of the
principal amount of the guaranteed obligation, 25% payable upon the issuance of the
conditional commitment, and the remaining amount payable upon the issuance of the
guarantee. The facility fee is designed to cover the direct administrative costs of the
negotiation and documentation of the loan guarantee. The 2008 fossil solicitation
required the same facility fee.
3) The maintenance fee in the draft Advanced Fossil Solicitation is stated to be expected to
be $500,000 each year of the loan, payable annually, beginning on the issuance of the
guarantee. The maintenance fee is designed to cover the direct administrative costs, other
than extraordinary expenses, to service and monitor the loan guarantee from the issuance
of the guarantee until the payment in full of the guaranteed obligation and has been
calculated based on the historical average cost of servicing and monitoring similar types
of projects. The 2008 fossil solicitation stated that the maintenance fee was “[e]xpected
to be in the range of $200,000 to $400,000 per year.”
The indirect administrative costs (paid to DOE’s third-party advisors) are required to be paid by
the project sponsor. This arrangement is typical in connection with large project financings. In
some instances, prices with the third-party advisors have been negotiated by DOE to decrease
them below such firms’ “market” rates. DOE works with project sponsors and its third-party
advisors to manage those costs. However, putting a limit on the costs would mean putting a limit
on the actual due diligence, documentation, and other services these advisors provide, which
would not be acceptable to any lender or guarantor.
2. Technical Eligibility
a. Commenters: 3, 6, 10, 11, 12, 15, 16, 17, 19, 21, 23, 26, 29, 30, 34, 35

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b. Comments: 3a, 6b, 10a, 11a, 12e, 15a, 16a, 17b, 19a, 21a, 23a, 26a, 29a, 30a, 34b, 34c,
35a
Several comments requested that their technologies be made eligible for the solicitation. One
commenter (Williamson) inquired as to whether clean coal technologies would be eligible, such
as those employing energy efficiency and emissions savings from recycling, improved emissions
controls, and alternative waste disposal methods. A second commenter (Dennis) asked to
include advanced fossil technologies that capture waste energy and recycle byproducts. The
third commenter (Schoenfield) suggested that the solicitation include eligibility for high flame
temperature oxy-combustion that uses less fuel. A fourth commenter (Tracy) wanted
confirmation that industrial processing facilities, ethanol plants, fertilizer plants, and captured
CO2 in a pipeline are eligible, and encouraged the concept that CO2 pipelines be clearly
addressed in the solicitation, so that potential applicants can clearly know whether CO2 pipelines
may be included (or must be excluded) from any potential qualifying project or facility. A fifth
commenter (Hekmat) asked if LNG facilities would qualify.
A sixth commenter (Paterson) asked whether it is more appropriate for projects using natural
gas as a feedstock, rather than coal, to submit under Category B as an industrial process (making
fuels and chemicals), or under Category D as a more efficient manufacturing process (or both). A
seventh commenter (Block) suggested that hydrogen produced from on-site natural gas be
eligible. An eighth commenter (Cox) asked for clarification that a project producing fuels
(gasoline, diesel or jet fuel) utilizing natural gas as the feedstock and a non-Fischer-Tropsch gas
to liquids technology would be considered eligible. A ninth commenter (Zaziski) requested
appropriate modifications or additions to the technology area descriptions and/or the list of
illustrative project types be made to include a class of new or substantially improved
technologies that utilize natural gas as a feedstock for chemical conversion to fuel or chemical
products. A tenth commenter (Dolhert) requested that the solicitation allow for projects that
will reduce energy use in the production and distribution of ethylene, including projects that use
catalytic cracking of ethane to ethylene.
An eleventh commenter (Dolan) requested that loan guarantees should be made available for
hydrogen infrastructure in the final solicitation. A twelfth commenter (Merritt) suggested that
the solicitation allow for polygeneration and process efficiency improvements with new
technology, existing technology integration, and cogeneration processes using a variety of fuels,
as well as process integration of wind, solar, or solar thermal power through physical or
electrical interconnection to create renewable, ultra–low, or zero emission baseload power,
partial and full oxidation polygeneration systems with carbon dioxide capture and water
production with re-use of byproducts, magnetohydrodynamics, metal oxide boilers with CO2
capture for reuse, sequestration or EOR, and inclusion of processes which can reduce the use of
fuel and electricity for other existing systems, such as polygeneration or cogeneration. A
thirteenth commenter (Hopkins) said that funding through this federal loan program could be
used for rapid build out of a natural gas distribution system and could provide loans to residents
and businesses to convert from fuel oil to gas, which would incentivize individuals and
businesses to buy the highest energy efficient furnaces that are dual oil and gas and can be easily
converted once the gas distribution system is in place. A fourteenth commenter (Shefchik)
urged that DOE consider the eligibility of natural gas distribution systems.
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A fifteenth commenter (Ducker) suggested that DOE amend the definition of Low-Carbon
Power Systems in Section II.A.1.c to include seamless integration of CO2 capture and also
suggested that DOE amend the Illustrative Types of Eligible Projects in Section II.B.3 to include
natural gas-fired systems with exhaust gas recirculation. A sixteenth commenter (McNamara)
asked that the final language of the solicitation, specifically within Technology Area 4 of the
solicitation, include high efficiency, flexible fossil power systems, in addition to the distributed
fossil power systems mentioned.
Answer:
The two principal goals of section 1703 of Title XVII of the Energy Policy Act of 2005 are to (1)
encourage commercialization of new or significantly improved energy-related technologies and
(2) achieve substantial environmental benefits by avoiding, reducing, or sequestering
anthropogenic emissions of greenhouse gases. Accordingly, as stated in section II.A.2 of the
draft Advanced Fossil Solicitation, it is a statutory requirement that all projects must satisfy these
requirements to be deemed eligible under the final Advanced Fossil Solicitation.
The draft Advanced Fossil Solicitation further clarifies, for the avoidance of doubt, that the
illustrative types of eligible projects listed in section II.B of the draft Advanced Fossil
