USDA Announces $181 Million Loan Guarantee Authority Under the Section 9003 Biorefinery Assistance Loan Guarantee Program

more+
less-
Explore:  Biofuel Funding Loans USDA

On October 2, 2013, the United States Department of Agriculture (USDA) published a long-awaited Notice of Funding Availability (NOFA) for the Section 9003 Biorefinery Assistance Loan Guarantee Program (9003 Program). This NOFA announces a new application submission period open through January 30, 2014, to provide guaranteed loans for the development and construction of commercial-scale biorefineries or the retrofitting of existing facilities, using eligible technology for the development of advanced biofuels. In addition to this publicly announced funding, Wilson Sonsini Goodrich & Rosati (WSGR) expects additional funding will become available under the program for eligible advanced biofuels projects and possibly biobased chemical projects.

Program Background. Section 9003 of the 2008 Farm Bill authorizes the USDA to guarantee loans of up to $250 million for the development and construction of commercial-scale biorefineries utilizing new and emerging technologies that produce advanced biofuels.1 The 9003 Program initially was authorized and funded through $320 million allocated to cover the program's credit subsidy costs, which could then be leveraged three to four times to fund an approximately $1 billion loan guarantee facility. To date, eleven conditional commitments have been issued by this program, of which only four achieved financial close due to various programmatic and awardee-specific developments.

Table 1: 9003 Biorefinery Assistance Awards to Date
Year Awardee Current Award Status
2009 Soymor $0 Retracted
2009 Range Fuels $80,000,000 Closed
2011 Coskata $87,850,000 Conditional
2011 Enerkem $80,000,000 Conditional
2011 INEOS $75,000,000 Closed
2011 Fremont Community Digester $12,825,000 Closed
2011 Sapphire $43,600,000 Closed (Repaid)
2012 Fiberight $25,000,000 Conditional
2012 Zeachem $198,500,000 Conditional
2012 Chemtex $99,000,000 Conditional
2012 Fulcrum $105,000,000 Conditional
2013 Current Notice of Funding Availability $181,000,000 Open for Applicants
 
Total Obligated Loan Guarantee Authority $987,775,000 Funds to Loan Authority Ratio
USDA 9003 Mandatory Funding $320,000,000 3.09

Program Funding. The new NOFA formally makes $76 million of credit subsidy allocation available to support an estimated $181 million in loan guarantees to eligible applicants. The budget authority made available under this NOFA originates from the initial $320 million allocation that has yet to be conditionally committed to projects. Applicants can receive an 80% guarantee for loans under $150 million, a 70% guarantee for loans $150 million to $200 million, and a 60% guarantee for loans over $200 million. Additionally, a highly qualified applicant can receive a 90% loan guarantee under special circumstances.

Additional WSGR Insight and Outlook. To date, approximately $211 million in loan guarantees has been permanently allocated to the four closed projects. Approximately $600 million in loan guarantees remains tied to the six conditionally committed projects. At present, the USDA is re-evaluating the remaining conditional commitments in an effort to bring as many of those projects as possible to closed status. Since one project is said to be moving through the formal retraction process, WSGR expects that two to four of these six projects may not reach financial close. Accordingly, WSGR expects that a portion of the $600 million in outstanding conditional commitments will be made available to new applicants through this and future NOFAs.

Table 2: Mandatory Funding for 9003
2008 Farm Bill
2009 $75,000,000
2010 $245,000,000
2011 -
2012 -
 
2013 Senate Draft
2013 -
2014 $100,000,000
2015 $58,000,000
2016 $58,000,000

Farm Bill Reauthorization. In addition to this immediate opportunity within the 9003 Program, the possibility remains for additional budget authority, and subsequent loan guarantees, through additional appropriations. The Senate version of the 2013 Farm Bill provides for up to $216 million of mandatory funding for the 9003 Program through 2016. Additionally, there is bipartisan support to expand the program's scope and eligibility requirements beyond the current 70% biofuel production minimum per project so it can support the development of innovative, commercially viable biobased chemical companies.

While the Farm Bill waits in the wings as Congress seeks a resolution for the current appropriations cycle, representatives and entities are working with Congress and garnering stronger support to expand the 9003 Program to encourage these biobased chemicals projects and promote mandatory funding for the program in the future.

Application Materials. Application materials, which we expect to largely resemble previous program application materials, will become available after the government shutdown and current lack of agency funding is resolved.

1 For more information, please see "Overview of the USDA Biorefinery Assistance Loan Guarantee Program," December 13, 2010, at http://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/section9003.htm, and "U.S. Department of Agriculture Loan Guarantee Programs and Utilization of Bond Financing," April 26, 2010, at http://www.wsgr.com/publications/pdfsearch/wsgralert_usda_loan_guarantees.pdf.