Geothermal project funding opportunities through USDA-RURAL DEVELOPMENT

1. Geothermal project funding opportunities through USDA-RURAL DEVELOPMENT Richard Carrig Rural Business Programs Director USDA-Rural Development (801) 524-4328 Richard.Carrig@ut.usda.gov

2. Who is USDA-Rural Development • Federal agency, whose mission is to help improve the quality of life for rural Americans. • Administratively divided into 3 rural development program areas: the Rural Business-Cooperative Service (RBS), the Rural Utility Service (RUS), and Rural Housing Service (RHS)

3. Who is USDA-Rural Development • Rural Development programs are delivered at National, State, Regional, and Local levels • Each state has a USDA-Rural Development state office responsible for program delivery for that state • RBS focuses on rural economic and business development programs • RUS focuses on rural municipal development programs • RHS focuses on rural housing development programs

4. Websites for USDA-Rural Development • National USDA-Rural Development website is: http://www.rurdev.usda.gov • National USDA-RBS website is: http://www.rurdev.usda.gov/rbs • Utah State Office USDA-Rural Development website is: http://www.rurdev.usda.gov/ut • National USDA-Rural Development 2002 Farm Bill website is: http://www.rurdev.usda.gov/rd/farmbill/9006resources.html

5. RBS programs promoting geothermal projects • Renewable Energy/Energy Efficiency (RE/EE) program • Guaranteed Business & Industry loan (B&I) program • Value-Added Producer Grant (VAPG) program • Rural Business Enterprise Grant (RBEG) program • Rural Business Opportunity Grant (RBOG) program • Rural Economic Development Loan and Grant (REDLG) program • Intermediary Relending Program (IRP) • Rural Business Investment Program (RBIP)

6. RE/EE program • Authorized by section 9006 of the Farm Security and Rural Investment Act of 2002 (Farm Bill) • Two part program to assist eligible farmers, ranchers, and rural small businesses purchase renewable energy (RE) systems, or make energy efficiency (EE) improvements. • RE/EE grant component enacted in 2003 • RE/EE direct loan and guaranteed loan components should be enacted in 2004

7. RE/EE program • Grant requests cannot exceed 25% of eligible project costs • In-kind contributions or other Federal grants cannot apply toward the applicant’s 75% matching funds requirement • Combination grant/direct/guaranteed requests cannot exceed 50% of eligible project costs

8. RE/EE program • Maximum RE grant assistance is $500,000 • Maximum EE grant assistance is $250,000 • Minimum RE/EE grant request is $10,000

9. RE/EE program • RE requests are for wind, solar, biomass, geothermal or hydrogen powered systems • RE requests must be supported with a project specific independent feasibility study • RE requests must also include a interconnection agreement, (only required if the project will generate power for sale into the power grid)

10. RE/EE program • EE requests must be supported with a independent energy audit • EE program requests must improve energy consumption by at least 15% (as compared to the previous 12 months), and pay for itself within 11 years

11. RE/EE program • RE/EE requests must be supported with a technical report from a engineer or architect. • RE/EE Program is not meant to fund unproven technologies, R&D projects, or demonstration projects

12. RE/EE Applicant Eligibility Requirements • U.S. agricultural producers deriving 50% or greater of their gross income from the sales of farm products • U.S. Small businesses (including cooperatives) which do not exceed SBA size standards

13. RE/EE Rural Area Requirements • All RE/EE projects must be located in a rural area • Small businesses must also be located in a rural area • Rural areas are defined as “Any area, other than a city or town that has a population of greater than 50,000 inhabitants and the urbanized area contiguous and adjacent to such city or town”

14. Eligible RE/EE Project Costs • Purchase and installation of a eligible renewable energy system • Energy improvement costs • Feasibility studies, energy audits, permit fees, most other related professional service fees

15. Ineligible RE/EE Project Costs • Land acquisition • Working capital • Residential improvements • Operating or maintenance expenses • Application processing fees • Agricultural tillage equipment • Vehicles

16. Ineligible RE/EE Project Costs • Costs incurred prior to the date of application EXCEPT predevelopment costs such as energy audits, feasibility studies, business plans, permit fees, or architectural/engineering fees

17. RE/EE program changes in 2004 • A draft regulation of the RE/EE Program including new guaranteed loan and direct loan components will be published soon • There will be a 60 day public comment period • The draft regulation will be posted on the National USDA-RBS Website when available

18. 2004 RE/EE Application Process • 2004 RE/EE applications will be requested after the public comment period has expired on the draft regulation • Request for applications will be posted on National USDA RBS website • Estimate Spring/Summer of 2004

19. 2003 RE/EE Funding Levels • Over 21 million dollars in projects funded in the RE/EE program nationwide in FY 2003 • 114 funded projects in 24 states. 35 projects supporting wind energy 46 projects supporting anaerobic digesters 6 projects supporting solar energy NO GEOTHERMAL PROJECTS FUNDED • NO UTAH PROJECTS FUNDED IN 2003

20. 2004 RE/EE funding levels • Funding levels for the RE/EE program in 2004 are currently undetermined • USDA-Rural Development still does not have an approved budget • Congress reconvenes on 1/20/04 to discuss budget and other issues

21. Value Added Producer Grant (VAPG) program

22. Value Added Producer Grant (VAPG) program • Authorized by Section 6401 of the Farm Security and Rural Investment Act of 2002 (Farm Bill) • Purpose is to increase value-added profit margins to producers of agricultural commodities • Many renewable energy projects can qualify in this program • Applicants must be a agricultural producer, eligible producer group, farmer/rancher cooperative, or a majority controlled producer based venture.

