Environmental Policies and Procedures

DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 25

Rural Utilities Service

7 CFR Parts 1703, 1709, 1710, 1717, 1720, 1721, 1724, 1726, 1737, 1738, 1739, 1740, 1753, 1774, 1775, 1779, 1780, 1781, 1782, 1784, and 1794

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1924, 1940, 1942, 1944, 1948, 1951, 1955, 1970, and 1980

Rural Housing Service

7 CFR Parts 3550, 3555, 3560, 3565, 3570, and 3575

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Parts 4274, 4279, 4280, 4284, 4287, 4288, and 4290

RIN 0575-AC56

Environmental Policies and Procedures

AGENCY:

Rural Business-Cooperative Service, Rural Housing Service, Rural Utilities Service, Farm Service Agency, USDA.

ACTION:

Final rule.

SUMMARY:

Rural Development, a mission area within the U.S. Department of Agriculture comprised of the Rural Business-Cooperative Service (RBS), Rural Housing Service (RHS), and Rural Utilities Service (RUS), hereafter referred to as the Agency, has unified and updated the environmental policies and procedures covering all Agency programs by consolidating two existing Agency regulations that implement the National Environmental Policy Act (NEPA) and other applicable environmental requirements. These final rules supplement the regulations of the Council on Environmental Quality (CEQ), the regulations of the Advisory Council on Historic Preservation (ACHP), associated environmental statutes, Executive Orders and Departmental Regulations. The majority of the changes to the existing rules relate to the categorical exclusion provisions in the Agency's procedures for implementing NEPA. These changes consolidate the provisions of the Agency's two current NEPA rules, and better conform the Agency's regulations, particularly for those actions listed as categorical exclusions, to the Agency's current activities and recent experiences and to CEQ's Memorandum for Heads of Federal Departments and Agencies entitled “Establishing, Applying, and Revising Categorical Exclusions under the National Environmental Policy Act” issued on November 23, 2010.

DATES:

Effective date:

The effective date for the final rule is April 1, 2016.

Applicability date:

For proposals that had a complete application submitted on or prior to April 1, 2016, either 7 CFR part 1794 or 7 CFR part 1940, subpart G, applies, as applicable. If the application was not complete prior to April 1, 2016, then 7 CFR part 1970 applies.

FOR FURTHER INFORMATION CONTACT:

Kellie M. Kubena, Director, Engineering and Environmental Staff, Rural Utilities Service, Stop 1571, 1400 Independence Ave. SW., Washington, DC 20250-1571; email:

Kellie.Kubena@wdc.usda.gov

; telephone: (202) 720-1649.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

This section describes NEPA requirements, including the different levels of environmental review and how the Agency makes a determination regarding the appropriate level of environmental review. It also describes the Agency's mission and its existing NEPA-implementing regulations.

A. National Environmental Policy Act

NEPA (Pub. L. 91-190, 42 U.S.C. 4321-4370) established a national environmental policy to, among other things, “create and maintain conditions under which man and nature can exist in productive harmony” (42 U.S.C. 4331(a)); sets goals for the protection, maintenance, and enhancement of the environment; and provides a process for carrying out the policy and working toward those goals. NEPA also created the Council on Environmental Quality (CEQ), which was later directed, by Executive Order, to promulgate binding regulations to guide all Federal agencies in preparation of agency-specific regulations for implementing NEPA (Executive Order No. 11514, “Protection and Enhancement of Environmental Quality” [March 5, 1970], as amended by Executive Order No. 11991, “Relating to Protection and Enhancement of Environmental Quality” [May 24, 1977]). The CEQ regulations are found at 40 CFR parts 1500-1508 (available online at:

https://ceq.doe.gov/ceq_regulations/Council_on_Environmental_Quality_Regulations.pdf

) and are referenced in this preamble.

As set forth in CEQ's NEPA-implementing regulations, the NEPA process requires different levels of environmental review and analysis of Federal agency actions, depending on the nature of the proposed action and the context in which it would occur. The three levels of analysis are: Categorical exclusion (CE), environmental assessment (EA), and environmental impact statement (EIS).

A CE is a category of actions that each Federal agency determines, by regulation, does not individually or cumulatively have a significant effect on the human environment (40 CFR 1508.4). The agency's procedures must provide for “extraordinary circumstances” in which a normally categorically excluded action may have a significant environmental effect. Examples of Agency CEs are routine financial transactions including but not limited to loans for purchase of real estate or equipment and small-scale construction. Even if a proposed action is classified by an agency as a CE, such proposed action is still screened for any extraordinary circumstances that would indicate a potential to have significant impacts. The CEs outlined in this rule are expected to have no or minimal environmental effects; however, extraordinary circumstances could include environmental effects limited or prohibited by other statutes, such as the Endangered Species Act or the National Historic Preservation Act, in a particular Federal action. If a CE applies, and the Federal agency determines that there are no extraordinary circumstances, the agency typically documents that determination in the project file. If, however, a CE applies and the agency determines that there are extraordinary circumstances, the agency would proceed to prepare an EA or an EIS.

An EA is prepared to determine whether the impacts of a particular proposal might be significant (40 CFR 1508.9). In an EA, the Federal agency briefly describes the need for the proposal, alternatives to the proposal, and the potential environmental impacts of the proposed agency action and alternatives to that action, including the no action alternative. An EA results in either a Finding of No Significant

Impact (FONSI) or a determination that the environmental impact may be significant and therefore an EIS is required.

A Federal agency is required to prepare an EIS for any major Federal action that may significantly affect the quality of the human environment (NEPA, 42 U.S.C. 4332(2)(C)). The EIS must include a detailed evaluation of: (1) The environmental impacts of the proposed action; (2) any adverse environmental effects that cannot be avoided; (3) alternatives to the proposed action; (4) the relationship between local, short-term resource uses and the maintenance and enhancement of long-term ecosystem productivity; and (5) any irreversible and irretrievable commitments of resources. NEPA requires that this evaluation be started once a proposal is concrete enough to warrant analysis and must be completed at the earliest possible time to ensure that planning and implementation decisions reflect the consideration of environmental values.

B. Agency's Mission

By statutory authority, the Agency is the leading Federal advocate for rural America, administering a multitude of programs, ranging from housing and community facilities to infrastructure and business development. Its mission is to increase economic opportunity and improve the quality of life in rural communities by providing the leadership, infrastructure, venture capital, and technical support that enables rural communities to prosper. The Agency supports these communities in a dynamic global environment defined by the Internet revolution, and the rise of new technologies, products, and new markets.

To achieve its mission, the Agency provides Federal financial assistance (including direct loans, grants, certain cooperative agreements, and loan guarantees) and technical assistance to help enhance the quality of life and provide the foundation for economic development in rural areas. Like all Federal agencies, the Agency is responsible for determining the appropriate level of review for every proposed action it takes. As part of the Agency's environmental review responsibilities under NEPA, the Agency's responsible official examines an individual proposed action to determine whether it qualifies for a CE under the Agency's NEPA regulations. The Agency's process is consistent with that described in guidance issued by CEQ in 2010 on establishing, applying, and revising CEs (“Final Guidance for Federal Departments and Agencies on Establishing, Applying, and Revising Categorical Exclusions Under the National Environmental Policy Act” (CEQ CE Guidance) (75 FR 75628)). This guidance states:

“When determining whether to use a categorical exclusion for a proposed activity, a Federal agency must carefully review the description of the proposed action to ensure that it fits within the category of actions described in the categorical exclusion. Next, the agency must consider the specific circumstances associated with the proposed activity, to rule out any extraordinary circumstances that might give rise to significant environmental effects requiring further analysis and documentation” in an EA or EIS (75 FR 75631).

The Agency requires applicants to describe their proposals in sufficient detail to enable the Agency to determine the required level of NEPA review. If the proposed action does not fall within an established CE or if there are extraordinary circumstances associated with the proposed action, the Agency's responsible official then determines if the action is one that normally requires the preparation of an EA or EIS. Those types of actions are specified in the Agency's final regulations.

If a proposed action, which is not a CE, does not normally require the preparation of an EIS, the Agency's responsible official will proceed to prepare an EA to determine if the potential environmental impacts of the proposed action may be significant. If the Agency concludes, based on the EA, that the impacts would not be significant, the Agency will prepare and issue a FONSI. If, however, the Agency concludes that the impacts may be significant, the Agency's responsible official will proceed to issue a notice of intent to prepare an EIS.

The Agency's procedures for determining whether to apply a CE or to prepare an EA or EIS and the manner in which those determinations are documented are set forth in the Agency's final NEPA regulations. To achieve the Agency's mission and to improve the delivery of its programs, the Agency consolidated and updated the existing environmental regulations into these final regulations to eliminate confusion between the two sets of NEPA regulations within the Agency, to promote consistency, and to facilitate NEPA reviews.

C. Existing Agency NEPA Regulations

Each Federal agency's NEPA implementing procedures are specific to the actions taken by that agency and supplement the CEQ regulations (40 CFR 1507.3). Both RBS/RHS and RUS have promulgated Agency NEPA regulations. The Agency also completes various other review requirements for its programs under the umbrella of NEPA, including historic preservation reviews under 16 U.S.C. 470f of the National Historic Preservation Act, and consultation on federally-listed species under 16 U.S.C. 1536 of the Endangered Species Act.

The environmental policies and procedures that had been utilized by RBS and RHS to implement NEPA were published as a final rule by the Farmers Home Administration (FmHA) on January 30, 1984 (7 CFR part 1940, subpart G, 49 FR 3724) and were amended on September 19, 1988 (53 FR 36266). RBS and RHS are successor agencies to FmHA, which ceased to exist on October 20, 1994, pursuant to The Agricultural Reorganization Act of 1994 (Pub. L. 103-354). Also pursuant to this Act, the farm programs under FmHA were transferred to the Farm Service Agency (FSA) that was established by the 1994 USDA reorganization.

RUS was established as part of the same 1994 USDA reorganization that established RBS and RHS, and is comprised of Rural Electrification Administration (REA), Electric and Telecommunications Programs combined with the Water and Waste Program from the former FmHA. The environmental policies and procedures that had been applicable to RUS programs were published as a final rule on March 13, 1984, by the REA (7 CFR part 1794, 49 FR 9544), were revised and published as a final rule in 1998 (63 FR 68648) to accommodate the 1994 USDA reorganization, and have been amended through 2003 (68 FR 45157).

The Agency's existing regulations for implementing NEPA needed to be updated to reflect the Agency's current structure and programs, CEQ guidance documents, and Executive Orders. In addition, the Agency consolidated the Agency's approach to environmental reviews for all assistance programs within the USDA Rural Development mission area to promote consistency, rather than having separate NEPA procedures for RBS/RHS and RUS.

Under this final rule, 7 CFR part 1970 replaces 7 CFR part 1794 for RUS and 7 CFR part 1940, subpart G, for RBS and RHS. While 7 CFR part 1940, subpart G, no longer applies to RBS and RHS, it will continue to apply to FSA.

D. Rulemaking Process

The Agency published a notice of proposed rulemaking related to environmental policies and procedures on February 4, 2014 (79 FR 6740). At

that time, comments on the proposed rule were due no later than April 7, 2014. In response to a request, the Agency extended the comment period from April 7, 2014 to May 7, 2014 (79 FR 18482). The Agency received over 500 written comment letters from organizations and individuals during the public comment period. The Agency considered the comments individually and collectively and has modified the proposed rule in response to comments, as discussed more fully below.

II. Purpose of Final Agency Environmental Regulations

Under 7 CFR part 1970, subparts A through D, the Agency consolidates, simplifies, and updates the NEPA rules promulgated separately by RBS/RHS and RUS. Although some substantive policy changes were made to reflect recent environmental policies established by Executive Orders and CEQ guidance, the Agency's main goal is to update and merge the two sets of regulations, rather than to promulgate new rules or requirements. The Agency has determined that a consolidated environmental rule will be easier to read, understand, and use. In preparing the consolidated rule, the Agency sought to combine the requirements from both part 1940, subpart G, and part 1794 to eliminate redundancy; promote consistency among the RBS, RHS, and RUS programs; and reduce confusion on the part of applicants for Agency financial assistance programs and the public.

The final changes are intended to (1) better align the Agency's regulations with the CEQ NEPA regulations and recent guidance, (2) update the provisions with respect to current technologies (

e.g.,

renewable energy) and recent regulatory requirements, (3) promote consistency among the Agency's programs, and (4) reflect Agency practice.

The consolidation encompasses the CEs currently in part 1940, subpart G, and in part 1794. In addition, the Agency has modified and expanded its list of CEs in a manner consistent with CEQ regulations and guidance. CEQ encourages the development and use of CEs and has identified them as an “essential tool” in facilitating NEPA implementation so that more resource-intensive EAs and EISs can be “targeted toward proposed actions that truly have the potential to cause significant environmental impacts” (CEQ CE Guidance, 75 FR 75631). Appropriate reliance on CEs provides a reasonable, proportionate, and effective analysis for many proposed actions, thereby helping agencies reduce paperwork (40 CFR 1508.4) and delay (40 CFR 1508.5).

The final rule outlines the processes the Agency will use to ensure that Agency actions comply with NEPA and other applicable environmental requirements in order to make better decisions based on an understanding of the environmental consequences of proposed actions, and take actions that protect, restore, and enhance the quality of the human environment. In this rule, NEPA review includes all applicable environmental review requirements such as those under the Endangered Species Act and the National Historic Preservation Act.

III. Comments Received and Agency Responses

The Agency received over 500 written comment letters from organizations and individuals. Almost all comment letters were submitted by rural electric cooperatives and associated organizations and were related to the application of the proposed rules to the RUS Electric Program. Approximately 70 commenters expressed support for the detailed comments submitted by the National Rural Electric Cooperative Association (NRECA), although several included additional substantive comments.

EarthJustice and the Natural Resources Defense Council (NRDC) also submitted detailed comments related to the RUS Electric Program. Comments were submitted by the Council for Rural and Affordable Housing, the National Association of Credit Specialists (NACS), and the Center for Equal Opportunity related to other aspects of the proposed regulations. Table 1 shows the major categories of comments received.

Major comment category

Affected NEPA rule sections

Definition of and NEPA compliance for loan-servicing actions and lien sharing

§ 1970.6, § 1970.8, § 1970.53.

CEs, including definition of extraordinary circumstances, proposed CE definitions, and inclusion of additional actions as CEs

§ 1970.52, § 1970.53, § 1970.54.

EAs, including resources needed to determine appropriate level of NEPA documentation, use of environmental reports, public comment period, and supplementation

§ 1970.101, § 1970.102, § 1970.103.

EISs, including actions that require preparation of an EIS and procurement of environmental professional services for EIS preparation support

§ 1970.151, § 1970.152.

Authority to consider and impose mitigation measures

§ 1970.16.

General NEPA compliance policy issues

§ 1970.4, § 1970.5, § 1970.9, § 1970.13, § 1970.14.

