Oregon Bulletin

August 1, 2013

Department of Energy, Chapter 330

Rule Caption: Clarifies eligible uses of loan proceeds from the Small Scale Energy Loan program.

Adm. Order No.: DOE 2-2013(Temp)

Filed with Sec. of State: 6-17-2013

Certified to be Effective: 6-17-13 thru 12-13-13

Notice Publication Date:

Rules Amended: 330-110-0040

Subject: The temporary rule for the Small Scale Energy Loan program (SELP) clarifies eligible uses of loan proceeds. In December 2012, the Oregon Department of Energy filed permanent rules amending OAR 330-110-0040(9) incorrectly. The Oregon Department of Energy believes a temporary rule is justified because without a temporary rule, a borrower could attempt to obtain a SELP loan for a single item, rather than a group of items that makeup a SELP project. The consequences of the rule as written, creates confusion about the allowable uses of bond funds as regulated by federal law. By adopting this temporary rule, clarifying eligible uses of loan proceeds, the Oregon Department of Energy will be able mitigate confusion and align with federal law.

Rules Coordinator: Kathy Stuttaford—(503) 373-2127


Loan Limits, Security, and Conditions

(1) The Director may limit the term and amount of any loan or loan approval. The Director may deny any application or set such terms and conditions in regard to any loan or loan approval as needed to assure a sound loan or to protect the fiscal integrity of the program.

(2) A loan secured by real property must be secured by a first lien on such real property in favor of the State of Oregon and must not exceed eighty percent of the security value of such real property. The real property that is collateral for the loan must have been appraised by a licensed appraiser, county assessor or Department appraiser, at the discretion of the director, no longer than six months prior to the date of the loan approval. The Department will consider junior liens only on a case-by-case basis.

(3) If a loan to a municipal corporation will be repaid from project income, the security package for the loan may include the project income.

(4) A loan to a state agency, an eligible federal agency or a public corporation may be secured by project income, in addition to the facility or equipment that make up the project, by a lease purchase contract or by other income or security in accordance with ORS 470.170. State agencies, eligible federal agencies or public corporation borrowers must provide resolutions or other official action of borrower’s governing body approving the loan and the other matters contemplated by the loan documents, and of all other documents evidencing any other necessary action by Applicant’s governing body.

(5) The Department generally requires an unconditional and absolute guaranty of the owners or the principal shareholder of the borrower or that of a person having sufficient resources to satisfy the borrower’s repayment obligation for the loan should the borrower default.

(6) The Director may consider savings in operation and maintenance costs in estimating the annual project cost savings. The Director may also, when calculating the estimated savings in fuel costs, consider reasonably expected increases in the cost of fuel.

(7) A project that primarily produces energy for sale must have:

(a) Secure sources of supply and contracts for the sale of output;

(b) Projected income, net of operating expenses and maintenance costs, of at least 125 percent of annual debt service for each year of the loan; and

(c) An identified secondary source of repayment apart from the project income.

(8) Unless the Director finds that mitigating financial factors warrant otherwise, a loan to a business for a project that saves or produces energy for use on site, is an alternative fuel project or is an energy-saving recycling project may be made only:

(a) Upon an identifiable and reasonable primary repayment source and the pledge of adequate security;

(b) For less than 80 percent of the security value of real property on which the Department has a first lien, the Department will consider junior liens on a case-by-case basis;

(c) To a business that has made a profit after taxes for at least the two years immediately preceding the loan application; and

(d) To a business that has a ratio of current assets to current liabilities of at least 1.75 to 1 and a ratio of total debt to owner’s equity of no more than 2 to 1. The Director may exempt a business from the requirements of OAR 330-110-0040 if it demonstrates to the satisfaction of the Director that sound businesses of similar type and size do not normally meet these standards.

(9) Loan proceeds must be used for the costs of a small scale local energy project, with the following limitations:

(a) Cost of acquisition of the project site must not exceed ten percent of the loan amount.

(b) Capital for start-up must not exceed three percent of the loan amount.

(c) Reserves must not exceed fifteen percent of the loan amount.

(10) The loan proceeds of an alternative fuel project may only be used for the following purposes:

(a) Incremental costs of the project that are beyond the reasonable estimated minimum costs to construct or install a similar project without alternative fuel features. Incremental costs do not include the cost of equipment or devices that, in standard industry practice, are used to dispense gasoline or, in the case of vehicles, equipment or devices that use gasoline and that also allow use of an alternative fuel without modification. Alternative fueling stations with underground fuel tanks do not qualify for funding as alternative fuel projects.

(b) In the case of vehicles, products and installation of such products approved by and meeting or exceeding the emission standards of the Department of Environmental Quality.

(11) No more than fifty percent of loan proceeds may be used to refinance existing debt authorized by ORS 470.050(27)(g) unless such debt is with the Department. The refinancing must result in a significant increase in the security value of the loan security.

Stat. Auth.: ORS 469 & 470.140

Stats. Implemented: ORS 470.080, 470.120, 470.150 - 470.155, 470.170 & 470.210

Hist.: DOE 12-1980, f. & ef. 12-16-80; DOE 6-1982, f. & ef. 4-21-82; DOE 2-1983, f. & ef. 5-16-83; DOE 3-1983(Temp), f. & ef. 9-20-83; DOE 4-1984, f. & ef. 3-6-84; DOE 2-1986, f. & ef. 3-4-86; DOE 4-1988, f. & cert. ef. 7-26-88; DOE 1-1993, f. & cert. ef. 1-27-93; DOE 1-1994, f. & cert. ef. 4-1-94; DOE 2-1998, f. & cert. ef. 9-30-98; DOE 7-2004, f. & cert. ef. 12-20-04; DOE 13-2012, f. & cert. ef. 12-20-12; DOE 2-2013(Temp), f. & cert. ef. 6-17-13 thru 12-13-13

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