Revisions to the Administrative Requirements and Provisions of the Clean Air Act Section 105 Grant Program

[[Page 366]]

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 35

[OAR-94-45; FRL-4921-3]

RIN 2060-AF03

Revisions to the Administrative Requirements and Provisions of

the Clean Air Act Section 105 Grant Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interim final rule with request for comments.

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SUMMARY: The Environmental Protection Agency (EPA) is promulgating an

interim final rule revising the current regulations which govern the

award of program grants under section 105 of the Clean Air Act (the

Act). The revisions ensure consistency with and continue implementation

of the Clean Air Act Amendments of 1990 (1990 Amendments). This

promulgation revises the regulations to incorporate changes governing

maintenance of effort (MOE) and cost-sharing requirements, including

provisions allowing a temporary waiver of the cost-sharing amounts, and

other miscellaneous changes contained in the 1990 Amendments.

DATES: This interim final rule is effective January 4, 1995.

EPA solicits comments on this interim final rule until February 3,

1995.

ADDRESSES: Supporting information used in the development of this

interim final rule and copies of the public documents submitted are

contained in Docket No. A-94-45. Comments on this interim final rule

should be mailed in duplicate, if possible, to the EPA Air Docket. This

docket is available for public inspection and copying between 8:00 a.m.

and 5:30 p.m., Monday through Friday, except legal holidays. The

address of the EPA Air Docket is: Air Docket, Environmental Protection

Agency, Mailcode 6102, Room M-1500, Waterside Mall, 401 M St., SW.,

Washington, DC 20460. A reasonable fee may be charged for copying.

Comments and data may also be submitted electronically by any of

three different mechanisms: by sending electronic mail (e-mail) to:

[email protected]; by sending a ``Subscribe'' message to

[email protected] and once subcribed, send your

comments to RIN-2060-AF03; or through the EPA Electronic Bulletin Board

by dialing 202-488-3671, enter selection ``DMAIL,'' user name ``BB--

USER'' or 919-541-4642, enter selection ``MAIL,'' user name ``BB--

USER.'' Electronic comments must be submitted as an ASCII file avoiding

the use of special control characters and any form of encryption.

Comments and data will also be accepted on disks in WordPerfect in 5.1

file format or ASCII file format. All comments and data in electronic

form should be identified by the docket number A-94-45. Electronic

comments on this interim final rule, but not the record, may be viewed

or new comments filed online at many Federal Depository Libraries.

Additional information on electronic submissions can be found in unit

V. of this document.

FOR FURTHER INFORMATION CONTACT: Peggy Anthony or Alexander Wolfe,

United States Environmental Protection Agency, Office of Air and

Radiation, Office of Program Management Operations (Mailcode 6102), 401

M St., SW., Washington, DC 20460 at (202) 260-7415.

SUPPLEMENTARY INFORMATION: This preamble is organized according to the

following outline:

I. Background and Purpose

II. Discussion of Regulatory Changes

A. Maintenance of Effort Requirements

1. Definition of Recurrent and Nonrecurrent Expenditures

2. Use of Prior Fiscal Year Data to Determine MOE Levels

3. Accounting Relative to Title V Programs

B. Cost-sharing Requirements

1. Maximum Federal Share

2. Waiver of Cost-sharing Requirement

C. State Allotments and Reserves

III. Summary of Interim Final Rule

IV. Public Docket

V. Regulatory Assessment Requirements

A. Office of Management and Budget Clearances

B. Regulatory Flexibility Act

C. Paperwork Reduction Act

D. Unfunded Mandates

The attached interim final rule revises the regulations at 40 CFR

part 35 to ensure a common sense approach to implementing the 1990

Amendments. The 1990 Amendments require our key stakeholders--state and

authorized local jurisdictions, to implement new operating permit

programs under Title V of the Act. The implementation of the new Title

V programs involve the transition of many activities previously covered

by Section 105 grant programs to the new Title V permit programs. Many

state and local agencies expressed serious concern about being able to

meet MOE requirements due to the reduction in activities; and may be

unable to provide the required 40 percent cost-share. As discussed in

unit II.A.3. of this preamble, EPA has determined that existing

regulations permit states to recompute their MOE levels to reflect the

transfer of state air quality program activities previously funded

through section 105 grants to the Title V permit program. This rule

provides state and local stakeholders with the additional regulatory

framework necessary to make the transition workable on a common sense

scale by allowing state and local government agencies to (1)

temporarily waive the cost-share requirement; and, (2) determine

recurrent and nonrecurrent expenditure levels with greater flexibility.