The Agency received no comments on the following sections of the proposed rule and, in the final rule, is not making any substantive changes beyond those discussed in the Notice of Proposed Rulemaking: In subpart A, §§ 1970.1, 1970.3, 1970.10, 1970.11, 1970.12, 1970.15, 1970.17, and 1970.18; in subpart B, §§ 1970.51 and 1970.55; in subpart C, § 1970.104; and in subpart D, §§ 1970.153, 1970.154 and 1970.155. The responses to comments in this section of the Preamble do not reflect minor changes made in the final rule for purposes of clarity, format, or readability. These changes are summarized in Section IV of the Preamble.

A. Procedural Comments

Comment:

NRECA requested the Agency extend the public comment period for 60 days.

Response:

The Agency extended the comment period on the proposed rule for 30 days, to May 7, 2014 (79 FR 18482).

Comment:

NRECA, with numerous rural electric cooperatives expressing support for the NRECA comments (referred to hereinafter as NRECA et al.), also requested the Agency to modify the proposed rules and reissue them as a revised draft for additional public comment.

Response:

The responses to the public comments received on the proposed rule do not require and have not resulted in extensive changes to the proposed rule. A number of the changes clarify and reflect Agency practice under current Agency regulations. In addition, the public had a total of 60 days to submit comments on the proposed rule which, as noted, resulted in the receipt of over 500 comment letters. For these reasons, the Agency has determined that the public has had a sufficient opportunity to review and comment on the proposed rule and that

issuance of a revised draft is not warranted.

B. General Comments on Proposed Rule

Comment:

A commenter stated that the proposed rule (§§ 1970.4, 1970.6, and 1970.14) appears to equate Native Hawaiians with Indian tribes, which is incorrect since the former classification is racial/ethnic while the latter is tribal.

Response:

The references to Native Hawaiians, Native Alaskans, and Indian tribes used in the proposed rule are consistent with the National Historic Preservation Act, 16 U.S.C. 470

et seq.,

and applicable regulations (36 CFR part 800). For this reason, the Agency retains its proposed language and has made no modification to the proposed rule in response to this comment.

C. Modifications Related to Servicing Actions and Lien Sharing

Comments:

A substantial majority (approximately 90%) of the comments received on the proposed rule were in response to proposed § 1970.8, “Actions requiring environmental review”—specifically proposed §§ 1970.8(b)(2) and (b)(2)(iii) relating to loan-servicing actions and lien sharing, respectively. These comments also referred to the related definition for loan-servicing actions in proposed § 1970.6. While the primary intent of the proposed rule was to consolidate the environmental rules of the three agencies (RBS, RHS, and RUS) that are under the Rural Development mission area, the overwhelming majority of the comments on these sections were directed at RUS's Electric Program with respect to its borrowers.

The commenters had opposing viewpoints with respect to their recommendations for the definition and Agency handling of loan-servicing actions and lien sharing as a “major Federal action.” Some commenters wanted the definition of loan-servicing to be expanded and to include more Agency actions, such as “lien accommodations, lien subordinations and lien releases” and that such actions should be included as “major Federal actions.” They argued that when RUS chooses to share, subordinate, or release its lien on the assets of an existing borrower to allow that borrower to obtain new financing for new generation capacity (the example cited most often), RUS is providing that borrower with financial assistance that furthers the new generation project.

Other commenters, however, wanted the list of actions requiring environmental review in § 1970.8 to exclude most loan-servicing actions because they are actions that “involve no reasonably foreseeable physical changes in the real world and are therefore unlikely to have the potential to significantly affect the human environment.” They also argued that RUS lacks sufficient Federal control and responsibility over any subsequent lien sharing for actions to be undertaken by borrowers that involve no direct Agency financial assistance. They stated that the proposed rule should define as “major Federal actions” only those actions likely to have an effect on the environment and that involve appropriate Federal involvement, control and responsibility. One commenter was not clear as to whether lien accommodations, lien subordinations, and lien releases are included within the definition of financial assistance or the definition of loan-servicing actions.

Of the commenters arguing to include loan-servicing actions as Federal actions requiring environmental review, and to expand the definition of loan-servicing, several of the commenters asserted that, in addition to all agency “consents” being loan-servicing actions, the regulation should further clarify that all “approvals” are also Federal actions, including approvals issued pursuant to existing loan contracts and mortgages. These commenters also stated that the definition should include decisions to grant a trust indenture that “allows third parties to take over administration of the loan contracts and mortgages governing an existing borrower's debt.” The commenters' concerns appeared to focus on the use of coal and its effects.

In contrast, a substantial number of other commenters stated that neither consents nor approvals should be Federal actions for purposes of NEPA. These commenters stated that consents and approvals routinely provided by RUS under its contractual agreements and security instruments do not involve construction and do not have the potential to foreseeably change the use of the property. Additionally, these commenters concluded that such actions were “unlikely to have the potential to significantly affect the human environment” and should not be considered major Federal actions. As one lender stated in its comments, loan-servicing actions aid lenders in facilitating the technicalities of their respective financing arrangements and, “by their very nature are not major federal actions” because they are routine in nature and “certainly lack the potential to meet the NEPA standard of significantly affecting the human environment.”

Several commenters stated that the proposed rule did not articulate any rationale or justification for the “180 degree shift” in the Agency's departure from its longstanding policy. Since 1998, RUS's environmental regulations specifically stated that ”[a]pprovals provided by RUS pursuant to loan contracts and security instruments, including approvals of lien accommodations, are not actions for the purposes of [the RUS NEPA regulations] and the provisions of [the RUS NEPA regulations] shall not apply to the exercise of such approvals” (7 CFR 1794.3).

Response:

Introduction

The Agency's response to these comments addresses the following: (1) Use of the term “major Federal action” in the proposed rule; (2) a clarification and description of “loan-servicing actions” which includes processes for the collection of debt, methods for modifying existing debt, lien releases of security instruments, approvals and consents, and decisions related to the use of different security instruments, including trust indentures; and (3) the extent to which lien sharing and lien subordination require NEPA review.

It is important to note that loan-servicing actions and lien sharing are very different matters. In addition, lien sharing (also referred to as a lien accommodation) is different from lien subordination. Lien sharing and lien subordination are treated differently under the Agency's final environmental rule as explained more fully below. For clarity, the Agency has modified and added to the definitions in § 1970.6 and has modified § 1970.8, which describes actions requiring environmental review.

This response also provides additional detail on the Agency's final position on loan-servicing and loan security actions, including some historical background on the unique nature of the RUS Electric and Telecommunications Programs and the process by which the Agency monitors and administers the financial assistance until the end of a grant or until a loan or loan guarantee is paid in full. This discussion further supports the clarifications to §§ 1970.6 and 1970.8 in the final rule.

Major Federal Actions

The Agency has concluded based on comments received that it inadvertently introduced confusion by using the term “major Federal action” in proposed § 1970.8. Commenters seemed to interpret the use of that term as shorthand for “major Federal action significantly affecting the quality of the human environment” and thus as an

indication that the Agency proposed to prepare an EIS for all actions described in proposed § 1970.8(b). That was not the Agency's intention and the Agency has deleted the word “major” in the final rule to avoid confusion.

NEPA requires Federal agencies to prepare an EIS for “major Federal actions significantly affecting the quality of the human environment. . .” 42 U.S.C. 4332(C). The CEQ regulations define “major Federal action” as including actions with effects that may be major and which are potentially subject to Federal control and responsibility. Major reinforces but does not have a meaning independent of significantly. 40 CFR 1508.18.

Thus, actions over which a Federal agency has sufficient control and responsibility are Federal actions to which NEPA applies and for which environmental review is required. However, only those major Federal actions significantly affecting the quality of the human environment must be the subject of an EIS.

Agency actions that could have significant environmental impacts will be the subject of an EIS as described in § 1970.151. Agency actions that will not individually or cumulatively have a significant environmental impact are listed as CEs in §§ 1970.53-1970.55. Agency actions not within these categories will be the subject of an EA as described in § 1970.101. Actions over which the Agency does not have sufficient control and responsibility are not Federal actions and thus are not subject to NEPA.

Servicing Actions

The Agency has determined that the definition and treatment of loan-servicing actions needs further clarification in this final rule. The terminology itself is the first area of clarification. Although the comments received and the discussion thus far refer to “loan-servicing”, it is recognized that the concept of servicing is not restricted to loans, but applies to guarantees and grants as well although the particular servicing actions may differ. Therefore, “loan-servicing” and “loan-servicing action” have been changed to “servicing” and “servicing action”.

Proposed § 1970.6 defined “loan-servicing actions” as “[a]ll Agency actions on a particular loan after loan closing or, in the case of guaranteed loans, after the issuance of the loan guarantee, including, but not limited to transfers, assumptions, consents, or leases of Agency-owned real property obtained through foreclosure.” In addition, proposed § 1970.8(b)(2) stated that “[c]ertain loan-servicing actions” are “major Federal actions.” After review of its servicing actions, the Agency has determined that the definition of the term “loan-servicing actions” needs to be revised in accordance with the plain meaning, industry usage, and to be more inclusive as noted above. Specifically, the Agency is clarifying that servicing actions are routine, ministerial, or administrative actions that are expected to occur as part of providing the particular type of financial assistance. As such, these actions fall within the original review of the financial assistance request, are not in and of themselves Federal actions requiring NEPA review, and will not be subject to new or additional NEPA reviews. The final rule reflects this clarification. This is consistent with past Agency pattern and practice, other federal agencies, industry standards, and the nature of servicing loans, loan guarantees, and grants after a financial assistance decision has been approved. Additional background in support of the change to servicing actions in the final rule is provided below. While the comments and the discussion below focus on RUS Electric and Telecommunications Programs, the final rule applies to all programs within the USDA Rural Development mission area that provide financial assistance.

NEPA is a procedural and planning statute under which Federal agencies are required to integrate the consideration of environmental values in their decision-making processes. Based on Agency experience and lending industry standards, its servicing actions involve routine, ministerial, or administrative standard actions related to direct financial assistance for which an appropriate NEPA review has already been conducted and on which a funding commitment decision has already been made. That is, the life cycle of financial assistance includes routine, ministerial, or administrative servicing activities that are conducted until the grant purpose ends or until a loan or loan guarantee is paid in full in accordance with the terms and conditions of its financial assistance documents, including security instruments. Servicing actions are an integral part of the Agency's obligation and responsibility for extending, managing, monitoring, servicing, and collecting its debt and assuring that its collateral is maintained. NEPA reviews for subsequent routine, ministerial, or administrative servicing actions would be not only duplicative of the NEPA review originally conducted for the financial assistance decision, but also unnecessary because these actions have no potential to affect the human environment..

This definition of servicing actions is consistent with lending industry standards and Agency practice. In the lending industry, usage of the term “loan-servicing” relates to collection, disbursement, billing, and payments made to service a debt. The U.S. Treasury Department, Financial Management Service,

Managing Federal Receivables, A Guide for Managing Loans and Administrative Debt

(May 2005), states that basic servicing includes: Billing the debtor, processing and crediting payment, monitoring the account, timely responding to borrower inquiries, and providing agency management with regular aggregate reports on receivables and debt collection reports. Compromising, adjusting, reducing or charging-off debts or claims and modifying or releasing the terms of security instruments, leases, contracts, and agreements, are also routine collection activities available to the Agency pursuant to Section 1981(b) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1981(b)), the Debt Collection Act of 1982 and the Debt Collection Improvement Act of 1996 (31 U.S.C. 3701, 3711-3720E). The Office of Management and Budget (OMB) requires federal lending agencies to vigorously pursue debt collection (OMB Circular A-129,

Policies for Federal Credit Programs and Non-Tax Receivables

(Jan. 2013)). It was not the Agency's intent in the draft rule to make these actions separate Federal actions requiring separate NEPA review.

As stated previously, the Agency reviewed its servicing actions, including its administrative “back office” actions. These servicing actions do not involve new projects, substantive changes to a project, new construction not reviewed under the original request for financial assistance, or a change in the use of the property that was the purpose of the original financial assistance. These servicing actions are for projects or facilities previously receiving financial assistance and the appropriate environmental review was conducted for the action prior to the time financial assistance was made. As a lender and as part of its due diligence and rural development mission, the Agency analyzes and assesses the risk that the proposed project will not be completed and that a loan would not be repaid. The Agency has specific statutory tools to deal with the risk of default after the funds have been advanced. The need for such servicing actions is known and contemplated at the time the financing is made and these actions are

considered part of one action,

i.e.,

providing financial assistance. The life cycle of financial assistance includes all of these activities from loan origination through final repayment and, in the case of a grant, through completion of the original purpose, evaluation of such purpose, and closeout of the grant. As a result, the Agency is clarifying that servicing actions are included within the original review of the financing and will not be subject to new or additional NEPA reviews in this final rule. As mentioned previously, this is consistent with past Agency pattern and practice, industry standards, and the nature of servicing loans, loan guarantees, and grants after financial assistance has been provided. This is consistent with the practices of the U.S. Department of Justice, the major collector of delinquent debt on behalf of the Federal government.

Actions on Delinquent Debt of Financially Troubled Borrowers

The Agency considers debt restructuring, as referred to by many commenters, as a generic term for actions authorized by statute, as previously discussed, including compromising, adjusting, reducing, or charging-off debts or claims, and modifying or releasing the terms of security instruments, leases, contracts, and agreements (Section 1982(b) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1981(b)). In addition, many RD program regulations provide for specific workout options for financially troubled borrowers, such as debt rescheduling, consolidation, writedown, extended terms and/or reduced interest rates. All of these actions are included within the definition of servicing actions. Most often, when repayment of debt is in jeopardy, default, or a borrower is experiencing financial distress, some form of compromising, adjusting, reducing, or charging-off debts or claims is requested after the project is already completed. These actions are intended to avoid default on existing debt, improve the borrower's repayment ability, and maximize recovery to the Agency. Such actions relate specifically to financial assistance already made and advanced, and would not require separate environmental review. If, however, the Agency were asked to provide new financial assistance along with such debt restructuring, a new environmental review would be required for the new financial assistance.

Prepayments and Lien Releases of Security Instruments

When a borrower pays its debt in full or in part, the acceptance of the funds and any releasing of the secured lien is ministerial and non-discretionary. A majority of the Agency programs have agreements or promissory notes that allow prepayments. Generally, in the lending industry, a borrower has a right to prepay its debt in full or in part unless specifically prohibited in writing. When a borrower prepays its debt it is exercising its contractual rights. The Agency simply accepts the funds in a prepayment in accordance with the terms of the agreement or promissory note. As such, prepayments are included in the definition of servicing actions. Furthermore, the Agency is required generally by state law to release the applicable security instrument since it no longer has any debt that is secured. For this reason, a lien release is a ministerial action and not a separate action requiring a NEPA review. The term “lien release” is also included in the definition of servicing actions under “modifying or releasing the terms of security instruments, leases, contracts, and agreements.”

Consents and Approvals

Consents and approvals the Agency may give pursuant to its contractual documents and security instruments are included within the definition of servicing actions. They are routine, ministerial, or administrative in nature. Further, they are assumed as part of the Agency's decision on its initial approval of financial assistance and the Agency's subsequent monitoring and administration of its debt and collateral, and have no potential to affect the quality of the human environment within the meaning of NEPA. For these reasons, no additional NEPA analysis and documentation is required.

