Title 42, The Public Health and WelfareRelease 119-110
§8814 Loan Guarantees
Title 42 › CHAPTER 96 — BIOMASS ENERGY AND ALCOHOL FUELS › SUBCHAPTER I — GENERAL BIOMASS ENERGY DEVELOPMENT › § 8814
Summary
The Secretary of Agriculture or the Secretary of Energy may promise to back loans that pay to build biomass energy projects, covering loss of principal and interest, subject to sections 8812 and 8817. A guarantee cannot be more than 90 percent of the project’s construction cost as estimated on the guarantee date. If later estimates show higher costs, the Secretary can, when asked, add a guarantee for up to 60 percent of the extra estimated cost. Guaranteed debt may not be bought, sold to, or issued to the Federal Financing Bank or any federal agency unless a later law after June 30, 1980, says otherwise. If the Secretary pays a lender because a borrower defaults, the Secretary takes over the lender’s rights to the loan. Guarantees cannot be cancelled except under their own terms and act as proof the loan and guarantee were properly approved. The Secretary may also pay a lender for a struggling borrower (who is not in default) if doing so serves the public interest and benefits the United States; the borrower must agree to repay under terms that protect the U.S. The applicant must show the lender would not lend on reasonable terms without the guarantee, and the lender must keep a fair share of the project’s risk.
Full Legal Text
Title 42, §8814
The Public Health and Welfare, Source: USLM XML via OLRC
(a)Authority of Secretary concerned
Subject to section 8812 and 8817 of this title, the Secretary concerned may commit to guarantee, and guarantee, against loss of principal and interest, loans which are made to provide funds for the construction of biomass energy projects.
(b)Estimated project construction costs as determinative of initial and revised amount of guarantee
(1)Any guarantee of a loan under this section may not exceed 90 per centum of the cost of the construction of the biomass energy project involved, as estimated by the Secretary on the date of the guarantee or commitment to guarantee.
(2)In the event the construction costs of the project are thereafter estimated by the Secretary concerned to exceed the construction costs initially estimated by the Secretary, the Secretary may in addition, upon application therefor, guarantee, against loss of principal and interest, a loan for up to 60 per centum of the difference between the construction costs then estimated and the construction costs initially estimated.
(c)Debt obligation; ineligibility for purchase, etc., by Federal Financing Bank or any Federal agency
Notwithstanding the provisions of the Federal Financing Bank Act of 1973 (12 U.S.C. 2281 et seq.) or any other provision of law (except as may be specifically provided by reference to this subsection in any Act enacted after June 30, 1980), no debt obligation which is guaranteed or committed to be guaranteed by the Secretary of Agriculture or the Secretary of Energy under this section shall be eligible for purchase by, or commitment to purchase by, or sale or issuance to, the Federal Financing Bank or any Federal agency.
(d)Terms and conditions
The terms and conditions of loan guarantees under this section shall provide that, if the Secretary concerned makes a payment of principal or interest upon the default by a borrower, the Secretary shall be subrogated to the rights of the recipient of such payment (and such subrogation shall be expressly set forth in the loan guarantee or related agreements).
(e)Termination, cancellation, or revocation, and conclusive nature of guarantee
Any loan guarantee under this section shall not be terminated, canceled, or otherwise revoked, except in accordance with the terms thereof and shall be conclusive evidence that such guarantee complies fully with the provisions of this chapter and of the approval and legality of the principal amount, interest rate, and all other terms of the securities, obligations, or loans and of the guarantee.
(f)Payment to lender
If the Secretary concerned determines that—
(1)the borrower is unable to meet payments and is not in default,
(2)it is in the public interest to permit the borrower to continue with such project, and
(3)the probable net benefit to the United States in paying the principal and interest due under the loan will be greater than that which would result in the event of a default,
then the Secretary may pay to the lender under a loan guarantee agreement an amount not greater than the principal and interest which the borrower is obligated to pay to such lender, if the borrower agrees to reimburse the Secretary for such payment on terms and conditions, including interest, which the Secretary determines are sufficient to protect the financial interests of the United States.
(g)Preconditions
(1)A loan may not be guaranteed under this section unless the applicant for such loan has established to the satisfaction of the Secretary concerned that the lender is not willing without such a guarantee to extend credit to the applicant at reasonable rates and terms, taking into consideration prevailing rates and terms for loans for similar purposes and periods of time, to finance the construction of the biomass energy project for which such loan is sought.
(2)The Secretary concerned shall ensure that the lender bears a reasonable degree of risk in the financing of such project.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The Federal Financing Bank Act of 1973, referred to in subsec. (c), is Pub. L. 93–224, Dec. 29, 1973, 87 Stat. 937, which is classified generally to chapter 24 (§ 2281 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see
Short Title
note set out under section 2281 of Title 12 and Tables. This chapter, referred to in subsec. (e), was in the original “this title”, meaning title II of Pub. L. 96–294, June 30, 1980, 94 Stat. 683, known as the Biomass Energy and Alcohol Fuels Act of 1980, which is classified principally to this chapter. For complete classification of title II to the Code, see
Short Title
note set out under section 8801 of this title and Tables.
Statutory Notes and Related Subsidiaries
Defaulted Loans Under Department of Energy Alcohol Fuels Loan Guarantee Program; Sale of Assets; Unobligated Funds Pub. L. 101–121, title II, Oct. 23, 1989, 103 Stat. 732, provided that: “Notwithstanding 31 U.S.C. 3302, funds derived from the sale of assets as a result of defaulted loans made under the Department of Energy Alcohol Fuels Loan Guarantee program, or any other funds received in connection with this program, shall hereafter be credited to the Biomass Energy Development account, and shall be available solely for payment of the guaranteed portion of defaulted loans and associated costs of the Department of Energy Alcohol Fuels Loan Guarantee program for loans guaranteed prior to
January 1, 1987. “Unobligated balances available in the ‘Alternative fuels production’ account may hereafter be used for payment of the guaranteed portion of defaulted loans and associated costs of the Department of Energy Alcohol Fuels Loan Guarantee program, subject to the determination by the Secretary of Energy that such unobligated funds are not needed for carrying out the purposes of the Alternative Fuels Production program: Provided, That the use of these unobligated funds for payment of defaulted loans and associated costs shall be available only for loans guaranteed prior to
January 1, 1987: Provided further, That such funds shall be used only after the unobligated balance in the Department of Energy Alcohol Fuel Loan Guarantee reserve has been exhausted.”
Reference
Citations & Metadata
Citation
42 U.S.C. § 8814
Title 42, The Public Health and Welfare
Last Updated
Sep 22, 2026
Release point: 119-110