---
kind: "section"
citation: "42 U.S.C. § 7651o"
title: "42"
title_heading: "The Public Health and Welfare"
number: "7651o"
heading: "Contingency guarantee, auctions, reserve"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/7651o"
units:
  - "Chapter 85 — Air Pollution Prevention and Control"
  - "Subchapter IV–A — Acid Deposition Control"
---

# §7651o. Contingency guarantee, auctions, reserve

- (a) **Definitions—** For purposes of this section—
  - (1) The term “independent power producer” means any [person](/usc/42/7602.md?p=e) who owns or operates, in whole or in part, one or more new independent power production facilities.
  - (2) The term “new independent power production facility” means a facility that—
    - (A) is used for the generation of electric energy, 80 percent or more of which is sold at wholesale;
    - (B) is nonrecourse [project](/usc/42/13641.md?p=2)-financed (as such term is defined by the [Secretary](/usc/42/242q–4.md?p=2) of Energy within 3 months of November 15, 1990);
    - (C) does not [generate](/usc/42/2021b.md?p=8) electric energy sold to any affiliate (as defined in section 79b(a)(11)[^1] of title 15) of the facility’s [owner](/usc/42/13641.md?p=4) or operator unless the [owner](/usc/42/13641.md?p=4) or operator of the facility demonstrates that it cannot obtain [allowances](/usc/42/7651a.md?p=3) from the affiliate; and
    - (D) is a [new unit](/usc/42/7651a.md?p=10) required to hold [allowances](/usc/42/7651a.md?p=3) under this subchapter.
  - (3) The term “required [allowances](/usc/42/7651a.md?p=3)” means the [allowances](/usc/42/7651a.md?p=3) required to operate such [unit](/usc/42/7651a.md?p=15) for so much of the [unit](/usc/42/7651a.md?p=15)’s useful life as occurs after January 1, 2000.
- (b) **Special reserve of allowances—** Within 36 months after November 15, 1990, the [Administrator](/usc/42/7602.md?p=a) shall promulgate regulations establishing a Special [Allowance](/usc/42/7651a.md?p=3) [Reserve](/usc/42/7651a.md?p=13) containing [allowances](/usc/42/7651a.md?p=3) to be sold under this section. For purposes of establishing the Special [Allowance](/usc/42/7651a.md?p=3) [Reserve](/usc/42/7651a.md?p=13), the [Administrator](/usc/42/7602.md?p=a) shall withhold—
  - (1) 2.8 percent of the [allocation](/usc/42/2021b.md?p=2) of [allowances](/usc/42/7651a.md?p=3) for each year from 1995 through 1999 inclusive; and
  - (2) 2.8 percent of the basic Phase II [allowance](/usc/42/7651a.md?p=3) [allocation](/usc/42/2021b.md?p=2) of [allowances](/usc/42/7651a.md?p=3) for each year beginning in the year 2000

  which would (but for this subsection) be issued for each [affected unit](/usc/42/7651a.md?p=2) at an [affected source](/usc/42/7651a.md?p=1). The [Administrator](/usc/42/7602.md?p=a) shall record such withholding for purposes of transferring the proceeds of the [allowance](/usc/42/7651a.md?p=3) sales under this subsection. The [allowances](/usc/42/7651a.md?p=3) so withheld shall be deposited in the [Reserve](/usc/42/7651a.md?p=13) under this section.

- (c) **Direct sale at $1,500 per ton—**
  - (1) **Subaccount for direct sales—** In accordance with regulations under this section, the [Administrator](/usc/42/7602.md?p=a) shall establish a Direct Sale Subaccount in the Special [Allowance](/usc/42/7651a.md?p=3) [Reserve](/usc/42/7651a.md?p=13) established under this section. The Direct Sale Subaccount shall contain [allowances](/usc/42/7651a.md?p=3) in the amount of 50,000 tons per year for each year beginning in the year 2000.
  - (2) **Sales—** [Allowances](/usc/42/7651a.md?p=3) in the subaccount shall be offered for direct sale to any [person](/usc/42/7602.md?p=e) at the times and in the amounts specified in table 1 at a price of $1,500 per [allowance](/usc/42/7651a.md?p=3), adjusted by the Consumer Price Index in the same manner as provided in [paragraph (3)](#c-3). Requests to purchase [allowances](/usc/42/7651a.md?p=3) from the Direct Sale Subaccount established under [paragraph (1)](#c-1) shall be approved in the order of receipt until no [allowances](/usc/42/7651a.md?p=3) remain in such subaccount, except that an opportunity to purchase such [allowances](/usc/42/7651a.md?p=3) shall be provided to the independent power producers referred to in this subsection before such [allowances](/usc/42/7651a.md?p=3) are offered to any other [person](/usc/42/7602.md?p=e). Each applicant shall be required to pay 50 percent of the total purchase price of the [allowances](/usc/42/7651a.md?p=3) within 6 months after the approval of the request to purchase. The remainder shall be paid on or before the transfer of the [allowances](/usc/42/7651a.md?p=3).