The preamble makes frequent use of the term ``state,'' usually

meaning the state air pollution control agency authorized to be the

recipient agency for the section 105 grant, as defined under section

302 of the Act. The reader should assume that when used here ``state''

also includes air pollution control agencies of the District of

Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam,

American Samoa, the Commonwealth of the Northern Mariana Islands, and

local governments where a local agency is a direct-funded recipient of

a section 105 air grant.

The preamble is organized to enable a review of the origins of the

part 35 changes being promulgated today. The preamble also describes

the impact on the MOE requirements due to the transfer of section 105

program activities to the Title V permit program. Although not the

subject of this rulemaking, the impact was identified during the

workgroup efforts described below and addressed in an opinion from

EPA's Office of General Counsel.

Proposed changes to part 35, subpart A affecting the award of air

grant assistance to Indian Tribes are the subject of a separate

rulemaking, ``Indian Tribes: Air Quality Planning and Management,'' and

will not be discussed in this action. See 59 FR 43955, August 25, 1994.

However, EPA intends that this rulemaking and the final Tribal air

assistance regulation will be compatible.

I. Background and Purpose

Section 105 of the Act, 42 U. S. C. 7405, authorizes the award of

grants to state, local, interstate, intermunicipal, and tribal air

pollution control agencies to support programs for the prevention and

control of air pollution. The Federal section 105 grant program has

been a major force in helping to establish and expand the air pollution

control programs of state and local agencies. Since including the

program in the 1963 Clean Air Act, Congress has

[[Page 367]] appropriated, and EPA has awarded, over $2.0 billion in

Federal grant assistance.

Section 105 contains two major administrative requirements to

ensure the fiscal commitment and continued eligibility of a recipient

agency. The recipient must: (1) contribute a share of the overall costs

of its section 105-approved program (cost-share or match); and (2)

expend annually an amount equal to or greater than its previous year's

commitment (MOE). The amount of funding established under the second

requirement is called the recipient's MOE level. These requirements

have prompted state, local, and tribal agencies to contribute nearly

$3.5 billion of their own funds over the last 30 years in support of

their efforts to prevent and control air pollution and implement

national ambient air quality standards.

The 1990 Amendments, Public Law 101-549, amended the section 105

provisions on cost-sharing, MOE, and state grant allotments. In

addition, Title V of the 1990 Amendments requires all states to

establish operating permit programs. The Title V permit programs must

include fee provisions to cover the costs of the permit programs. Many

activities previously funded through section 105 grants are now

required to be included within and funded through the Title V permits

and fees.

This rulemaking amends the section 105 program grant regulations at

40 CFR part 35, subpart A to (1) further implement the 1990 Amendments;

(2) ensure consistency between the regulations and the Act as amended;

and (3) address the fiscal impact of Title V permit fee provisions on

section 105 program grant recipients. The rule promulgated here

provides increased flexibility to grant recipients in determining and

setting expenditure levels and provides the regulatory linkage

necessary for reasonable implementation of statutory provisions under

both Titles I and V of the Act.

This interim final rule is consistent with Federal and Agency

intent to: enhance the fiscal capacity of state and local governments

to enable the effective implementation of their air pollution

prevention and control responsibilities; reduce, where possible, any

unnecessary administrative burdens associated with the receipt of

Federal assistance; and help ensure the financial integrity of the air

grant and permit fee programs.

The rule is published as an interim final rule (rather than as a

proposed rule) in accordance with the Administrative Procedure Act, 5

U.S.C. 553(a), which exempts grant rules from the notice and comment

requirements for rulemaking. Nevertheless, EPA solicits public comment

on this interim final rule. The rule takes effect today in order to

allow for the prompt implementation of the provisions affecting the

section 105 grant program, including waivers of the cost-sharing

requirement.

