PKG00245998-instructions.pdf

Vol. 79 Monday, No. 248 December 29, 2014

Part III

Department of Agriculture Rural Business-Cooperative Service Rural Utilities Service 7 CFR Part 4280 Rural Energy for America Program; Final Rule

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78220 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations

DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4280

RIN 0570–AA76

Rural Energy for America Program

AGENCY: Rural Business-Cooperative Service and Rural Utilities Service, USDA.

ACTION: Final rule.

SUMMARY: The Rural Business- Cooperative Service (Agency) is publishing this final rule for the Rural Energy for America Program (REAP).

This final rule modifies REAP based on comments received on the interim rule, which was published on April 14, 2011, and the proposed rule, which was published on April 12, 2013. The final rule establishes provisions for the grants and loan guarantees available for renewable energy systems (RES) and energy efficiency improvements (EEI) and for the grants available for energy audits and for renewable energy development assistance.

DATES: This final rule is effective February 12, 2015.

FOR FURTHER INFORMATION CONTACT:

Kelley Oehler, Energy Branch, U.S.

Department of Agriculture, 1400 Independence Avenue SW., Stop 3225, Washington, DC 20250–3201; telephone

(202) 720–6819.

SUPPLEMENTARY INFORMATION:

Executive Summary

The Farm Security and Rural Investment Act of 2002 (FSRIA), established the renewable energy systems (RES) and energy efficiency improvements (EEI) program under Title IX, Section 9006, for making grants, loan guarantees, and direct loans to farmers and ranchers (agricultural producers) or rural small businesses to purchase renewable energy systems and make energy efficiency improvements.

Section 9001 of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) amended Title IX of the FSRIA. Under the 2008 Farm Bill, Section 9007 of the amended FSRIA authorized the Agency to continue providing to agricultural producers and rural small businesses loan guarantees and grants for the development and construction of RES and EEI projects, but removed the ability to provide direct loans. The 2008 Farm Bill also expanded the types of RES technologies eligible for funding to include hydroelectric and ocean energy. Further, the 2008 Farm Bill authorizes the Agency to provide grants specifically for energy audits (EA), renewable energy development assistance (REDA), and RES feasibility studies. The 2008 Farm Bill also changed the name of the program to the Rural Energy for America Program (REAP).

REAP’s authority is continued in the Agricultural Act of 2014 (2014 Farm Bill), with several specific changes: (1) Removing RES feasibility study grants,

(2) removing the ability to provide assistance for flexible fuel pumps, adding councils as define in 16 U.S.C.

3451, to be an eligible applicant for EA and REDA grants, and (4) creating a three tier application process for RES and EEI projects.

REAP seeks to promote energy efficiency and renewable energy development for agricultural producers and rural small businesses by providing grants and guaranteed loans for eight different categories of renewable energy production (e.g., wind, solar, anaerobic digestion, hydro, and geothermal) as well as for EEI.

Eligible applicants for RES and EEI financial assistance are agricultural producers and rural small businesses.

For EA and REDA grants, eligible entities are units of a state tribal or local government; land-grant colleges and universities, and other institution of higher education; rural electric cooperatives; councils, as define in 16 U.S.C. 3451; public power entities; and instrumentalities of a state, tribal, or local government.

Purpose of the Regulatory Action This final rule revises 7 CFR part

4280, subpart B to implement the provisions contained in the 2014 Farm Bill and addresses comments received on both the interim rule, published in the Federal Register on April 14, 2011, and the proposed rule, published in the Federal Register on April 12, 2013.

Summary of the Major Changes For RES and EEI projects, the final rule implements a three-tier application process based on total project cost;

reduces the technical reports requirements; removes pre-commercial technologies as eligible technologies;

and modifies several scoring criteria for RES and EEI. For EA and REDA projects, the final rule removes the scoring criterion regarding contracting.

The final rule also incorporates grant and guaranteed loan application deadline dates that allow the Agency to meet the statutory deadlines for funding the EA and REDA grants and RES and EEI grants of $20,000 or less.

Costs and Benefits

For a typical fiscal year, the Agency estimates that approximately 1,393 REAP awards will be made as follows:

487 RES awards, 884 EEI awards, and 22 EA/REDA awards. Of the RES awards, the vast majority are expected to be associated with solar, followed by wind and biomass projects. The awardees are expected to be mostly businesses, including sole proprietors, with relatively few state, local, and tribal government entities.

