SUPPLEMENTARY INFORMATION:

I. Background

The Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Program, administered under 7 CFR 4279 Subpart C and 7 CFR 4287 Subpart D, provides loan guarantees up to $250 million to eligible applicants to develop advanced biofuels, renewable chemicals, and biobased-products manufacturing facilities to deliver new and innovative technologies. These loan guarantees assist to develop, build, or retrofit facilities to support new and emerging technologies and produce advanced biofuels, renewable chemicals, and biobased products.

II. Summary of Changes to Rule

This updated final rule for the Section 9003 program strengthens the $250 million loan guarantee framework for advanced biofuels, renewable chemicals, and biobased products by introducing critical integrity measures. These revisions to the regulation will strengthen oversight and management of the growing Section 9003 loan guarantee portfolios. The revisions aim to prevent fraud and abuse by barring any borrower or guarantor from remaining involved in a project if it results in a monetary loss to the Agency. These changes ensure that participants remain fully committed to the long-term success of their operations rather than relying on debt reductions or government-backed bailouts to mitigate poor performance. For example, consider a borrower with a failed project due to cost overruns or bad management. In this example, if the Agency pays the Lender's final loss claim, and the Lender writes down the borrower's debt, but the borrower continues operating the project, the government bore the cost of the borrower's poor management. If the Agency permits a borrower or guarantor to remain involved in a project following the Agency's loss, the borrower or guarantor may eventually profit from the project at the government's expense, effectively turning this government assistance into a grant. This arrangement creates perverse incentives for unethical parties to not execute their project to the best of their ability, seek to write down the loss paid by the taxpayer, and later earn a profit based on the government's loss. These regulatory changes close any loophole that would allow for a borrower or guarantor to later profit from a failed project funded by the Agency. ( printed page 42336)

1. Section 4287.345 Default by Borrower

Section 4287.345(c) is revised to prohibit debt write-downs when borrowers or guarantors retain decision-making authority.

2. Section 4287.358 Prohibition Under Agency Programs

Section 4287.358(h) is added to prohibit borrowers and guarantors, as well as related parties with whom either the applicant or guarantor does not have an arm's length transaction relationship, from remaining involved in a project any time the Agency sustains a loss. The new section 4289.358(h) prevents entities from continuing to benefit from a project after the Agency has absorbed a financial loss on their behalf.

III. Executive Orders

Executive Order 12372—Intergovernmental Review of Federal Programs

This program is not subject to the requirements of Executive Order 12372, “Intergovernmental Review of Federal Programs,” as implemented under USDA's regulations at 2 CFR 415, subpart C.

Executive Order 12866—Regulatory Planning and Review

This rule has been determined to be not significant for purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

Executive Order 12988—Civil Justice Reform

This rule has been reviewed under Executive Order 12988. In accordance with this rule: (1) unless otherwise specifically provided, all State and local laws that conflict with this rule will be preempted; (2) no retroactive effect will be given to this rule except as specifically prescribed in the rule; and (3) administrative proceedings of the National Appeals Division of the Department of Agriculture (7 CFR part 11) must be exhausted before bringing suit in court that challenges action taken under this rule.

Executive Order 13132—Federalism

The policies contained in this rule do not have any substantial direct effect on States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Nor does this rule impose substantial direct compliance costs on state and local governments. Therefore, consultation with the States is not required.

Executive Order 13175—Consultation and Coordination With Indian Tribal Governments

This final rule has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. Executive Order 13175 requires Federal agencies to consult and coordinate with Tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal government and Indian Tribes or on the distribution of power and responsibilities between the Federal government and Indian Tribes. Consultation is also required for any regulation that preempts Tribal law or that imposes substantial direct compliance costs on Indian Tribal governments and that is not required by statute.

The Agency has determined that this final rule does not have Tribal implications that require formal Tribal consultation under Executive Order 13175. If a Tribe requests consultation, the RBCS will work with the Office of Tribal Relations to ensure meaningful consultation is provided where changes, additions and modifications identified herein are not expressly mandated by Congress.

Assistance Listing Number

The Assistance Listing Number assigned to the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Program is 10.865.

