The DOE Loan Programs Office (LPO) wants to ensure that the projects it helps to finance are subject to a comprehensive environmental review and address community issues, so that all parties can work to create a stronger, more resilient community in the energy transition. To ensure that major federal actions, including federal financial assistance, address these related issues proactively, President Richard Nixon signed the National Environmental Policy Act (NEPA) into law in 1970.  

NEPA was the first major environmental law that required federal agencies to assess the environmental effects of proposed major federal action prior to making decisions. All projects receiving LPO loans and loan guarantees are subject to a NEPA review, which involves a full analysis of a project’s potential environmental and socioeconomic impacts and is a required step in LPO’s comprehensive due diligence process. The NEPA process is integral to LPO’s review of applications and ensures that LPO considers the environmental impact of its action (providing a federal loan or loan guarantee) in its decision-making process. 

"Due diligence'' is a broad term that may include anything from a robust examination of the technology and the specific target market, to an analysis of the financial model and plan for the project. LPO engages in due diligence throughout the review process, beginning before conditional commitment all the way through financial close.   

The project also undergoes detailed legal, market, and environmental reviews, including an environmental review pursuant to NEPA, and associated regulatory agency consultations in accordance with the Endangered Species Act and National Historic Preservation Act. Additional reviews include Davis-Bacon labor requirements, and other state and local laws and regulations. It is during this work that LPO’s deal team engages outside consultants and advisors with specialized expertise relevant to the project to assist with the transaction. 

The due diligence process may take several months to complete, and it is through this process that LPO identifies clear conditions that must be met prior to closing and funding a given transaction. Specifically, LPO does not close on loans prior to the satisfactory completion of:  

  • The environmental review pursuant to NEPA. (Even though LPO may still be able to issue a conditional commitment if the NEPA process has been initiated, satisfactory completion is a required condition to financial close.) 
  • A community workforce and Justice40 evaluation of the project.  
  • Associated consultations with relevant project stakeholders as needed, including affected federal, state, and local agencies; and tribal communities.  
  • The applicant’s commitment to allowing LPO to monitor the site (for example, to verify that all permitting process requirements have been met prior to reaching financial close). 

Navigating the NEPA Review

LPO’s Environmental Compliance (EC) team members work with applicants to complete the NEPA review and associated regulatory agency consultations for the project, and they coordinate internally with the LPO deal team. Based on the characteristics and scope of the project, the level of NEPA review may fall within an established Categorical Exclusion, or it may require the preparation of an Environmental Assessment or an Environmental Impact Statement: 

  • Categorical Exclusions (CX) (40 CFR 1501.4) – Categories of actions that normally do not have a significant effect on the human environment, and therefore do not require preparation of an environmental assessment or environmental impact statement. 
  • Environmental Assessments (EA) (40 CFR 1501.5) – Shall briefly provide sufficient evidence and analysis for determining whether to prepare an environmental impact statement or a finding of no significant impact (FONSI). 
  • Environmental Impact Statements (EIS) (40 CFR 1502) – Shall provide full and fair discussion of significant environmental impacts and shall inform decision makers and the public of reasonable alternatives that would avoid or minimize adverse impacts or enhance the quality of the human environment. Agencies shall focus on significant environmental issues and alternatives and shall reduce paperwork and the accumulation of extraneous background data. Statements shall be concise, clear, and to the point, and shall be supported by evidence that the agency has made the necessary environmental analyses. 

After reviewing the application information, the EC team also engages in discussions with the applicant to: 

  • Fully understand the scope and siting of the project and obtain any missing or incomplete environmental information as required in the application. 
  • Identify the appropriate level of environmental review as described above (i.e., CX, EA, or EIS).  
  • Identify other federal agency involvement in the project and relevant permits, consultations, and/or approvals that may be applicable (e.g., Clean Water Act - Section 404 wetland permits; Clean Air Act – Title V air emission permits; Consultations and Approvals pursuant to Section 7 of the Endangered Species Act, or Section 106 of the National Historic Preservation Act). 
  • Explain that if the level of environmental review will be an EA or an EIS, LPO will notify the State NEPA Clearinghouse point of contact – as well as potentially interested, federally recognized Native American tribes of LPO federal action – and will engage with state and tribes in the NEPA process. 
  • Advise applicants that incomplete or insufficient information can prolong the environmental review process. 

Learn More

These frequently asked questions and answers further explain the LPO NEPA process, the review of environmental and socioeconomic impacts, and how the NEPA process informs DOE’s decision on whether to issue a loan or loan guarantee for a project.  

Available opportunities for public comment on environmental actions for related applications can be found here

For additional clarification about the NEPA process, request a pre-application consultation by emailing LPO@hq.doe.gov. During these consultations, LPO can also work with potential applicants to determine whether their project may be eligible for a loan or loan guarantee. 

 

Jigar Shah
Director of the Loan Programs Office
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