DOE places dozens of loan guarantee applications on hold

By Kris Bevill | May 23, 2011

The head of the U.S. DOE’s loan guarantee programs has issued letters to multiple applicants, informing them that their projects are being placed on hold due to timing restrictions. The 1705 loan guarantee program is set to expire on Sept. 30, which means that in order to participate in the program, projects must have closed on the loan guarantee and begin construction by that date. In a blog posted to the DOE’s website on May 10, Jonathan Silver, director of the loan programs office, said this rigorous schedule will make it impossible for all of the current applicants to succeed by the end date, and therefore the DOE will continue to work with only those companies that are farthest along in the application process.

“Recognizing that generating an application and supporting it through the review process is both time consuming and expensive, we are placing a number of other applications on hold,” Silver wrote. “This does not mean they are not quality projects, it simply means other applicants that are further along are more likely to meet the program’s deadline and consume the available funding.”

The 1705 program has received $2.4 billion in appropriations funds to support the program. According to the DOE, 19 loan guarantees and conditional commitments have been issued since March 2009, accounting for nearly two-thirds of the program’s total budget. The agency expects that the projects allowed to continue the process this year will consume the remaining funds available, but said it may be possible for those applications placed on hold to compete for any money left over. The agency is also forming a plan to possibly allow those projects to become eligible for newly approved funding to be made available through the 1703 program. That program can be used to supply loan guarantees for renewable energy projects currently, but very few applications have been filed, likely because applicants are required to pay higher participation fees than are required by the 1705 program.

A DOE spokesperson declined to offer further details as to how 1705 program applicants may be evaluated for participation in the 1703 program. As to the exact number of projects that have been placed on hold, the spokesperson said only that “dozens” received a notification letter from Silver, and a lesser number received notice that their applications would continue to be active.

To date, no DOE loan guarantees have been closed for cellulosic ethanol projects. Several companies have been in the running for approval for some time, however, including Poet LLC, Fulcrum Bioenergy Inc., BlueFire Renewables Inc., and Montana Ethanol Holdings LLC. A Poet spokesman confirmed that its application for a loan guarantee for Project Liberty, its cellulosic ethanol facility, is not on hold and said the company remains optimistic that there will be a successful outcome. BlueFire stated in a recent financial filing that it received notice in February its DOE loan guarantee application would be placed on hold until necessary remaining equity for the project is raised. BlueFire also has a pending loan guarantee application with the USDA for its 19 MMgy wood waste-to-ethanol plant to be located in Fulton, Miss.

Last November, Fulcrum reached the term sheet negotiation phase of the DOE loan guarantee process for its 10.5 MMgy cellulosic ethanol municipal solid waste-to-ethanol project near Reno, Nev. Earlier this year, Fulcrum officials spoke out against proposed cuts to the loan guarantee program, stating that its project will not come to fruition without a federal loan guarantee.  A representative for the company declined to comment on the current status of its application.

In February, Montana Ethanol Holdings said it had advanced through the initial phase of the loan guarantee application process as of Dec. 31 and was awaiting word on further progress. The company is seeking to construct a 115 MMgy barley- and wheat-based ethanol plant in Great Falls, Mont.  Company President Gary Hebener said the project recently advanced to the due diligence phase of the 1703 program. The company qualified to participate in both the 1705 and 1703 sections of the program, but because 1705 is expiring soon and is not expected to be extended, Hebener said the company will proceed with its application under the 1703 section.