[Federal Register: September 10, 2008 (Volume 73, Number 176)]
[Rules and Regulations]
[Page 52584-52591]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se08-6]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 35
[EPA-HQ-OW-2006-0765; FRL-8712-7]
RIN 2040-AE99
NPDES Voluntary Permit Fee Incentive for Clean Water Act Section
106 Grants; Allotment Formula
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: This final rule revises the allotment formula contained in
EPA's Clean Water Act (CWA) Section 106
[[Page 52585]]
Water Pollution Control grant regulations to include a financial
incentive for States to voluntarily collect adequate National Pollutant
Discharge Elimination System (NPDES) permit fees. EPA is amending its
existing CWA Section 106 grant allotment. This amendment provides the
Agency with the flexibility to annually allot separately an amount up
to three percent of the FY 2008 base funds allocated to States from CWA
Section 106 grants appropriated by Congress. This rule will begin in FY
2009. The incentive will not impact the FY 2008 base funds. It will be
set-aside for allotment only if funds allotted to the States are
greater than the amount allotted in FY 2008.
DATES: This rule is effective on September 10, 2008.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OW-2006-0765. All documents in the docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g. , CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is publicly available only in hard copy.
Publicly available docket materials are available either electronically
through www.regulations.gov or in hard copy at the Water Docket, EPA/
DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington, DC.
The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday
through Friday, excluding legal holidays. The telephone number for the
Public Reading Room is (202) 566-1744, and the telephone number for the
Water Docket is (202) 566-2426.
FOR FURTHER INFORMATION CONTACT: Robyn Delehanty, Office of Water,
Office of Wastewater Management, 4201M, U.S. Environmental Protection
Agency, 1200 Pennsylvania Avenue, NW., Washington, DC 20460; telephone
number: (202) 564-3880; fax number: (202) 501-2346; e-mail address:
delehanty.robyn@epa.gov.
SUPPLEMENTARY INFORMATION:
I. General Information
Affected Entities: State Agencies that are eligible to receive
grants under Section 106 of the Clean Water Act (CWA).
II. Background
Section 106 of the CWA authorizes the EPA to provide grants to
State and interstate agencies \1\ to administer programs for the
prevention, reduction, and elimination of water pollution, including
the development and implementation of groundwater protection
strategies. Section 106(b) of the CWA directs the EPA Administrator to
make allotments ``in accordance with regulations promulgated by him on
the basis of the extent of the pollution problem in the respective
States.'' EPA's regulations implementing Section 106 can be found at 40
CFR 35.160 et seq. EPA's current allotment formula for Section 106
grants includes an allotment ratio for each State based on six
components selected to reflect the extent of the water pollution
problem in the respective States. These six components are surface
water area, ground water use, water quality impairment, potential point
sources, nonpoint sources, and the population of urbanized areas. 40
CFR 35.162(b)(1)(i). By including a component related to point sources,
EPA recognizes the important role they play in determining the extent
of pollution in a State.
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\1\ CWA Sections 106 and 518 authorize EPA to award such grants
to eligible Indian Tribes, but this rule does not affect those
grants.
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EPA proposed this rule amending the CWA Section 106 allotment
formula on January 4, 2007 (72 FR 293) and requested comments from
interested parties. EPA received 717 comments on the proposed rule. A
summary of the significant public comments and the Agency's responses
are included in this preamble in Section III below. This preamble also
summarizes the two changes to the final rule which EPA determined
necessary. These changes involve delaying implementation of this rule
until FY 2009 and changing the base fiscal year which the Agency will
use to determine if an allotment for this purpose should be made. EPA's
responses to all comments received on this rulemaking are included in
the docket described above.
This final rule amends the State allotment formula to incorporate
financial incentives for States to implement adequate NPDES fee
programs. The Agency recognizes the importance of States' flexibility
in program management. Therefore, this final rule is purely an
incentive; it is voluntary and will not impact State's base funds. This
rule will only be invoked if there is an increase above the FY 2008
level in the total amount of funds allotted to States under 40 CFR
35.162(b).
The Clean Water Act prohibits the discharge of any pollutant from
point sources except in compliance with other provisions of the
statute. 33 U.S.C. 1311(a). One of these provisions is CWA Section 402,
under which pollutant discharges can be authorized by an NPDES permit.
33 U.S.C. 1342(a). EPA oversees the NPDES program and also approves
applications from States to administer and enforce the NPDES program in
those States. Currently, 45 States are authorized by EPA to administer
all or some parts of the NPDES program.
