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Loan Guarantees for Projects that Employ Innovative Technologies

Proposed Rule

The proposed rule removes a requirement in current regulation that the secretary of Energy must receive a first lien on all assets in projects funded by these loan guarantees. Instead, the

RULE SUMMARY

The proposed rule removes a requirement in current regulation that the secretary of Energy must receive a first lien on all assets in projects funded by these loan guarantees. Instead, the appropriate collateral would be up to the judgment of the secretary, subject to the requirement that it not be subordinate to other financing. 

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

CriterionScore

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
1901-AB27 can be found from regulations.gov using RIN and using a keyword search, as well as on the Department of Energy website. On the Department of Energy website, the regulation can be found by entering either a keyword or the RIN into the search box on the top right section of the home page. However, an actial RIA is nowhere to be found in either the Federal Register notice or as a separate document. A single paragraph under "Executive Order 12866" says that OIRA reviewed the rule, but it says nothing about and RIA.
2/5
2. How verifiable are the data used in the analysis?
There are no data.
0/5
3. How verifiable are the models and assumptions used in the analysis?
There are no explicit models or assumptions.
0/5
4. Was the analysis comprehensible to an informed layperson?
The Federal Register notice is not too difficult to read, though it requires some concentration to understand the financing arrangements this regulation makes possible. But since there is no explicit regulatory analysis and no hints of regulatory analysis in the notice, it is hard to understand why the department chose this option beyond a desire to extend loans to projects with a wider variety of ownership structures or collateral arrangements.
1/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
1/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The notice clearly identifies how the regulation promulgated in 2007 prevents DOE from extending loan guarantees to some projects that might otherwise qualify. But since the department did not explain how this change will affect outcomes, it has not really explained how the systemic problem is a barrier to achievement of outcomes.
2/5
Does the analysis identify how these outcomes are to be measured?
No relevant content.
0/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
DOE asserts that it has had some expressions of interest from proejct sponsors who would not currently qualify for loan guarantees, but it is not clear if this is a widespread or an anecdotal problem.
1/5
Does the analysis present credible empirical support for the theory?
The notice mentions some examples of the types of projects that would qualify for loan guarantees under the new regulation and says it has heard from sponsors of these types of projects, so essentially this is an assertion that DOE has some evidence.
1/5
Does the analysis adequately assess uncertainty about the outcomes?
No discussion of uncertainty.
0/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
1/5
Does the analysis identify a market failure or other systemic problem?
The notice clearly identifies how the regulation promulgated in 2007 prevents DOE from extending loan guarantees to some projects that might otherwise qualify. But since the department did not explain how this change will affect outcomes, it has not really explained how the systemic problem is a barrier to achievement of outcomes.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
DOE asserts that it has had some expressions of interest from project sponsors who would not currently qualify for loan guarantees, but it is not clear if this is a widespread or an anecdotal problem.
1/5
Does the analysis present credible empirical support for the theory?
The notice mentions some examples of the types of projects that would qualify for loan guarantees under the new regulation and says it has heard from sponsors of these types of projects, so essentially this is an assertion that DOE has some evidence.
1/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
No discussion of uncertainty.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
0/5
Does the analysis enumerate other alternatives to address the problem?
The only alternatives considered are the existing regulation and the new approach.
0/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
The new approach is a very narrow tweak that allows DOE to extend loan guarantees to more types of projects.
1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
No evaluation of the effect on outcomes.
0/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
DOE implies that some worthwhile projects will not get loan guarantees if it does not change the regulation, but it does not assess whether these projects will be undertaken in the absence of loan guarantees or how this will affect outcomes. So, it does nothing to establish a baseline.
0/5
8. How well does the analysis assess costs and benefits?
0/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
No discussion of costs -- not even the amount of loan guarantees authorized or appropriated.
0/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
No relevant content.
0/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
No relevant content.
0/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
No relevant content.
0/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
No relevant content.
0/5
Does the analysis identify the alternative that maximizes net benefits?
No relevant content.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No relevant content.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
No relevant content.
0/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
No relevant content.
0/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
Since virtually no regulatory analysis was done, there is no evidence that the department used the non-existent analysis.
0/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Since virtually no regulatory analysis was done, there is no evidence that the department used the non-existent analysis.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
No commitment to do this or to do any other kind of assessment in the future. The notice only mentions that the new regualtion would allow DOE to give loan guarantees to some additional types of projects and this furthers the goals of the legislation, but the absence of analysis provides no criteria for measuring results in the future.
0/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
No discussion of data and no evidence that DOE has or gathers any data relevant to the outcomes that might bs associated with this regulation.
0/5
 
Total5 / 60

Additional details

Agency
Department of Energy
Regulatory Identification Number
1901-AB27
Agency Name
Department of Energy
Rule Publication Date
08/08/2009
Comment Closing Date
09/08/2009