The United States Court of Appeals, seventh Circuit has held that RUS, as a lending agency, can only protect itself and compensate for borrowers' risk of default by setting terms and conditions on its extension of financial assistance. See

Wabash Valley Power Assoc.

v.

Rural Electrification Administration,

988 F. 2d 1480 (7th Cir. 1993). In Circular A-129,

Policies for Federal Credit Programs and Non-Tax Receivables

(January 2013), OMB advises agencies to have contractual agreements that include all covenants and restrictions necessary to protect the Federal Government's interest. RUS has established a unique contractual relationship with its borrowers and its general scheme of consents and approvals are made to assure that its collateral is maintained during the term of its loan or loan guarantee.

RUS's Electric Program provides system financing to furnish and improve electric services to rural Americans in rural areas, as defined at 7 U.S.C. 901

et seq.

Additionally by statute, RUS is required to certify that a loan will be repaid in the time agreed upon and is adequately secured. As such, RUS's contractual provisions and security instruments are focused on assuring that the loan funds are used for statutory purposes in rural areas and steps are taken to protect RUS's security. Since 1998, the existing RUS environmental regulation has specifically stated that ”[a]pprovals provided by RUS pursuant to loan contracts and security instruments, including approvals of lien accommodations, are not actions for the purposes of [the RUS NEPA regulations] and the provisions of [the RUS NEPA regulations] shall not apply to the exercise of such approvals.” (7 CFR 1794.3).

The Agency agrees with the substantial majority of commenters who believe that providing consents and approvals per se, does not make those consents or approvals additional or new Federal actions that have the potential to affect the quality of the human environment within the meaning of NEPA. To the contrary, RUS has reviewed the consents and approvals it may give pursuant to its contractual documents and security instruments and has determined that they are routine, ministerial, or administrative in nature and consistent with standard lending practices to protect collateral and maintain its first lien position. For example, consents and approvals for depreciation rates, accounting compliance, rates to members (sufficient to pay debt), contracts for operation and management, patronage refunds, transmission agreements, termination of franchises and territory, contracts for power supply and requirements or contracts for financial transactions all involve actions to protect the security of and repayment to the Federal Government. The Agency, as a lender, agrees with the substantial majority of commenters that its consents and approvals are not separate actions requiring environmental review, and in fact are known and contemplated within the context of standard lending processes and practices at the time the Agency decides whether or not to provide financial assistance. Therefore, these actions are included in the definition of servicing actions for a loan, loan guarantee, or grant. This is

consistent with RUS's past and current administrative pattern and practice.

Trust Indentures

Contrary to some commenters' assertions, RUS's decision to use a trust indenture as a security instrument is not a Federal action. Rather, as explained below, a trust indenture documents what collateral secures the debt and how the collateral will be maintained. As such, it is simply a documentation of the financial assistance decision, not a separate decision subject to additional NEPA analysis and documentation. The original provision of financial assistance is the Federal action.

Historically, RUS's Electric Program did not provide project financing but provided 100% system financing and took a secured first lien on an electric borrower's entire utility system through a system-wide mortgage. In the late 1960s and thereafter, due to limited RUS funding and because the utility industry is so capital intensive, most RUS borrowers began financing all or a part of their capital needs with commercial lenders. The use of trust indentures became more prevalent with RUS borrowers as RUS became unable to finance 100% of all of its borrowers' capital needs as it had in the past. A few commenters took issue with the use of trust indentures by some RUS borrowers, asserting that under an indenture, a trustee “take[s] over” “governing an existing borrower's debt,” and that RUS delegates its administrative tasks to third parties. The Agency disagrees with this assertion, which is a misunderstanding of an indenture. A trust indenture, as used by lenders, is simply a shared security instrument.

The Administrator of RUS, for example, is required by the Rural Electrification Act to insure and certify that prior to making a loan, the security for the loan is reasonably adequate and that such loan will be repaid within the time agreed (7 U.S.C. 904). RUS has historically required its loans to be secured in order for them to be repaid according to the terms and conditions of its loan documents. A trust indenture secures the assets of a borrower for lenders in case of a default and sets terms (

i.e.,

financial ratios) for the debt to be secured once a lender has agreed to make a loan or guarantee a loan. The indenture trustee neither takes over the role of any lender nor governs the existing borrower's debt. The trustee's duties are ministerial and non-discretionary prior to a default.

As a result, the Agency also disagrees with the commenter's assertion that RUS delegates its administrative tasks to third parties. This, again, is a misunderstanding of the nature of a security instrument, whether a mortgage or an indenture. If RUS is the actual lender or guarantor, the appropriate environmental review will be conducted for the project at the time a decision is made on whether or not to provide financial assistance. The type and use of security instruments, such as trust indentures, does not have any effect on the environmental review process completed at the time RUS makes a decision on whether or not to provide financial assistance. The use of an indenture by RUS and a borrower does not “outsource its decision-making authority.”

The Agency does not agree that the use of a trust indenture “should itself trigger environmental review as appropriate.” As stated previously, a trust indenture is merely one form of a security instrument that is executed and delivered to document and secure a debt after a determination is made to provide financial assistance. Just like a promissory note that documents repayment of the debt, a trust indenture documents what collateral secures the debt and how the collateral will be maintained.

Lien Sharing

The Agency has included a definition of lien sharing (referred to in comments as a lien accommodation) in the final rule. Lien sharing is an agreement between lenders to pro-rata payment on shared secured collateral without priority preference (see § 1970.6). As discussed below, it is not considered to be a servicing action. If, however, the Agency were asked to provide new financial assistance along with a request to share its lien, a new environmental review would be required.

The Agency agrees with commenters who argued that the Agency has no authority or control and responsibility over future actions to be taken as a result of a private lender's request for lien sharing and thus has clarified in the final rule (§ 1970.8(d)) that lien sharing is not a Federal action to which NEPA applies.

Any lien sharing for RBS, RHS and certain RUS programs would occur as part of the original request for financial assistance. These programs generally provide financial assistance for specific projects. The security for these projects relies on the project's revenues and assets for repayment of its debt. As a project financier, the Agency's focus is on the borrower, the Agency's security interest, and on the project financed until the financial assistance is repaid in full.

A project requires 100% funding in order to be completed to serve rural America. If the Agency does not fund the entire project, it is possible that it will need to “share” a first lien on the project with other lenders. Therefore, the sharing of the lien has already been anticipated and considered. As such, the appropriate NEPA review has been performed prior to the approval of financial assistance for the original loan or loan guarantee.

Lien sharing for RUS Electric and other Telecommunications Programs is unique. In these programs, RUS provides system-wide financial assistance to borrowers for furnishing and improving electric service to persons in rural areas and for the construction and improvement of facilities for telecommunication service in rural areas. It should be noted that there are instances where system-wide liens are taken in the Water and Waste Disposal Program. RUS relies on all of the borrower's revenues, and repayment is secured by a lien on all of the borrower's electric and telecommunications assets (

i.e.,

its entire utility system) at the time the first loan or loan guarantee is made. In addition, RUS takes a secured first lien on all assets subsequently acquired by the borrower. RUS typically makes multiple loans and loan guarantees to its borrowers. RUS tries to maximize repayment where repayment terms are initially set for 35 years and each subsequent loan or guarantee extends the term of its system-wide first lien for another 35 years. In these programs, lien sharing is expected after initial loans and loan guarantees are made.

In addition, for the Electric and Telecommunications Programs, RUS is not a lender of last resort. When considering its financial needs and timing of its projects, a borrower has options and choices that are solely within the borrower's discretion. The borrower can determine to seek financing from any lender at any time for any project. RUS has no influence or control over the outcome of these private transactions.

As RUS borrowers have utilized non-Federal lenders and incurred additional non-Federal debt, RUS could be over secured at any time during the long-term repayment period and RUS has become a minority debt holder. In order for RUS's Electric and Telecommunications Programs' borrowers to effectively and efficiently manage their business operations and financing, they have contractually agreed to give RUS a long-term secured first system-wide lien on all assets and all after-acquired assets, but they

reasonably expect and have relied on RUS to share its lien to facilitate the use of non-Federal funds for financing infrastructure.

In 1993, at the request of a private lender providing financing to an Electric Program borrower for a capital investment and as a result of legislation (7 U.S.C. 936e), Congress directed the USDA Secretary to expeditiously either offer to share the Federal Government's lien on the borrower's (if equity exceeds 110%) system or offer to subordinate the government's lien on the assets financed by the private lender. In the mandate to share the Federal Government's first lien, Congress intended for RUS's Electric and Telecommunications Programs' borrowers to have access to private-sector financing for facilitating infrastructure development. Congress also stated clearly that any regulations implementing this requirement were to focus only on maintaining reasonably adequate security for a RUS loan or loan guarantee. Sharing its first lien also shares the risk of lending with other lenders. RUS shares its lien on a pro-rata basis. The actual “sharing” only occurs following a default and enforcement remedy against the system or in the bankruptcy proceedings. Currently, RUS's Electric Program has a default rate of 0.04%. It is clear that Congress intended the sharing of the Federal Government's system-wide first lien to facilitate the use of non-Federal funds to finance infrastructure and that RUS's primary interests are repayment of the borrowers' debt. In following this Congressional mandate, and in actual practice as stated above, RUS lacks significant discretion and control or responsibility related to sharing its secured system-wide first liens and, as discussed below, any subsequent activities taken between the borrower and a non-Federal lender.

Some commenters suggested that RUS can “influence the type of generation its borrowers construct or acquire;” the Agency does not agree with this statement. RUS's Electric Program has approximately 550 borrowers, of which approximately 40 are involved in generation and most of those are not currently building new generation. Since 2003, RUS has provided 100% direct financing to a borrower for one coal plant and to two borrowers to purchase minority interests in coal-based generation facilities constructed by investor-owned utilities. RUS can only determine what projects or facilities for which it will provide financial assistance and cannot substitute its business judgment for that of its borrowers with regard to projects or facilities for which the borrower seeks to use non-Federal financing.

RUS routinely consents to private-lender requests for sharing its lien unless it would adversely affect RUS's financial interests,

i.e.,

the borrower cannot repay its RUS loans or guarantees due to the new loan. If a RUS Electric Program borrower borrows non-Federal funds or places a lien on its system without RUS sharing, RUS's remedy is to sue the borrower for contractual breach or refuse to provide the borrower with any additional RUS financial assistance. RUS cannot directly control whether the borrower accepts private-sector financing and what it does with that financing.

For there to be a Federal action to which NEPA applies, there must be Federal control and responsibility. In the lien sharing context, the non-Federal lender provides the financial assistance and sets its own terms and conditions for the project it finances. Negotiation of any terms or conditions are between the lender and its borrower, and the non-Federal lender makes its own risk and security assessments. RUS cannot choose its borrowers' lender and is not a party to the lender's loan contracts or decision making. RUS's consent is not a prerequisite to construction, nor can RUS require the borrower to consider alternatives, change locations, or prevent, alter, or manage construction of the project. Because RUS does not have any permitting or independent regulatory authority, it has insufficient legal or regulatory control over what, where, or when a project will be constructed. In addition, RUS is a lender and not a regulator; therefore, the Agency does not have sufficient control and responsibility over the non-Federal lenders or borrowers or the non-Federally financed project to trigger NEPA review. All of those non-Federally funded projects are instead under the regulatory control and oversight of applicable Federal and state environmental agencies, laws, and regulations.

Therefore, in consideration of all the comments on this matter, the Agency has concluded that it does not have sufficient control and responsibility over projects or facilities that it does not finance. Simply sharing its first lien with a non-Federal lender is not a Federal action for purposes of NEPA, and such sharing does not “Federalize” the project.

Lien Subordination

Unlike lien sharing, lien subordination is a Federal action subject to NEPA review. Lien subordination is addressed in Circular A-129,

Policies for Federal Credit Programs and Non-Tax Receivables

(January 2013), where OMB advises Federal agencies not to subordinate the Federal Government's interest since a subordination increases the risk of loss to the government because non-Federal lenders would have first claim on a borrower's assets. The Agency agrees that subordinating its lien is different from lien sharing, and is to be used sparingly since it imposes greater financial risk to the Agency since other creditors would have first claim on the borrower's assets. The Agency considers Subordination to be a form of financial assistance and will require the appropriate environmental review. The Agency has clarified this in the final rule (§ 1970.8), and has included a new definition of lien subordination (§ 1970.6).

Joint Ownership

Some commenters suggested changes to the percent of ownership thresholds for Federal actions (as described in § 1970.8(c)), or that there be additional flexibility in environmental review requirements at certain ownership levels. Response: The provisions in § 1970.8(c) are unchanged from those in 7 CFR 1794.20, based on the Agency's experience that the approach used has proven reasonable and not a burden to applicants. Furthermore, it is the Agency's experience that applicants having a minority interest in an action as defined in part 1794 and part 1970 is equivalent to having no control. Section 1970.8(c) remains unchanged in the final rule.

Approval of Planning Documents, Timing

Two commenters recommended that the Agency clarify that the approval of planning documents, such as construction work plans, is not a federal action subject to environmental review. Response: In accordance with 40 CFR 1505.1(b) and 1970.8(b)(1), the Agency has defined the Federal action and major decision point at which NEPA must be complete as the approval of financial assistance, not approval of planning documents (See 1970.8(b)(1)).

All of the Agency's programs require planning documents that, for example, define the purpose and need for the proposal, determine project eligibility, or address legal, financial, design, and environmental considerations during the underwriting process. Therefore, planning documents establish and define the basis for applications of financial assistance but are not major decision points for the purposes of NEPA and other environmental or historic preservation statutes and

regulations. That decision point is the approval of the request for financial assistance.

Another commenter asserted that the timing of the environmental review process could be changed to allow obligation of funds prior to completion of the environmental review. Response: The objective of NEPA and other statutes integrated into part 1970, are that Federal agencies consider the effects of their actions before decisions are made and before actions are taken. For example, in accordance with 40 CFR 1500.1(b), NEPA procedures must insure that environmental information is available to public officials and citizens

before

[emphasis added] decisions are made and

before

[emphasis added] actions are taken. In addition and in accordance with 36 CFR 800.1(c), the agency official must complete the section 106 process `

prior to the approval of any Federal funds

[emphasis added] on the undertaking.” Based on these regulations and other requirements, the Agency has established that the approval of financial assistance is the Agency's major decision point prior to which the environmental review process must be completed. In addition, the timing of the environmental review process is addressed at § 1970.11, and this section remains unchanged from the proposed rule.

Guaranteed Loans

Comments suggested that the proposed rule does not go far enough when considering projects involving loan guarantees. One commenter said guaranteed lenders should not be included in the definition of “applicants”, while another asserted that loan guarantee transactions have been erroneously included in the NEPA review process and should in fact be totally exempted from the process. Response: The Agency considers providing guaranteed loans as a form of financial assistance. This is consistent with Federal credit law and OMB policies (OMB Circular A-129). In addition, excluding Section 313A of the RE Act, as amended, part 1940, subpart G and part 1794 have classified guaranteed loans as “Federal actions” subject to NEPA since 1984.