State water quality programs are funded with a mixture of State and
federal dollars. The growing complexity of water quality issues has
prompted more States to implement NPDES permit fee programs. An
estimated 41 States currently have permit fee programs in place, with
such fees paying for all or a portion of the cost of the State's permit
program.
A number of States still operate their permit programs with little
or no reliance on permit fees. States can address permit program budget
shortfalls through the implementation of permit fee programs that
collect funds to cover the cost of issuing and administering permits.
Funding permit programs with the support of permit fees allows States
to use CWA Section 106 funds for other critical water quality programs,
which address the prevention, reduction, and elimination of water
pollution.
EPA is committed to making State surface water protection programs
more sustainable through better resource management. As State agencies
carry out most of the day-to-day aspects of water quality functions,
their responsibilities are expanding while they are simultaneously
facing increasingly severe funding constraints. As a nation, billions
of federal funds under the Water Pollution Control grants, together
with State resources, have been spent to establish and maintain
adequate measures for the prevention and control of surface and
groundwater resources. Federal and State governments cannot carry out
this responsibility alone. EPA is committed to finding effective and
efficient solutions to maintaining sustainable State water pollution
control programs that continue to provide this nation with clean and
protected water. All levels of government and the private sector must
share in this commitment.
The purpose of this rule is to encourage States to voluntarily
collect NPDES permit fees adequate to meet their program costs. This
amendment to the allotment formula is designed to provide an incentive
for States to voluntarily move toward greater sustainability in the way
they manage
[[Page 52586]]
and budget for environmental programs and to shift part of the
financial burden to those who benefit from NPDES permits. No State is
required to collect permit fees under this rule. To ensure that no
States receive a reduction from their current allotment amount, no
funds will be set aside for this permit fee incentive unless funds
designated for distribution in FY 2009 and subsequent fiscal years
under 40 CFR 35.162(b) are greater than $171 million, which is the
amount of funds set aside under 40 CFR 35.162(b) in FY 2008. If 40 CFR
35.162(b) funds in FY 2009 or later fiscal years are not greater than
$171 million, then EPA will not be able to invoke the permit incentive.
This rule is intended to increase overall available funding for CWA 106
eligible activities.
The amount of any permit fee incentive allotment set-aside would be
limited to three percent of the funds allotted under 40 CFR 35.162(b)
in FY 2008, or $5.1 million. And, in order to ensure that the incentive
to each qualifying State is modest, the rule caps the maximum share of
the incentive at 50% of the amount a State received under 40 CFR
35.162(b) in the previous year. As a result of this rule, beginning in
FY 2009, EPA would allot the State and interstate CWA 106 grant funds
in the following order: 2.6 percent will be set aside for allotment to
the eligible interstate agencies in accordance with the existing
interstate allotment formula in 40 CFR 35.162(c); next, funds may be
allotted for specific water pollution control elements under 40 CFR
35.162(d); next, funds may be allotted to States in accordance with the
permit fee incentive allotment formula under 40 CFR 35.162(e), which
requires that ``there is an increase above the FY 2008 level in the
total amount of funds allotted to States under subsection (b)''; and
finally, the balance will be allotted to the States in accordance with
the existing allotment formula under 40 CFR 35.162(b).
The only States which will be eligible for this set-aside are those
States which have been authorized by EPA to implement the NPDES program
by the first day of the fiscal year, October 1, for which funds are
appropriated by Congress. Under this rule, these States must also
submit annually a certification to EPA (to the attention of the
Regional Administrator). For FY 2009, the certification must be
postmarked by November 14, 2008. For every year thereafter, the
required certification must be postmarked by October 1. The
certification must meet the following two requirements. First, the
certification must include the total NPDES State program costs, the
percentage of NPDES program costs recovered by the State through permit
fee collections during the most recently completed State fiscal year,
and a statement that the amount of permit fees collected is used by the
State to defray NPDES program costs. This rule defines NPDES program
costs as all activities relating to permitting, enforcement, and
compliance. Second, the certification must include a statement that
State recurrent expenditures for water quality programs have not
decreased from the previous State fiscal year, or indicate that a
decrease in such expenditures is attributable to a non-selective
reduction of the programs of all executive branch agencies of the State
government. The concept of non-selective reduction is derived from the
statutory requirements related to maintenance of effort from Clean Air
Act Section 105 grants and EPA's implementing regulations found at 40
CFR 35.146. Under the Clean Air Act, EPA is prohibited from awarding
grants to air pollution control agencies if State recurrent
expenditures are not at least equal to such expenditures during the
preceding State fiscal year. EPA can still award a grant even if there
are decreases in such expenditures if EPA determines that the reduction
is attributable to a non-selective reduction of all State programs.