The Regulatory Impact Analysis (RIA) completed for this final rule calculates a net costs savings of approximately $10 million as the result of improvements in the implementation of the REAP program. The cost savings achieved by the rule are attributed to the decreased costs estimated for the changes in program implementation. In addition the reduction in burden meets the reporting requirements of the retrospective review report which provided a specific percentage reduction in application burden, specifically the time it takes to complete the narrative portion of the application, which was reduced from 40 hours in the baseline, down to 20 hours in the final rule, a 50 percent reduction.

Executive Order 12866

This final rule has been reviewed under Executive Order (EO) 12866 and has been determined to be economically significant by the Office of Management and Budget (OMB). The EO defines a ‘‘significant regulatory action’’ as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in this EO. The Agency conducted a benefit-cost analysis to fulfill the requirements of EO 12866.

Executive Order 13563

The agency has reviewed this regulation pursuant to EO 13563, issued on January 18, 2011 (76 FR 3281, January 21, 2011). EO 13563 is supplemental to and explicitly reaffirms

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78221 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations the principles, structures, and definitions governing regulatory review established in EO 12866. To the extent permitted by law, agencies are required by EO 13563 to: (1) Propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

The Agency identified REAP as one of the Department’s periodic retrospective review of regulations under Executive Order 13563, and has proposed a tiered application approach that reduces applicant burden for technical reports and streamlines the narrative portion of the application. Notably, there is an estimated 20 percent reduction in the number of hours it takes to complete a technical report for those applications for projects with total project costs of more than $80,000 to $200,000; the elimination of a technical report for those applications for projects with total project costs of $80,000 or less; and a 50 percent reduction in the number of hours it takes to complete the narrative portion of burden.

Unfunded Mandates Reform Act Title II of the Unfunded Mandates

Reform Act 1995 (UMRA), Public Law 104–4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. Under section 202 of the UMRA, Rural Development generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with ‘‘Federal mandates’’ that may result in expenditures to state, local, or tribal governments, in the aggregate, or to the private sector of $100 million or more in any one year.

When such a statement is needed for a rule, section 205 of the UMRA generally requires Rural Development to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective, or least burdensome alternative that achieves the objectives of the rule.

This final rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for state, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

REAP has been operating since 2005 under 7 CFR part 4280, subpart B, and through the issuance of various Notices of Funds Availability (NOFA), including several notices issued in response to Title IX of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill).

Under this program, the Agency conducts a National Environmental Policy Act (NEPA) review for each application received. To date, no significant environmental impacts have been reported, and Findings of No Significant Impact (FONSI) have been issued for each approved application.

Taken collectively, the applications show no potential for significant adverse cumulative effects.

This document has been reviewed in accordance with 7 CFR part 1940, subpart G, ‘‘Environmental Program.’’ Rural Development has determined that this action does not constitute a major Federal action significantly affecting the quality of the human environment, and in accordance with NEPA of 1969, 42 U.S.C. 4321 et. seq., an Environmental Impact Statement is not required. Grant applications will be reviewed individually to determine compliance with NEPA.

Executive Order 12988, Civil Justice Reform

This final rule has been reviewed under EO 12988, Civil Justice Reform. In accordance with this rule: (1) All state and local laws and regulations that are in conflict with this rule will be preempted; (2) no retroactive effect will be given to this rule; and (3) administrative proceedings in accordance with the regulations of the Department of Agriculture’s National Appeals Division (7 CFR part 11) must be exhausted before bringing suit in court challenging action taken under this rule unless those regulations specifically allow bringing suit at an earlier time.

Executive Order 13132, Federalism It has been determined, under EO

13132, Federalism, that this final rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in the rule will not have a substantial direct effect on states or their political subdivisions or on the distribution of power and responsibilities among the various government levels.

Regulatory Flexibility Act The Regulatory Flexibility Act (5

U.S.C. 601–612) (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the Agency certifies that the rule will not have an economically significant impact on a substantial number of small entities.

Small entities include small businesses, small organizations, and small governmental jurisdictions.

In compliance with the RFA, Rural Development has determined that this action, while mostly affecting small entities, will not have a significant economic impact on a substantial number of these small entities. Rural Development made this determination based on the fact that this regulation only impacts those who choose to participate in the program. Small entity applicants will not be affected to a greater extent than large entity applicants.

Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use

The regulatory impact analysis conducted for this final rule meets the requirements for EO 13211, which states that an agency undertaking regulatory actions related to energy supply, distribution, or use is to prepare a Statement of Energy Effects. This analysis finds that this rule will not have any adverse impacts on energy supply, distribution, or use.