Summary Revisions to Final Rule

In light of the discussion above, the Agency is revising proposed §§ 1970.6 and 1970.8 as described below. While the revisions address comments that primarily focused on RUS's Electric and Telecommunications Programs, as stated previously, the final rules apply to all financial assistance programs (

i.e.,

RBS, RHS and RUS) within the USDA Rural Development mission area.

The Agency is clarifying the definitions for financial assistance and servicing actions; and providing new definitions for lien sharing, lien subordination, loan, grant, loan guarantee, and cooperative agreement in the final rule (§ 1970.6). The definition of multi-tier action was revised to include similar Agency relending programs and actions. Both revised and new definitions are set forth in the regulatory text of this rule at § 1970.6.

In addition, the Agency is modifying § 1970.8 (1) to delete the word “major” from “major Federal action” to avoid confusion and to be consistent with CEQ regulations, (2) to make it clear that servicing actions do not require separate NEPA reviews, (3) to make it clear that lien sharing is not a Federal action for purposes of NEPA, and (4) to require that requests for lien subordination be subject to NEPA review. The Agency has revised § 1970.8(a) and (b) and added new paragraphs (d) and (e) as set forth in the regulatory text of this rule.

Further, the Agency has made conforming changes to § 1970.53(a) by deleting proposed § 1970.53(a)(1) referring to refinancing of debt and that portion of proposed § 1970.53(a)(5) that refers to servicing actions. As explained in detail in Section III.C, actions on debt are included in the definition of servicing actions in revised § 1970.6, and servicing actions are routine, ministerial, or administrative components of financial assistance and do not require separate NEPA review.

D. Specific Comments on Proposed Rule—Subpart A

Section 1970.4 Policies

Comment:

One commenter requested that § 1970.4 be removed from the proposed rulemaking because it appeared to impose substantive obligations that are beyond the procedural mandate of NEPA as written, and likely to create ambiguity about the obligations of the Agency when implementing NEPA (

e.g.,

the borrower would be required, whenever practicable, to avoid or minimize “adverse environmental impacts” as well as to avoid conversion of wetlands and farmlands and development in floodplains (including 500-year floodplains)). The commenter also identified a perceived conflict between the use of the term “practicable” in § 1970.4(a) and another statement in the preamble of the proposed rule that stated that the modifier “practicable” is not to be used in the proposed rule in order to be consistent with CEQ regulations. Finally, this same commenter identified § 1970.4(g), related to reductions in greenhouse gas emissions (GHG), as another example of ambiguity being introduced into the process by requiring an evaluation of opportunities to reduce a project's potential emission of substantial quantities of GHG, where the Agency does not have the statutory authority under NEPA to require the reduction of GHG emissions. The commenter also stated that the Agency did not provide a clear definition of what would be considered a substantial quantity, and that, if the borrower were to exceed the unclear threshold, there would be no clear understanding on what reducing greenhouse gases to the “maximum extent feasible” would mean. The commenter recommended removal of this section entirely because the Agency does not have authority to require GHG reductions, and inclusion of this language is not consistent with CEQ regulations.

Response:

The Agency has an obligation under NEPA to protect the environment and it is Agency policy to avoid funding projects with adverse environmental impacts and to minimize impacts where financial assistance is approved. The term “adverse” is not as broad as the commenter concludes, but rather is specific to the context of the various Executive Orders and statutes, such as Executive Order 11988 which is listed in § 1970.3(gg). While the term “practicable” is used in the rule language in § 1970.4 (“where a practicable alternative exists”), its use was explained in the preamble of the proposed rule that tied it directly to language found in Executive Order 11988; it is not specific to § 1970.4. Rather than prohibit the use of “practicable”, the Agency simply noted in the preamble to the proposed rule that the Executive Order uses “practicable” while NEPA requires the term “reasonable”. The terms are essentially interchangeable, as both involve the consideration of relevant constraints imposed by environmental, economic, legal, social and technological parameters (see also 7 CFR 1940.302(h) and 40 CFR 1505.2(b)). The Agency identified no inconsistency with use of the term “practicable”.

Regarding the language related to GHG reductions, the insertion of this Executive Order language is not regulatory but reflects new USDA policies and is consistent with Executive Order 13514 on Federal Sustainability that requires the Federal government to reduce GHG pollution by 28 percent by 2020; and by an even more recent Executive Order 13693

signed by the President on March 19, 2015, calling for even greater reductions in GHG (40 percent from 2008 levels over the next decade). The inclusion of GHG emission reduction language was also recommended by CEQ. No change has been made to the regulations in response to the comments relating to § 1970.4. However, the Agency recognizes the ambiguity in some of the phrasing related to GHG reductions in particular, and has developed additional guidance for applicants to further clarify how GHG emissions are to be considered and evaluated in applicant proposals.

Comment:

Many commenters stated that the policy statement regarding the need for electric generating facilities (which are identified as critical actions/facilities in § 1970.6) to avoid development within the 500-year floodplain exceeded the requirements of NEPA and Executive Order 11988 (Floodplain Management). Some commenters also wanted the Agency to recognize that many of the areas served are rural, less-developed, and much more prone to be within the 500-year floodplain than more urban and developed areas. Commenters stated that the Agency should recognize that adequate protection measures can be implemented in the 500-year floodplain without requiring burdensome practicability analyses, and that the Agency should change the rule to prohibit development within the 100-year floodplain instead of the 500-year floodplain. They also requested clarification on how an applicant is supposed to show “demonstrated significant need” to justify development within the floodplain.

Response:

The proposed 500-year floodplain language is consistent with guidance from the Federal Interagency Floodplain Task Force to all Federal agencies in implementing Executive Order 11988. While Executive Order 11988 itself does not discuss critical actions within the 500-year floodplain, the Water Resources Council Floodplain Management Guidelines for Implementing Executive Order 11988 (43 FR 6030, February 10, 1978) do, in their discussion of Step 1 of the 8-step decision-making process. The definition of critical action is sufficiently comprehensive and consistent with the definition issued by FEMA in 44 CFR 9.4 (Floodplain Management and Protection of Wetlands, Definitions). The Agency does not consider the proposed language to be a prohibition. The statement—“unless there is a demonstrated, significant need for the proposal and no practicable alternative exists”—provides sufficient flexibility in considering specific project actions in the Agency's decision-making capacity. The key is that the applicant and Agency need to demonstrate that there is no practicable alternative to locating there, with the 8-step process essentially providing the means to do so. The facility would also have to be designed to a higher protection standard, and have flood evacuation plans, including identification of access roads that would be usable during a flood. The Agency wishes to maintain consistency with the Federal guidelines and has not changed the rule to prohibit development within the 100-year floodplain, instead of the 500-year floodplain, as requested. That said, the Agency also acknowledges that some of the phrasing in the rule may be too limiting and has eliminated the phrase “there are no exceptions to this policy” in the last sentence of § 1970.4(a). The revised language is consistent with the USDA Departmental Regulation 9500-3 (Land Use Policy, issued March 22, 1983), § 6(i), Responsibilities: “When land use regulations or decisions are inconsistent with USDA policies and procedures for the protection of important farmlands, rangelands, forest lands, wetlands, or floodplains, USDA agencies shall not assist in actions that would convert these lands to other uses or encroach upon floodplains, unless (1) there is demonstrated, significant need for the project, program, or facility, and (2) there are no practicable alternative actions or sites that would avoid conversion of these lands or, if conversion is unavoidable, reduce the number of acres to be converted or encroached upon directly or indirectly.”

Additionally, Executive Order 13690 (Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input, January 30, 2015) modifies and expands upon Executive Order 11988, establishing a new flood risk management standard, and acts to revise the Water Resources Council's Floodplain Management Guidelines. The Agency also wishes to be consistent with this Executive Order and associated standards and guidelines.

No other changes have been made to the regulation in response to these comments.

Section 1970.5 Responsible Parties

Comment:

Many commenters recommended that the provision for applicants to cooperate with the Agency on achieving environmental goals as a requirement for financial assistance is not appropriate in the NEPA rule.

Response:

The Agency has an obligation under NEPA to protect, restore and enhance the environment and it is Agency policy to avoid or minimize funding projects with adverse environmental impacts. The intent of part 1970 is to provide a necessary framework for the consideration of environmental impacts of its actions. There is no intent to condition financial assistance on anything other than the action under consideration and only those actions over which the Agency has control and responsibility. The proposed language in § 1970.5(b) was specifically provided to address uncooperative applicants and applicants which provide insufficient documentation on those projects requiring applicant-prepared documentation. In either instance, if the applicant does not provide a complete information package, the Agency cannot complete the necessary environmental impact analysis and process the application. For these reasons, no changes were made to the regulation in response to these comments.

Section 1970.6 Definitions

Comment:

Many commenters requested clarification on the definition of loan-servicing actions.

Response:

These comments have been addressed in a separate discussion relating to NEPA compliance for loan-servicing actions in Section III.C of this preamble.

Comment:

Another commenter requested clarification of the definition for “previously disturbed or developed land,” specifically as it related to another description of previously disturbed land found elsewhere in the preamble. This commenter also requested clarification on what is considered mitigation under the proposed regulations and recommended that a definition of mitigation be included in § 1970.6. A third commenter was confused about whether the categories of “environmental reports” currently used by RUS will continue to be used.

Response:

The Agency agrees that the definition of previously disturbed or developed land should be clarified and has modified the language accordingly. With respect to mitigation, the Agency did not include a definition in § 1970.6 in the final rule because it considers the definition of mitigation found in the CEQ regulations at 40 CFR 1508.20 as the controlling definition and there is no need for duplication. However, the Agency will provide further clarification and examples of types of mitigation in guidance documents for applicants; this guidance will be available on the Agency's Web site. See also related

comments and responses in § 1970.16 Mitigation.

Regarding use of the term “environmental report,” the Agency has reconsidered and decided to continue to use this term. In the final rule, the term “environmental report” (ER) is being used to apply only to the environmental documentation required for CEs classified in § 1970.54. A definition of environmental report has been added to the final rule (§ 1970.6) to clarify its meaning and use.

Section 1970.8 Actions Requiring Environmental Review

Comment:

All of the comments received on the proposed section, which comprised the majority of comments on the proposed rule, were in response to § 1970.8(b) relating to the inclusion of loan-servicing actions as “major Federal actions.”

Response:

These comments have been addressed in a separate discussion relating to NEPA compliance for loan-servicing actions in Section III.C of this preamble.

Section 1970.9(c) Levels of Environmental Review

Comment:

Many commenters stated that the language used to describe “connected actions” in § 1970.9(c) went beyond what the CEQ regulations provide with respect to the Agency's use of the term “closely related.” While CEQ regulations describe “connected actions” to be “closely related,” CEQ goes on to provide three specific tests and does not use “closely related” as part of any test for determining whether an action is connected. Commenters were particularly concerned about fully integrated electric transmission systems where many projects that are not “connected” could be interpreted to be “closely related” because they occur near one another in time or space or are each solving different parts of a local or regional problem. The commenters recommended that the Agency only provide that the scope of analysis for EAs and EISs will include “connected actions” as defined by CEQ. Another commenter requested that the Agency clarify the roles and responsibilities of each entity, when multiple organizations are involved in developing a single environmental document, and also consider providing guidance on how to determine the analysis boundaries for connected actions.

Response:

Section 1970.9(c) is fully consistent with the CEQ regulations at 40 CFR 1508.24, which requires a scope of actions that are closely related (

e.g.,

connected, similar, cumulative) to be analyzed in the same NEPA document in order to fully assess the potential combined and cumulative impacts of these actions. In particular, determining whether an action is “connected” involves considering whether an action would automatically trigger another action, would not or could not proceed unless other actions were taken previously or simultaneously, or are interdependent parts of a larger action (40 CFR 1508.24(a)(1)). However, to ensure clarity on the issue, the Agency has deleted the term “closely related” in § 1970.9(c) because, as noted by commenters, “closely related” is already included in the definition of “scope” under “connected actions” in 40 CFR 1508.25. In addition, while not all closely related actions may be connected actions under 40 CFR 1508.25, they could be similar or cumulative and, if so, should be analyzed in the same NEPA document, at least as part of a cumulative impact assessment.

As part of the scoping process and its responsibility to emphasize interagency cooperation and public involvement in evaluating the environmental considerations of its actions, the Agency will work with all appropriate entities on jointly funded, specific actions in determining the scope of analysis for each action to be considered in preparing a single environmental document. Determining the scope of each action applies to CEs as well as EAs and EISs. CEQ has issued guidance to ensure that connected actions and related actions with cumulatively significant impacts are considered in the same NEPA document, including CEs (

Final Guidance for Federal Departments and Agencies on Establishing, Applying, and Revising Categorical Exclusions under the National Environmental Policy Act,

75 FR 75628).

The Agency will request additional information, on an as-needed basis and using its discretion and expertise, from the applicant and other agencies to determine the scope of the action to be analyzed. Respective roles and responsibilities would also be defined, possibly through a memorandum of understanding or similar document. No additional Agency guidance is necessary at this time.

The Agency has made a similar conforming change to § 1970.51(b)(3) to clarify the applicability of a CE relative to cumulative actions.

Section 1970.9(d) Levels of Environmental Review

Comment:

A commenter stated that the submittal of construction work plans by an applicant is a form of application for funding and, in accordance with § 1970.9(d), will require environmental documentation at the time of submittal (“the Agency may request any additional environmental information at or prior to the time of approval”). However, the proposed rule does not clearly state what environmental documentation is required when submitting a construction work plan. As noted in § 1970.6, projects identified in construction work plans can have long lead times, which means they can change in scope over time or may never occur. As a result, the commenter stated that multiple unavoidable revisions would need to be made to NEPA documents for projects contained in construction work plans and requested that § 1970.9(d) in the final rule require that only a determination of future NEPA requirements be made for these projects.

Response:

The Agency understands that the processing requirements for construction work plans/loan designs are different than the single project/single application/single loan process more typical of many Agency programs. Construction work plans, for example, are a prerequisite to a loan application for some programs. The Agency also understands that construction work plan descriptions of projects often lack sufficient information to provide a preliminary NEPA classification, and this is the reason that the Agency may request additional information on multi-year project construction as specified in § 1970.9(d). Such requests could include information on project construction (

e.g.,

percent pole replacement on transmission line rebuilds) or maps/other environmental resource information to correctly classify a project. The Agency expects that this type of information can be gathered through public database searches,

e.g.,

facility locations relative to federally-designated critical habitat, federally-owned/managed lands, tribal lands, etc. The final rule language does state that additional environmental information may be required at this stage of the financial assistance application process, recognizing that different types of documentation are required at various stages in the application and approval process. For example, if after review of a construction work plan, the Agency determines that a proposed action may be eligible for a CE under § 1970.54, the Agency would ask the applicant to provide an environmental report (see below) in order to determine if there were extraordinary circumstances that would prevent the application of the CE.