This situation would occur, for example, when a State legislature
enacts budget cuts across all State agencies and does not target the
air program. EPA is adopting a similar approach in this rulemaking.
After EPA determines the number of eligible States which have met
the certification requirements, each State will be able to receive up
to a full share of the set-aside amount. EPA will determine the amount
of a full share by dividing the set-aside amount by the number of
eligible States which have met the certification requirements. A full
share will be the same amount for each State. The percent of a full
share that each State will receive, however, will be determined by the
following formula, based on the certification information described
above.
(A) A State will receive 25 percent of a full share if that State
has collected permit fees which equal or exceed 75 percent of total
State NPDES program costs; or
(B) A State will receive 50 percent of a full share if that State
has collected permit fees which equal or exceed 90 percent of total
State NPDES program costs; or
(C) A State will receive a full share if that State has collected
permit fees which equal 100 percent of total State NPDES program costs.
In other words, in its certification, a State must inform EPA of
its total NPDES program costs and the percentage of which are recovered
through permit fees. EPA would use the information from this
certification to determine any additional amount a State would receive
in its Section 106 grant based on this financial incentive allotment
formula. If, for example, there is an increase in Section 106 funding
of $5.1 million and EPA has verified that 5 States will qualify for the
Permit Fee Incentive, the first step would be to determine the value of
a full share. This would be calculated by dividing $5.1 million by 5
states with a full share equaling $1.02 million. Next, based on the
State's certification, the percent of fees collected will be used to
calculate the amount of the incentive for each qualifying state. For
example; State A collects 75% of their NPDES permit program costs,
State B collects 90%, State C collects 75%, State D collects 100%, and
State E collects 75%. Once again a full share equals $1.02 million.
State A will receive 1/4 of $1.02 million which calculates to be
$255,000. State B will receive 1/2 of $1.02 million or $510,000. State
C will receive 1/4 of $1.02 million or $255,000. State D will receive a
full share, $1.02 million and finally, State E will receive 1/4 of
$1.02 million or $255,000. A total incentive of $2,295,000 will be
distributed to the 5 States with a remaining balance of $2,805,000.
Since 100% of the incentive pool was not allotted per 40 CFR 35.162(f)
(e.g., because some or all qualifying States do not cover 100% of their
NPDES program costs with fees), then the remainder of the incentive
pool will be allotted per the formula under 40 CFR 35.162 (b). A more
simplified example would be if a State's total NPDES program costs are
$1 million, and the State collected $750,000 in NPDES permit fees, a
State would receive 25% of a full share in addition to the grant amount
allotted to it under the current CWA Section 106 allotment formula. It
should be noted that the rule caps the maximum share of the incentive
at 50% of the amount a State received under 40 CFR 35.162(b) in the
previous year. States receiving the incentive, either in part or in
full, are free to allocate those funds per the individual State's water
quality program priorities, which address the prevention, reduction,
and elimination of water pollution and are eligible under CWA Section
106.
[[Page 52587]]
III. Response to Comments
A. EPA's Authority To Issue This Rule
Multiple commenters questioned the Agency's authority to create the
incentive program for various reasons. The Agency maintains that it
clearly has the legal authority to establish conditions for the
distribution of grant funding consistent with the approach reflected in
the rule. Section 106(b) of the CWA states: ``From the sums
appropriated in any fiscal year, the Administrator shall make
allotments to the several States and interstate agencies in accordance
with regulations promulgated by him on the basis of the extent of the
pollution problem in the respective States.'' 33 U.S.C. 1256(b). EPA
complies with this statutory requirement and makes allotments on the
basis of the extent of the pollution problem in the States. EPA has
codified this basis at 40 CFR 35.162(b)(1), which lists six components
the agency takes into account to determine this allotment: Surface
water area, ground water use, water quality impairment, potential point
sources, nonpoint sources, and population of urbanized areas. We also
list associated elements, sub elements, and supporting data for each
component. This is not, however, the only basis the agency uses to make
allotments to the States, and we do not read the above statutory
provision as requiring that the extent of pollution be the only basis
for the allotment process. Section 106(b) does not state that
allotments shall be made only on the basis of the extent of pollution.
Thus, we do not read this language to prohibit other bases for the
overall allotment of Section 106 grant funds. Further, the statutory
language includes the phrase ``[f]rom the sums appropriated, the
Administrator shall make allotments [emphasis added] * * *'' implying
that not all of the funds appropriated must be allotted on this basis.
In fact, EPA has promulgated other bases for allotting 106 funds.
