Here's the latest piece from the CGC outlining a potential Energy Independence Trust (EIT):

Summary of Energy Independence Trust Legislation

 

Set forth below is a summary of recommendations on the formation of an Energy Independence Trust (“EIT”).

Charter, Purpose and Ownership.  The legislation would authorize the establishment of a federally chartered clean energy financing institution, the EIT.  The purpose of EIT would be to:  (i) create sustainable electricity generation and efficient consumption of electricity by providing financing support for the near-term and wide-scale deployment of commercially ready clean energy technologies; (ii) rebuild, on a sustainable basis, the economy of Gulf states affected by the oil spill, and to extend that effort to the economy of all states; and (iii) catalyze new private sector investment in the Gulf states in the short term, and in the nation over the long term.  It is contemplated that EIT would not have equity owners.

Lending Activity.  The EIT would provide financing support, including direct loans and loan guarantees, to clean energy projects subject to the following criteria:

·        Maximum Financing Support Per Project. The EIT would not provide more than $500 million in financing support to any one project.

·        Clean Energy Projects Defined.  The authorizing legislation would establish which projects are clean energy projects eligible for EIT financing support (e.g., renewable energy, energy efficiency, clean energy job training, and oil consumption reduction projects).

·        State Clean Energy Financing Institutions (“CEFIs”).  In addition to financing clean energy projects, the EIT would also provide direct and indirect financing support to state CEFIs (discussed below), which would in turn finance clean energy projects in accordance with the authorizing legislation for the EIT. 

·        Focus on the Gulf Coast region affected by the oil spill. The authorizing legislation would establish an appropriate minimum allocation of near-term EIT financing support for clean energy projects in the Gulf Coast Region.  For example, the first $__ million or __% of financing support activity taking place within the first __ year(s) of the existence of the EIT could be devoted to economic recovery efforts in the Gulf Coast region through financing support for clean energy projects in the region either directly or through financing support provided to state CEFIs in the region. 

·        Credit Subsidy Cost. In order to remain budget neutral, legislation creating the EIT should be written so that the “credit subsidy cost” associated with the default risk for clean energy project loans provided or guaranteed by EIT are covered by the eventual borrower, rather than the federal government.

Source of Funding.  Potential sources of funding for the EIT may include the following:

·        BP Fines. A percentage of the fines paid by BP should be allocated to capitalize the EIT. These fines would not be drawn from any compensation paid to residents or other compensatory monies.

·        Supplemental Environmental Project. Congress could pass legislation that enables BP to pay its fines mandated by law into a “Supplemental Environmental Project (“SEP”),” with payment by BP of $50 million into the EIT qualifying as an “SEP” payment, satisfying partial requirements of payment of the fines that are meted out to BP by the Department of Justice according to existing statutes.

·         Borrowing from the government. The Department of Treasury may make loans available to the EIT up to an aggregate total amount of $10 billion. The loans would provide for an annual fee to the Treasury in addition to interest payments that would be sufficient to pay any credit costs to the United States under the Federal Credit Reform Act of 1990.

·        Individuals, corporations, and foundations. The EIT may receive charitable gifts, grants, contributions as well as loans from individuals, corporations, and philanthropic foundations.

·        New Markets Tax Credits.  The EIT may raise capital through issuing its own bonds and/or notes, including tax-exempt bond offerings and small denomination “green bonds” that consumers could purchase on a retail basis.  EIT could also borrow from commercial lenders.

·        CDFI Fund.  The EIT would seek to qualify as a community development financial institution (“CDFI”) and to be eligible for funding from the CDFI Fund.  As a CDFI, the EIT would be eligible to receive discount loans from banks seeking to meet their Community Reinvestment Act obligations. The EIT would be treated as a qualified community development entity for purposes of Section 45D and Section 1400N(m) of the Code

·        Loan Paybacks. Once the EIT is capitalized and begins its clean energy financing support activities, the EIT would receive monies for its financing support, such as a return of and on its direct loans, and through partnering with other investors.  For example, the EIT may provide loans to leverage and otherwise catalyze equity investments in clean energy projects. 

·        Carbon Emission Reduction Credits.  In the event that a market for carbon emission credits emerges, EIT could participate as a credit supplier using credits earned from its clean energy financing projects.

The EIT would not be funded initially through federal appropriations (although appropriations to the EIT would not be precluded), and the EIT’s lending activity would not be backed explicitly or implicitly by the full faith and credit of the U.S. Government.  