Solicitation may or may not be eligible, depending on the project structure, loan application, and
subsequent technical review. Inclusion of a particular technology or project in the illustrative
list, as several comments requested, does not assure that a project employing such technology is
eligible. Ultimately, the project’s loan application is responsible for demonstrating satisfaction
of all eligibility criteria, subject to LPO review and assessment.
LPO intends for the definition of new or significantly improved technologies in the Advanced
Fossil Solicitation to conform to final rule 10 CFR Part 609, which provides the following
relevant terms: “New or Significantly Improved Technology means a technology concerned with
the production, consumption, or transportation of energy and that is not a Commercial
Technology, and that has either: (1) Only recently been developed, discovered, or learned; or (2)
Involves or constitutes one or more meaningful and important improvements in productivity or
value, in comparison to Commercial Technologies in use in the United States at the time the
Term Sheet is issued;” and “Commercial Technology means a technology in general use in the
commercial marketplace in the United States at the time the Term Sheet is issued by DOE. A
technology is in general use if it has been installed in and is being used in three or more
commercial projects in the United States in the same general application as in the proposed
project, and has been in operation in each such commercial project for a period of at least five
years….” Project applications will be required to demonstrate that a New or Significantly
Improved Technology is being proposed.
As stated in the draft Advanced Fossil Solicitation, LPO intends that the scope of the draft
Advanced Fossil Solicitation is broad. In response to several comments requesting inclusion of
various industrial processes as eligible projects, the term “industrial processing facilities” in
section II.B of the draft Advanced Fossil Solicitation is meant to include fuel production and
conversion, petrochemical and petrochemical derivatives production, and hydrocarbon
derivatives production sourced from fossil fuels. In response to comments requesting the
inclusion of CO2 pipelines and hydrogen and LNG infrastructure as eligible projects, LPO
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reiterates that any such project will only be deemed eligible if it satisfies the requirements of
sections II.A and II.B of the draft Advanced Fossil Solicitation. In response to comments about
projects that fit multiple technology areas, a project that qualifies under more than one of the
technology areas described in section II.A.1 of the draft Advanced Fossil Solicitation may
submit an application under any applicable technology area.
With respect to the costs related to pipeline transport of CO2 for a proposed project, LPO intends
to adhere to the principles described in 10 CFR Part 609.12(a) to determine whether costs are
eligible project costs, namely that they be “Project Costs” as defined in 10 CFR Part 609, which
requires that they be “costs, including escalation and contingencies that are to be expended or
accrued by Borrower and are necessary, reasonable, customary and directly related to the design,
engineering, financing, construction, startup, commissioning and shakedown of an Eligible
Project….” It further states that “Project [C]osts…do not include costs for the items set forth in
[Section] 609.12(c) of this part.” LPO will review the project costs of each applicant project to
determine if they are eligible under 10 CFR Part 609.
3. Loan Repayment
a. Commenters: 6
b. Comments: 6b
One commenter (Schoenfield) requested that failed projects not be required to pay back the
loan. The commenter noted that because of high LPO application and other fees, the LPO’s low
interest rates are not enough to reduce the investment risk to the utility industry and that
investment risk to utilities or technology providers must be reduced by not requiring payback
unless the project revenue is sufficient.
Answer:
As a guarantor of debt, DOE is not intended to take the same level of risk as an equity provider
to a project. If DOE were to agree, at the time of the issuance of the guarantee, that the debt did
not need to be repaid if the project failed, DOE would be taking the same risk as the equity,
which is not what Title XVII anticipated or requires.
In addition, pursuant to Section 1702(d)(1) of the Energy Policy Act of 2005, DOE can provide a
guarantee only if DOE determines that there is “a reasonable prospect of repayment of the
principal and interest on the obligation by the borrower.” It is unlikely that DOE would ever be
able to make such a determination if the project had an ability to walk away from the debt
without consequence.
4. Process Timing
a. Commenters: 1, 7, 8, 10, 12, 32
b. Comments: 1a, 7a, 8a, 10d, 12b, 12e, 32a
Three commenters asked that DOE provide clarity on the schedule and timing for the Advanced
Fossil Solicitation. The first commenter (Hallett) asked when the final solicitation will be
released and for the dates for submitting an application. The second, third, and fourth
commenters (Hickmott, Kavinoky, Keeling) requested further information on dates of
8

