[Federal Register Volume 71, Number 241 (Friday, December 15, 2006)]
[Rules and Regulations]
[Pages 75407-75409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21365]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 71, No. 241 / Friday, December 15, 2006 /
Rules and Regulations
[[Page 75407]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 123
RIN 3245-AF46
Disaster Relief to Small Business Concerns Damaged by Drought
AGENCY: Small Business Administration.
ACTION: Interim final rule with requests for comments.
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SUMMARY: The U.S. Small Business Administration (SBA) makes economic
injury disaster loans to small businesses that have been adversely
affected by specific disaster events. Recent legislation authorizes SBA
to make economic injury disaster loans when the disaster is (1) a
drought or (2) below average water levels in the Great Lakes or on any
body of water in the United States that supports commerce by small
business concerns. The legislation also specifically authorizes SBA to
provide economic injury disaster loan assistance to farm-related and
nonfarm-related small businesses adversely affected by disasters. SBA
is issuing an interim final rule because of the emergency nature of the
recent legislation.
DATES: Effective Date: This rule is effective January 16, 2007.
Comment Date: Comments must be received on or before January 16,
2007.
ADDRESSES: You may submit comments, identified by RIN 3245-AF46, by any
of the following methods: (1) Federal Rulemaking Portal: http://www.regulations.gov, following the specific instructions for submitting
comments; (2) FAX (202) 481-2226; or E-mail: [email protected];
or (3) Mail/Hand Delivery/Courier: Herbert L. Mitchell, Associate
Administrator for Disaster Assistance, 409 3rd Street, SW., Washington,
DC 20416.
FOR FURTHER INFORMATION CONTACT: Roger B. Garland, Office of Disaster
Assistance, 202-205-6734 or [email protected].
SUPPLEMENTARY INFORMATION: SBA is amending Part 123 of Title 13 of the
CFR to reflect the recent changes to the Small Business Act (Act)
contained in Pub. L. 109-163, enacted on January 6, 2006 (Legislation),
which broaden SBA's authority to make economic injury disaster loans
(EIDL) to otherwise eligible small businesses. The Legislation has no
effect on SBA's physical disaster loan program under which SBA has
authority to make loans to repair, rehabilitate or replace property
damaged or destroyed by a disaster.
SBA's EIDL financing is available to small businesses that have
suffered substantial economic injury as a direct result of a declared
disaster. A business incurs substantial economic injury if it is unable
to meet its obligations as they mature or it is unable to pay its
ordinary and necessary operating expenses. Neither loss of anticipated
profits nor a drop in sales is considered to be substantial economic
injury for EIDL purposes.
Disasters for which EIDL assistance only (not physical loan
assistance) is available can be declared in two ways--(1) the Secretary
of Agriculture (Secretary) can declare a natural disaster under 7
U.S.C. 1961, and (2) SBA can make an economic injury disaster
declaration based on a State Governor's certification that a minimum
number of small businesses in the State have suffered substantial
economic injury as a result of a disaster event. In both situations,
SBA does not make physical disaster loans. Before the Legislation, if a
disaster were declared, SBA would make EIDLs to eligible small
businesses that suffered economic injury as a direct result of the
disaster. In the case of any natural disaster (including a drought)
declared by the Secretary, eligible small businesses would include
farm-related small businesses, but would not include nonfarm-related
small businesses. SBA excluded nonfarm-related businesses from EIDL
assistance for natural disasters because the statutory authority which
authorizes the Secretary to declare a natural disaster is limited to
assisting farmers and ranchers (7 U.S.C. 1921 and 1961).
The Legislation amends sections 3(k) and 7(b)(2) of the Act (15
U.S.C. 632(k) and 636(b)(2)) to specify that: (1) Both farm-related and
nonfarm-related small businesses will henceforth be eligible for SBA
EIDL assistance regardless of the type of disaster; and (2) EIDL
assistance will be available for drought disasters and for disasters
triggered by below average water levels in the Great Lakes or on any
body of water in the United States that supports commerce by small
businesses. Although droughts may have been included in natural
disasters declared by the Secretary before the Legislation, they could
not be certified by a Governor of a State. Furthermore, this is the
first time that below-average-water-levels in bodies of water in the
United States may serve as the basis for a disaster declaration.
Accordingly, droughts and below-average-water-levels can now be
considered disasters for purposes of EIDL assistance when declared by
the Secretary or when declared by SBA based on the certification of a
Governor of a State. No physical disaster loans are authorized in such
events. Additionally, whether the disaster is drought or below average
water level, or another type of disaster event, SBA is authorized to
make EIDLs to affected farm-related and nonfarm-related small
businesses. SBA continues to be prohibited, however, from making any
type of disaster loan to agricultural enterprises, as defined in
section 18 of the Act (15 U.S.C. 647). The section of the Legislation
related to nonfarm-related small businesses small businesses will be
reflected as a revision to SBA's SOP 50-30, and will not be
incorporated in this rule.