Executive Order 12372, Intergovernmental Review of Federal Programs

This program is not subject to the provisions of EO 12372, which require intergovernmental consultation with state and local officials.

Executive Order 13175, Consultation and Coordination With Indian Tribes

This EO imposes requirements on Rural Development in the development

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78222 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations of regulatory policies that have tribal implications or preempt tribal laws.

Rural Development has determined that this rule does not have a substantial direct effect on one or more Indian Tribe(s) or on either the relationship or the distribution of powers and responsibilities between the Federal Government and the Indian Tribes.

Thus, this rule is not subject to the requirements of EO 13175.

However, in implementing changes to the program resulting from the 2008 Farm Bill, this program was included in the USDA Joint Agency Regional Consultations that consolidated the consultation efforts of 70 USDA rules from the 2008 Farm Bill. USDA Rural Development sent senior level agency staff to seven regional locations and engaged tribal leadership in each region to consult on a host of programmatic adjustments.

Upon completion of the consultation process, USDA Rural Development analyzed the feedback and incorporated input from the consultation into REAP.

For example, with the intent to increase tribal participation in the program, the definition of a small business in this rule includes tribal business entities formed as Section 17 Corporations as determined by the Secretary of the Interior or other tribal business entities that have similar structures and relationships with their tribal governments as determined by USDA Rural Development.

Programs Affected

REAP is listed in the Catalog of Federal Domestic Assistance under Number 10.868.

Paperwork Reduction Act

The information collection requirements contained in this final rule have been submitted to the Office of Management and Budget (OMB) for review and approval.

E-Government Act Compliance

Rural Development is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. The rule allows electronic submission of applications through grants.gov. The Rural Development Web site contains information on all of Rural Development’s programs, including regulations, fillable forms, and factsheets.

I. Background

Rural Development administers a multitude of programs, ranging from housing and community facilities to infrastructure and business development. Its mission is to increase economic opportunity and improve the quality of life in rural communities by providing leadership, infrastructure, venture capital, and technical support that can support rural communities, helping them to prosper.

To achieve its mission, Rural Development provides financial support (including direct loans, grants, loan guarantees, and direct payments) and technical assistance to help enhance the quality of life and provide support for economic development in rural areas.

The 2008 Farm Bill contains several sections under which Rural Development provides financial assistance for the production and use of biofuels. This authority is continued in the Agricultural Act of 2014 (2014 Farm Bill).

In response to the Farm Security and Rural Investment Act of 2002 (FSRIA), which established the Renewable Energy Systems and Energy Efficiency Improvements Program under Title IX, Section 9006, the Agency promulgated a rule (70 FR 41264, July 18, 2005) under 7 CFR part 4280, subpart B) a program for making grants, loan guarantees, and direct loans to farmers and ranchers (agricultural producers) or rural small businesses to purchase RES and make EEI. Renewable energy sources eligible for funding included bioenergy, anaerobic digesters, geothermal electric, direct geothermal, solar, hydrogen, and wind.

Section 9001 of the 2008 Farm Bill amended Title IX of the FSRIA. Under the 2008 Farm Bill and Section 9007 of the amended FSRIA, the Agency is authorized to continue providing to agricultural producers and rural small businesses loan guarantees and grants for the development and construction of RES and EEI projects. In addition to the current set of renewable energy projects eligible for funding, the 2008 Farm Bill expanded the program to include two new renewable energy technologies:

hydroelectric and ocean energy. Further, the 2008 Farm Bill authorized the Agency to provide grants specifically for energy audits, renewable energy development assistance, and feasibility studies. This expanded program is referred to as REAP, which continues the Agency’s assistance for the adoption of both RES and EEI through Federal Government loan guarantees and grants.

During the promulgation of this final rule, the 2014 Farm Bill was enacted and repealed the RES feasibility study component of REAP. This change has been incorporated into this final rule. In addition, the 2014 Farm Bill report language removed the ability to provide assistance for flexible fuel pumps, and the Bill added a provision to allow a council to be an eligible applicant for energy audit and renewable energy development assistance. Both of these changes have also been incorporated into this final rule. All comments regarding RES feasibility study grants and flexible fuel pumps will not be summarized or addressed. All references in the final rule to RES feasibility study grants and flexible fuel pumps have been removed.

After the 2008 Farm Bill, the Agency issued a series of Federal Register notices implementing the provisions in the 2008 Farm Bill for RES feasibility studies, energy audits, and renewable energy development assistance. For energy audits and renewable energy development assistance, these notices were published on March 11, 2009 (74 FR 10533), and May 27, 2010 (75 FR 29706).