II. Discussion of Regulatory Changes

This section provides a more detailed explanation of the regulatory

changes EPA intends to make to the existing 40 CFR part 35, subpart A.

A. Maintenance of Effort Requirements

1. Definition of recurrent and nonrecurrent expenditures. Section

105 (c)(1) of the Act provides that no agency shall receive a section

105 grant during any fiscal year when its ``recurrent expenditures'' of

non-Federal funds for air pollution control programs will be less than

its expenditures were for such programs during the preceding fiscal

year. The 1990 Amendments require EPA to revise the current regulations

which define applicable recurrent and nonrecurrent expenditures, and in

so doing, to ``give due consideration to exempting an agency from the

limitations of this paragraph [MOE requirements] and subsection (a) of

this section [cost-sharing requirements] due to periodic increases

experienced by that agency from time to time in its annual expenditures

for purposes acceptable to the Administrator for that fiscal year.''

Section 105(c)(1) of the Act, as amended. This rule revises the

definition for recurrent expenditures and adds a new definition for

nonrecurrent expenditures for the air grant program. As discussed in

unit B.2. of this preamble, the regulations also provide for an

exemption from the cost-sharing requirements in certain limited

circumstances.

The current regulatory definition of ``recurrent expenditures'' in

40 CFR 35.105 provides that all expenditures, except those for

equipment purchases with a unit acquisition cost of $5,000 or more, are

considered recurrent unless justified by the applicant as unique and

approved by the Regional Administrator in the grant agreement. The

revised definition being promulgated for the air grant program removes

the $5,000 limitation to recognize price changes due to inflation and

changes in the nature and design of air pollution control equipment.

Such changes have occurred since the last promulgation and are likely

to continue. The revised definition will provide greater flexibility to

air pollution control agencies in the MOE requirements by not

subjecting them to an artificial dollar ceiling and administratively

burdensome justifications for basic purchases. This rule leaves in

place the current definition of ``recurrent expenditures'' at 40 CFR

35.105 which will continue to be used in other continuing environmental

programs governed by 40 CFR part 35, subpart A.

2. Use of prior fiscal year data to determine MOE levels. While the

MOE provision requires that each recipient expend annually at least the

same or greater amount of its own resources on its section 105 program

as it did in the previous year, it often takes several months beyond

the end of a fiscal year for EPA to determine the final expenditure

amounts for the grants. In order to permit EPA to award the section 105

grants in a timely manner, even when the required fiscal data is not

yet available, the 1990 Amendments revised section 105(c)(1) to allow

EPA to compare an agency's prospective expenditure level to that of its

second preceding fiscal year. When the preceding year's final fiscal

data is received, EPA will then provide an official verification that

the MOE requirements have been met. Section 35.210(a) has been revised

to permit the use of data from the second preceding fiscal year as

provided in the 1990 Amendments.

3. Accounting relative to Title V programs. States have expressed

concern over how the transfer of resources from their section 105 grant

program to their Title V program will affect the MOE requirement and

their ability to continue to receive a Federal grant.

This concern and other grant and fee program transition issues

prompted EPA to initiate, in May 1994, a workgroup to develop clear

transition policies and procedures for regions and states to follow.

The workgroup effort resulted in the issuance of a June 27, 1994

opinion from the Office of General Counsel on the ability of states to

adjust MOE levels once Title V programs are approved. EPA also issued

transition guidance on July 21, 1994 and August 28, 1994.

Based on the June 27, 1994 opinion, EPA has determined that a

state's MOE level may be reduced to reflect the transfer of activities

previously funded through its section 105 program to the Title V

program without jeopardizing the state's continued eligibility for a

section 105 grant. However, a state must maintain the level of effort

associated with recurrent expenditures for activities that continue to

be supported with section 105 program grants. This principle applies

not only to the year in which the Title V program is initially

[[Page 368]] approved but in subsequent years as well.

Section 105(c)(1) of the Act provides that ``No agency shall

receive any grant under this section during any fiscal year when its

expenditures of nonfederal funds for recurrent expenditures for air

pollution control programs will be less than its expenditures were for

such programs during the preceding fiscal year.'' The MOE regulations

implementing this provision state that: ``To receive funds under

section 105, an agency must expend annually for recurrent section 105

program expenditures an amount of nonfederal funds at least equal to

such expenditures during the preceding fiscal year.'' 40 CFR 35.120.