    | Table 1—Number of [Allowances](/usc/42/7651a.md?p=3) Available for Sale at $1,500 Per Ton |  |  |
    | --- | --- | --- |
    | Year of Sale | Spot Sale (same year) | Advance Sale |
    | 1993–1999 |  | 25,000 |
    | 2000 and after | 25,000 | 25,000 |
    | [Allowances](/usc/42/7651a.md?p=3) sold in the spot sale in any year are [allowances](/usc/42/7651a.md?p=3) which may only be used in that year (unless banked for use in a later year). [Allowances](/usc/42/7651a.md?p=3) sold in the advance sale in any year are [allowances](/usc/42/7651a.md?p=3) which may only be used in the 7th year after the year in which they are first offered for sale (unless banked for use in a later year). |  |  |

  - (3) **Entitlement to written guarantee—** Any independent power producer that submits an application to the [Administrator](/usc/42/7602.md?p=a) establishing that such independent power producer—
    - (A) proposes to construct a new independent power production facility for which [allowances](/usc/42/7651a.md?p=3) are required under this subchapter;
    - (B) will apply for financing to construct such facility after January 1, 1990, and before the date of the first auction under this section;
    - (C) has submitted to each [owner](/usc/42/13641.md?p=4) or operator of an [affected unit](/usc/42/7651a.md?p=2) listed in table A (in [section 7651c of this title](/usc/42/7651c.md)) a written offer to purchase the required [allowances](/usc/42/7651a.md?p=3) for $750 per ton; and
    - (D) has not received (within 180 days after submitting offers to purchase under [subparagraph (C)](#c-3-C)) an acceptance of the offer to purchase the required [allowances](/usc/42/7651a.md?p=3),

    shall, within 30 days after submission of such application, be entitled to receive the [Administrator](/usc/42/7602.md?p=a)’s written guarantee (subject to the eligibility requirements set forth in [paragraph (4)](#c-4)) that such required [allowances](/usc/42/7651a.md?p=3) will be made available for purchase from the Direct Sale Subaccount established under this subsection and at a guaranteed price. The guaranteed price at which such [allowances](/usc/42/7651a.md?p=3) shall be made available for purchase shall be $1,500 per ton, adjusted by the percentage, if any, by which the Consumer Price Index (as determined under [section 7661a(b)(3)(B)(v) of this title](/usc/42/7661a.md?p=b-3-B-v)) for the year in which the [allowance](/usc/42/7651a.md?p=3) is purchased exceeds the Consumer Price Index for the calendar year 1990.

