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New State Legislation Increases Funding, Availability and Scope for Green Energy Bonds in Illinois

The State of Illinois recently passed legislation granting the Illinois Finance Authority (IFA) the power to issue up to $3 billion of bonds (up to $450 million for a single project) to help finance the construction of energy efficiency, renewable energy and clean coal projects in Illinois. Effective January 1, 2010, Public Law 96-817 will provide entities seeking to undertake qualifying projects with a substantial source of state-guaranteed bonds to help finance such projects. While bonding authority for clean coal and renewable energy projects has existed in the state since 2001, the new legislation addresses security concerns that should better allow the issuance and use of these green energy bonds.

Eligible projects include, but are not limited to:

• "energy efficiency projects" that reduce the amount of electricity or natural gas required to achieve a given end use
• carbon abatement, storage and sequestration projects at existing electric generating facilities
• transmission lines and associated equipment that transfer electricity for clean coal and renewable energy projects
• projects associated with the installation of sulfur dioxide scrubber technology
• renewable energy projects that utilize renewable energy resources such as wind, solar, biodiesel and biomass, and projects that improve the production of renewable fuels

Unlike the prior programs, the inclusion of the energy efficiency project bonds broadens the use of these bonds so that more traditional manufacturing and commercial entities may be eligible for funding to help finance the change-out of inefficient equipment, the upgrade of windows, roofs, lighting and heating equipment, and numerous other energy efficiency projects.

Entities that wish to receive green energy bonds must submit a formal application to the IFA as part of a six phase transaction review and approval process. The legislation does not specify a deadline for applications. All projects must satisfy certain risk asset acceptance criteria and minimum threshold requirements. These conditions require, among other things, demonstration that the technology is viable or feasible, that proper capitalization and financing exists as well as a predictable source of debt repayment, and that the appropriate zoning and environmental permitting will be completed within 18 months of project approval. A more detailed explanation of the application process is available at
http://www.il-fa.com/energy/energy_guidlines_090909.pdf.

The full text of the green energy bond public law (Public Law 96-817) is available at
http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=096-0817.

Additional information on the IFA's energy efficiency, renewable energy and clean coal project bonds can be found http://www.il-fa.com/energy/.

RECENT ENVIRONMENTAL PUBLICATIONS

"U.S. EPA Continues Its Pursuit Of Greenhouse Gas Regulation" Environmental Update (October 30, 2009)
"Greenhouse Gas Emissions a Nuisance, Yes or No?" Environmental Update (October 23, 2009)
"USEPA Tightens Emissions Standards for Coal Preparation Plants and Processing Facilities," Environmental Update (October 13, 2009)
"Greenhouse Gas Emissions a Nuisance? Second Circuit Rules Utilities Subject to Carbon Emissions Suit," Environmental Update (September 23, 2009)
"U.S. EPA issues Mandatory Greenhouse Gas Reporting Final Rule," Environmental Update (September 22, 2009)

ABOUT SCHIFF HARDIN LLP

Schiff Hardin's diverse environmental practice advises clients engaged in a wide variety of industries and commercial endeavors such as electric generation, natural gas distribution and production, chemical manufacturing, auto and auto parts manufacturing, consumer goods manufacturing, real estate development and investments by financial institutions and equity investors.