Also under the Legislation, if a Governor of a State certifies to
SBA that a disaster exists which affects the minimum number of small
businesses, SBA has 30 days to respond in writing with its decision as
to whether it will make EIDLs to otherwise eligible small businesses,
and the reasons for such decision. In a House Committee Report issued
several years ago with respect to a drought relief bill similar to the
Legislation, Congress acknowledged that SBA has always had a good
response record, but it wanted to ensure the continuation of such a
record by placing a time frame in the law. See H. Rep. 107-230, 107th
Cong., 2d Sess. (2002). To implement the 30-day response requirement in
the Legislation, SBA is adding a sentence to section 123.3 which
provides that, after it receives a Governor's certification of a
disaster, it has an obligation to respond within 30
[[Page 75408]]
days with its decision and the underlying reasons.
The Small Business Act (15 U.S.C. 632(k)) defines a disaster to be
a sudden event. Because the Legislation defines disasters to include
events, specifically drought and below average water levels, that are
not sudden, SBA is adding, after the fourth sentence of section 123.2
of SBA's regulations, the following language:
For purposes of EIDL assistance only, the definition of a disaster
includes droughts and below average water levels in the Great Lakes or
on any body of water in the United States that supports commerce by
small business concerns.
SBA understands that there is no simple uniform quantitative
criterion for defining drought or water shortage impacts that works
well in all regions, seasons, and climates in the United States.
Accordingly, SBA wants to clarify that, when a Governor provides a
certification of a disaster based on a finding of drought, the
supplementary information accompanying the certification must include
findings which show that conditions during the incident period meet or
exceed the U.S. Drought Monitor (USDM) standard of ``severe''
(Intensity level D-2 to D-4). The USDM is updated weekly by the U.S.
Department of Commerce's National Oceanic and Atmospheric
Administration (NOAA), and is available at http://drought.unl.edu/dm/monitor. SBA will rely on the USDM to understand when a drought begins
and ends in specific parts of the country. With respect to below
average water levels, the supplementary information accompanying the
certification must include findings which establish long-term average
water levels based on recorded historical data, show that current water
levels are below long-term average levels, and demonstrate that
economic injury has occurred as a direct result of the low water
levels.
Justification for Publishing an Interim Final Rule
In general, SBA publishes a rule for public comment before issuing
a final rule, in accordance with the Administrative Procedure Act, 5
U.S.C. 553 and 13 CFR 101.108. The Administrative Procedure Act,
however, does provide an exception from the general rule where the
agency finds good cause to omit public participation. 5 U.S.C.
553(c)(3)(B). The good cause requirement is satisfied when prior public
participation can be shown to be impracticable, unnecessary, or
contrary to the public interest. Under such circumstances, an agency
may publish an interim final rule without soliciting public comment. In
addition, section 123.3 of SBA regulations states that SBA ``reserves
the right to change the rules in this part, without advance notice, by
publishing interim emergency regulations in the Federal Register.'' (13
CFR 123.1)
Since a disaster can strike at any moment it is critical that the
SBA has regulations in place that can respond quickly to assist those
affected by the disaster. Historically a disaster is defined to be a
sudden event, whereas drought and below average water levels do not
occur suddenly. The Legislation requires the SBA to treat a drought and
below average water levels as disasters and provide EIDL loans to both
farm related and non-farm related small business concerns. Accordingly,
SBA finds that good cause exists to publish this rule as an interim
final rule in light of the congressional intent and the need to make
economic injury disaster loans available to businesses that have
suffered economic injury, but that do not qualify under existing rules.
Advance solicitation of comments for this rulemaking would be
impracticable and contrary to the public interest, as it would delay
the delivery of critical assistance to these businesses. Any such delay
could be prejudicial to the affected businesses and contrary to the
legislative intent. It is likely that some could be forced to cease
operations before a rule could be enacted under standard notice and
comment rulemaking procedures.
Although this rule is being published as an interim final rule
pursuant to 5 U.S.C. 553(b)(3)(B), comments are solicited from
interested members of the public. These comments must be submitted on
or before January 16, 2007. SBA will then consider these comments and
the need for making any amendments raised by these comments.
Compliance With Executive Orders 13132, 12988 and 12866, the Regulatory
Flexibility Act (5 U.S.C. 601-612), and the Paperwork Reduction Act (44
U.S.C. Ch. 35)
The interim final rule will not have substantial direct effects on
the States, on the relationship between the national government and the
States, or the distribution of power and responsibilities among the
various levels of government. Therefore, for the purposes of Executive
Order 13132, SBA determines that this interim final rule has no
federalism implications warranting preparation of a federalism
assessment.
The Office of Management and Budget (OMB) has determined that this
rule constitutes a significant regulatory action under Executive Order
12866. The new legislation expands SBA's definition of disaster, as
defined in Section 3(k) of the Small Business Act (15 U.S.C. 632), to
include drought and below average levels in the Great Lakes, or on any
body of water in the United States that supports commerce by small
business concerns.