The Agency is now using the term “environmental report,” previously required by RUS in support of both CEs that required the preparation of ERs and EAs, as the environmental documentation that is required to support a proposed action's classification as a CE classified in § 1970.54, and only a CE. A new definition of environmental report has been added to § 1970.6. If the Agency determines the proposed action should be the subject of an EA, the Agency would ask the applicant to prepare the EA in accordance with § 1970.102. No changes have been made to the rule language except to the final sentence in § 1970.9 to clarify that any request for additional environmental information would occur prior to the time of loan approval.

Section 1970.13 Consideration of Alternatives

Comment:

A commenter recommended that the Agency consider a full range of alternative solutions to a given need, and to consider alternatives such as energy efficiency and distributed generation where the need is generation- or transmission-based. The commenter stated that not only are these solutions economically and technically feasible, they are often the easiest to procure and cost the least.

Response:

The Agency will consider all reasonable alternatives to the proposed action, where reasonable alternatives would include those that meet the underlying purpose and need to which the Agency is responding. No change has been made to the regulation in response to this comment. However, the Agency has developed additional guidance relating to alternative development and analysis for electric generation and transmission projects that addresses the need to consider a full range of alternatives, including load management, energy conservation, and other generation technologies (

e.g.,

natural gas, nuclear, wind, solar). This guidance is available on the Agency's Web site.

Section 1970.14 Public Involvement

Comment:

A commenter stated that non-Federal parties under proposed § 1970.14 may try to utilize the proposed rules simply to block the development of certain properties (

e.g.,

housing for low-income, elderly and disabled persons).

Response:

Public involvement is an important component of the NEPA process. That participants in the NEPA process may oppose a proposed action is not a valid reason to curtail public involvement. Blocking a proposed action can be achieved when the Federal agency fails to comply with NEPA, including failing to ensure public comments are sought and considered. This rule does not provide a formal appeal process per se, but one objective of NEPA and other related environmental statutes, regulations, and Executive Orders, is to provide for public involvement activities. Section 1970.14 provides for these public involvement processes. No change has been made to the regulation in response to this comment.

Section 1970.16 Mitigation

Comment:

Commenters questioned the Agency's authority to consider and impose mitigation measures. They stated that the Agency should recognize that its ability to impose substantive mitigation requirements must be based on some other legal authority and not as a function of NEPA which is a procedural statute. They also stated that, while agencies must analyze possible mitigation measures, those measures need not be legally enforceable, funded or even in final form to comply with NEPA's procedural requirement, as recognized in a CEQ 2011 guidance letter referenced by the commenters. The CEQ letter stated that agencies should not commit to mitigation measures if there are insufficient legal authorities or if it is not reasonable to foresee the availability of sufficient resources to perform or ensure performance of mitigation.

Response:

Although NEPA is a procedural statute, the Agency notes that it also has an action-forcing component in Section 102(2)(c). Further, courts have recognized that the absence of a discussion of possible mitigation in NEPA documents undermines this action-forcing component. Additionally, 40 CFR 1505.3(a) and (b) state that agencies shall “include appropriate conditions in grants, permits or other approvals” and “condition funding of actions on mitigation”.

Under its organic statutes, the Agency has authority to impose reasonable terms and conditions on its provision of financial assistance. As a condition to receiving financial assistance, the Agency can require substantive mitigation measures to reduce potential environmental impacts. Mitigation measures, for the purposes of NEPA, do not include those measures that are otherwise required by Federal, state, or local statutes or regulations.

Regarding the request to add a definition of mitigation to § 1970.5, the Agency does not see a need because it would simply duplicate the definition of mitigation already included in the CEQ regulations at 40 CFR 1508.20. However, the Agency has developed examples of types of mitigation (

e.g.,

spatial or temporal construction restrictions based on the presence of endangered species) to include in Agency guidance documents available on its Web site. Such guidance also addresses the development and use of formal mitigation plans by applicants and the Agency, to include oversight roles and responsibilities for mitigation implementation. No changes to the regulation have been made in response to this comment.

E. Specific Comments on Proposed Rule—Subpart B

Section 1970.51 Applying CEs

Comment:

Commenters stated that the Agency exceeded CEQ requirements in the discussion of cumulative actions and cumulative effects as discussed in § 1970.51(b)(3). They state that CEQ requires an agency to consider cumulative actions but does not apply any “related to” standard. Rather, the courts consider a number of factors to help determine whether an action is a cumulative action that should be considered with a proposed action. Commenters requested that the expanded scope of analysis be removed and the Agency simply incorporate or refer to the CEQ requirement.

Response:

With respect to the language in § 1970.51(b)(3) relating to cumulative actions and effects, the Agency agrees that the proposed rule language needs further clarification. The Agency has clarified § 1970.51(b)(3) to better describe the applicability of a CE relative to cumulative effects, consistent with 40 CFR 1508.25(a)(2).

However, it is important to point out that the purpose of § 1970.51(b)(3) is to ensure that connected actions and related actions with cumulative significant impacts are considered in the same NEPA analysis, including a CE. An applicant may not split up one proposed action into smaller parts in an effort to qualify for a CE, rather than preparing an EA (or an EIS). CEQ has issued guidance which specifically addresses this potential occurrence:

“When developing a new or revised categorical exclusion, Federal agencies must be sure the proposed category captures the entire proposed action. Categorical exclusions should not be established or used for a segment or an interdependent part of a larger proposed action. The actions included in the category of actions described in the categorical exclusion must be stand-alone actions that have independent utility”.

Final Guidance for Federal Departments and Agencies on Establishing, Applying, and

Revising Categorical Exclusions under the National Environmental Policy Act

(75 FR 75632).

The Agency recognizes that applicant proposals may be related (such as for integrated infrastructure), although not connected. As long as the proposals have independent utility, they would not be considered as connected actions. However, if the proposals, taken together, could have cumulatively significant impacts, the Agency would be required to prepare an EA (or an EIS). No other changes have been made to the regulation in response to this comment.

Section 1970.52 Extraordinary Circumstances

Comment:

One commenter requested clarification on whether the crossing of a waterbody with a special use designation would qualify as a CE under the proposed rulemaking.

Response:

Based on the information provided, a state special use water designation would fall within the definition of extraordinary circumstances in § 1970.52(b)(4)((v), areas having formal Federal or state designations. The Agency would need additional information on the specific project before making a determination as to whether application of a CE was appropriate. The critical issue is whether there is an “adverse effect” on “specially designated waters” from the crossing, not simply its presence.

Comment:

Another commenter requested a definition of the term “important” as it relates to sensitive resources in § 1970.52, clarification as to whether the presence of a sensitive resource or the occurrence of an adverse impact will trigger an EA, and asked whose opinion would be used to determine the trigger for an EA—the Agency or the agency which had regulatory authority over the sensitive resource in question.

Response:

The term “important” is not used in § 1970.52. It is used in the preamble to the draft regulations, in the context of important farmland. Important farmland is defined by the USDA Natural Resources Conservation Service in Departmental Regulation 9500-3, and reference to important farmland is also currently included in the existing Agency rules at 7 CFR 1794.6 and 7 CFR 1940.304.

The presence of an extraordinary circumstance would typically require the preparation of an EA to determine whether the proposed action could pose significant environmental impacts. However, the Agency also recognizes that there may be a situation where a sensitive resource is present, but it is clear there would be no environmental impacts from the proposed action. Thus, the trigger for an EA or an EIS would be present if the Agency, after consultation with the appropriate regulatory or natural resource agency, concludes the impacts would be significant. Therefore, determining effects to the listed resource or situation in § 1970.52 is based on both the presence of a special resource

and

the proposal's potential to cause significant adverse environmental effects on that resource. Section 1970.52(c) has been deleted and Section 1970.52(a) revised to clarify that a higher level of NEPA review would be triggered “in the

event

of an extraordinary circumstance,” rather than “in the

presence

of an extraordinary circumstance.”

It is the Agency's sole responsibility to determine whether to prepare an EA (or an EIS) and not apply a categorical exclusion. As needed, the Agency could consult with the appropriate agency with expertise on the resource to assist in the determination.

Section 1970.53 CEs Involving No or Minimal Disturbance Without an Environmental Report

Comment:

Many commenters stated that the proposed rule included no discussion of how the Agency would document the CE process at the time the decision is made, thereby putting the Agency's determination at risk of being classified as a post-hoc rationalization in any subsequent litigation. The commenters also stated that the Agency should require concise documentation supporting CE decisions but also not impose too onerous a burden on documentation.

Response:

It is important to clarify that there are two types of documentation related to CEs. First, for those CEs listed in § 1970.53, applicants are not expected to submit any environmental documentation in most situations. The Agency, however, reserves the right to request additional documentation from applicants if needed to support their determinations. For those CEs listed in § 1970.54, CEs involving small-scale development, applicants are required to submit an environmental report to the Agency. The titles of these two subsections have been edited to clarify whether an environmental report is required,

e.g.,

§ 1970.53 CEs involving no or minimal disturbance without an environmental report and § 1970.54 CEs involving small-scale development with an environmental report. Section 1970.54 identifies the minimum documentation requirements an applicant must provide. The Agency has developed applicant guidance for preparing an environmental report required for these actions. This guidance is available on the Agency's Web site.

Second, for all CEs, the Agency will prepare internal documentation for its files to demonstrate that, prior to a decision to approve an action with a CE, the Agency considered the potential for extraordinary circumstances and determined whether the application of a CE was appropriate in the circumstances. The Agency's internal documentation will include a description of the proposed action, rationale for why the proposed action fits within a CE, and confirmation that no extraordinary circumstances exist. The details associated with this Agency requirement are addressed in internal Agency guidance for staff. Such Agency guidance has been developed and includes a CE form that will be used by Agency staff to document application of CEs. No change has been made to the final regulation in response to this comment.

Comment:

A commenter stated that some actions in § 1970.53 have the potential to result in adverse impacts and should require documentation. This commenter used an example of financial assistance that enabled an existing coal plant to continue operations, which could result in greater impacts than enabling the same coal plant to expand operation at greater capacity than before. The commenter recommended that the Agency require environmental documentation for RUS's loan-servicing actions and for its loans for upgrades to generation facilities because many of these actions have the potential for extraordinary circumstances.

Response:

Routine financial transactions that provide financial assistance to existing businesses or other entities to facilitate their continuing operations (with no expansion of size or capacity) are categorically excluded under § 1970.53(a) because they do not impose or facilitate the imposition of any new environmental impacts. If the Agency had been involved in the financing for the original construction of the facility, a NEPA document would likely have been prepared at that time. Financial assistance for the expansion of an existing coal plant, as described in the comment, would not qualify for a CE under § 1970.53. The Agency's position on loan-servicing actions, in general, is addressed in the discussion under § 1970.8 and in Section III.C. No change has been made to the regulation based on these comments.

Comment:

A commenter recommended that the Agency expand the list of CEs in § 1970.53, involving no

or minimal disturbance, to clearly include the collocation of telecommunications facilities and promote deployment of distributed antenna systems and small cell networks. The commenter stated that collocation of telecommunications facilities on existing infrastructure accelerates deployment of broadband networks without the need to develop duplicative, potentially environmentally disruptive new sites. The commenter provided examples from other agency regulations, including a similar U.S. Department of Energy (DOE) CE at 10 CFR part 1021 Appendix B4.7.

Response:

The Agency agrees with the commenter and has added a new CE at § 1970.53(d)(5) in the final rule to categorically exclude the collocation of telecommunications equipment and deployment of distributed antenna systems and small cell networks provided that the latter technologies are not attached to and will not cause adverse effects to historic properties. Related revisions were also made in the final rule to § 1970.53(d)(1), which categorically excludes upgrading and rebuilding existing telecommunication facilities (both wired and wireless) or the addition of aerial telecommunication cables to electric power lines, and the new § 1970.53(d)(2), which categorically excludes burying facilities for communication purposes in previously developed, existing rights-of-way. Additional language has been added to this CE to indicate that its use is intended for areas already committed to urbanized development or rural settlements. The Agency has determined that adding additional aerial cables on existing electric power lines, whether at distribution or transmission voltages, has minimal or no potential for affecting environmental resources. Constuction activities related to adding an additional cable to existing structures, based on Agency experience and other Federal agency practice, typically occur on previously disturbed, existing rights-of-way similar to routine maintenance activities by utility crews.

Section 1970.53(a) Routine Financial Actions

CE § 1970.53(a)(1) [Related to Refinancing of Debt]

Comment:

Many commenters recommended that the Agency revise the CE in three ways: (1) Clarify that the debt refinancing covered by the CE is limited to when RUS provides the refinancing or continues to extend credit to the borrower under the refinancing; (2) clarify that because debt refinancing may be undertaken in a debt restructuring, the Agency should include both debt refinancing and debt restructuring in the CE; and (3) remove the proviso that the CE does not apply if the applicant is using refinancing as a means to avoid compliance with environmental requirements. Rather, the commenters stated, the Agency should use the “extraordinary circumstances” review to ensure that refinancing or restructuring does not include a feature that makes the exclusion inappropriate. Other commenters asked for clarification on what refinancing actions are covered by this CE, and requested that the proposed rule specify that debt refinancing may require an environmental review, depending on both the nature and purpose of the refinancing.

Response:

Based on the number of comments received, this section requires clarification. The Agency reviewed the nature of and use of refinancing. Prepayments, as previously discussed, are different from refinancing. “Refinancing” to simply change an interest rate is a servicing action. There are no changes in the scope of the project as originally approved and financed, or no new projects or facilities requiring a new NEPA review. RBS, RHS and RUS each have limited or no authority to “refinance” in this manner.

Another type of refinancing occurs if the Agency provides financial assistance to pay off all or a portion of existing debt and the refinancing involves new projects or facilities. At the time the Agency makes a decision to refinance and to provide financial assistance for the new project or facility, the appropriate NEPA review would occur in accordance with § 1970.8(b)(1).

Yet another type of refinancing or other financial assistance involves financing provided by a non-Federal lender and is generally referred to as “up-front,” “bridge,” “construction,” or “interim” financing. These actions usually involve short-term temporary financing. The purpose of the temporary financing is that it provides a bridge to and is to be replaced by the Agency at a specified time. The Agency's financial assistance is a replacement of the temporary financing with permanent long-term financing. In all of these cases, the Agency knows in advance that the applicant will request permanent long-term Agency financial assistance, and the applicant and the Agency conduct the appropriate NEPA review before any Agency financial assistance is approved. These actions are covered under § 1970.8(1),” providing financial assistance.” For these reasons, the Agency is deleting “refinancing of debt” as a CE in § 1970.53(a).

Debt restructuring is a generic term that includes compromising, adjusting, reducing, or charging-off debts or claims and other debt workout options. These types of actions are also included within the definition of servicing action in § 1970.6. However, if additional financial assistance is requested along with any such actions, the Agency would undertake the appropriate NEPA review at that time.

