REAPing the Benefits of USDA’s Rural Energy for America Program – aka REAP

November 16, 2016 |

mindy-collierBy Mindy Collier, Lee Enterprises Consulting
Special to The Digest

On October 18, 2016 USDA published its Notice of Solicitation of Applications for the Rural Energy for America Program (REAP) for Federal Fiscal Year 2017 in the Federal Register. The deadline is March 31, 2017 for grants up to $500,000. Loan applications are accepted throughout the year. Although this deadline is almost 5 months away, it’s literally around the corner when you consider the amount of time-consuming information necessary to complete these applications. Before thinking about pursuing a REAP grant or loan, here are some preliminary items to address.

  • Applicant eligibility – You must be an Agricultural Producer or a Small Business
  • Property eligibility – Is the location of your facility within a boundaries of an eligible area? You can check by going to rd.usda.gov/programs-services/programs-services-businesses and click on “Check Eligibility” to enter the property address.
    1. Do you have site control through either direct ownership or lease for the useful life of the project
  • Project eligibility – Funds may be used for renewable energy systems such as;
    1. Biomass
    2. Geothermal for electric generation or direct use
    3. Hydropower below 30 megawatts
    4. Hydrogen
    5. Small and large wind generation
    6. Small and large solar generation
    7. Ocean(tidal, current, thermal) generation
  • Matching Funds – grant funding will not exceed 25% of the “eligible project cost” so applicants must be able to provide documentation of funds, i.e. letter of commitment or bank statement, for the remaining 75% of project costs.
  • Registrations with Dun and Bradstreet (DUNS number) , System for Award Management (SAM) and Grants.gov. These registrations can take anywhere from a week to 2 weeks to complete.

Once you’ve established eligibility, the application requirements vary depending upon the total project costs. For example if you have a total project cost of greater than $199,999.99, the amount of information required substantially increases. Assuming that most projects are over this threshold, here are just a few of the items that need special attention and take considerable time to complete.

Feasibility Study. Although not necessary if your Total Project Costs are under $200,000.00, it is required if your project costs are $200,000.00 or greater. CAUTION. Not all feasibility studies are alike. USDA has specific guidance on what should be addressed in the feasibility study. Please make sure that the consultant you hire to produce your feasibility study is knowledgeable of USDA’s requirements. A compliant feasibility study could take 30-60 days to complete.

Technical Report. As with Feasibility Studies, not all Technical Reports are alike. The Technical Report should be done by a licensed Professional Engineer (PE) on projects costing over $400,000 and peer-reviewed by another PE if the project costs more than $1.2 million. Again, USDA provides specific sections to be addressed in the report including (A) Qualifications of the Project Team, (B) Agreements and Permits, (C) Resource Assessment, (D) Design and Engineering, (E) Project Development, (F) Equipment Procurement and Installation and (G) Operations and Maintenance.

Financials. Financial information includes historical financial statements – preferably the past 3 years, current balance sheet and income statement – within 90 days of the application submission, and pro forma financial statements that reflect the use of the grant award plus three (3) additional years.

Prior Experience with Grants and Loans. USDA wants to ensure that the applicant has the experience and capability to be a good steward of federal funds. Recent changes to regulations in federal grant administration stress the need for internal controls to reduce the risk of fraud. Be sure to address the experience company management or your operation consultants have in this area.

Under REAP, you can seek grants, loans or a combination of a grant/loan. A loan cannot exceed 75% of the eligible project costs and the percentage of guarantee is dependent upon the amount of the loan, but will not exceed 80 percent of the total eligible project costs, i.e. 70 percent for loans greater than $5 million up to and including $10 million.   Loans are processed through any Federal or State chartered bank, Farm Credit Bank, other Farm Credit system institution with direct lending authority, and Bank for Cooperatives. Credit unions may also be eligible lenders if they are subject to credit examination and supervision by either the National Credit Union Administration or a State agency. USDA’s application for loan guarantee requires that the lender completes Part B which includes detailed information on collateral available for the loan and an itemized budget identifying the borrower’s contribution, loan amounts and other funds making up the project costs.

Both the REAP loans and grants require extensive and time-consuming work. Reading through USDA’s regulations can be exasperating, however, I’ve found that the State USDA offices are extremely helpful in providing assistance on interpreting the legalese. Experienced consultants such as those who work with Lee Enterprises can also help with putting together grant and loan packages that are thorough and competitive.

About the Author: Mindy Lee Collier, has written successful USDA REAP grants biomass facilities and solar. She provides expertise in identifying and obtaining financial assistance and ensuring compliance with governmental regulations.

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