On April 14, 2011 (76 FR 21110), the Agency published an interim final rule that established a consolidated REAP program by including each part of the program in a single subpart. Because the majority of the interim final rule was based on existing provisions that were at that time being implemented through the existing subpart for RES and EEI (7 CFR part 4280, subpart B) and the notices identified above, the Agency published the REAP regulation as an interim final rule, with the opportunity to comment.

On April 12, 2013 (78 FR 22044), the Agency published a proposed rule for REAP, which proposed a number of changes to the interim final rule.

The Agency requested comments on both the interim final rule and the proposed rule. All of the comments received are summarized in Section III of this preamble. Most of the proposed rule’s provisions have been carried forward into subpart B of this final rule, although there have been several significant changes. A summary of major changes to the proposed rule are summarized below in Section II of this preamble.

II. Summary of Changes to the Proposed Rule

This section presents the major changes to the REAP April 12, 2013, proposed rule. Most of the changes were the result of the Agency’s consideration of public comments on the proposed rule. As indicated above, the Agency is also making changes to the rule due to

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78223 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations statutory changes resulting from the enactment of the 2014 Farm Bill. Other changes, however, are being made even though the Agency did not receive comments on those provisions. The Agency is making these other changes as a result of the recent revocation of the USDA’s 1971 Statement of Policy titled ‘‘Public Participation in Rulemaking,’’ FR Doc. 2013–25321. This revocation restores to USDA the discretion to use notice-and-comment rulemaking procedures when appropriate. Rather than making these other changes in a separate rulemaking, the Agency has elected to include them in this final rule. Unless otherwise indicated, rule citations refer to those in the final rule.

A. Definitions (§ 4280.103)

The following definition was added to the final rule:

Council. The definition was added because the 2014 Farm Bill allows a council, as define in 16 U.S.C. 3451, to be an eligible applicant for energy audit and renewable energy development assistance grants.

The following definitions were revised from what was published in the proposed rule:

Agricultural Producer. Clarified that the 50 percent of gross income must come from the products that are grown or raised.

Annual Receipts. Directly incorporates the definition found in Small Business Administration regulations.

Anaerobic Digester Project. Clarifies that the digester uses animal waste.

Commercially Available. The Agency added a second part to the definition such that a Renewable Energy System would be considered ‘‘commercially available’’ if the system has been certified by a recognized industry organization whose certification standards are acceptable to the Agency.

In addition, the Agency clarified the definition to make clear that the provisions are applied equally to domestic and foreign systems.

Complete Application. Revised definition to encompass that an application must be complete enough for the Agency to determine technical merit, which is similar process to the existing rules methodology to determine technical merit.

Departmental Regulations. Removed 7 CFR part 3021, because the cross reference is no longer valid.

Eligible Project Costs. Reference REAP by name, instead of general term ‘‘program.’’

Energy Assessment. Added language to the definition for projects with total project costs of $80,000 or less that an individual or entity can conduct energy assessments and does not require the individual or entity to be ‘‘independent.’’

Feasibility Study. The term business was replaced with business operation, to clarify that it was not just a requirement for businesses but Ag producers as well.

Instrumentality. Removed the examples since the 2014 Farm Bill now includes a council as an eligible applicant.

Matching Funds. This definition was revised to clarify that matching funds are the additional funds required to complete the project that are required by 7 U.S.C. 8107, which are 75 percent of eligible project costs for grants and 25 percent of eligible project costs for guaranteed loans. Other funds provided that are in excess of the funds required by statute are not considered matching funds.

Refurbished. This definition was revised to add the requirement that refurbishment must take place in a ‘‘commercial’’ facility and that the refurbished equipment must come with a warranty that is approved by the Agency or its designee.

Retrofitting. The Agency made the definition more general by removing reference to renewable energy system and added a requirement that the retrofit does not affect the original warranty, if the warranty is still in existence.

Renewable Energy System. The definition is being modified in 7 CFR, part 4280 because the 2014 Farm Bill added the definition of ‘‘renewable energy systems’’ to the statute. The statutory definition of a ‘‘renewable energy system’’ is a system that produces a usable energy from a renewable energy source and may include distribution components necessary to move energy produced by such system to initial point of sale, but may not include a mechanism for dispensing energy at retail.

Simple Payback. A number of changes were made to this definition.

1. Replaced net income with earnings before interest, taxes, depreciation and amortization (EBITDA), which is financing measure of operating cash flow, based on data from the income statement.