submittals and processing timeframes. The fourth commenter (Keeling) also requested the
deadline for application submittals. A fifth commenter (Paterson) requested information on how
sequestration might impact the DOE review process. The same commenter asked what dates
DOE is contemplating for a Part I submission, and whether there will be a rolling submittal
schedule. The same commenter asked how much time an applicant has to submit a Part II
application after being invited to do so. A sixth commenter (Dimming) suggested that DOE
provide deadlines by which it will respond to Part I and Part II of the Application, as well as
complete its due diligence.
Answer:
DOE expects that the final Advanced Fossil Solicitation will be issued in the Fall of 2013.
The deadlines for filing Part I and Part II applications will be set forth in detail in the final
Advanced Fossil Solicitation. DOE anticipates providing a number of Part I deadline dates and
Part II deadline dates. An applicant will be permitted to submit a Part I application prior to any
Part I deadline. If such applicant is invited to submit a Part II application, it may do so prior to
any Part II deadline.
DOE’s expectation is that the application portal for filing an application will be available shortly
after the issuance of the final Advanced Fossil Solicitation.
Based on information currently available, DOE does not anticipate that sequestration will
substantially affect DOE’s review of applications.
5. Process Guidance
a. Commenters: 9
b. Comments: 9a
One commenter (Keeling) requested that DOE provide a guidance document to accompany the
solicitation that would outline how to navigate the process.
Answer:
DOE is creating an application portal for submission of applications. The application portal has
been designed to be “user friendly” and will allow the user to work on its application, save its
work, revise its work, and proofread its work prior to submission. DOE expects that the
information requested in the initial section of Part I of the application will be entered directly
into the text fields provided in the application portal. DOE expects that the information
requested for all other sections of Part I of the application and the information requested for all
sections of Part II of the application will be provided in PDF or Excel documents uploaded
through the application portal. DOE has professionals from multiple disciplines reviewing the
application portal, with the goal of providing clear and detailed instructions regarding how to use
the application portal.
DOE’s preliminary expectation is that the application portal for filing an application will be
available shortly after the issuance of the final Advanced Fossil Solicitation, which will allow
applicants to commence the submittal process of their applications, regardless of the deadlines in
the final Advanced Fossil Solicitation.
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DOE intends to hold at least one webinar and/or seminar on the final Advanced Fossil
Solicitation, at which we will discuss the process. We will announce all such webinars/seminars
on the LPO website.
6. Loan Authority
a. Commenters: 10
b. Comments: 10b
One commenter (Tracy) requested to know what the dollar limit of loan authority to a single
project would be.
Answer:
DOE does not have a statutory or regulatory dollar limit of loan authority to a single project.
However, as it states in Section IV.C. of the draft Advanced Fossil Solicitation, “[t]he use of
partial guarantees and/or co-lenders will be viewed favorably by DOE.”
7. Multiple Contracting
a. Commenters: 10
b. Comments: 10c
One commenter (Tracy) requested to know whether multiple contracting parties would be given
a preference.
Answer:
DOE has no particular preference as to whether there is one or there are several project sponsors.
DOE’s interest in any project sponsor is, as stated in Section IV.C. of the draft Advanced Fossil
Solicitation, in its experience in the development of advanced fossil energy projects, including
experience in securing project financing, project due diligence, developing, designing,
equipping, building, interconnecting, contracting for the sale/purchase of energy, and
commissioning of the assets.
8. Credit and Equity
a. Commenters: 12, 25, 32
b. Comments: 12c, 12d, 25b, 32e
One commenter (Paterson) asked what equity levels traditionally have been seen on projects
over $200 million in financing, and how those equity levels affect the creditworthiness review.
The same commenter wanted to know what the credit subsidy costs have historically been for
DOE loans to date. A second commenter (Fisher) noted that it also will be important for DOE to
provide applicants early insight into the credit subsidy calculation, perhaps after the project’s
Part I and Part II application review, but prior to formal due diligence; for example, an extremely
high credit subsidy score could cause the applicant to weigh whether it can justify continuing
with the process. A third commenter (Dimming) requested that DOE provide further clarity
around the statement that the ability of a project to secure long-term commercial financing
without a loan guarantee will be assessed.
10