For example, our regulation at 40 CFR 35.162(b)(2) imposes a funding
floor; 40 CFR 35.162(b)(4) includes an inflation adjustment; 40 CFR
35.162(b)(5) imposes a cap on funding increases; and 40 CFR
35.162(b)(6) imposes a cap on the component ratio of the six elements.
In addition, we allot to the interstate agencies based on a percentage
of funds appropriated for Section 106 purposes (40 CFR 35.162(c)).
Finally, we also have the ability to use an alternative allotment
formula when the appropriations process indicates that some of the
Section 106 funds should be used for specific water pollution control
elements (40 CFR 35.162(d)).
Other language in Section 106 also lends support to our
interpretation of our authority. Section 106(c) authorizes the
Administrator to pay States for their water quality programs two
different ways, whichever is the lesser: Either the allotment under
106(b) or ``the reasonable costs as determined by the Administrator of
developing and carrying out a [State] pollution program * * *'' Section
106(g) allows EPA to reallot any sums allotted under 106(b) when funds
originally allotted are not paid to the State. This reallotment is not
required to be conducted in accordance with 106(b). Both of these
provisions indicate to EPA that Congress gave the Agency flexibility to
allot to the States and interstates not only on the basis of the extent
of pollution in the States but also on the basis of other factors.
Further, because the permit fee rule is related to fees charged to
dischargers, it does, in fact, fit within the extent of pollution basis
used in the current allotment formula. Under the current allotment
formula found at 40 CFR 35.162(b), one of the six components evaluated
is the number of potential point sources. Similarly, the incentive
allotment is based in part on evaluating the number of point sources in
a State and collection of fees from dischargers. Finally, no State has
challenged the allotment formulae summarized above that have been
implemented by EPA for several years.
Two commenters, citing 40 CFR 35.162(d), stated that EPA lacks the
authority to engage in the rulemaking absent Congressional
authorization and that we failed to consult with States as required
under this provision. We disagree. No Congressional action is required
to execute this rulemaking (see discussion above). The President's FY
2007 Budget Request for EPA did include language directing EPA to
promulgate this rule, but that language was never enacted into statute.
As stated above, EPA has the statutory authority to promulgate this
rule under Section 106 of the Clean Water Act. In addition, EPA will
submit the final rule to Congress in accordance with the Congressional
Review Act.
Regarding the applicability of 40 CFR 35.162(d), this rule does not
fall within the scope of that provision because this rule does not
allot a portion of the funds for a specific water pollution control
element, such as assessment of impaired water bodies. (See, Table 1 of
40 CFR 35.162, Formula Component No. 3). The provision at 40 CFR
35.162(d) was promulgated to address a situation like that which
occurred in FY 2006 in which both the President's Budget Request and
EPA's Appropriation targeted Section 106 grants funds to support
enhanced water quality monitoring efforts. As EPA stated when it
promulgated 40 CFR 35.162(d), the application of 35.162(d) is limited
to ``situations where the appropriations process has indicated that
funds should be used for a specific purpose'' (71 FR 17, January 3,
2006). Because this rule does not fall within this situation, any
consultation requirement is not applicable.
B. EPA's Rulemaking Process
Commenters also questioned whether the Agency complied with all
applicable statutory and executive order reviews relating to the
rulemaking process. EPA maintains we met all of our obligations and
have even gone beyond that which is required.
Some commenters asserted that EPA did not adequately consult with
the states on the details of the rulemaking as required in Executive
Order 13132, ``Federalism''. We disagree that this rule has federalism
implications that would trigger the requirements of Executive Order
13132. Actions that have ``federalism implications'' are defined in the
Executive Order to include regulations and regulatory policies that
have ``substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.''
This rule is a voluntary incentive that does not have substantial
direct compliance costs on States. Nor will this rule substantially
impact the relationship between the national government and the States
or the distribution of power between the national government and the
States, as contemplated under the Executive Order.
These commenters also suggested that EPA failed to consult under
Executive Order 13132. Although this Executive Order is not applicable,
EPA, in fact, took several steps to ensure that input from the States
was solicited and considered. State representatives nominated by the
Association of State and Interstate Water Pollution Control
Administrators (ASIWPCA) and the Environmental Council of the States
were provided an opportunity to provide input at the outset of rule
development. EPA held a series of work group teleconferences in 2006
and discussed the proposed rule with attendees at the 2006 annual
ASIWPCA meeting. EPA carefully considered feedback received during work
group meetings prior to the publication of the proposed rule. As a
result of the comments received from the States and
[[Page 52588]]
other entities prior to publication of the proposed rule, the proposal
was modified significantly.