  - (4) **Eligibility requirements—** The guarantee issued by the [Administrator](/usc/42/7602.md?p=a) under [paragraph (3)](#c-3) shall be subject to a demonstration by the independent power producer, satisfactory to the [Administrator](/usc/42/7602.md?p=a), that—
    - (A) the independent power producer has—
      - (i) made good faith efforts to purchase the required [allowances](/usc/42/7651a.md?p=3) from the [owners](/usc/42/13641.md?p=4) or operators of [affected units](/usc/42/7651a.md?p=2) to which [allowances](/usc/42/7651a.md?p=3) will be allocated, including efforts to purchase at annual auctions under this section, and from [industrial sources](/usc/42/7651a.md?p=24) that have elected to become [affected units](/usc/42/7651a.md?p=2) pursuant to [section 7651i of this title](/usc/42/7651i.md); and
      - (ii) such bids and efforts were unsuccessful in obtaining the required [allowances](/usc/42/7651a.md?p=3); and
    - (B) the independent power producer will continue to make good faith efforts to purchase the required [allowances](/usc/42/7651a.md?p=3) from the [owners](/usc/42/13641.md?p=4) or operators of [affected units](/usc/42/7651a.md?p=2) and from [industrial sources](/usc/42/7651a.md?p=24).
  - (5) **Issuance of guaranteed allowances from Direct Sale Subaccount under this section—** From the [allowances](/usc/42/7651a.md?p=3) available in the Direct Sale Subaccount established under this subsection, upon payment of the guaranteed price, the [Administrator](/usc/42/7602.md?p=a) shall issue to any [person](/usc/42/7602.md?p=e) exercising the right to purchase [allowances](/usc/42/7651a.md?p=3) pursuant to a guarantee under this subsection the [allowances](/usc/42/7651a.md?p=3) covered by such guarantee. [Persons](/usc/42/7602.md?p=e) to which guarantees under this subsection have been issued shall have the opportunity to purchase [allowances](/usc/42/7651a.md?p=3) pursuant to such guarantee from such subaccount before the [allowances](/usc/42/7651a.md?p=3) in such [reserve](/usc/42/7651a.md?p=13) are offered for sale to any other [person](/usc/42/7602.md?p=e).
  - (6) **Proceeds—** Notwithstanding [section 3302 of title 31](/usc/31/3302.md) or any other provision of law, the [Administrator](/usc/42/7602.md?p=a) shall require that the proceeds of any sale under this subsection be transferred, within 90 days after the sale, without charge, on a pro rata basis to the [owners](/usc/42/13641.md?p=4) or operators of the [affected units](/usc/42/7651a.md?p=2) from whom the [allowances](/usc/42/7651a.md?p=3) were withheld under [subsection (b)](#b) and that any unsold [allowances](/usc/42/7651a.md?p=3) be transferred to the Subaccount for Auction Sales established under [subsection (d)](#d). No proceeds of any sale under this subsection shall be held by any officer or employee of the United States or treated for any purpose as revenue to the United States or to the [Administrator](/usc/42/7602.md?p=a).
  - (7) **Termination of subaccount—** If the [Administrator](/usc/42/7602.md?p=a) determines that, during any period of 2 consecutive calendar years, less than 20 percent of the [allowances](/usc/42/7651a.md?p=3) available in the subaccount for direct sales established under this subsection have been purchased under this paragraph, the [Administrator](/usc/42/7602.md?p=a) shall terminate the subaccount and transfer such [allowances](/usc/42/7651a.md?p=3) to the Auction Subaccount under [subsection (d)](#d).
- (d) **Auction sales—**
  - (1) **Subaccount for auctions—** The [Administrator](/usc/42/7602.md?p=a) shall establish an Auction Subaccount in the Special [Reserve](/usc/42/7651a.md?p=13) established under this section. The Auction Subaccount shall contain [allowances](/usc/42/7651a.md?p=3) to be sold at auction under this section in the amount of 150,000 tons per year for each year from 1995 through 1999, inclusive and 250,000 tons per year for each year beginning in the calendar year 2000.
  - (2) **Annual auctions—** Commencing in 1993 and in each year thereafter, the [Administrator](/usc/42/7602.md?p=a) shall conduct auctions at which the [allowances](/usc/42/7651a.md?p=3) referred to in [paragraph (1)](#d-1) shall be offered for sale in accordance with regulations promulgated by the [Administrator](/usc/42/7602.md?p=a), in consultation with the [Secretary](/usc/42/242q–4.md?p=2) of the Treasury, within 12 months of November 15, 1990. The [allowances](/usc/42/7651a.md?p=3) referred to in [paragraph (1)](#d-1) shall be offered for sale at auction in the amounts specified in table 2. The auction shall be open to any [person](/usc/42/7602.md?p=e). A [person](/usc/42/7602.md?p=e) wishing to bid for such [allowances](/usc/42/7651a.md?p=3) shall submit (by a date set by the [Administrator](/usc/42/7602.md?p=a)) to the [Administrator](/usc/42/7602.md?p=a) (on a sealed bid schedule provided by the [Administrator](/usc/42/7602.md?p=a)) offers to purchase specified numbers of [allowances](/usc/42/7651a.md?p=3) at specified prices. Such regulations shall specify that the auctioned [allowances](/usc/42/7651a.md?p=3) shall be allocated and sold on the basis of bid price, starting with the highest-priced bid and continuing until all [allowances](/usc/42/7651a.md?p=3) for sale at such auction have been allocated. The regulations shall not permit that a minimum price be set for the purchase of withheld [allowances](/usc/42/7651a.md?p=3). [Allowances](/usc/42/7651a.md?p=3) purchased at the auction may be used for any purpose and at any time after the auction, subject to the provisions of this subchapter.

    | Table 2—Number of [Allowances](/usc/42/7651a.md?p=3) Available for Auction |  |  |
    | --- | --- | --- |
    | Year of Sale | Spot<br>Auction (same year) | Advance Auction |
    | 1993 | 50,000* | 100,000 |
    | 1994 | 50,000* | 100,000 |
    | 1995 | 50,000* | 100,000 |
    | 1996 | 150,000 | 100,000 |
    | 1997 | 150,000 | 100,000 |
    | 1998 | 150,000 | 100,000 |
    | 1999 | 150,000 | 100,000 |
    | 2000 and after | 100,000 | 100,000 |
    | [Allowances](/usc/42/7651a.md?p=3) sold in the spot sale in any year are [allowances](/usc/42/7651a.md?p=3) which may only be used in that year (unless banked for use in a later year), except as otherwise noted. [Allowances](/usc/42/7651a.md?p=3) sold in the advance auction in any year are [allowances](/usc/42/7651a.md?p=3) which may only be used in the 7th year after the year in which they are first offered for sale (unless banked for use in a later year). |  |  |
    | *Available for use only in 1995 (unless banked for use in a later year). |  |  |