Answer:
Section 1702(c) of the Energy Policy Act of 2005 permits DOE to issue loan guarantees for up to
a maximum of 80% of eligible project costs. However, an 80:20 debt to equity ratio (leverage) is
unlikely, particularly given the risk profiles and cash flows of many of our applicants’ projects.
Many factors go into determining how much debt is appropriate for any particular project, such
as risks associated with construction and the ability of the projected cash flows to predictably
service debt. Leverage is an important component of overall risk mitigation in a project and is
important factor in credit subsidy calculation.
DOE does not have sufficient information available to estimate the potential credit subsidy cost
for a project unless and until it has completed the Part II application review and begun
discussions with the applicant regarding appropriate structuring for the project. However, DOE
agrees that the potential credit subsidy cost is an important factor in an applicant’s determination
whether to proceed and will make every attempt to provide an initial estimate as early in the
process as practicable.
Applications for loan guarantees for projects that could be financed on a long-term basis by
commercial banks or others without a federal loan guarantee will be viewed unfavorably.
9. Federal Support
a. Commenters: 12, 32, 36
b. Comments: 12g, 32f, 36a
One commenter (Paterson) asked why project applicants must disclose all other federal support,
when such support is not allowed for obtaining a loan. The same commenter noted that having a
federal agency as an off-taker should bolster its creditworthiness. A second commenter
(Dimming) requested that DOE provide further details about the ineligibility of projects that
otherwise benefit direct or indirectly from other federal support. A third commenter (Johnsen)
suggested that the federal support clause may well be in conflict with the stated objective of
supporting many new or significantly improved technologies, because such technologies may be
sponsored by applicants and principles with innovative and economically viable technologies,
but those applicants and principals may have no prior experience in the fossil energy sector.
Answer:
The Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, div C, tit. III, “Title 17 Innovative
Technology Loan Guarantee Program,” 123 Stat. 524, 619-20 (2009), as amended by the
Supplemental Appropriations Act , 2009, Pub. L. No. 111-32, tit. IV, “Title 17 Innovative
Technology Loan Guarantee Program,” 123 Stat. 1859, 1878 (2009), provides that none of the
DOE’s loan authority that is being used in connection with the final Advanced Fossil Solicitation
“shall be available for commitments to guarantee loans for any projects where funds, personnel,
or property (tangible or intangible) of any Federal agency, instrumentality, personnel or affiliated
entity are expected to be used (directly or indirectly) through acquisitions, contracts,
demonstrations, exchanges, grants, incentives, leases, procurements, sales, other transaction
authority, or other arrangements, to support the project or to obtain goods or services from the
project…”