2. Removed all tax credits, carbon credits, renewable energy credits, from the calculation.

3. Based on eligible project costs rather than total project costs.

4. For EEI projects and RES systems that reduce onsite energy use, calculation of historical energy used prior to the project implementation can now be calculated on a 12, 24, 36, 48, or 60 month basis at the applicant’s discretion, versus the proposed rule which required applicants to use a 36 months.

5. For projects that reduce energy use, added ‘‘or replace’’ to identify that projects that replace energy will use this method to determine simple payback and removed the ability to include revenue from byproducts produced by the energy system. Also those RES project that replace over 100 percent of the energy used by the applicant will use the actual average price paid for the energy replaced, and the projected revenue received from energy sold in a typical year.

Small Business. Added an additional option to qualify as a small business using average net income and net worth, and reorganized the definition.

The following definitions were in the proposed rule but were removed from the final rule:

Blended Liquid Transportation Fuel.

The definition was required to define flexible fuel pumps and the 2014 Farm Bill report language repealed the ability of the REAP to provide assistance for flexible fuel pumps, therefore the Agency is removing the definition.

Energy Analysis. As a result of this deletion, conforming changes were made throughout rule.

Flexible fuel pump. The 2014 Farm Bill report language repealed the ability of the REAP to provide assistance for flexible fuel pumps, therefore the Agency is removing the definition.

B. General Applicant, Application, and Funding Provisions (§ 4280.110)

The Agency clarified that a grant application for EA and REDA can be submitted at any time.

C. Notifications (§ 4280.111)

The final rule clarifies that once an application is determined to be ineligible no further processing of the application will occur. The Agency also relabeled paragraph (c) to ‘‘Funding Determination’’ rather than ‘‘Disposition of applications.’’

D. Project Eligibility (§ 4280.113)

The Agency added a provision to identify conditions under which a subsequent EEI, that improves or replaces an EEI project previously funded under REAP, is eligible for funding.

Based on comments, for agricultural producers with operations in non-rural areas, the Agency removed the italicized text in the following: ‘‘the application can only be for renewable energy systems or energy efficiency

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78224 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations improvements on integral components of or that are directly related to the operation . . .’’ so that it now reads:

‘‘the application can only be for RES or EEI on components that are directly related to and their use and purpose is limited to the agricultural production operation . . .’’ (see § 4280.113(d)). This same change was also made for project eligibility for Energy Audits grants, Renewable Energy Development Assistance grants, and RES/EEI guaranteed loans.

The Agency added provisions identifying how a renewable energy system project, in which a residence is closely associated with and shares an energy metering device with the rural small business or agricultural operation, would be eligible for funding (see § 4280.113(e)).

E. RES and EEI Grant Funding (§ 4280.114)

In determining items that qualify as an eligible project cost, the Agency removed the phrase ‘‘integral component’’ so that an item is an eligible project cost if it is ‘‘directly related to and its use and purpose is limited to the RES or EEI.’’ (see § 4280.114(c)).

The Agency also identified that a second meter will be considered eligible project costs for those applicants whose projects involve residences (see § 4280.114(c)(6)).

Lastly, the Agency revised ineligible project costs (§ 4280.114(d)) in the proposed rule by rephrasing ‘‘guaranteeing of lease payments’’ to ‘‘lease payments’’ and removing reference to ‘‘guaranteeing loans made by other Federal agencies’’ which is not applicable to RES and EEI grants, but only to RES and EEI guaranteed loans.

F. Determination of Technical Merit (§ 4280.116)

Under the final rule, the process and criteria that the Agency will use in determining whether a project has technical merit has been established in a new section (see § 4280.116).

G. Grant applications for RES and EEI Projects (§ 4280.117, § 4280.118, § 4280.119)

The Agency clarified the time frames associated with determining if the applicant meets the definition of Rural Small Business for Annual receipts and number of employees, and with determining if the applicant meets the definition of Agricultural Producer for gross income (Annual receipts). This change applies to all three tiers of grant applications and to guaranteed loan applications.

The Agency removed references to Form AD 2106, but included language in the application that requests applicant to provide ethnicity, race, and gender information. This information is optional and is not required for a Complete Application. This change was also made to the energy audit and renewable energy development assistance grants.

The Agency added provisions to technical reports that were not in the proposed rule to describe how the technology meets Commercially Available definition, and to include simple payback calculations for the project.

The Agency added language to the final rule to indicate what documentation is required to receive points for commitment of funds. This same change was also made for Energy Audits grants and Renewable Energy Development Assistance grants.

H. Scoring RES and EEI Grant Applications (§ 4280.120)

Environmental benefits criterion was modified to detail how points are awarded if an applicant can document a positive effect on any of the three impact areas: Resource conservation, public health, and the environment.