Some commenters asserted that EPA did not comply with Executive
Order 12866, as amended by Executive Order 13258 and Executive Order
13422. We disagree. EPA disagrees with assertions that the rule will
have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities. However, upon further consideration, the Agency has
determined that the rule is a ``significant regulatory action'' under
Executive Order 12866 because it raises novel policy issues. Therefore,
this rule will be submitted to OMB for review.
Additionally, some commenters asserted that this rule does not meet
the ``compelling public need'' test included in Executive Order 12866.
EPA disagrees that Executive Order 12866 contains a test that mandates
Agency rules have a compelling public need. The requirements of the
Executive Order are clearly distinct from the ``Statement of Regulatory
Philosophy and Principles'' that contains the compelling public need
language. However, EPA has complied with the Agency responsibilities
included in Section 6 of Executive Order 12866.
A few commenters contended that EPA has not complied with the
Unfunded Mandates Reform Act (UMRA) and the Regulatory Flexibility Act
(RFA), as amended by the Small Business Regulatory Enforcement Fairness
Act (SBREFA). We disagree. By its terms, the RFA only applies to
rulemakings which require notice and comment rulemaking under 5 U.S.C.
553(b) or any other statute. Grant rules are expressly excluded from
the coverage of 5 U.S.C. 553(b) by the provisions of 5 U.S.C. 553(a).
Similarly, UMRA applies to ``federal mandates,'' which exclude
``conditions of Federal assistance.'' 2 U.S.C. 658(5), (6) & (7).
Because this is a grant rule, by definition this rule is not subject to
the RFA or Sections 202 and 205 of UMRA. Additionally, UMRA generally
excludes from the definition of ``Federal intergovernmental mandate''
duties that arise from participation in a voluntary federal program,
such as the fee incentive program established by this rule.
C. Financial Impact of Proposed Rule
Many commenters expressed concerns regarding the potential
financial impact of the proposed rule. Commenters' concerns included:
That the costs of working to qualify for the incentive would exceed the
value of the incentive, that increased permit fees would adversely
impact small communities and businesses, and that States may see a
decline in general revenue funding from their legislatures if they
begin collecting permit fees. Many of the comments drew conclusions
based on the premise that EPA was requiring States to impose permit
fees on point source-dischargers.
The incentive program is voluntary. It is designed to encourage
States to consider establishing or expanding permit fee programs.
However, States are under no obligation to apply for these funds. Each
State should continue to make their permit fee decisions based on sound
economic and programmatic information.
As a result of comments received during the development of the
proposed rule, EPA did make changes prior to the proposal of the rule
to promote responsible decision making regarding permit fees and
participation in the incentive program. EPA established the pool at a
modest amount (no more than three percent of FY 2008 core program
funding). The Agency considers the incentive pool to be sufficient to
generate State interest but not large enough to significantly impact
the amount of core Section 106 funding available. The incentive pool
will not be taken from existing core program funding but will only be
created from State grant increases above FY 2008 levels. No State will
receive reduced funding as a result of this rule. The total incentive
will never exceed approximately $5.1 million. Future increases in
Section 106 funding above FY 2008 levels may be distributed through the
current distribution mechanism using the allotment formula found at 40
CFR 35.162.
Some comments also focused on the challenges that States may
potentially encounter in attempting to comply with the rule, including
collection and reporting of cost information to EPA in a timely manner.
EPA will work with the States to provide assistance in applying for a
share of the incentive. As necessary, EPA will provide any
clarifications on the application process, including guidance and Q&A
documents. The Agency postponed rule implementation until FY 2009 to
provide States additional time to establish new or expand existing
permit fee programs.
Multiple commenters objected to the use of grant ``set-asides.''
The comments suggested that designating funds for specific purposes
eliminates State flexibility to use the funding to address the highest
State priorities. As use of approximately 85 percent of State grant
funding is still at the discretion of the States (with EPA approval),
EPA has ensured that States continue to have wide latitude in targeting
funding according to State priorities. EPA has designated the remaining
funding to address Administration priorities and to ensure that the
funds are used as Congress intended. In addition, States receiving the
incentive, either in part or in full are free to allocate those funds
per the individual State's water quality program priorities.
Furthermore, recovering permit program costs through fees will make
resources available for other water quality program activities,
creating a net increase in the amount of funds that States can devote
to addressing their water quality priorities.
D. State Discretion and the Role of State Legislatures and General
Funds
Commenters provided information regarding how States fund their
NPDES programs, and the restrictions that some States face in
implementing or expanding permit fee programs. Some noted that their
NPDES permits are funded through States' general revenue. Some
commenters expressed concerns that the proposed rule would interfere
with State discretion regarding how States manage and fund State water
quality programs. Commenters also noted that it may be difficult or
even impossible to receive legislative approval for implementation of a
permit fee system or increases in existing fees.