11

However, the Act goes on to make clear that it does not intend to preclude the use of this loan
authority for projects that benefit from “(a) otherwise allowable Federal income tax benefits; (b)
being located on Federal land pursuant to a lease or right-of-way agreement for which all
consideration for all uses is (i) paid exclusively in cash, (ii) deposited in the Treasury as
offsetting receipts, and (iii) equal to the fair market value as determined by the head of the
relevant Federal agency; (c) Federal insurance programs, including Price-Anderson; (d) for
electric generation projects, use of transmission facilities owned or operated by a Federal Power
Marketing Administration or the Tennessee Valley Authority that have been authorized,
approved, and financed independent of the project receiving the guarantee; (e) contracts, leases
or other agreements entered into prior to May 1, 2009, for front-end nuclear fuel cycle projects,
where such project licenses technology from the Department of Energy, and pays royalties to the
federal government for such license and the amount of such royalties will exceed the amount of
federal spending, if any, under such contracts, leases or agreements; or (f) grants or cooperative
agreements, to the extent that obligations of such grants or cooperative agreements have been
recorded in accordance with section 1501(a)95) of title 31, United States Code, on or before May
1, 2009.”
The draft Advanced Fossil Solicitation requires the applicant to disclose all other federal support
to ensure that the application is eligible pursuant to this Appropriations Act, which is the Act that
provides the appropriated funds being used under the final Advanced Fossil Solicitation.
10. Prior Experience
a. Commenters: 17, 20, 36
b. Comments: 17a, 20c, 36b
One commenter (Cox) felt that Section I.C.4. of the application submission instructions
requiring applicants to describe at least two projects in the fossil energy area that: (a) have been
completed by the applicant’s organization or its principals (b) the applicant’s organization or
principals raised equity and secured debt for financing, and (c) the applicant’s organization
operated and maintained for a minimum of two years were unduly limiting and in conflict with
the stated objective of supporting many new or significantly improved technologies. The
commenter thought that experience in developing, funding and operating projects in the
alternative fuels/biofuels sector of the energy industry may have far greater relevance than fossil
energy sector experience alone and urged DOE to allow more flexibility in their consideration of
prior experience. A second commenter (King) noted that the solicitation’s definition or “prior
experience” eliminates innovations by smaller or newly established companies. A third
commenter (Johnsen) suggested that an applicant may consist of principles with substantial
experience in business technology and project development, and providing substantial equity
funding and co-lender involvement, but not have at least two projects in the fossil energy sector
similar in nature and scope to the project being proposed.
Answer:
DOE not only wants the debt that it guarantees to be repaid, but it also wants to see eligible
projects built and completed. The projects contemplated by the draft Advanced Fossil
Solicitation are quite complex, and evidence of an ability of the involved parties to execute on
similar projects is vital to becoming comfortable that the applicant project will be a success.
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However, we do understand that there may be other ways to provide that comfort and will
address that concern appropriately in the final Advanced Fossil Solicitation.
11. Innovation
a. Commenters: 22
b. Comments: 22a
One commenter (Thornton) raised a concern that potential Combined Heat and Power (CHP)
projects will use well-demonstrated technologies including steam turbines, combustion turbines
and reciprocating engines and may not be perceived as innovative. The commenter believes that
loan guarantees could be used to facilitate financing of CHP, WHR and other energy-efficient
systems, noting that there are innovative approaches which can break new ground in CHP and
WHR and limited US market penetration.
Answer:
LPO recognizes the comments and confirms the commenter’s position that the final Advanced
Fossil Solicitation will be clear that loan guarantees are available to finance only innovative
technologies.
With specific respect to CHP, and all other technologies in the final Advanced Fossil
Solicitation, eligible projects must employ a “New or Significantly Improved Technology,” as
defined in final rule 10 CFR Part 609, which provides that “New or Significantly Improved
Technology means a technology concerned with the production, consumption or transportation
of energy and that is not a Commercial Technology, and that has either: (1) Only recently been
developed, discovered, or learned; or (2) Involves or constitutes one or more meaningful and
important improvements in productivity or value, in comparison to Commercial Technologies in
use in the United States at the time the Term Sheet is issued.”
The final rule 10 CFR Part 609 defines “Commercial Technology” as “a technology in general
use in the commercial marketplace in the United States at the time the Term Sheet is issued by
DOE. A technology is in general use if it has been installed in and is being used in three or more
commercial projects in the United States in the same general application as in the proposed
project and has been in operation in each such commercial project for a period of at least five
years. The five-year period shall be measured, for each project, starting on the in service date of
the project or facility employing that particular technology. For purposes of this section,
commercial projects include projects that have been the recipients of a loan guarantee from DOE
under this part.”
The final Advanced Fossil Solicitation will require New or Significantly Improved Technology,
as defined in final rule 10 CFR Part 609.
12. Statutory Requirements
a. Commenters: 24, 28, 31
b. Comments: 24a, 28a, 31a
One commenter (Metcalf) noted that the draft Advanced Fossil Solicitation deviates from the
express directions of the “Explanatory Statement” and includes a substantially broader list of
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eligible projects than those intended by Congress by describing eligible projects as those
utilizing “fossil energy resources” and “fossil fuels”. According to the commenter, Congress
clearly indicated in its “Explanatory Statement” that the eligible projects it intended to be
supported by loan guarantees were “coal based power generation and industrial gasification
activities” and “advanced coal gasification”. If Congress intended that the $6 billion and $2
billion authority referred to in the “Explanatory Statement” be allocated for the broader “fossil”
category, it would have so stated. The inclusion of “eligible projects” that are not consistent with
the clearly stated intent of Congress that such loan guarantee authority is available only to coalbased projects should be eliminated in the final Advanced Fossil Solicitation.
A second commenter (Krutzfeldt) said that carbon 'recycling' must be defined in the regulation
and on equal footing with underground sequestration. The definition should include biological
capture of CO2 with technologies and pathways above ground. A third commenter (Hanna)
suggested that DOE withdraw the solicitation until it is demonstrated that taxpayers can be
protected, as required under the original Title XVII statute.
Answer:
We are aware of the Committee Report language noted in Metcalf’s comment and have given it
due consideration. However, based upon LPO’s experience in connection with a previously
issued Advanced Fossil Solicitation that addressed only “coal based power generation, industrial
gasification and advanced coal gasification facilities,” LPO has determined that the final
Advanced Fossil Solicitation scope should be broadened to encompass not only coal based
power generation, industrial gasification and advanced coal gasification facilities, but also other
projects that are eligible under Title XVII. We notified Congress of this intent on March 28,
2013, and received no inquiries or other response from them regarding our intent. Finally, we
note that Committee Reports are not binding law, but are to be given due consideration by the
implementing agencies, which we have done. Cherokee Nation v. Leavitt, 543 U.S. 631 at 646
(2005) (“[R]estrictive language contained in Committee Reports is not legally binding.”)
Section II.A.2 of the draft Advanced Fossil Solicitation restates the Title XVII eligibility
requirement that any project must “avoid, reduce, or sequester air pollutants or anthropogenic
emission of greenhouse gases.” As such, any carbon reduction technology or strategy that avoids
or reduces greenhouse gas emissions may be deemed eligible in addition to geologic
sequestration. LPO intends to assess all applications on a life-cycle basis to determine if the
project contributes to greenhouse gas avoidance, reduction, or sequestration in support of an
eligibility determination.
As DOE fulfills its mission in connection with Title XVII, we work tirelessly to protect
taxpayer’s interests and serve as strong stewards of taxpayer dollars. Several independent
reports have shown that the taxpayer’s interests are well-protected under this program. Herbert
Allison’s report from February 2013, on the LPO confirmed that DOE has been judicious in
balancing risk and that the loan portfolio, as a whole, is expected to perform well and holds less
than the amount of risk envisioned by Congress when they created and funded the program. In
addition, a December 2011 report by Bloomberg Government found that the LPO portfolio was
in solid financial health.