The Agency modified the second score criterion, ‘‘Quantity of energy generated or saved per REAP dollar requested,’’ by reducing the points allocated to 10 points. Due to this point reduction, the Agency has added back the scoring criterion from the existing rule ‘‘Energy replaced, saved, or generated’’ and allocated a maximum of 15 points to this criterion.

‘‘Quantity of energy generated or saved per REAP dollar requested’’ was further modified to use energy generated or saved over a 12 month period rather than 36 months that was required in the proposed rule, and the project will need to achieve 50,000 BTUs per REAP dollar requested rather than 25,000 to receive maximum point under this criterion.

Size of agricultural producer or rural small business was clarified to indicate that the calculation is made on the size of the applicant’s agricultural operation or business concern as applicable. This change conforms to language used in Small Business Administration (SBA) regulations for small business determination.

The Agency has revised the ‘‘readiness’’ criterion (now referred to as ‘‘Commitment of Funds’’) to reflect a sliding scale for those applications that can show commitment of more than 50 percent matching funds and other funds.

Previous grantees and borrowers criterion was revised to increase points for applicants who have not received previous assistance.

Simple payback was revised to increase the maximum number of years for RES project payback by 5 years, raising it from 20 to 25.

Under the State Director and Administrator priority points, the Agency added three new categories for consideration in awarding points: (1) The applicant is a member of an unserved or under-served population,

(2) furthers a Presidential initiative or a Secretary of Agriculture priority, and (3) the proposed project is located in an impoverished area, has experienced long-term population decline, or loss of employment

I. Selecting RES and EEI Grant Applications for Award (§ 4280.121)

Competition cycles for REAP applications were modified such that all RES/EEI grant applications, regardless of the amount of funding requested (which includes $20,000 or less), will compete in up to two competition cycles. RES/EEI grant applications requesting $20,000 or less will compete an additional three times for the $20,000 or less set aside, for a total of up to 5 competitions. Guaranteed loan-only applications will compete periodically, provided that the Agency receives a sufficient number of applications in order to maintain a competitive awards process.

All competitions dates may be modified by a Federal Register Notice (see § 4280.121 for RES/EEI grants).

The Agency clarified that an application received after the application submittal deadline can be considered for funding in the subsequent fiscal year if the applicant remains interested in the grant. This same change was also made for Energy Audits grants and Renewable Energy Development Assistance grants.

The Agency relabeled paragraph (e) from ‘‘Disposition of ranked applications not funded’’ to ‘‘Handling of Ranked Applications Not Funded.’’

J. Awarding and Administering RES and EEI Grants (§ 4280.122)

A change was made to indicate that commitments for matching funds and other funds are needed prior to closing the grant.

K. Servicing RES and EEI Grants (§ 4280.123)

Under programmatic changes the Agency revised the provision that requires prior approval (paragraph (b)(1)) to reflect that prior approval is

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78225 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations not required in cases where there is a decrease in project cost that does not have any negative affect on the long-term viability of the project. In these cases review and approval will be required prior to disbursement.

For transfer of ownership, the Agency added a requirement that the project is also operational.

For both RES and EEI reports, the Agency clarified that jobs reported, if any, are a direct result of the REAP funded project.

For EEI reports, the Agency removed reference to 36 months and refers to the time period as reported in the energy assessment or energy audit.

L. Construction Planning and Performing Development (§ 4280.124)

The Agency rephrased ‘‘unnecessary experience and bonding requirements’’ in the proposed rule to read ‘‘unnecessary experience or excessive bonding requirements’’ to better reflect Agency intent (see § 4280.124(a)(1)).

The final rule clarifies that any exception requested for surety must be in writing and will require Agency funding be disbursed after project is operational (see § 4280.124(a)(3)(v)).

The final rule eliminates the cross reference in the proposed rule to 7 CFR

1780.74 regarding contracts awarded prior to application and brought the applicable requirements into this section (see § 4280.124 (g)).

M. Guaranteed Loan Funding (§ 4280.129)

The Agency added provisions to allow refinancing in the final rule under certain conditions. The final rule also clarifies that eligible project costs include buildings and equipment acquisition when an existing renewable energy system is being financed with guaranteed loan funds.

N. Scoring RES and EEI Guaranteed Loan-Only Applications (§ 4280.135)

The final rule incorporates a periodic competition for guaranteed loan-only applications, provided that the Agency receives a sufficient number of applications in order to maintain a competitive awards process.