 

Features of the EIT

Legal Status.  TheEIT would be created under Title 36 of the United States Code as a “patriotic organization” similar to the American Red Cross and would have all the powers of a nonprofit corporation incorporated under the laws of the District of Columbia.  As a patriotic organization, EIT would be an independent legal entity from the U.S. government—it would not be an agency of the U.S. government. Because EIT would not take deposits, EIT would not be a “bank” as defined in the National Bank Act or other federal banking statutes.  All income and property of EIT would be expressly exempt from federal, state and local taxation.  It is contemplated that EIT would apply to the IRS for status as a charitable organization under section 501(c)(3) of the Internal Revenue Code.  As a section 501(c)(3) organization, the EIT would be eligible to receive tax-deductible donations from individuals and grants from foundations.  As a section 501(c)(3) organization incorporated in the District of Columbia, the EIT would also be entitled to issue tax-exempt bonds, for example, through the D.C. Revenue Bond Program.

Powers.  EIT would have customary corporate powers, including without limitation: (i) the power to adopt bylaws, (ii) lease and own real property, (iii) accept gifts or donations of property or services, (iv) obtain grants, (v) make contracts with private and public persons, companies, agencies, organizations and institutions and (vi) partner with other persons, banks or lending institutions in providing financing support for clean energy projects.  EIT would have powers to make loans and provide guarantees and other types of financing support for clean energy projects.  EIT would have the power to conduct business in any state without regard to any state law qualification requirements.

State Clean Energy Financing Institutions (“CEFIs”).  Under the authorizing legislation, states would be entitled to establish or designate their own green financing institutions or state CEFIs which could receive direct and indirect financing support from the EIT.  The legislation would establish criteria for federal certification of state CEFIs, including the scope of clean energy projects eligible for financing support and the state CEFI underwriting requirements.  Preexisting state clean energy financing institutions, including revolving loan programs and clean energy funds, would be eligible for certification as a state CEFI provided that they use the financing support provided by the EIT in accordance with the terms of the authorizing legislation for the EIT.  States would be invited, but not required, to create their own state CEFIs (though a large number of states have existing institutions or programs that potentially could be state CEFIs).

Offices.  EIT would maintain its principal office in the D.C. metropolitan area and would establish other offices in other places as necessary or appropriate for its business.

Board of Directors.  The initial Board of Directors (the “Board”) would be selected by the President.  Thereafter, the Board would be self-perpetuating, electing its succeeding directors.  The Directors would have staggered terms [3/5 years].  The CEO would be a member of the Board and entitled to vote on all matters.  Candidates for the Board would need to meet certain criteria including, but not limited to: U.S. citizenship, specified independence criteria, experience representing diverse industries such as management consulting, law, banking, financial services, energy, manufacturing or transportation sectors, technology assessment, or risk management and representation of consumers.  Additionally, at least one director should be from a nonprofit involved in one of the industries described above, or otherwise be experienced in the management of nonprofit corporations.  The duties and powers of the Board would be consistent with those of a private lending institution.  Directors would be compensated consistent with compensation paid to directors or similarly situated private lending institution.  The Board would develop and comply with appropriate corporate governance policies and practices.

Meetings of the Board shall be open to the public under such terms and exceptions set forth herein.  The Board and any committee may hold closed sessions to consider, among other things, matters relating to individual employees, proprietary information, litigation, and other matters involving confidential advice of counsel, confidential information obtained from others and other matters when disclosure would be premature.

Officers and Employees.  EIT would have a CEO, selected by the President with the advice and consent of the Senate, for a seven year term.  Additional officer positions would be determined and filled by the Board.  Officers would be compensated at prevailing rates for similarly situated entities as determined in the manner established by the Board.  EIT employees would not be federal employees and compensation would be set in the manner determined by the Board.

Advisory Councils/Committees/Advisors.  The Board would have the authority to establish advisory councils, committees and to retain advisors as it deems necessary and useful.

Periodic Reporting and Audits.  EIT would have annual audited financial statements prepared by an independent accounting firm in accordance with generally accepted accounting principles.  The financial transactions of EIT for any fiscal year during which federal funds are available to finance any portion of its operations may be audited by the Governmental Accountability Office, and a report of each such audit shall be made by the Comptroller General to the Congress and furnished to the President, the Secretary of [the Department of Energy/Treasury] and to EIT at the time submitted to Congress.

            Miscellaneous.  EIT may not contribute to or otherwise support any political party or candidates for elected public office.  Equal opportunity in employment shall be afforded to all persons by EIT in accordance with the equal employment opportunity regulations of the Department of Energy.  Nothing contained in the legislation shall authorize any department, agency, officer or employee of the United States to exercise any direction, supervisions, or control over EIT or of its borrowers or guarantors or over the charter or bylaws of EIT.

-Posted by Alex Kragie