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All of LPO’s projects (including those that apply under the final Advanced Fossil Solicitation)
undergo many months of rigorous technical, financial and legal due diligence by LPO personnel.
This extensive record has made clear that the loan guarantee to Solyndra and all other loan
guarantees were issued on their merits.
It also should be noted that Section 1702(a) of the Energy Policy Act of 2005 requires that the
“cost” (credit subsidy cost) of the guarantee has either been appropriated or paid by the
borrower. As this solicitation requires that the borrower to pay the relevant credit subsidy cost,
the full “cost of the loan guarantee” will be accounted for by the private sector at the time of
closing.
13. Scale and Viability
a. Commenters: 25
b. Comments: 25a
One commenter (Fisher) noted that DOE should focus on projects using technology with some
experience at scale. Rather than spread loan guarantee funds across many smaller projects, DOE
should focus on fewer larger projects that have the potential to achieve the required financial
returns.
Answer:
The two principal goals of section 1703 of Title XVII of the Energy Policy Act of 2005 are to
encourage commercial use of new or significantly improved energy-related technologies and to
achieve substantial environmental benefits, primarily in the form of greenhouse gas reductions.
According to final rule 10 CFR Part 609, which is applicable to the final Advanced Fossil
Solicitation, eligible projects must employ “New or Significantly Improved Technology,”
which means “a technology concerned with the production, consumption or transportation of
energy and that is not a Commercial Technology, and that has either: (1) Only recently been
developed, discovered, or learned; or (2) Involves or constitutes one or more meaningful and
important improvements in productivity or value, in comparison to Commercial Technologies in
use in the United States at the time the Term Sheet is issued.”
The final rule 10 CFR Part 609 further defines “Commercial Technology” as “a technology in
general use in the commercial marketplace in the United States at the time the Term Sheet is
issued by DOE. A technology is in general use if it has been installed in and is being used in
three or more commercial projects in the United States in the same general application as in the
proposed project and has been in operation in each such commercial project for a period of at
least five years. The five-year period shall be measured, for each project, starting on the in
service date of the project or facility employing that particular technology. For purposes of this
section, commercial projects include projects that have been the recipients of a loan guarantee
from DOE under this part.”
Therefore, the degree to which the relevant technology may have been utilized at scale is limited.
However, assessment of a project’s viability, encompassing the elements submitted by the
commenter, is a main priority of LPO’s application review and determination to proceed, as
described in Section IV of the draft Advanced Fossil Solicitation. LPO intends to prioritize
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projects that are more viable due to factors described in Sections IV.D-G of the draft Advanced
Fossil Solicitation. Project viability also will have a principal impact on the terms of any project
seeking loan guarantee closure.
14. Weighting
a. Commenters: 32, 34
b. Comments: 32g, 34a
One Commenter (Dimming) suggested that criteria weightings should favor innovative projects
that have high technical merit and will enable cost-effective and significant emissions reductions.
They suggested the following weightings:
Criteria
Financial
Factors