23. Value Added Producer Grant (VAPG) program • Requests can be either a planning grant or a working capital grant (but not both) • Planning grant funds can be used to develop business plans, conduct feasibility studies, or develop marketing plans • Working Capital grant funds can be used implement business plans or marketing plans

24. Value Added Producer Grant (VAPG) program • VAPG funds cannot be used for planning, repair, rehab., acquisition, or construction of a building or facility (including a processing facility) • VAPG funds cannot be used for the purchase, rental, or installation of fixed equipment

25. Value Added Producer Grant (VAPG) Program • Maximum award per grant is $500,000 • VAPG awards cannot exceed 50% of relevant project costs • Applicant matching funds or eligible in-kind contributions are required • Applicant matching funds can include direct or guaranteed loans • Other Federal funds cannot count as eligible matching funds

26. VAPG program application process • VAPG requests are solicited once per year • Proposed regulation published in the Federal Register on June 27, 2003, and comment period closed August 12, 2003 • Final regulation pending • Regulation and application solicitation request will be posted on the National USDA RBS website • Request for this year’s funding cycle will likely be late spring/early summer

27. The Guaranteed Business & Industry (B&I) Program

28. Guaranteed B&I program • A commercial lender is the applicant to USDA for a B&I guarantee on the lender’s loan • USDA will not guarantee marginal or substandard loans • Encourage rural lenders to finance good quality businesses that support a diversified economic base and provide or save good quality jobs in rural areas

29. Guaranteed B&I program • Commercial lenders that are subject to credit examination and supervision by a Federal, State or Farm Credit system institution with direct commercial lending authority are eligible to participate in the B&I program

30. Guaranteed B&I program • Eligible borrowers include: a. Individuals, corporations, partnerships, cooperatives, or other legal entities. Corporation or non-public entities must be primarily owned by a bona fide U.S. citizen(s) or legal resident(s)

31. Guaranteed B&I program b. Public entities, such as towns, county governments, special improvement districts, etc. c. Federally recognized tribal groups

32. Guaranteed B&I program • Borrowers should be able to obtain better rates and terms on their loan if the loan is guaranteed by USDA • USDA does not negotiate loan rates and terms

33. Guaranteed B&I program • Eligible rural areas are defined as any area, other than a city or town that has a population greater than 50,000 inhabitants (2000 census), and areas contiguous to these communities • Most of Utah, including many communities along the Wasatch front, are eligible rural areas for the B&I program

34. Guaranteed B&I program • Eligible loan purposes: Some restrictions, but most typical commercial loan purposes are eligible • B&I loan limit is 25 million dollars • Loan guarantee limits: a. 80% for loans up to 5 million dollars b. 70% for loans of 5 million dollars up to 10 million dollars; c. 60% for loans of 10 million dollars and above

35. Guaranteed B&I program • Maximum repayment terms: a. Working capital- max. 7 years b. Equipment- max. 15 years c. Real estate- max. 30 years

36. Guaranteed B&I program • A one time guarantee fee is required. • Guarantee fee is 2% of the guaranteed loan amount (typically 1.6% of the full loan request for loans up to 5 million dollars)

37. Guaranteed B&I program • For existing businesses, A minimum 10% ‘opening’ tangible balance sheet equity is required. • For startups or newly established businesses, a minimum 20% ‘opening’ tangible balance sheet equity is required • All loans must be adequately collateralized

38. Guaranteed B&I program • Guaranteed B&I requests are funded throughout the year. • There should be sufficient B&I funding authority to continue to fund acceptable B&I loan applications throughout 2004

39. Rural Business Enterprise Grant (RBEG) program

40. RBEG program • Eligible applicants are limited to: a. Public bodies b. Private non-profit organizations c. Federally recognized tribes

41. RBEG program • RBEG funds are used by an eligible applicant to promote the economic development of multiple small and emerging rural businesses • Small and emerging businesses must have fewer than 50 employees, and have less than 1 million dollars in gross annual sales

42. RBEG program • Eligible rural areas for the RBEG program are defined as communities with a population of 50,000 or less (2000 census), and not located adjacent to urban areas of more than 50,000 population • Same definition as B&I and RE/EE

43. RBEG program • RBEG funded projects must be unable to obtain funding elsewhere at reasonable rates and terms a. Including loans, loan guarantees, and personal resources

44. RBEG program • RBEG funds may be used to: a. Construct, improve, or purchase buildings and equipment (no pass through grants) b. Provide economic development technical assistance c. capitalize a rural revolving loan fund

45. RBEG program • RBEG funds CANNOT be used for: a. Production agriculture purposes b. Comprehensive planning c. Pass through grants d. Residential housing e. Startup or working capital (except as a loan from a RLF)

46. RBEG program • RBEG requests are competitively funded • No minimum or maximum limit, but most funded projects are under $100,000 • RBEG requests are funded at multiple intervals throughout the year. • Contact the State Office for USDA-Rural Development for an RBEG application packet

47. Other RBS programs • Please visit our state website for a summary of other RBS programs that can benefit geothermal projects. • Contact us to discuss your project and how USDA can assist you to develop your project

48. Contact information Richard Carrig Rural Business Programs Director USDA-Rural Development Phone: (801) 524-4328 Email: Richard.Carrig@ut.usda.gov Mailing address: USDA-Rural Development Wallace F. Bennett Federal Bldg. Room 4311 Salt Lake City, Utah 84138 ATTN: RICHARD CARRIG