Civil Rights Impact Analysis

This Final Rule was reviewed in accordance with USDA Regulation 4300-4, Civil Rights Impact Analysis,” to identify any major civil rights impacts the rule might have on program participants on the basis of age, race, religion, color, national origin, sex, disability, genetic information, political beliefs, marital status, familial status, parental status, veteran status, religion, reprisal and/or resulting from all or a part of an individual's income being derived from any public assistance program. This Final rule is within a Guarantee-based program. Guarantees are not covered under Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, and Title IX of the Education Amendments Act of 1972, as amended, when Federal assistance does not include insurance or interest credit loans. Lenders must comply with other applicable Federal laws, including Equal Employment Opportunities, the Equal Credit Opportunity Act, the Fair Housing Act, and the Civil Rights Act of 1964. Guaranteed loans that involve the construction of or addition to facilities that accommodate the public must comply with the Architectural Barriers Act Accessibility Standard. The borrower and lender are responsible for ensuring compliance with these requirements.

Congressional Review Act

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this final rule as not a major rule, as defined by 5 U.S.C. 804(2).

E-Government Act Compliance

Rural Development is committed to the E-Government Act, which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible and to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

National Environmental Policy Act

In accordance with the National Environmental Policy Act of 1969, Public Law 91-190, this final rule has been reviewed in accordance with 7 CFR part 1b (“National Environmental Policy Act”). The Agency has determined that (i) this action meets the criteria established in 7 CFR 1b and (ii) no extraordinary circumstances exist. Therefore, the Agency has determined that the action does not have a significant effect on the human environment, and therefore neither an Environmental Assessment nor an Environmental Impact Statement is required.

Paperwork Reduction Act

This rule contains no reporting or recordkeeping provisions requiring Office of Management and Budget (OMB) approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment ( printed page 42337) rulemaking requirements under the Administrative Procedure Act (“APA”) or any other statute. The Administrative Procedures Act exempts from notice and comment requirements rules “relating to agency management or personnel or to public property, loans, grants, benefits, or contracts” (5 U.S.C. 553(a)(2)), so an analysis has not been prepared for this rule.

Severability

It is USDA's intention that the provisions of this rule shall operate independently of each other. In the event that this rule or any portion of this rule is ultimately declared invalid or stayed as to a particular provision, it is USDA's intent that the rule nonetheless be severable and remain valid with respect to those provisions not affected by a declaration of invalidity or stayed. USDA concludes it would separately adopt all of the provisions contained in this final rule.

Unfunded Mandates Reform Act (UMRA)

Title II of the UMRA, Public Law 104-4, establishes requirements for Federal Agencies to assess the effects of their regulatory actions on State, local, and Tribal Governments and on the private sector. Under section 202 of the UMRA, Federal Agencies generally must prepare a written statement, including cost-benefit analysis, for proposed and Final Rules with “Federal mandates” that may result in expenditures to State, local, or Tribal Governments, in the aggregate, or to the private sector, of $100 million or more in any one-year. When such a statement is needed for a rule, section 205 of the UMRA generally requires a Federal Agency to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective, or least burdensome alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and Tribal Governments or for the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

USDA Non-Discrimination Statement

In accordance with Federal civil rights laws and USDA civil rights regulations and policies, the USDA, its Mission Areas, agencies, staff offices, employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.

Persons with disabilities who require alternative means of communication to obtain program information ( e.g., Braille, large print, audiotape, American Sign Language, etc.) should contact the State or local Agency that administers the program or contact USDA through the Telecommunications Relay Service at 711 (voice and TTY). Program information may be made available in languages other than English.

To file a program discrimination complaint, a complainant should complete a Form AD-3027, USDA Program Discrimination Complaint Form, which can be obtained online at https://www.usda.gov/​sites/​default/​files/​documents/​ad-3027.pdf and at any USDA office or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by:

a. Mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue SW, Mail Stop 9410, Washington, DC 20250-9410; or

b. Fax: (202) 690-7442; or

c. Email:program.intake@usda.gov.

USDA is an equal opportunity provider, employer, and lender.

For the reasons stated in the preamble, the RBCS amends 7 CFR 4287 Subpart D as follows: