The recently enacted American Recovery and Reinvestment Act of 2009 provides for $3.2 billion in grants to qualifying local government entities, states and Indian tribes under the previously unfunded Energy Efficiency and Conservation Block Grant Program (the “Program”). Qualifying local government entities, states and Indian tribes can apply for and receive grants under the Program for projects relating to energy efficiency, sustainable development and conservation. The Department of Energy (DOE) will distribute funds, determine project eligibility and oversee the Program.

The Program is intended to assist qualifying local government entities, states and Indian tribes in the implementation of qualifying projects to (a) decrease fossil fuel emissions created as a result of activities in their jurisdiction, (b) reduce total energy use of the local, state or tribal entity, and (c) improve the overall energy efficiency of their community.

Eligible Government Entities and Available Funds

The DOE is currently drafting, and is expected to publish on March 6, 2008, a proposed rulemaking detailing the formulas to determine how Program funds will be further allocated between qualifying city and county entities within each category. We anticipate that the DOE will propose a funding formula similar to that utilized in the Community Development Block Grant program administered by the U.S. Department of Housing and Urban Development. Set forth below are the top-tier allocations mandated by the statute authorizing the Program, 42 U.S.C. §§ 17151-17158.

City and County Governments. The DOE will allocate $1.9 billion of funds to qualifying local government entities for qualifying projects. The Program’s funds are available to two overlapping categories of local government entities, which Congress has termed “Alternative 1” and “Alternative 2” entities. Congress allocated approximately $952 million of funds under the Program to be distributed among the cities and counties in each category. The categories’ requirements for qualifying city and county entities are outlined below.

Qualifying City and County Governments under the Program

To view the table click here.

State Governments. The DOE will allocate approximately $784 million to the states under the Program. Each state, the District of Columbia, Puerto Rico and United States’ territory and possession is eligible to receive approximately $9.8 million in program funds. DOE will distribute the remaining funds of approximately $254.8 million among the states according to population and other criteria being developed by the DOE.

Competitive Grants to Other Local Government Entities. The DOE will make available approximately $456 million for competitive grants under the Program to local governmental entities that would not otherwise be eligible to receive funds under the Program. These funds will be distributed on a competitive basis according to criteria to be determined by the DOE.

Qualifying Projects

Subject to certain limits, qualifying local government entities, states and Indian tribes may use grant funds for the purposes of, among other things:

  • Development of Energy Strategies. Development and implementation of an energy efficiency and conservation strategy, including the retention of consultant services to assist in the development of such strategy.
  • Projects that Reduce and Capture Landfill Gases. The purchase and implementation of technologies to reduce, capture and, to the maximum extent practicable, use methane and other greenhouse gases generated by landfills or similar sources.
  • Implementation of Renewable Energy Technology. Development, implementation and installation of onsite renewable energy technology that generates electricity from renewable resources, including (A) solar energy, (B) wind energy, (C) fuel cells and (D) biomass.
  • Transportation Initiatives. Development and implementation of programs to conserve energy used in transportation, including (A) use of flex time by employers; (B) satellite work centers; (C) development and promotion of zoning guidelines or requirements that promote energy efficient development; (D) development of infrastructure, such as bike lanes and pathways and pedestrian walkways; (E) synchronization of traffic signals; and (F) other measures that increase energy efficiency and decrease energy consumption.
  • Facilities Efficiency Programs. Development and implementation of energy efficiency and conservation programs for buildings and facilities within the jurisdiction of the eligible entity, including (A) design and operation of the programs; (B) identifying the most effective methods for achieving maximum participation and efficiency rates; (C) public education; (D) measurement and verification protocols; and (E) identification of energy efficient technologies.
  • Development of Financial Incentives. Establishment of financial incentive programs for energy efficiency improvements.
  • Improved Energy Distribution. Application and implementation of energy distribution technologies that significantly increase energy efficiency, including (A) distributed resources and (B) district heating and cooling systems.

In addition to the projects above, a qualifying local government entity also may use (i) the greater of 10 percent of its grant funds or $75,000 for administrative expenses; (ii) the greater of 20 percent of its grant funds or $250,000 for the establishment of revolving loan funds; and (iii) the greater of 20 percent of its grant funds or $250,000 for the provision of subgrants to non-governmental organizations for the purposes of assisting in the implementation of the entity’s energy efficiency and conservation strategy. That strategy must be submitted to the DOE within one year after the date on which a qualifying local government entity receives grant funds.

Considerations for Cities, Counties and Non-Governmental Entities

  • Plan to Respond to Upcoming Notice of Proposed Rulemaking. Cities, counties and non-governmental entities who may benefit from projects authorized by the Program (e.g., contractors, consultants and project developers) should be prepared to comment upon DOE’s upcoming rulemaking, which is expected to be published in the Federal Register on March 6, 2009. This notice will likely detail the legal requirements and methodology DOE intends to use to allocate funds between cities and counties and the factors upon which Program funds will be granted to cities and counties. Commenting on the rule provides an opportunity to shape the parameters for implementation of the Program, to ensure the Program positively affects their community.
  • Develop Strategic and Project-based Initiatives. Cities and counties intending to apply for Program funds should begin developing a broad strategic energy efficiency and sustainability program, and should consider project-level initiatives and the extent to which these initiatives will produce high-value impact upon their communities.
  • Engage with Private Sector Experts. Cities, counties and non-governmental entities who may benefit from the Program should be prepared to engage outside experts specializing in renewable energy, project finance, carbon management, sustainable development and regulatory matters to understand and evaluate the short, medium and long-term legal, financial and environmental costs and benefits of using Program funds in the implementation of energy and efficiency initiatives.
  • Coordinate with Other Government Entities. Cities and counties should consider pursuing joint implementation initiatives under the Program, and should contact other government entities eligible to receive funds under the Program (including state governments) to devise and structure such initiatives. In doing so, municipal governments should be mindful of federal and state requirements relating to the transfer of funds among various government and private entities and the potential implications of such transfers on the joint implementation initiative.
  • Register for Funds. Cities and counties intending to apply for Program funds should ensure they are familiar with FedConnect, have acquired a federal DUNS number, have registered with the Federal Central Contractor Directory, and have registered their E-Business Point of Contact at FedConnect. These registrations are required for cities and counties applying for funding and, because registration can take up to three weeks to complete, cities and counties should, as soon as possible, confirm their registration is up-to-date.