  - (3) **Proceeds—**
    - (A) Notwithstanding [section 3302 of title 31](/usc/31/3302.md) or any other provision of law, within 90 days of receipt, the [Administrator](/usc/42/7602.md?p=a) shall transfer the proceeds from the auction under this section, on a pro rata basis, to the [owners](/usc/42/13641.md?p=4) or operators of the [affected units](/usc/42/7651a.md?p=2) at an [affected source](/usc/42/7651a.md?p=1) from whom [allowances](/usc/42/7651a.md?p=3) were withheld under [subsection (b)](#b). No funds transferred from a purchaser to a seller of [allowances](/usc/42/7651a.md?p=3) under this paragraph shall be held by any officer or employee of the United States or treated for any purpose as revenue to the United States or the [Administrator](/usc/42/7602.md?p=a).
    - (B) At the end of each year, any [allowances](/usc/42/7651a.md?p=3) offered for sale but not sold at the auction shall be returned without charge, on a pro rata basis, to the [owner](/usc/42/13641.md?p=4) or operator of the [affected units](/usc/42/7651a.md?p=2) from whose [allocation](/usc/42/2021b.md?p=2) the [allowances](/usc/42/7651a.md?p=3) were withheld.
  - (4) **Additional auction participants—** Any [person](/usc/42/7602.md?p=e) holding [allowances](/usc/42/7651a.md?p=3) or to whom [allowances](/usc/42/7651a.md?p=3) are allocated by the [Administrator](/usc/42/7602.md?p=a) may submit those [allowances](/usc/42/7651a.md?p=3) to the [Administrator](/usc/42/7602.md?p=a) to be offered for sale at auction under this subsection. The proceeds of any such sale shall be transferred at the time of sale by the purchaser to the [person](/usc/42/7602.md?p=e) submitting such [allowances](/usc/42/7651a.md?p=3) for sale. The holder of [allowances](/usc/42/7651a.md?p=3) offered for sale under this paragraph may specify a minimum sale price. Any [person](/usc/42/7602.md?p=e) may purchase [allowances](/usc/42/7651a.md?p=3) offered for auction under this paragraph. Such [allowances](/usc/42/7651a.md?p=3) shall be allocated and sold to purchasers on the basis of bid price after the auction under [paragraph (2)](#d-2) is complete. No funds transferred from a purchaser to a seller of [allowances](/usc/42/7651a.md?p=3) under this paragraph shall be held by any officer or employee of the United States or treated for any purpose as revenue to the United States or the [Administrator](/usc/42/7602.md?p=a).
  - (5) **Recording by EPA—** The [Administrator](/usc/42/7602.md?p=a) shall record and publicly report the nature, prices and results of each auction under this subsection, including the prices of successful bids, and shall record the transfers of [allowances](/usc/42/7651a.md?p=3) as a result of each auction in accordance with the requirements of this section. The transfer of [allowances](/usc/42/7651a.md?p=3) at such auction shall be recorded in accordance with the regulations promulgated by the [Administrator](/usc/42/7602.md?p=a) under this subchapter.
- (e) **Changes in sales, auctions, and withholding—** Pursuant to rulemaking after public notice and comment the [Administrator](/usc/42/7602.md?p=a) may at any time after the year 1998 (in the case of advance sales or advance auctions) and 2005 (in the case of spot sales or spot auctions) decrease the number of [allowances](/usc/42/7651a.md?p=3) withheld and sold under this section.
- (f) **Termination of auctions—** The [Administrator](/usc/42/7602.md?p=a) may terminate the withholding of [allowances](/usc/42/7651a.md?p=3) and the auction sales under this section if the [Administrator](/usc/42/7602.md?p=a) determines that, during any period of 3 consecutive calendar years after 2002, less than 20 percent of the [allowances](/usc/42/7651a.md?p=3) available in the auction subaccount have been purchased. Pursuant to regulations under this section, the [Administrator](/usc/42/7602.md?p=a) may by delegation or contract provide for the conduct of sales or auctions under the [Administrator](/usc/42/7602.md?p=a)’s supervision by other departments or [agencies](/usc/42/8262.md?p=1) of the United States Government or by nongovernmental [agencies](/usc/42/8262.md?p=1), groups, or organizations.

## Footnotes

[^1]: See References in Text note below.

## Source credit

(July 14, 1955, ch. 360, title IV, § 416, as added Pub. L. 101–549, title IV, § 401, Nov. 15, 1990, 104 Stat. 2626.)

## Notes

### Editorial Notes

### References in Text

Section 79b of title 15, referred to in subsec. (a)(2)(C), was repealed by Pub. L. 109–58, title XII, § 1263, Aug. 8, 2005, 119 Stat. 974. See section 16451(1) of this title.