Proposed Cut Inflation Act of 2022 Provides Additional Funding to DOE’s Loan Program Office to Support Energy, Vehicle, and Transit Infrastructure Development in the United States | Kilpatrick Townsend & Stockton LLP

On July 27, 2022, Senator Manchin (D-WV) and Senator Schumer (D-NY) announced a new reconciliation bill, the Inflation Reduction Act of 2022 (IRA). The IRA would provide $433 billion in total investments, including $369 billion for “energy security and climate change” and $64 billion for an “extension of the Affordable Care Act”. The proposed law will need to pass the Senate and House before it can be signed into law by President Biden.

Of the $369 billion earmarked for energy security and climate change, which supports various tax incentives, programs and other initiatives, the IRA is providing approximately $70 billion in new funds to the Ministry’s Loan Program Office (LPO). of Energy (DOE). LPO allowances include:

  • $40 Billion in Additional Funding for DOE Title XVII Loan Guarantee Program

The IRA would provide an additional $40 billion in funding to the OPA Title XVII Loan Guarantee Program to support energy infrastructure development in the United States.

The LPO finances major energy infrastructure projects in the United States. The LPO currently administers “more than $40 billion in loans and loan guarantees […] to help deploy innovative clean energy, advanced transportation, and tribal energy projects in the United States. Additionally, “Since 2009, LPO has issued more than $35 billion in loans and loan guarantees to more than 30 projects across the United States, catalyzing new energy technologies, creating jobs, and building on its in-depth industry expertise. The $40 billion provided to the DOE’s Title XVII loan guarantee program under the IRA is in addition to the more than $40 billion it already administers.

  • $3 billion in funding to support the DOE’s expanded Advanced Technology Vehicle Manufacturing Direct Lending Program

In addition to and independent of the $40 billion in additional funding that would be provided to the LPO for the Title XVII Loan Guarantee Program, the IRA would also provide an additional $3 billion in funding to the LPO Manufacturing Direct Loan Program. DOE Advanced Technology Vehicles (ATVM).

The ATVM, which operates through the LPO, currently manages approximately “$17.7 billion in funding available to provide low-cost loan capital for the manufacture of fuel-efficient vehicles and components qualifying for United States”, with an emphasis on light-duty vehicles that meet or exceed certain fuel efficiency requirements. The additional $3 billion in ATVM funding will support the manufacture of medium and heavy-duty vehicles that meet certain greenhouse gas emission standards, as well as “a train or locomotive, a sea vessel, an airplane and hyperloop technology”. The expansion of ATVM was authorized in the Infrastructure Investment and Jobs Act 2021 and would now be funded by the IRA.

  • $3.6 billion to the LPO for costs of guarantees under the Title XVII loan guarantee program

The IRA is also providing the LPO with $3.6 billion “for the costs of guarantees made under the Loan Guarantee Program of Title XVII, Section 1703 of the Energy Policy Act of 2005 (42 USC 16513)” .

The Title XVII Loan Guarantee Program supports the development of projects that: “(1) [e]use new or significantly improved technologies over commercial technologies in the Services in the United States at the time the warranty is issued; (2) avoid, reduce or sequester anthropogenic greenhouse gas emissions; (3) [are located in] the United States (foreign ownership or sponsorship of projects is permitted as long as the project is located in one of the fifty states, the District of Columbia or a US territory); [and] (4) offer a reasonable prospect of reimbursement. The $3.6 billion in funding under the IRA would allow the LPO to repay guarantee fees associated with the Title XVII loan guarantee program.

  • $5 billion to support financing for reinvestment in energy infrastructure under the Title XVII loan guarantee program

The IRA amends the Title XVII loan guarantee program and allocates $5 billion to support the financing of energy infrastructure reinvestment under the OPA.

The IRA amends the Title XVII Loan Guarantee Program by adding new Section 1706, which authorizes the Secretary of the DOE to issue guarantees, including refinancing, for projects that “[(a)](1) retool, repower, repurpose, or replace energy infrastructure that has ceased operations; Where [(a)](2) enable operational energy infrastructure to avoid, reduce, use or sequester air pollutants or anthropogenic greenhouse gas emissions. For the purposes of this section, an energy infrastructure is defined as “a facility and related equipment used for (1) the generation or transmission of electrical energy; or (2) the production, processing, and delivery of fossil fuels, petroleum-derived fuels, or petrochemical feedstocks. In addition, a project referred to in subsection “(a)(1) that involves the generation of electricity by the use of fossil fuels shall be required to have controls or technologies to avoid, reduce, use or sequester air pollutants and anthropogenic greenhouse gas emissions”. The $5 billion allocated to support the financing of energy infrastructure reinvestment under the LPO is in addition to the amounts previously mentioned.

  • The IRA has increased the level of funding for the Tribal Energy Loan Guarantee Scheme to $20bn

The IRA has increased the level of guaranteed funds available for the LPO’s Tribal Energy Loan Guarantee Scheme (TELGP).

In addition to the ATVM, the LPO also administers the TELGP. The TELGP “supports tribal investments in energy-related projects by providing direct loans or partial loan guarantees to a federally recognized tribe, including an Alaska Native village or regional or village corporations; or a Tribal Energy Development Organization (TEDO) that is wholly or substantially owned by a federally recognized Indian tribe or Alaska Native corporation. As noted, the IRA is increasing the funding secured to TELGP, which is in addition to the aforementioned funding allocated to the LPO. The IRA amends the Energy Policy Act 2005 by increasing the “total amount remaining guaranteed by the Secretary of Energy at any time under” the TELGP by an amount which “shall not exceed $2 billion” to an amount that must not exceed 20 billion dollars. .

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