Baseline Costs: SBA is unable to estimate the exact costs
associated with including EIDL assistance loans for droughts and below
average water level areas because the program is new and SBA has not
collected relevant information or statistics on drought and below
average water levels in the past. However SBA has been able to estimate
some costs related to the $9 million ceiling set forth in the
Legislation for certain EIDL assistance to non-farm related small
businesses, which information is provided below. Other drought and low
water assistance has no funding ceiling, and so without further data
SBA is unable to analyze the costs related to such assistance.
Therefore SBA is asking for public comments and any information related
to the cost, benefits and distributional effects of this rule.
The Legislation authorizes a maximum of $9 million for each of four
years (2005-2008) to provide EIDL assistance to nonfarm-related small
business concerns for economic injury caused by drought. Using a
subsidy rate of 14.64%, program outlays would be estimated at a maximum
of $61.5 million annually. An analysis of EIDL loans approved from 2001
to 2006 shows an average loan size of approximately $150,000. Given the
maximum annual program outlay, this would result in loans to
approximately 410 nonfarm-related small businesses per year.
The change would result in minimal additional overhead costs,
limited to the marginal costs of making an additional standard EIDL.
Because the change is limited to expansion of eligibility for the
current loan program, there are few implementation costs not already
incurred under the normal course of business.
The disaster loan program has been evaluated under the Program
Assessment Rating Tool (PART). The results of the fiscal 2004
evaluation resulted in an assessment that the Disaster Loan Program was
EFFECTIVE.
Alternatives: The legislative change is mandatory and specific in
its amendment of the Act's definition of disaster (Section 3(k)), to
add drought and below average water levels in the Great Lakes or any
body of water in the U.S. that supports commerce by small
[[Page 75409]]
business. As a result of the Legislation, there are no significant
implementation alternatives.
Best Available Means to Reach Objectives: Since the legislative
language is specific with respect to changing the definition of
disaster, the best available means to comply with the Legislation is to
make the changes using standard operating procedures presently in
effect.
This action meets applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
SBA has determined that this interim final rule does not impose
additional reporting or recordkeeping requirements under the Paperwork
Reduction Act, 44 U.S.C., Chapter 35. The Governor's request is already
approved by the Office of Management and Budget as an informal
collection, OMB Control Number 3245-0121.
Because the rule is an interim final rule, there is no requirement
for SBA to prepare an Initial Regulatory Flexibility Act (IRFA)
analysis. The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires
administrative agencies to consider the effect of their actions on
small entities, small non-profit businesses, and small local
governments. Pursuant to the RFA, when an agency issues a rule, the
agency must prepare an IRFA which describes whether the impact of the
rule will have a significant economic impact on a substantial number of
small entities. However, the RFA requires analysis of a rule only where
notice and comment rulemaking are required. Rules are exempt from
Administrative Procedure Act (APA) notice and comment requirements and
therefore from the RFA requirements when the agency for good cause
finds (and incorporates the finding and a brief statement of reasons in
the rules issued) that notice and public procedure thereon is
impracticable, unnecessary, or contrary to the public interest. In this
case it would be contrary to the public interest to delay the
promulgation of the rule.
List of Subjects in 13 CFR Part 123
Disaster assistance, Loan programs--business, Small businesses.
0
For the reasons set forth in the preamble, SBA amends part 123 of title
13 of the Code of Federal Regulations as follows:
PART 123--DISASTER LOAN PROGRAM
0
1. The authority citation for part 123 continues to read as follows:
Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c); Pub. L. 102-395,
106 Stat. 1828, 1864; and Pub. L. 103-75, 107 Stat. 739; and Pub. L.
106-50, 113 Stat. 245.
0
2. Amend Sec. 123.2 by adding, after the fourth sentence, new
sentences to read as follows:
Sec. 123.2 What are disaster loans and disaster declarations?
* * * However, for purposes of economic injury disaster loans only,
they do include droughts and below average water levels in the Great
Lakes or on any body of water in the United States that supports
commerce by small businesses. * * *
0
3. Amend Sec. 123.3(a)(5) by adding sentences at the end to read as
follows:
Sec. 123.3 How are disaster declarations made?
(a) * * *
(5) * * * When a Governor certifies with respect to a drought or to
below average water levels, the supporting documentation must include
findings which show that conditions during the incident period meet or
exceed the U.S. Drought Monitor (USDM) standard of ``severe''
(Intensity level D-2 to D-4). The USDM may be found at http://drought.unl.edu/dm/monitor. With respect to below average water levels,
the supplementary information accompanying the certification must
include findings which establish long-term average water levels based
on recorded historical data, show that current water levels are below
long-term average levels, and demonstrate that economic injury has
occurred as a direct result of the low water levels. Not later than 30
days after SBA receives a certification by a Governor, it shall respond
in writing with its decision and its reasons.
* * * * *
Dated: December 8, 2006.
Steven C. Preston,
Administrator.
[FR Doc. E6-21365 Filed 12-14-06; 8:45 am]
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