EPA emphasizes that the incentive program is voluntary. The
incentive program promotes the use of permit fees as a mechanism for
funding water quality activities. EPA recognizes that there are a
number of revenue streams that States may employ to support State water
quality programs, including federal support, State general funds, and
revenue from those who benefit from the activity (permit fees). EPA
also recognizes that there may currently be limitations in place that
prevent States from increasing permit fees or implementing permit fee
programs in time to qualify for the incentive in FY 2009.
Ultimately, States have the option to collect fees and apply for
the incentive funds or to choose other mechanisms for funding their
activities. States that do not qualify for the incentive during the
first year that it is available will not be precluded from receiving a
share of the incentive in future years.
Recovering permit program costs through fees will make resources
[[Page 52589]]
available for other water quality program activities, creating a net
increase in the amount of funds that States can devote to addressing
their water quality priorities. A State may choose not to apply for
funds if State officials decide that meeting the qualifying threshold
is not in the best interest of the State. EPA intentionally limited the
size of the incentive pool to protect core funding for all States, in
recognition of the fact that not every State will qualify or attempt to
qualify for the incentive program.
E. Objective and Intent of Proposed Rule
Many commenters stated that EPA has not clearly articulated the
objective of the rule or demonstrated that the incentive will serve the
intended purpose of shifting more of the financial burden for program
operation to NPDES permit holders. As stated above, the purpose of this
rule is to encourage States to voluntarily collect NPDES permit fees
adequate to meet their program costs. This rule is designed to provide
an incentive for States to move toward greater sustainability in the
way they manage and budget for environmental programs and to shift part
of the financial burden to those who benefit from NPDES permits.
F. Promoting Water Quality Protection
Some commenters contended that the creation of an incentive pool
would limit funding to State water quality programs, thereby
potentially adversely impacting a State's ability to protect and
improve water quality. These comments were based on the belief that the
incentive pool represents a reduction in 106 funding and may signal
EPA's intent to eliminate all federal funding for State water quality
programs in the future. EPA has ensured that the rule creates an
incentive that is sufficient to encourage States to increase or
maintain the sustainability of their water quality programs while
protecting core 106 funding for those States that currently do not, or
choose not to, qualify for the incentive. The incentive pool will be
created only from program funding increases above FY 2008 funding
levels (up to three percent of FY 2008 core program funding) and can
only be applied to support Section 106 eligible activities. In
addition, following distribution of incentives to qualifying States,
all remaining incentive funds will be distributed to all States through
the existing formula (40 CFR 35.162(b)).
Some commenters also stated that EPA has failed to demonstrate that
the incentive program will have a positive environmental impact. EPA
acknowledges that States which fail to qualify for the incentive will
receive fewer grant dollars than if all of the funds were distributed
through the existing formula. However, EPA does not believe that this
will negatively impact a State's ability to protect water quality or
unfairly penalize those States that are currently unable to qualify for
the incentive. Ultimately, the Agency believes that the new fee revenue
that States will generate, coupled with the incentive, may
significantly increase the available funding for water quality
programs, justifying EPA's decision to set aside a modest portion of
106 funding. EPA also believes that this increase in available funding
will allow States to build more sustainable water quality programs that
are better equipped to address water quality problems.
G. Impact on Non-Authorized States
Some commenters expressed concern regarding the impact of the
proposed rule on non-authorized States. EPA reiterates that base grant
funding for State water quality programs is protected under this rule.
The incentive pool will be created only from future State Section 106
increases greater than FY 2008 funding. The total incentive will never
exceed approximately $5.1 million. Therefore, the amount of funding
diverted from any one State as a consequence of this rule will be
relatively modest, should not adversely impact a State's ability to
effectively implement their water quality program, and should not be a
pivotal factor in any State program approval decision.
H. Permit Fees for EPA-Regulated Dischargers
Some commenters noted that the rule does not apply to federal
facilities, tribal lands, and other EPA-regulated dischargers in non-
authorized States. EPA reiterates that this rule is not solely intended
to collect fees. It is intended to support the implementation of high
quality NPDES programs in authorized States while at the same time
build more sustainable State water programs. EPA does not collect user
fees in non-authorized States. In addition, the distribution of permit
program responsibilities among the non-authorized States and EPA varies
by State. While none of the non-authorized States issue permits, many
carry out a number of permit program-related activities.