CE § 1970.53(a)(5) [Related to Loan-Servicing Actions]

Comment:

A commenter identified a potential inconsistency between § 1970.9(c) which requires the Agency to complete a single environmental document evaluating an applicant's proposal and other activities within the scope of analysis, and § 1970.53(a)(5), which the commenter says seems to allow (and in fact requires under some circumstances) at least two separate reviews. The commenter stated that the Agency cannot take an action but defer some portion of the NEPA analysis to a subsequent review. If what the Agency intends is that an appropriate environmental analysis will occur for a separate and later Agency action, the Agency should remove references to “such actions” and “separate environmental review” in this CE. Commenters also expressed confusion about the Agency's reference to “such actions [not being] ripe for immediate review” and whether it was referring to a loan-servicing action or to reasonably foreseeable construction or changes in operation. Further, as noted in Section III.C, many commenters did not agree with the Agency's inclusion of loan-servicing actions as major Federal actions requiring NEPA analysis.

Response:

As explained in Section III.C, servicing actions are directly related to financial assistance and do not require separate NEPA review. Sections 1970.6 and 1970.8 have been revised to clarify the definition and treatment of servicing actions, and conforming changes have been made to § 1970.53(a)(5). Specifically, the Agency is removing servicing actions as a CE in § 1970.53(a)(5) in the final rule. Other revisions to proposed § 1970.53(a)(5), re-numbered as § 1970.53(a)(4) in the final rule, include removal of the last sentence relating to actions not being ripe for immediate review to help eliminate any confusion related to this matter.

With respect to § 1970.9, there is no inconsistency between § 1970.9 and § 1970.53(a)(5) in the proposed rule.

Section 1970.9 simply explains the three types of NEPA reviews: CE, EA and EIS. Subsection (c) notes that, for each type, the Agency will evaluate the proposal and closely related actions in the same NEPA document. Proposed § 1970.53(a)(5) described one type of action that is categorically excluded from formal NEPA documentation, although not NEPA review. To the extent that separate reviews are required, they would occur at different times and under different circumstances. See also the discussion of modifications to § 1970.9(c), above.

Comment:

A commenter was unable to find where § 1970.53(a) covered subsequent loans for project cost overruns and recommended that, if it was not covered, then it needed to be cited as a CE without documentation.

Response:

Providing subsequent loans for project cost overruns was not specifically addressed in the draft rule but has been added to the final rule as a CE without documentation. Additional funding for a cost overrun would involve financial assistance and thus is subject to NEPA review. However, a request for additional funding to address a cost overrun where there is no substantial change to the original proposal would be eligible for a CE, and added as a new CE in § 1970.53(a)(5). This addition is consistent with the CE currently included in 7 CFR 1794.21(c)(4).

CE § 1970.53(c) Minor Construction Proposals

Comment:

One commenter stated that the 15-acre land-clearing threshold for minimal disturbance under proposed § 1970.53(c)(9) should be applied to all proposed actions. Therefore, if less than 15 acres of land clearing was required for a project, it would fall under proposed § 1970.53(c)(9).

Response:

Proposed § 1970.53(c)(9) refers to only land clearing operations (

e.g.,

timber harvesting) that would not include any site development activities after the land was cleared. This CE does not apply to any site development activities that may occur on the land after it was cleared. CEs in § 1970.54, CEs involving small-scale development with an environmental report, use a 10-acre threshold. The use of this 10-acre limit is based on the current threshold of 10 acres currently found in § 1794.21(a)(22), which allows construction of facilities and buildings involving no more than 10 acres of physical disturbance. The Agency has made no change to the final regulation with respect to that threshold value. To eliminate any confusion over the 15-acre limit for land clearing in CE § 1970.53(c)(9), the Agency has revised this CE to clarify that it refers to biomass harvesting and has moved the CE to 1970.54(a)(10).

Comment:

A commenter requested that the replacement of existing water and sewer lines in the same trench should be considered as a CE without documentation, citing reasons that there will be no new disturbance of additional area and the new lines are just replacing the older existing ones with no new additional connections.

Response:

The Agency agrees and has added a new CE under § 1970.53(c) (specifically, § 1970.53(c)(6) in the final rule) that allows for the replacement of existing water and sewer lines under certain conditions. Any improvements or expansion of an existing utility network, which could include additional ground disturbance or trigger new growth or development, would remain a CE under § 1970.54(b)(2) but would require the preparation of an environmental report.

Proposed CE § 1970.53(c)(7) Related to New Utility Service Connections

Comment:

A commenter recommended that the Agency make clear that its proposed rules are technology-neutral and include wireless technologies. The commenter stated that the proposed rules are inconsistent in their treatment of telecommunications facilities and do not uniformly track the language of the existing rules, which could confuse the interpretation of the new rules. Some examples were provided by the commenter (

e.g.,

reference to utility service connections), where use of “utility” as a substitute for “power lines, substations, or telecommunications facilities” may introduce ambiguity. The commenter also recommended that the Agency consider adopting environmental rules that have already proven effective by other Federal agencies.

Response:

It is the Agency's intent that wireless telecommunications infrastructure be included in the broader term “utility” and that wireless telecommunications infrastructure would be eligible for this and other CEs if the criteria are met. The proposed rule included a class of CEs relating to energy or telecommunication proposals. The Agency has clarified in the final rule (see § 1970.53(d)(1)) that telecommunications facilities include both wired and wireless telecommunications infrastructure and they would also be eligible for CEs, similar to other utilities, as long as the criteria were met. In addition, the Agency has included in the new § 1970.53(d)(2) additional types of facilities for communication purposes as discussed elsewhere in the rule.

CE § 1970.53(c)(2) and § 1970.54(c)(12) Related to Pollution Prevention

Comment:

Many commenters requested that these two CEs be amended to apply to activities done for purposes of “pollution control” in addition to “pollution prevention” so as to apply to pollution control devices more generally. The commenters requested that these CEs also apply to decommissioning and shutdown measures, in addition to repairs, upgrades, modifications, or enhancement.

Response:

The Agency agrees and has added activities done for purposes of “pollution control.” However, the Agency disagrees that these CEs should be made applicable to decommissioning and shutdown measures. Because Agency loans are associated with assets as collateral, it is unlikely that the Agency could provide financial assistance for an asset with no remaining useful life and that asset could not serve as collateral for the Agency, which are the conditions which must be met for this CE.

CE § 1970.53(c)(2), § 1970.53(d)(9), and § 1970.54(c)(12)

Comments:

Many commenters requested that the Agency revise “energy efficiency” to “energy efficiency, including heat rate efficiency” to ensure that projects to upgrade or modify units to improve heat rate efficiencies, or to return those efficiencies to the original design rates, are covered in the CE. They stated that improvements to heat rate efficiencies allow a generator to generate the same amount of electricity using less fuel and thus generate and emit fewer pollutants. Therefore, these projects are unlikely to have significant environmental effects and should be included in these CEs.

Response:

The Agency agrees and has revised language in the Final Rule to add “heat rate efficiency” to the phrase “energy efficiency” as appropriate.

CE § 1970.53(d)(1) Related to Energy or Telecommunication Proposals (Pole Replacements)

Comment:

The commenter noted a potential contradiction between proposed § 1970.53(d)(1) and § 1794.22(a)(5) in the existing RUS regulations. According to the commenter, because some pole replacements and uprating projects using phase raisers and associated reconductoring involve minimal environmental disturbance or risk, these activities should fit within a CE that

would not require environmental documentation by the applicant.

Response:

The Agency agrees that no documentation would be necessary for this CE and has included it within § 1970.53 which includes no applicant documentation requirements. This is a change from what is currently in § 1794.22(a)(5) which requires an environmental report. The renumbered and final § 1970.53(d)(3) uses a component of the existing § 1794.22(a)(5) to encompass pole replacement (less than 20 percent), which the Agency has determined, based on past experience, does not result in significant impact to environmental resources. Rather than retain the 20 percent threshold reference used in § 1794.22(a)(5), the Agency added provisions similar to an existing CE promulgated by the U.S. Bureau of Land Management relating to upgrading of existing facilities which involve no additional disturbance outside the right-of-way boundary. Such provisions help ensure there is no potential for significant impact and there is no need for additional documentation.

CE § 1970.53(d)(2) Related to Electric Distribution Lines

Comment:

Commenters requested clarification on the definition of “rebuilding” as used in this CE. They identified various examples of types of actions and asked whether the Agency would consider them as “rebuilding” or not, such as: (1) The re-spanning of existing overhead line and overhead-to-underground conversions; and (2) rebuilding in existing disturbed utility rights-of-way (transmission lines, roads, pipelines), and in or adjacent to existing buried utility or pipeline rights-of-way.

Response:

The Agency agrees that the term “rebuilding” warrants further clarification and has revised this CE to describe what “rebuilding” includes,

i.e.,

pole replacements within existing rights-of-way similar to an existing CE promulgated by the U.S. Bureau of Land Management relating to upgrading of existing facilities which involve no additional disturbance outside the right-of-way boundary. Such provisions help ensure there is no potential for significant impact and there is no need for additional documentation. In addition, the CE does not include overhead-to-underground conversions. These changes were made to the renumbered and final § 1970.53(d)(4).

CE § 1970.53(d)(9) Related to Environmental Improvements

Comment:

Many commenters stated that the conditions imposed in this CE would prevent its use for the installation of most or all pollution control devices by stipulating the CE cannot apply if the improvement results in an increase in pollutant emissions, effluent discharges, or waste products. The commenters provided examples of some pollution control devices that reduce emissions of one type of pollutant but increase an emission or discharge of another pollutant or waste product. They stated that a CE, rather than a longer and more resource-intensive EA, is appropriate even if installation of a pollution control device at a facility allows it to remain in operation longer and delays introduction of other sources of electric generation that might emit fewer pollutants. They requested that the Agency recognize that installation of these pollution control devices usually occurs in close coordination with the appropriate permitting authorities and that the Agency should defer to these permitting authorities in determining whether the activities are unlikely to have significant environmental effects or not. The commenters requested that the Agency rewrite the CE to encompass pollution control devices more broadly; specifically that the CE should apply to the installation of pollution control devices consistent with applicable Federal, tribal, state or local requirements or that are approved by relevant permitting authorities or consistent with existing permits, similar to a Department of Homeland Security CE that applies to pollution prevention and pollution control equipment. These commenters further recommended that the Agency include as a CE a borrower's proposal to shut down, decommission, or remove an asset from service in order to meet operational or pollution control targets.

In contrast, other commenters stated that the Agency's decision to fund the addition, replacement, or upgrade of pollution control equipment at existing electric generation facilities is environmentally significant and should be subject to NEPA review. Specific concerns included the effect that such actions can have on extending the working life of a facility with environmental impacts that would not otherwise be financially viable. These commenters recommended that loans for facilities under this CE should entail full environmental review for significant actions and, at a minimum, require environmental documentation where a CE is applied.

Response:

With respect to the comments suggesting that the installation of any pollution control device should be categorically excluded without qualification, the Agency has determined that such actions could have significant environmental impacts unless limitations are in place. While installation of pollution control devices is typically done in coordination with permitting agencies, that fact does not excuse the Agency from complying with NEPA. In addition, the fact that a permitting agency may authorize installation of pollution control equipment does not indicate that the action would have no significant environmental impacts. Permitting agencies only determine whether applicable regulatory standards are met, not whether environmental impacts could be significant.

Although the renumbered and final § 1970.53(d)(11) requires that the proposed action not cause an increase in pollutant emissions, effluent discharges, or waste products, a CE in § 1970.54(c)(12) applies to modifications or enhancements to existing facilities or structures that would not substantially change the footprint or function of the facility and that are undertaken for the purpose of improving energy efficiency, promoting pollution prevention, safety, reliability, or security. Thus, installation of a pollution control device that would not meet the requirements of § 1970.53(d)(11) could still be eligible for a CE under § 1970.54(c)(12). To support the application of this CE, the applicant would be required to prepare and submit an environmental report. Such documentation would likely include waste management plans and required permits to verify proper handling and disposal of wastes. The Agency has determined that the conditions included in § 1970.53(d)(11) and the documentation requirements of § 1970.54(c)(12) provide the Agency with sufficient assurance that no significant impact would occur as a result of a proposal to install pollution control equipment.

Regarding the suggestion that § 1970.53(d)(11) include actions when the borrower shuts down or decommissions or removes an asset from service to meet operational or pollution control targets, the Agency does not provide financing for decommissioning as discussed above. For this reason, the Agency has not included decommissioning as a CE.

With respect to the comments suggesting that the addition, replacement, or upgrade of pollution control equipment at existing electric generation facilities should be the subject of a full environmental review, the Agency believes that the conditions included in this CE (

i.e.,

proposal does not result in a change to the design capacity or function of the facility and

does not result in an increase in pollutants) are sufficient to ensure that such actions would not result in significant environmental impacts. There are numerous factors that influence the useful life of a facility. It is a complicated issue and also subject to Federal and state control and jurisdiction. It would be difficult for the Agency to determine whether its financial assistance for an addition, replacement, or upgrade of pollution control equipment directly contributed to an extension of useful life, or simply was used to meet environmental requirements. As such, the Agency does not believe it is appropriate to require full environmental review.

§ 1970.54 CEs Involving Small-Scale Development With an Environmental Report

Comment:

A commenter requested the Agency to provide additional guidance for documentation requirements to address CE decisions proposed in § 1970.54 and to maintain the current criteria in § 1794.21 and § 1794.22. This commenter also described how the Agency currently requires the applicant to prepare and submit a project description or environmental report for projects that meet appropriate criteria for a CE; and referred to checklists the Agency had used in the past, and guidance previously provided in RUS Bulletin 1974-600 which documents the categories of projects requiring an environmental report. Another commenter identified the CE documentation that should be included (a description of proposed action, the rationale for why the action fits within a CE, and confirmation that no extraordinary circumstances exist), and stated that with respect to the particular actions relevant to this commenter, the use of a construction work plan is the most efficient means for documentation. Another commenter recommended that the Agency develop a NEPA questionnaire, perhaps similar to DOE's Smart Grid Investment Grant Program, for submittal with construction work plans—allowing Agency staff to determine what level of NEPA review will be required, and to satisfy the requirements contained in § 1970.9(a); and that environmental documents should only be required for projects that are realized. This commenter also stated that the use of a questionnaire was mentioned in the preamble for the proposed rule but not included in the rule language itself, and encouraged the Agency to formalize a NEPA questionnaire or short evaluation format that could be used in place of the RUS environmental report referred to in the existing RUS regulations.

Response:

The proposed rule suggested the elimination of the use of environmental reports in lieu of a form of “environmental documentation” that had been unnamed at the time; however, in the final rule, the Agency recognizes that continued use of an environmental report (which was required by RUS in part 1794) will be an efficient way to capture the necessary information and serve as the required CE documentation. The Agency has developed guidance for preparing environmental reports (ERs) for CEs described in § 1970.54. This guidance is available on the Agency's Web site. The information to be captured will be consistent with the documentation content requirements identified by the commenter. Program specific guides and forms are not published as part of the final rule but will be available on agency Web sites as separate guidance to applicants.