Weighting
10%

Technical
Factors

40%

Policy Factors

50%

Programmatic
Factors

Pass / Fail

Explanation
Projects that have excellent creditworthiness should be able to
access the commercial lending market without Federal support.
It is recognized that the DOE should support projects that have
a strong prospect of financial success; however, first-of-a-kind
projects may operate with lower-than-normal margins but still
be considered a success as long as they meet debt repayment
obligations and lay the groundwork for further and more
profitable deployment. Weighting certain financial factors too
highly will skew the program in favor of large enterprises and
projects that are able to secure commercial financing with ease.
This occurs at the expense of smaller enterprises and newer,
more innovative technologies. The Credit Subsidy Cost is the
appropriate way to address additional risk that DOE perceives
within each project.
The technical factors identified in the Draft Solicitation deserve
thorough evaluation and consideration, as the technical merit of
a project is something that can be determined with a high level
of confidence and accuracy and is necessary to enabling the
project to meet its financial obligations.
The loan guarantee program presents an opportunity for the
DOE to rapidly advance technologies that will enable the
United States to achieve emissions reduction, energy cost, and
energy security goals. Without significant breakthroughs by
advanced fossil energy projects, the realistic timeframe for
achieving these goals will continue to be pushed out. The
projects that support these breakthroughs are initially met with
considerable commercial challenges. It is important and
justifiable for the Government to support projects that meet
these pivotal policy criteria, and thus the Loan Program should
put considerable weight on these factors.
Compliance factors should be determined to either be
satisfactory (pass) or unsatisfactory (fail) so that these important
factors could not be usurped by the relative weight of the other
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factors.

A second commenter (Ducker) suggested that weightings should focus on the cumulative
benefit of technology innovativeness together with the likelihood of widespread deployment and
the ability to greatly reduce CO2 emissions through widespread deployments. He proposed the
following weightings:
Review of Financial Factors: 20%
Review of Technical Factors: 40%
*Strong weighting for technical readiness (Criteria 1a)
*Strong weighting for long-term applicability of the technology (Criteria 1b)
Review of Policy Factors: 30%
*Criteria 1 should consider the cumulative ability for the technology to reduce CO2
based on the long-term applicability to future commercial projects in addition to the
individual project’s ability to reduce CO2
*Strong weighting should be given for the potential of the technology to be widely
employed in future power projects (Criteria 2)
*Criteria 3 (or an additional Criteria 4) should consider the project’s ability to leverage
other CO2 reduction advancements over the life of the project
*Add Criteria to provide additional weighting for the project’s ability to meet more than
one eligibility requirement
Review of Programmatic Factors: 10%
Answer:
While we are taking these comments into careful consideration in determining the appropriate
weighting of the various factors, it may be useful to briefly summarize the application process to
illustrate the appropriate place for policy considerations. Part I applications largely verify a
project’s eligibility, given both statutory and policy considerations. Part II applications largely
verify a project’s viability, given financial, technical, and programmatic factors. DOE also
intends to apply a robust policy screen to those projects that successfully navigate the Part II
application review.
15. Environmental Review
a. Commenters: 33
b. Comments: 33a
One commenter (Carey) had an environmentally-related question for the fossil solicitation
process. Noting that NEPA was required, the commenter asked what environmental factors and
environmental data bases would be considered in the event that an environmental critique is
required under 10 CFR 1021.216(g). The commenter also asked whether DOE plans to
commence with a 216 review.
Answer:
The need for the preparation of an environmental critique pursuant to DOE’s NEPA regulations
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at 10 CFR 1021.216 (a 216 review), will depend on the number and nature of the applications
received in response to the final Advanced Fossil Solicitation and on the number of applicants
that proceed beyond the Part II application process. In the event that a 216 process is warranted,
the evaluation of applicant’s proposals will follow the structure outlined in 10 CFR 1021.216(g).
Attachment B of the draft Advanced Fossil Solicitation describes the information to be included
in the application for use by DOE in the preparation of NEPA-related documentation, including
any necessary 216 review.

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