The final rule clarifies that all guaranteed loan-only applications that do not meet the minimum score will be competed in a National competition at end of the fiscal year.

The Agency removed reference to Form AD 2106, but included language in the application that requests applicant to provide ethnicity, race, and gender information. This information is optional and is not required for a Complete Application.

O. Application and Documentation (§ 4280.137)

The final rule corrects the reference in paragraph (b)(2)(v) from ‘‘the applicant must submit an estimated appraisal’’ to ‘‘the lender must submit an estimated appraisal.’’

P. Selecting RES and EEI Guaranteed Loan-Only Applications for Award (§ 4280.139)

The Agency changed quarterly competitions to periodic competitions in the final rule in order to improve access to capital and indicated that the final National competition would be the first business day of September. All competitions dates may be modified by a Federal Register Notice (see § 4280.139 for RES/EEI guaranteed loans).

The final rule relabels paragraph (c) from ‘‘Disposition of ranked applications not funded’’ to ‘‘Handling of Ranked Applications Not Funded.’’

Q. Technical Reports for Energy Efficiency Improvement Projects (Appendix A to Part 4280)

The final rule requires energy audit or energy assessment to use actual energy consumed for the building and equipment being evaluated for 12, 24, 36, 48, or 60 months at the applicant’s discretion, versus all applicants being required to use 36 months. The technical report was also modified to require information for simple payback calculations to be submitted. Lastly, the Agency added requirements for an individual or entity to perform assessments if total project cost is $80,000 or less.

R. Technical Reports for Renewable Energy System (RES) Projects With Total Project Costs of Less Than $200,000, but More Than $80,000 (Appendix B to Part 4280)

The Agency clarified what needs to be included in ‘‘Project description’’ and ‘‘Resource assessment.’’ The required information for simple payback calculations was clarified.

III. Summary of Comments and Responses

The current REAP program was implemented through the interim final rule which was published in the Federal Register on April 14, 2011 (76 FR 21110), with a 60-day comment period that ended June 13, 2011. The proposed rule was published in the Federal Register on April 12, 2013 (78 FR 22044), with a 60-day comment period that ended June 11, 2013.

Comments on the interim final rule were received from 32 commenters and comments on the proposed rule were received from 37 commenters.

Combined, these commenters provided approximately 150 similar comments.

Commenters included biorefinery owner/operators, community development groups, industry and trade associations, investment banking institutions, Rural Development personnel, and individuals. As a result of some of the comments, the Agency made changes in the rule. The Agency sincerely appreciates the time and effort of all commenters.

Responses to the comments on both the interim final rule and the proposed rule are discussed below. Comments made in response to requested comments found in the proposed rule are presented first, followed by comments on the interim final rule and the proposed rule grouped by category and rule section.

Requested Comments—a. Application Threshold for Projects With Total Project Costs of No More Than $200,000

Comment: One commenter stated that larger thresholds skew to favor larger projects. According to the commenter, most agricultural producers that the commenter works with in southern Oregon are working on solar projects that are much less expensive, generally involving 5 kilowatt (kW), which can now be installed for less than $5/watt, for cattle water or power production for remote locations. The commenter recommended that the threshold be reduced to $100,000 or less.

Response: The proposed rule contains two thresholds—$200,000 and $80,000.

The commenter recommended a threshold of $100,000. The $80,000 threshold is sufficient to address the commenter’s concern.

Requested Comments—b. Less Documentation for Applications for Projects With Total Project Costs of No More Than $80,000

Comment: Numerous commenters agreed with the Agency’s decision to create a third category for projects totaling less than $80,000. The commenters stated that the current application for small projects is burdensome at 40 to 50 pages in length, and dissuades farmers and rural small businesses interested in small wind technologies from applying to the program. The commenters suggested developing a template that meets all the statutory requirements and one commenter submitted an alternative application for consideration. Many of the commenters endorsed the proposal to simplify the application process for projects in the $80,000 to $200,000 tier, VerDate Sep<11>2014 19:58 Dec 24, 2014 Jkt 235001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\29DER3.SGM 29DER3tk el le y on D

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78226 Federal Register / Vol. 79, No. 248 / Monday, December 29, 2014 / Rules and Regulations as it would presumably increase small wind energy participation in the REAP program.

One commenter, in contrast, did not support the three-tiered grant application system, stating that three-tiers lead to additional complexity for applicants and Agency staff. This commenter recommended that the Agency use a two-tiered system, incorporating the simplified application process outlined for projects under $80,000 for all projects $200,000 or less.