CE § 1970.54(b)(1) Related to Small-Scale Corridor Development

Comment:

The commenter recommended that the construction of roads, sidewalks, etc., in existing areas should be moved to § 1970.53 as a CE without documentation. Similar to the argument for replacing existing utility lines in the same trench area, the re-construction or overlay of roads in an existing right-of-way does not require the disturbance of additional area and thus would not impact the environment.

Response:

The construction or repair of roads, streets and sidewalks would likely include new ground disturbance with the potential for significant environmental impact, depending on what resources may be present and potentially affected. The difference between § 1970.54(b)(1) and previous CEs that did not require documentation is that § 1970.54(b)(1) includes “construction” while the other CEs included re-construction, replacement or restoration activities. Section 1970.53(c)(3) does categorically exclude proposals involving minimal external modifications, restoration, and replacement in kind. For these reasons, no change has been made to this section in response to this comment.

CE § 1970.54(b)(3) Related to Small-Scale Corridor Development

Comment:

A commenter stated that the documentation requirements associated with § 1970.54(b)(3), relating to utility line replacement required by a non-Agency road re-construction project, will hold up road construction for the Agency for at least 2 months and has the potential to back up road construction into the next year putting budgets at risk given the review requirements, including a minimum 30-day public comment period. The commenter also pointed out that even if a NEPA review were required for the road re-construction activity undertaken by non-Agency applicants, the non-Agency applicant is under no obligation to share the studies with the utilities that are required to move their lines because of the road re-construction. Any additional review required by the Agency related to utility replacement or relocation would duplicate the NEPA review by the non-Agency lead which is the opposite of the intent of proposed part 1970.

Response:

This particular CE envisions that the replacement of utility lines is necessitated by road reconstruction activities that have been undertaken by others (

e.g.,

state or Federal transportation agency). The use of a CE (rather than an EA) for the utility replacement portion of the work is expected to shorten the current review process such that it should not take two months; as a CE, it would not require a 30-day public comment period. Thus, it is unlikely that road construction would be delayed by the application of this CE. The Agency requirement for an environmental report would ensure that no extraordinary circumstances would be present in such projects, given that ground disturbing activities would be involved. In the event that the associated road reconstruction does include its own separate NEPA review, the applicant could further streamline the CE documentation process by referencing and providing the documentation prepared by the project (road construction) proponent as part of the environmental report required by the Agency. No change has been made to this section in response to this comment.

With regard to the commenter's assertion that a non-Agency applicant is under no obligation to share the studies with the utilities that are required to move their lines because of the road re-construction, the Agency has never experienced the reluctance to share environmental studies, nor has it ever been denied, upon request, copies of such studies. In most if not all cases, the environmental studies referenced are being prepared for either a state or Federal agency and once the studies are submitted to that agency, the study is public information (unless the studies contain information that is being withheld from disclosure to the public because, for example, it contains data about the location, character, or

ownership of a historic property). If an applicant experiences a reluctance to share relevant studies, the applicant is encouraged to contact the Agency and Agency staff will request copies from the state or Federal agency involved in the activity.

CE § 1970.54(c) Related to Small-Scale Energy Proposals

Comment:

Commenters requested revision and clarification for several of the CEs within this category relating to the proposed distance limits on small-scale energy proposals (

e.g.,

transmission lines). They stated that the Agency is disregarding its own experience and instead relying on the experience of another agency (

i.e.,

DOE) in determining the threshold distance limits, when there is no evidence that there are problems with the limits included in the existing RUS regulations,

e.g.,

the existing 25-mile transmission line limit in § 1794.22(a)(1) as compared to the 10-mile limit in proposed § 1970.54(c)(2). Commenters did not agree that the proposed regulations needed to be consistent with DOE regulations and did not find compelling reasons for changing the existing CE requirements such as those contained in § 1794.22(a)(1). The commenters recommended that the Agency rely on its own experience and remove the new length restrictions.

Response:

In proposing the new limits, the Agency saw merit in developing regulations consistent with the DOE regulations on this matter, such as benefiting from DOE's experience that transmission lines within certain limits have not resulted in significant environmental impacts. However, the commenters are correct that the Agency's own decades-long experience with several of the CEs justifies use of the existing limitations, and the Agency agrees that RUS' administrative record provides a lengthy historical context. After further consideration, the Agency is reverting to the original language and threshold distance values in § 1794.22(a)(1) to replace the limits in proposed § 1970.54(c)(2). These limits for new construction are also being used, for consistency, to support the threshold distance in § 1970.54(c)(3) related to reconstruction. In general, reconstruction and minor relocations would have less impact than new construction.

F. Specific Comments on Proposed Rule—Subpart C

Section 1970.101 General

Comment:

A commenter stated that the Agency will not have the resources available to engage in the level of consultation needed to meet the requirements of § 1970.101(c), which requires the Agency to determine the proper level of classification of the applicant's proposal; and § 1970.103, which requires the Agency to identify any unique environmental requirements associated with the applicant's proposal. The commenter requests additional guidance on how the Agency will determine “the proper classification of an applicant's proposal.”

Response:

The Agency currently expends resources to properly classify an applicant's proposal under the existing NEPA regulations. The Agency expects the promulgation of the updated NEPA regulations to decrease the number of environmental reviews and to streamline the reviews that are undertaken. One intent of the revised NEPA regulations is to streamline the Agency NEPA process, particularly for CEs; this will likely decrease the Agency's paperwork burden and review times and conserve Agency resources. Applicants also can help conserve Agency resources by fully describing the action for which they are seeking financial assistance and by submitting complete information packages, as addressed in the final rule. No change has been made to the proposed regulation in response to this comment.

Section 1970.102 Preparation of EAs

Comment:

A commenter requested that the Agency clarify the language used in the preamble relating to environmental reports and whether these categories of reports will still be used by RUS. Under the existing RUS regulations, environmental reports are prepared by applicants and normally serve as the EA (or CEs if appropriate) following RUS review and approval. In addition, the commenter requested that the Agency provide guidance regarding when the 14-day or 30-day public comment period will be used. In particular, the commenter asked why, as in the example provided in the preamble to the draft regulation (79 FR at 6755), a 14-day comment period would be needed if “there is no public concern.”

Response:

Under the existing RUS regulations, environmental reports are prepared by applicants in support of both CEs and EAs; for EAs, the environmental report normally served as the EA following RUS review and approval as the commenter described. Under the final rule, the Agency has specifically eliminated the requirement for environmental reports for EAs. Applicants are required to prepare EAs when an EA is required (§ 1970.5(b)(3)(iv)(C)). However, under the final rule, the environmental documentation that applicants are required to prepare for certain CEs are being referred to as environmental reports. A definition of environmental report has been added to § 1970.6 to clarify this term. With respect to the comment period, the Agency may believe that there is “likely no public concern” (which would make a 14-day comment period appropriate), but would not know for sure until the EA was made available for public review. The preamble language in the proposed rule also provided an example of when a 30-day review period would be appropriate (79 FR at 6755). No change has been made to the proposed regulation in response to this comment. The Agency has developed guidance on effective public involvement that addresses review and comment periods on EAs. That guidance will be made available on its Web site.

Section 1970.103 Supplementing EAs

Comment:

Many commenters recommended that the Agency revise its standards for supplementing an EA to be consistent with CEQ regulations and the Agency's standards for supplementing an EIS, by replacing inconsistent language in the first sentence with the language used in § 1970.155(a)(1) and (2). They stated that 1970.103 strays from the CEQ regulation in several ways, including: (1) The proposed supplemental EA language omits the word “significant” and only uses the phrase “new relevant environmental information”; (2) the proposed supplemental EA provision that supplementation may be necessary after issuance of an EA or FONSI differs from CEQ regulations, and language in § 1970.155 provides that supplementing only occurs before the action is taken; and (3) the provision governing supplemental EAs omits a key phrase in CEQ regulations where the changes or new information (to be considered) are “relevant to environmental concerns.” Commenters requested that the Agency include exclusions providing that a supplemental analysis is not required where new information or new circumstances result in a lessening of adverse environmental impacts previously evaluated without causing other impacts that are significant and were not previously evaluated. One commenter also stated that there does not appear to be any definition of what constitutes a substantial change, and requested additional guidance on this topic. Of particular concern to one commenter was a situation where the

changes are related to project modifications made at the direction of a landowner or a state public utility commission (

e.g.,

as part of regulatory process to build new transmission facilities and the associated routing considerations).

Response:

The Agency disagrees that there is any inconsistency between the cited regulations. The language in § 1970.155 is consistent with the CEQ regulations at 40 CFR 1502.9(c). The language in § 1970.103 does not need to be consistent with either § 1970.155 or the CEQ regulations because it addresses supplementing EAs, which is not addressed in either the CEQ regulations or in § 1970.155. Further, § 1970.103 notes that new information

may

require supplementation, but supplementation is not always required. The word “significant” is used in § 1970.155 because it refers to supplementation of EISs and is consistent with the CEQ regulations; “substantial” change is a more appropriate term relating to an EA than “significant.” Whether a change is considered “substantial” will depend on the circumstances. In addition, by using the term “relevant environmental information,” the Agency intends that any new information must be relevant to the potential environmental impacts of the proposal that was the subject of the EA.

With respect to the suggestion that supplementing an EA not be required where new information or new circumstances result in a lessening of adverse environmental impacts, the Agency notes that such a determination would not be possible unless an evaluation of previously evaluated impacts and potential new impacts were conducted. In other words, the Agency must prepare a supplemental EA in order to evaluate whether new information or circumstances would result in an increase or a decrease in environmental impacts as compared to those previously evaluated.

The Agency has clarified § 1970.103 to state that supplementing an EA may be required after the issuance of an EA or FONSI, but before the action has been implemented. No other changes have been made in the final rule relating to § 1970.103 in response to this comment.

G. Specific Comments on Proposed Rule—Subpart D

Section 1970.151 General

Comment:

A commenter disagreed with the exclusion of “other than gas-fired combustion turbines, of more than 50 average MW output, and all associated electric transmission facilities” from “new electric generating facilities” in the non-exclusive list of Agency actions for which an EIS is required. The commenter stated that the impacts from natural gas can be significant and points to the emissions of greenhouse gases and the recent boom in hydraulic fracturing as concerns that should be taken into account.

Response:

In accordance with § 1970.101, the potential impacts of natural gas combustion turbines would be evaluated in an EA. If, on the basis of the EA, the Agency determines that the environmental impacts could be significant, an EIS will be prepared. The preparation of an EA is consistent with current RUS regulations at § 1794.25(a)(1). Because all previous Agency EAs for gas-fired combustion turbines of more than 50 average MW output have resulted in FONSIs, an EA—not an EIS—is the appropriate level of NEPA review.

Comment:

A commenter stated that proposed § 1970.151 is as flawed as proposed § 1970.8(b) in that the Agency has determined an EIS is required without any analysis of whether such actions listed are a “major Federal action.” Rather, the commenter states that the Agency should decide on a case-by-case basis as to whether the action is a major Federal action before requiring an EIS. With respect to the exception for gas-fired turbines in § 1970.151(b)(4), the commenter states that “gas-fired turbine” may not be an inclusive enough term and offers a more appropriate term of “gas-fired prime movers” to include gas-fired turbines and gas engines.

Response:

The Agency agrees that the use of the term “gas-fired prime movers” (defined as gas-fired turbines and gas engines) is more inclusive and appropriate for this section and has changed the language in the final rule (§ 1970.151(b)(4)). In addition, the Agency is modifying the language in this section to make it clear that the Agency will prepare an EIS for new electric generating facilities including all new associated electric transmission facilities, except for gas-fired prime movers. This change is intended to clarify the scope of the proposed action to be analyzed in an EIS.

However, the Agency does not agree to the requested change in identifying specific actions that require an EIS. Section 1970.151 follows the CEQ regulations that require agencies to identify classes of action that normally require EISs (40 CFR 1507.3(b)(2)(i)). In addition, as noted in the CEQ regulations, “major reinforces but does not have a meaning independent of significantly” (40 CFR 1508.18). No other change has been made to this section in response to this comment.

Section 1970.152 EIS Funding and Professional Services

Comment:

Commenters stated that applicants should be capable of securing outside professional environmental services for EISs without using the Federal procurement process, and want the rule to be clear that Federal Acquisition Regulations do not apply.

Response:

The Agency agrees that applicants may and should secure outside environmental professional services for EISs without the use of or reliance on the Federal procurement process. The Agency does support the use of a third-party contracting process as described in Question 16 in CEQ's

Forty Most Asked Questions Concerning CEQ's National Environmental Policy Act Regulations

(46 FR 18026) where CEQ stated that the “Federal procurement requirements do not apply to the agency because it incurs no obligations or costs under the contract, nor does the agency procure anything under the contract.” While the Agency's policy and standard practice is to solicit and procure professional services of qualified contractors under a third-party contracting process that is consistent with 40 CFR 1506.5(c), the Agency reserves the right to consider alternate procurement methods. To avoid any conflicts of interest, the Agency maintains responsibility for selecting the contractor, in accordance with 40 CFR 1506.5(c), and the applicant must not initiate any procurement of professional services without written prior approval of the Agency. This has been clarified in the final rule.

IV. Section-by-Section Analysis of the Final Agency NEPA Regulation

This section provides a detailed discussion of the final Agency NEPA rule. For each section, the changes made to the final rule are briefly described, along with the reason for the change. In most cases, the reason for the change is addressed in Section III in response to public comments. In a few instances, the Agency has initiated the change, such as to include Executive Orders and a Departmental Regulation that were either overlooked in the proposed rule or issued since publication of the proposed rule, provide further clarification of an important point, or correct a previous oversight. Overall, the final rule includes the same language as the proposed rule language which, in turn, is the same as an existing regulation or includes only minor modifications. This section only

includes those sections of the final rule that have been revised since publication of the proposed rule.

A. Subpart A—Environmental Policies

Authority (§ 1970.3)

The Agency has included references to Executive Orders 13653, “Preparing the United States for the Impacts of Climate Change”, 13690, “Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input”, and 13693, “Planning for Federal Sustainability in the Next Decade” in the final rule. Executive Order 13653 was not included in the proposed rule, and Orders 13690 and 13693 were issued by the President in January 2015 and March 2015, respectively, after publication of the proposed rule.

Definitions and Acronyms (§ 1970.6)

The Agency has revised the definitions of applicant, guaranteed lender, financial assistance, servicing actions, and previously disturbed or developed land in the final rule in order to provide further clarification in response to public comments. In particular, a definition of servicing actions has been added to clarify what actions are included (

e.g.,

consents and approvals). Although not in response to public comments, the Agency has changed “loan-servicing actions” to the more inclusive “servicing actions” to cover routine post-financial assistance actions related to guarantees, grants and cooperative agreements too. The Agency has also added definitions in the final rule for the following new terms to help clarify commenter confusion over their use in the proposed rule: Cooperative agreement, environmental report, grant, loan, loan guarantee, lien sharing, and lien subordination. The Agency added a definition of substantial improvement as this term is used in regard to flood impact evaluations; it added a definition of cooperative agreement as these have been added as a type of financial assistance; it also added a definition of average megawatt to substantiate the use of this term in defining classes of actions. The Agency revised the definition of guaranteed lender to make it clear that the Federal Financing Bank (FFB) is not a guaranteed lender for the purposes of this regulation because RUS prepares the appropriate NEPA documentation, performs underwriting, and collects and services the loans for FFB, which is unlike the typical guarantor role for other Agency programs. Finally, the Agency added two significant new programs and three existing programs to the list of programs in the definition of multi-tier action; the new programs are the Energy Efficiency and Conservation Loan Program and the Rural Energy Savings Program, and the existing programs are Section 313A of the Rural Electrification Act of 1936, Guarantees for Bonds and Notes Issued for Electrification or Telephone Purposes, the Rural Microentrepeneur Assistance Program, and the Rural Business Development Grant Program.