I. Resources Needs Gap
A few commenters were concerned that EPA's focus on permit fees
detracts from efforts to address the resources needs gap identified in
the State Water Quality Management Resource Analysis Task Force's
Interim 2002 report. EPA agrees that action needs to be taken to
address the resource needs gap and believes that this rule responds
directly to the State Resource Analysis Report. The Agency asserts that
if States establish or expand permit fee programs to qualify for the
incentive funds established under this rule, they will ultimately
realize a net increase in the amount of funding available for their
water quality programs. EPA also believes that recovering all or most
of program costs through permit fees represents a more sustainable
approach to program management and budgeting.
J. Measuring the Success of NPDES Programs
A few commenters stated that the success of NPDES programs should
be measured by improvements in water quality, rather than the amount of
permit fees a State generates. EPA agrees with this position and does
not consider the criteria set forth in today's rule regarding permit
program costs recovered to be an environmental measure of NPDES program
success or a measure of NPDES program adequacy. The purpose of this
rule is to encourage States to voluntarily collect NPDES permit fees
adequate to meet their program costs.
K. Self-Certification and Reporting Requirements
Many commenters stated that the proposed rule would impose a
significant administrative burden on the States. Additionally, some
commenters indicated that the incentive would not be sufficient to
justify the expenses necessary to meet the certification requirements
of the proposed rule. In addition to ensuring the integrity of the
incentive program, EPA believes the reporting required under the
incentive program will help States to understand and document program
costs and identify more opportunities to ensure program sustainability.
The rule provides for a modest incentive to further encourage
States to establish or expand their permit fee programs. EPA
anticipates that the additional revenue streams created from both the
extra fees and the incentive awards will provide sufficient revenue to
generate interest among States and cover the costs of creating or
expanding a permit fee program and meeting all accounting and reporting
requirements outlined in this rule. Since this rule establishes a
voluntary incentive program, EPA advises States to carefully analyze
all options before pursuing any fee strategy.
[[Page 52590]]
L. Defining NPDES Activities
Some commenters requested clarification and definitions for several
terms used in the proposed rule, including ``NPDES program'' and an
``adequate'' NPDES fee program. As necessary, EPA will provide
additional guidance regarding those activities the Agency considers to
be included in the program's scope.
M. Current Status of State NPDES Programs
Some commenters provided information regarding the current status
and structure of, and funding mechanisms for State NPDES programs. This
information is included in the comments which can be found in the
public docket, available at www.regulations.gov.
N. Alternatives to Proposed Incentive
Some commenters suggested alternatives to the proposed rule. While
the Agency has determined that some of these suggestions are not
viable, others are not mutually exclusive of the rule we are finalizing
today. EPA commits to continue to work with the States on these ideas.
Conclusion
After careful evaluation of the comments received, the Agency has
decided to finalize this rule with only two minor modifications: (1)
Changing the implementation date of the rule from FY 2008 to FY 2009
(e.g., beginning October 1, 2008) and (2) changing the base fiscal year
the Agency will use to determine if a permit fee allotment is made from
FY 2006 to FY 2008.
Statutory and Executive Order Reviews: Under Executive Order 12866
(58 FR 51735, October 4, 1993), this rule is a ``significant action''
because it involves novel policy issues. Accordingly, EPA submitted
this action to the Office of Management and Budget (OMB) for review
under Executive Order 12866 and any changes made in response to OMB
recommendations have been documented in the docket for this action.
Because this rule is not subject to notice and comment requirements
under the Administrative Procedures Act or any other statute, it is not
subject to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Today's rule contains no Federal mandates (under the regulatory
provisions of Title 2 of the Unfunded Mandates Reform Act of 1999
(UMRA)) for State, local, or tribal governments or the private sector
that would subject the rule to Sections 202 and 205 of the UMRA) (Pub.
L. 104-4). The rule imposes no enforceable duty on any State, local, or
Tribal governments or the private sector. In addition, this rule does
not significantly or uniquely affect small governments. Although this
rule proposes to create new binding legal requirements, such
requirements do not substantially and directly affect Indian Tribes
under Executive Order 13175 (63 FR 67249, November 9, 2000). EPA
interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as
applying only to those regulatory actions that concern health or safety
risks, such that the analysis required under section 5-501 of the
Executive Order has the potential to influence the regulation. This
action is not subject to Executive Order 13045 because it does not
establish an environmental standard intended to mitigate health or
safety risks. This rule will not have federalism implications, as
specified in Executive Order 13132 (64 FR 43255, August 10, 1999).