Response: The Agency thanks the commenters supporting the proposed three-tier application system. While the Agency agrees with the one commenter that a two-tier system would be simpler, the Agency finds that a three-tier system achieves a better balance in the information being requested to account for the differences in the level of technologies; that a two-tier system would either result in obtaining more information than is necessary for the smallest projects or not obtaining enough information on the larger projects.

With regard to the suggestion by one commenter to develop a template for applications for $80,000 or less, the Agency agrees that this would be useful and intends to pursue the development of such a template.

Requested Comments—c. Definition of Small Business

The Agency received comments on the definition of small business in both the interim final rule and the proposed rule. Both sets of comments are addressed below.

Comment: In commenting on the interim final rule, a number of commenters were concerned that the restrictions in the SBA standards for defining a small business were unduly limiting retailers, especially those with multiple facilities, from participating in REAP. The commenters were seeking, in general, either to eliminate the use of SBA size standard for determining REAP eligibility or to apply the SBA size standard at the individual business concern level rather than at the entire entity level, which includes accounting for affiliates.

Four commenters stated that an obstacle to using REAP that hits at the heart of rural America are the SBA size requirements. These requirements are based on average annual profits and/or number of employees, which prevent interested businesses from using this program. One commenter stated numerous farm cooperatives are unable to take advantage of REAP because they are owned by a parent company, have subsidiaries or affiliates at other locations, and do not qualify for the program because they come under the umbrella of a much larger entity, exceeding SBA eligibility requirements.

The commenter encouraged USDA to allow these types of businesses to be judged as a stand-alone company when determining their eligibility based on SBA standards.

Another commenter urged the Agency to use an alternate consideration for small business that would allow a broader interpretation of the term ‘‘small business’’ by allowing each site to be treated as its own entity rather than requiring small business status to be determined at the entire-entity level.

According to the commenter, multi-site locations rarely qualify as a small business.

Response: The Agency has determined that defining ‘‘small business’’ in accordance with how the SBA defines ‘‘small business’’ is not only reasonable, but helps provide consistency within the Federal Government. That being said, even SBA has several definitions for ‘‘small business’’ depending on the specific SBA program. In evaluating the various SBA programs, the Agency has decided to use the small business sized standards used by the SBA financial assistance programs, commonly referred to as the 7A and the SBA 504 programs, as found in 13 CFR 121.301(a) and (b).

As noted in the comment, commenters were seeking, in general, either to remove the cap or to apply the cap at the individual business concern level rather than at the entire entity level, which includes accounting for affiliates. The Agency disagrees with both suggestions, primarily because the Agency has determined that it would be inappropriate to adjust how a business is determined to be a small business relative to the restrictions found in these SBA definitions; that is, the Agency defers to SBA’s expertise and years of experience in the specific metrics to use to define a ‘‘small business.’’

Further, with regard specifically to the recommendation to apply the income limitation to the individual business concern only, the Agency is concerned that either change would open the door for huge companies to obtain assistance by forming a secondary company that could apply for and receive REAP assistance. These companies would have resources not available to other small businesses and potentially have an unfair advantage when putting together an application for assistance.

With regard to removing the income limitation altogether, the statutory authority for the program requires the

Agency to consider the applicant’s small business status as an eligibility criterion and the Agency cannot do otherwise.

Thus, the Agency has not adopted this suggestion in the final rule.

Comment: In commenting on the interim final rule, two commenters recommended revising the definition of small business to follow an Agency guideline or the broad guideline used by SBA, which only looks at net income and/or net worth, or some other standard guideline. According to the commenters, the small business size standards for each industry are so different that it makes it difficult to determine eligibility. Both commenters stated that, if there were one or two numbers to review in every case, it would be much easier and the Agency would be able to help more businesses.

Response: For the reasons stated in the responses to the previous two comments, the Agency has decided to use the small business sized standards used by the SBA financial assistance programs, commonly referred to as the 7A and the SBA 504 programs, as found in 13 CFR 121.301(a) and (b).

With regard to the suggestion to look at net income and/or net worth in determining the size of the applicant, the Agency agrees that this is appropriate. By incorporating reference to 13 CFR 121.301(b), the Agency is adding the tangible net worth and average net income of the business concern and its affiliates as an alternative set of metrics for determining whether the applicant is a small business.

Comment: One commenter suggested removing the limit on the size of the applicant all together given the intent of the program is to encourage energy savings and generation of renewable energy. According to the commenter, the SBA size standards are one of the most burdensome and inconsistent areas within REAP, particularly the determination of parent subsidiary and affiliate status and aggregation of this income has been a challenge.