Because the regulations describe the term ``recurrent expenditures

for air pollution control programs,'' as ``recurrent section 105

program expenditures,'' EPA believes a reasonable interpretation of the

MOE provisions is that they require states to maintain only their

effort associated with activities that are included within the section

105 grant program.

Because many of the activities previously funded through section

105 program grants are now included within the Title V permit fee

program and permit program activity costs are no longer allowable costs

under the section 105 program, expenditures for permit activities are

no longer ``recurrent section 105 program expenditures'' for which the

MOE level must be maintained. A new MOE level should be calculated that

reflects the expenditures associated with the remaining section 105

activities.

B. Cost-sharing Requirements

1. Maximum Federal share. Prior to the 1990 Amendments, EPA was

authorized to award Section 105 program grants that, depending upon the

purposes of the grants and recipients' identities, provided up to one-

half to three-quarters of the approved program costs. Distinctions were

made among types of recipients and between cost-sharing requirements

for planning, developing, establishing, and improving programs and

maintaining programs. The 1990 Amendments eliminated the distinctions

between the types of recipients and activities along with the varying

Federal funding percentages associated with each. Instead all funded

activity is now termed as 'implementation' which is now defined in this

rulemaking to encompass virtually every type of program activity.

The Amendments revised section 105(a) to authorize grant awards up

to three-fifths (60 percent) of the costs of ``implementing'' the air

programs. Section 105 (a)(1)(A) defines ``implementing'' as ``any

activity related to the planning, developing, establishing, carrying-

out, improving, or maintaining of such programs.''

The 1990 Amendments further provided that air pollution control

agencies contributing less than two-fifths (40 percent) of the approved

program costs had 3 years from the date of enactment (November 15,

1990) to meet the required nonfederal minimum or face a reduction in

their EPA funding. Section 105 (a)(1)(B) of the Act. The change in the

cost-share requirement was phased-in to prevent the disruption of

affected grantee's current air program operations.

This rulemaking revises the current regulations by deleting the

existing regulations at 40 CFR 35.205 and inserting new provisions for

a uniform cost-sharing requirement for all program activities and a 3-

year phase-in period. The statutory definition of the term

``implementing'' has been included in the new definitions section at 40

CFR 35.201.

2. Waiver of cost-sharing requirement. In accordance with section

105(c)(1) EPA has determined that an exemption from the cost-sharing

requirement is appropriate in certain very limited circumstances

because of increased expenditures experienced by states as a result of

the transfer of resources to the Title V permit program.

In the 1980's, many states enacted operating permit programs as

part of their air pollution control programs. The costs of these state

permit programs were allowable under section 105 grants and many states

used the permit fees they collected to satisfy the cost-sharing

requirement of the section 105 grant program. The 1990 Amendments,

however, added Title V to the Act. Title V requires all states to

establish operating permit programs supported by permit fees. Many

activities previously funded through section 105 grants are now

required to be included and funded through the Title V permit fee

programs. In order to obtain a permit, sources of pollution must pay to

the state an annual fee that is sufficient to cover all the costs of

the permitting program. (Section 502(b)(3)(A)). Title V and EPA

regulations require that any such permit fees collected be utilized

solely to cover the costs of the permit programs. (Section

502(b)(3)(C)(iii) and 40 CFR 70.9(d)).

Some states assumed the fees collected under Title V could be used

to pay a portion or all of the 40 percent cost-share for their section

105 grant, like the fees under previous state permit programs. Other

states without previously existing permit programs also planned to use

Title V fees in lieu of state general revenues and other sources to

meet the cost-share requirement. Relying on the assumption that Title V

fees could be used for cost-sharing, some state legislatures did not

authorize and appropriate funds sufficient to meet the cost-share

requirements beyond the funds anticipated from the fees.

