By Eli W.L. Hopson

On April 14, the House and Senate passed, and on April 15, President Obama signed into law, the final Continuing Resolution (CR) for the remainder of FY 2011.  Section 1425 of the CR makes important modifications regarding the authority of the U.S. Department of Energy (DOE) to provide loan guarantees under its Title XVII Section 1703 and Section 1705 programs.  Section 1417 provides continued, though reduced funding levels, for DOE’s Advanced Research Projects Agency—Energy (ARPA-E).  (For more information on these programs, see Latham’s Client Alerts.)

DOE Loan Guarantee Programs

CR revises DOE authorization levels for Section 1703 program loan guarantees — Section 1425 of the CR rescinds $18.183 billion of the $18.5 billion in authority provided to DOE under the explanatory statement of the Omnibus Appropriations Act, 2009 for loan guarantees for innovative renewable and/or energy efficient systems and manufacturing, and distributed energy generation, transmission and distribution projects under Section 1703, while providing authority for $1.183 billion for loan guarantees.  While this rescission in loan guarantee authority appears to be significant its actual impact likely is insignificant because the authority rescinded has been unused and its future use was uncertain because of various restrictions on Section 1703 loan guarantees, especially the requirement that recipients pay the Credit Subsidy Costs for guarantees when they receive a guarantee.

CR appropriates additional funds to pay Credit Subsidy Costs for certain Section 1703 projects – Section 1425 of the CR provides that in addition to the authority discussed above for loan guarantees for innovative renewable and/or energy efficient systems and manufacturing, and distributed energy generation, transmission and distribution projects under Section 1703, an appropriation of $170 million is made to pay the Credit Subsidy Costs for these projects.  This appropriation to pay Credit Subsidy Costs is significant because, as discussed above and in Latham’s Client Alerts, these projects previously had to pay their Credit Subsidy Costs.

CR provides certain Section 1705 projects the ability to obtain guarantees under Section 1703 (and thereby avoid construction commencement and sunset provisions in Section 1705) – Section 1425 of the CR provides that the funds it appropriates for Credit Subsidy Costs and the loan guarantee authority it provides are also available for projects for which an application has been submitted to DOE prior to February 24, 2011, in whole or in part, for a guarantee under Section 1705.  This is a significant modification to the Section 1705 program because it will allow the above-described Section 1705 projects to obtain guarantees and payments of Credit Subsidy Costs under Section 1703, which, unlike Section 1705, does not require projects to commence construction by, and does not have its funding authority expire on, September 30, 2011.

ARPA-E
Section 1417 of the CR provides ARPA-E with $180 million in funding for the remainder of the fiscal year.  This funding is significant both because it marks the first time that ARPA-E has received funding through the traditional appropriations process (prior funding had been through the American Recovery and Reinvestment Act) and because it is at a level that is significantly greater than the $50 million included in the 2011 budget legislation, H.R. 1, that initially that passed in the House (though less than the $250 million proposed by the Administration) (for more information on the budget cuts proposed on H.R. 1, see the earlier Clean Energy Law Report blog entry).