Actions Requiring Environmental Review (§ 1970.8)

The Agency has revised § 1970.8(a) and (b) to: (1) Delete the word “major” when referring to a Federal action to avoid confusion; and (2) require that requests for lien subordination be the subject of NEPA review. The Agency also added new paragraphs (d) and (e) to make it clear that lien sharing is not a Federal action for purposes of NEPA (unless additional financial assistance is included in the request for lien sharing) and that servicing actions do not require separate NEPA reviews as discussed above. With respect to servicing actions, the Agency has determined that such actions are routine, ministerial or administrative actions that occur as part of the monitoring and administering of financial assistance. Thus, the Agency determined that these subsequent actions fall within the original environmental review of the financial assistance application and will not be the subject of new or additional NEPA reviews. Accordingly, the Agency revised § 1970.8(b)(2) to: (1) Eliminate loan-servicing actions and related examples of consents and approvals and lien sharing as actions requiring NEPA review; (2) further clarify which post-financial assistance actions are considered Federal actions (

e.g.,

lien subordination); and (3) add one new action requiring NEPA review—one that includes a substantial change in scope of projects receiving financial assistance not previously considered (§ 1970.8(b)(2)(iii)).

Levels of Environmental Review (§ 1970.9)

In response to public comment, the Agency clarified in the final sentence in § 1970.9(d) that any request for additional environmental information would occur prior to financial assistance being made.

Public Involvement (§ 1970.14)

Text was moved from § 1970.153(a)(2) to § 1970.14(d)(2) regarding the applicant's responsibility to obtain proof of publication of notices to clarify that this responsibility applies to all levels of environmental review.

B. Subpart B—NEPA Categorical Exclusions

Applying CEs (§ 1970.51)

The Agency has clarified the language in § 1970.51(b)(3) to better describe the applicability of a CE relative to a cumulative action, consistent with 40 CFR 1508.25(a)(2).

Extraordinary Circumstances (§ 1970.52)

The Agency added text to paragraph (b)(4)(iii) to explain the circumstances under which an alternatives analysis is or is not required.

The Agency modified paragraph (b)(4)(iv) to delete reference to specific executive orders relating to floodplains, consistent with Agency rulemaking procedures. Language was also added to this paragraph to include a reference to substantial improvements and explain requirements related to purchasing structures within floodplains.

CEs Involving No or Minimal Disturbance Without an Environmental Report (§ 1970.53)

The Agency added text to the introduction to explain how certain actions in this section will be identified by the Agency as requiring no further review under Section 106 of the National Historic Preservation Act and Section 7 of the Endangered Species Act.

1970.53(a) Routine Financial Actions

The Agency deleted proposed § 1970.53(a)(1) referring to refinancing of debt and significantly modified proposed § 1970.53(a)(5) to eliminate servicing actions as a CE because they are not Federal actions separate from the original Federal financing, so they do not need a CE. As explained in Section III, “refinancing” of debt to change interest rate without additional financing is included in the definition of servicing actions in final § 1970.6, and servicing actions are routine, ministerial, or administrative components of financial assistance and do not require separate NEPA review. Language has been added to § 1970.53 (a)(2)(iii) to include replacement or conversion of equipment to enable use of renewable fuels. Section 1970.53(a)(5) (renumbered in the final rule as § 1970.53(a)(4)) has been revised so that it relates only to the sale or lease of Agency-owned real property.

The Agency has added back a CE (see § 1970.53(a)(5)) to address financial assistance for cost overruns where there is no change to the proposal as originally approved. While providing

additional financial assistance for cost overruns was not specifically addressed in the proposed rule, it is included in existing RUS regulations at 7 CFR 1794.21(c)(4).

The Agency has revised the language in § 1970.53(a)(7) to clarify that this CE is for a guarantee provided to the Federal Financing Bank pursuant to Section 313A(a) of the Rural Electrification Act of 1936 for the sole purpose of (a) refinancing existing debt instruments of a lender organized on a not-for-profit basis, or (b) for the purpose of prepaying outstanding notes or bonds made to or guaranteed by the Agency. The Agency reviewed the actions under Section 313A(a) and determined that these refinancings were the primary types of actions taken under this statute. The primary refinancing done under Section 313A(a) involves outstanding bonds or notes of the not-for-profit lender itself. These were issued by the not-for-profit lender for projects or facilities already constructed. Prepayment of outstanding bonds or notes of the Agency involves projects or facilities that previously were reviewed by the Agency for the appropriate environmental action when it provided the financial assistance. All other types of actions under Section 313A(a) will be a multi-tier action under § 1970.55.

1970.53(c) Minor Construction Proposals

The agency has revised § 1970.53(c)(1) to change “location” to “geographic scope” for clarity and to ensure location includes the scope of the minor amendments or revisions.

The Agency has revised § 1970.53(c)(2) in response to public comments to clarify that energy efficiency includes heat rate efficiency, and to add activities done for purposes of “pollution control.” Language was also added to this section to include replacement or conversion of equipment to enable use of renewable fuels. The Agency also deleted the terms “fixtures” and “reconstruction” to account for any potential Section 106 concerns.

The Agency has added a new CE (§ 1970.53(c)(6)), in response to public comments, that allows for the replacement of existing water and sewer lines under certain conditions. Any improvements or expansion of an existing utility network, which could include additional ground disturbance or trigger new growth or development, will remain a CE under § 1970.54(b)(2) and will require an environmental report. Proposed CEs in § 1970.53(c)(6) through (c)(8) have been renumbered as § 1970.53(c)(7) through (c)(9).

The Agency has revised the proposed § 1970.53(c)(9) in response to public comments, to clarify that this CE refers to the

harvesting

of no more than 15 acres of vegetative biomass under specific conditions. This clarification was made to eliminate any confusion over the 10-acre limit for site development in § 1970.54(a). The CE has been moved to § 1970.54(a)(10) to account for potential impacts not previously considered. Proposed § 1970.53(c)(10) for conversion of pastureland to agricultural production was deleted because it was determined not to be relevant to Agency programs.

1970.53(d) Energy or Telecommunication Proposals

The Agency has revised § 1970.53(d)(1), in response to public comments, to clarify the Agency's intent that wireless telecommunications infrastructure is included in the broader term under telecommunications “facilities” and that wireless telecommunications technologies are eligible for this and other CEs if the criteria are met. The term “changes” was also revised for clarification to “upgrading or rebuilding.” The addition or attachment of aerial cables “for communication purposes” to electric power lines also has been added to this CE. The phrase was part of § 1970.53(d)(3) in the proposed rule. In addition, references to changes to transmission lines were revised and moved to the renumbered 1970.53(d)(3).

Also in response to public comments, the Agency has added a new CE (see § 1970.53(d)(5)) for collocation of telecommunications equipment on existing infrastructure and deployment of distributed antenna systems and small cell networks. The final CE includes certain conditions related to the effects on historic properties.

The Agency also made conforming changes to the remaining CEs in § 1970.53(d) as follows:

• Added a new § 1970.53(d)(2) to create a separate CE for a portion of the old § 1970.53(d)(1). This was done for clarity. Changed the term “telecommunication cables” previously used in § 1970.53(d)(3) to “facilities for communication purposes” in § 1970.53(d)(2) to include smartgrid proposals.

• Revised § 1970.53(d)(4) (numbered as § 1970.53(d)(2) in the proposed rule), in response to public comments, to clarify what is meant by “rebuilding” of electric distribution lines. The final CE describes that “rebuilding” includes pole replacements within existing ROWs, but not overhead-to-underground conversions. The phrase “telecommunication facilities” was deleted and those actions were added to the final § 1970.53(d)(1). Language was also added to specify that actions eligible for this CE must not affect the environment beyond the previously developed, existing rights-of-way.

• Added language to § 1970.53(d)(7) (numbered as § 1970.53(d)(5) in proposed rule) to include installation adjacent to existing structures that would not affect the environment beyond the previously developed facility area and stated that the CE would not apply if there were adverse effects to historic properties.

The Agency has renumbered the subsequent CEs in § 1970.53(d)(6) through (9) as § 1970.53(d)(8) through (11) and made a minor edit to § 1970.53(d)(10) (numbered as § 1970.53(d)(8) in the proposed rule) for clarity. The term “power” was deleted between electric and transmission; the Agency determined it was redundant.

1970.53(e) Emergency Actions

Section 1970.53(e) was added to address actions necessary in emergency situations. This CE was inadvertently left out of the proposed rule. It was present in § 1794.21(a)(4) and § 1940.322(b). The subsequent CEs in § 1970.53(e) through (g) have been renumbered as § 1970.53(f) through (h).

CEs Involving Small-Scale Development With an Environmental Report (§ 1970.54)

1970.54(b) Small-Scale Corridor Development

The Agency deleted § 1970.54(b)(4)(“Construction of new distribution lines and associated facilities less than 69 kilovolts (kV)”) because it determined that this CE is addressed in § 1970.54(c)(2).

The Agency clarified proposed § 1970.54(b)(4)(formerly (b)(5)), which requires environmental documentation (

i.e.,

an environmental report), to help distinguish it from a similar CE in § 1970.53(d)(4) that does not require environmental documentation. Both CEs involve actions relating to telecommunications facilities. The Agency also revised this CE by adding “new linear” telecommunication facilities to provide more descriptive language and to distinguish it from § 1970.53(d)(1) and (d)(2). The previous term “lines, cables” was changed to “facilities” and the phrase “and infrastructure” was included for clarity.

1970.54(c) Small-Scale Energy Proposals

The Agency revised proposed § 1970.54 (c)(2) and (c)(3) in response to

public comments relating to the proposed distance limits on small-scale energy proposals (

e.g.,

transmission lines). The Agency has reverted to the language in the existing regulations and threshold distance values in § 1794.22(a)(1) to replace the limits in proposed § 1970.54(c)(2) and support the limit in final § 1970.54(c)(3).

The Agency added a new section 1970.54(c)(8) to include Agency programs that fund small biomass projects, and established an upper threshold for projects to qualify for a CE with report. Similarly, the Agency added “geothermal heating or cooling projects” to § 1970.54(c)(9) and (10)(formerly (c)(8) and (9)).

The Agency revised proposed § 1970.54(c)(13)(formerly (c)(12)) in response to public comments to clarify that energy efficiency includes heat rate efficiency, and to add activities done for purposes of “pollution control.”

C. Subpart C—NEPA Environmental Assessments

Preparation of EAs (§ 1970.102)

The Agency modified proposed § 1970.102(b)(6)(ii) to include online publication of notices.

Supplementing EAs (§ 1970.103)

The Agency clarified proposed § 1970.103 to state that supplementing an EA may be required after the issuance of an EA or FONSI, but before the action has been implemented. No other changes have been made in the final rule relating to § 1970.103.

D. Subpart D—NEPA Environmental Impact Statements

General (§ 1970.151)

The Agency revised § 1970.151(b)(4), in response to public comments, to refer to “gas-fired prime movers,” which the Agency agrees is more inclusive and appropriate for this section. For clarity, the Agency also modified the text to make it clear that the scope of an EIS prepared for a new electric generating facility would include “all associated electric transmission facilities.” The Agency also added renewable systems (solar, wind, geothermal) as being excluded from this section. Commenters generally expressed that the Agency support renewable energy and encouraged the Agency to consider the actions that would encourage the use of renewable systems.

EIS Funding and Professional Services (§ 1970.152)

The Agency revised proposed § 1970.152(b), in response to public comments, to clarify its intent to use a “third-party contracting process” that is consistent with Question 16 of CEQ's “Forty Most Asked Questions Concerning CEQ's National Environmental Policy Act Regulations” (46 FR 18026). Using this process, Federal procurement requirements will not apply to the Agency because it will incur no obligations or costs under the contract and will not procure anything under the contract. While the Agency intends to use the third-party contracting process, it reserves the right to consider alternate procurement methods. The Agency retains the responsibility for selecting the contractor, in accordance with 40 CFR 1506.5(c). The applicant may not initiate any procurement of professional services without written prior approval of the Agency.

Required Determinations

Executive Order 12866, Regulatory Planning and Review

This final rule has been reviewed under Executive Order (EO) 12866 and has been determined not significant by the Office of Management and Budget. The EO defines a “significant regulatory action” as one that is likely to result in a rule that may: (1) 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; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this EO.

The Agency determined that this regulation involves combining two existing intra-Agency regulations that supplement the NEPA procedures of the Council on Environmental Quality, the National Historic Preservation Act (NHPA) procedures of the Advisory Council on Historic Preservation, and the Endangered Species Act that are established bodies of technical regulations which the Agency must necessarily update routinely to keep the regulations operationally current. The Agency has concluded that the net effect of the rule will be beneficial due to the streamlining and updated adherence to statutes and, therefore, does not warrant preparation of a regulatory evaluation as the anticipated impact is positive.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public Law 104-4 establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the Agency generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments, in the aggregate, or to the private sector of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires the Agency to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective, or least burdensome alternative that achieves the objectives of the rule.

This final rule would consolidate and update the Agency's existing rules governing compliance with NEPA to better align the Agency's regulations, particularly its categorical exclusions, with its current activities and recent experiences, and update the provisions with respect to current programs and regulatory requirements. The final rule would result in no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, and tribal governments or the private sector of $100 million or more in any one year. Accordingly, no assessment or analysis is required under the Unfunded Mandates Reform Act of 1995.

National Environmental Policy Act

In this rule, the Agency proposes amendments that modify and clarify procedures for considering the environmental effects of the Agency's actions within the agencies' decision making process, thereby enhancing compliance with the letter and spirit of NEPA. The Agency has reviewed 7 CFR part 1940, subpart G, “Environmental Program” and part 1794, “Environmental Policies and Procedures” and determined that this final rule qualifies for categorical exclusion (CE) under 7 CFR 1940.310(e)(3) and 7 CFR 1794.21(a)(1), because it is a strictly procedural rulemaking and no extraordinary circumstances exist that require further environmental analysis. Therefore, the Agency has determined that promulgation of this final rule is not a major Federal action significantly affecting the quality of the human environment, and in accordance with NEPA of 1969, 42 U.S.C. 4321

et seq.,

an Environmental Impact Statement is not required.

Executive Order 12988, Civil Justice Reform

This final rule has been reviewed under E.O. 12988, Civil Justice Reform. In accordance with this rule: (1) All State and local laws and regulations that are in con

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