Executive Order 12898 (59 FR 7629 (February 16, 1994)) establishes
federal executive policy on environmental justice. EPA has determined
that this rule will not have disproportionately high and adverse human
health or environmental effects on minority or low-income populations
because it is a grant rule that does not affect the level of protection
provided to human health or the environment. This rule is not a
``significant energy action'' as defined in Executive Order 13211,
``Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use'' (66 FR 28355 (May 22, 2001)) because it
is not likely to have a significant adverse effect on the supply,
distribution, or use of energy. Further, we have concluded that this
rule is not likely to have any adverse energy effects. This rule does
not involve technical standards; thus, the requirements of Section
12(d) of the National Technology Transfer and Advancement Act of 1995
(15 U.S.C. 272 note) do not apply. This rule does not impose an
additional information collection burden under the provisions of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The
Congressional Review Act, 5 U.S.C. 801 et seq., generally provides that
before certain actions may take effect, the agency promulgating the
action must submit a report, which includes a copy of the action, to
each House of the Congress and to the Comptroller General of the United
States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2). This rule will be effective on September 10, 2008.
List of Subjects in 40 CFR Part 35
Environmental protection, Administrative practices and procedures,
Reporting and recordkeeping requirements, Water pollution control.
Dated: September 4, 2008.
Benjamin H. Grumbles,
Assistant Administrator, Office of Water.
0
EPA amends 40 CFR part 35 as follows:
PART 35--[AMENDED]
Subpart A--[Amended]
0
1. The authority citation for part 35, Subpart A continues to read as
follows:
Authority: 42 U.S.C. 7401 et seq.; 33 U.S.C. 1251 et seq.; 42
U.S.C. 300f et seq.; 42 U.S.C. 6901 et seq.; 7 U.S.C. 136 et seq.;
15 U.S.C. 2601 et seq.; 42 U.S.C. 13101 et seq.; Public Law 104-134,
110 Stat. 1321, 1321-299 (1966); Public Law 105-65, 111 Stat. 1344,
1373 (1997).
0
2. Section 35.162 is amended by adding paragraph (e) to read as
follows:
Sec. 35.162 Basis for allotment.
* * * * *
(e) Permit fee incentive allotment formula. If there is an increase
above the FY 2008 level in the total amount of funds allotted to States
under subsection (b), EPA may award this increase as the permit fee
incentive allotment to eligible States in accordance with this section.
The amount of this annual allotment shall not be greater than three
percent of the funds allotted under paragraph (b) of this section in FY
2008, and any funds above this amount shall be allotted to States under
paragraph (b) of this section.
(1) Each eligible State may receive up to a full share of this
allotment, as determined by the following formula. A full share is the
allotment amount divided by the number of eligible States:
(i) A State will receive 25 percent of a full share if that State
has collected permit fees which equal or exceed 75 percent of total
State NPDES program costs; or
(ii) A State will receive 50 percent of a full share if that State
has collected permit fees which equal or exceed 90 percent of total
State NPDES program costs; or
(iii) A State will receive a full share if that State has collected
permit fees
[[Page 52591]]
which equal 100 percent of total State NPDES program costs.
(2) The maximum share to any State under this subsection shall not
exceed 50 percent of the State's previous year's total Section 106
allotment determined under paragraph (b) of this section.
(3) Any funds left remaining after all shares have been allotted
under this subsection will be re-allotted to the States under paragraph
(b) of this section.
(4) In order for a State to be eligible for this incentive, a State
must: be authorized by EPA to implement the NPDES program by the first
day of the Federal fiscal year, October 1, for which the funds have
been appropriated; and submit to EPA a certification meeting the
requirements of paragraph (e)(5) of this section.
(5) The certification required under paragraph (e)(4) of this
section must meet the following requirements:
(i) The certification must be submitted annually to EPA (to the
attention of the Regional Administrator). For FY 2009, the
certification must be postmarked by November, 14, 2008. For every year
thereafter the certification must be postmarked by October 1; and
(ii) The certification must include the total NPDES State program
costs and the percentage of NPDES program costs, as defined in
paragraph (e)(6) of this section, recovered by the State through permit
fee collections during the most recently completed State fiscal year,
and a statement that the amount of permit fees collected is used by the
State to defray NPDES program costs; and
(iii) The certification must include a statement that State
recurrent expenditures for water quality programs have not decreased
from the previous State fiscal year or indicate that a decrease in such
expenditures is attributable to a non-selective reduction of the
programs of all executive branch agencies of the State government.
(6) NPDES program costs are defined as all permitting, enforcement,
and compliance costs.
[FR Doc. E8-21046 Filed 9-9-08; 8:45 am]
BILLING CODE 6560-50-P