However, Title V permit fees cannot be used to meet the cost-

sharing requirements of section 105 program grants. In order to qualify

for cost-sharing, costs incurred by a grantee must be allowable under

its grant with EPA. (40 CFR 31.24(a)). A grantee may not count costs

that are not part of its grant program. Because Title V requires that

the permit program be funded solely from the fees collected, and that

the fees collected be used only for that purpose, Title V permit

program costs cannot be funded from a section 105 grant. As a result,

the permit program cost are not allowable section 105 grant costs and,

therefore, the costs and the fees used to pay them cannot be used to

meet the section 105 cost-sharing requirements.

Because the Title V fees cannot be used for cost-sharing, some

state and local agencies have indicated that they will not be able to

meet the 40 percent cost-sharing obligation once their Title V programs

are approved. As a result, some states need additional time to identify

other sources of funds or obtain additional funds from their

legislatures. If a state cannot meet its cost-share it would either be

ineligible for a section 105 award or would have its grant award

reduced as a result. Section 105 grants fund a large portion of state

air pollution control programs. Without grant support some states have

indicated an inability to fulfill responsibilities under the Act and

would not be able to meet all of the statutory deadlines. Consequently,

states would risk the imposition of severe growth sanctions.

To prevent significant shortfalls in near-term funding, states

requested relief from the cost-sharing requirements. The EPA has noted

three regulatory and administrative remedies that would help provide

states relief and additional time to secure the necessary funding

support: deferral of cost-sharing to the end of the budget period; use

of revenue generated from fees during program development for cost-

sharing; and promulgation of this rule to provide a temporary waiver of

the cost-sharing requirement. [[Page 369]]

\ Deferral of cost-sharing. States can request deferral of the

cost-sharing requirements until later in the annual grant budget period

in order to provide additional time to obtain cost-sharing resources.

Regulations governing cost-sharing require only that the costs be

incurred under the assistance agreement, i.e., during the budget period

identified in the assistance agreement (40 CFR 31.24). This is

consistent with the decisions of the Comptroller General. See e.g., 60

Comp. Gen. 208 (1981) (Cost-share requirements are met when nonfederal

share is provided by the end of the grant budget period).

\ Use of fees generated prior to Title V implementation. As part of

approved section 105 grant workplans, states have used section 105

grant funds in the development (``ramp-up'') of their Title V programs.

Fees generated to help develop these Title V programs prior to their

approval by EPA, unless otherwise specifically directed by the state to

support its Title V program once it is approved, can be used for cost-

sharing.

\ Waiver of cost-sharing requirements. The promulgation of this

rulemaking will provide temporary relief in the form of waivers from

the cost-sharing requirement in certain very limited circumstances

under the authority provided in section 105(c)(1) of the Act. That

section authorizes EPA to provide an exemption from both the section

105(c)(1) MOE requirements and the cost-sharing requirements of section

105(a) due to periodic increases experienced by states in their annual

expenditures for purposes acceptable to EPA. Because some states

assumed they could use the Title V fees for cost-sharing, they are now

confronted with unanticipated increases in their expenditures in order

to meet the cost-sharing requirements. EPA believes these increases

fall within the scope of section 105 waiver authority.

The rule provides that a waiver may be permitted only when the

reduction of a state or local agency's nonfederal grant contribution of

the required cost-share is due to the redirection of its grant matching

resources to the Title V operating permit program.

The waiver will be temporary and available on a case-by-case basis

for a 1-year period. The waiver may be renewed for no more than 2

additional years so long as the total waiver period does not expire

later than 3 years from the date of initial approval of a state's Title

V program. EPA believes the 3-year timeframe is reasonable because it

will provide the state legislatures with both annual and biennial

sessions the opportunity to take corrective fiscal action. In addition,

EPA believes it could take 3 years for a state to refocus its programs

and resources.

The Governor of the state or the Governor's designee, (or in the

case of a local air pollution control agency, the accountable

authorizing official) must request a waiver from the Regional

Administrator on an annual basis. A relevant showing of financial need,

which meets the criteria set forth by EPA in Sec. 35.205(b), and any

criteria in companion guidance to be issued by the Agency, must be

provided by the state to the responsible EPA region. The waiver request

should describe the nature and timing of the corrective fiscal action

the state intends to take to restore its contribution to at least a 40

percent level.

The Governor of the state or the Governor's designee, (or in the

case of a local air pollution control agency, the accountable

authorizing official) must also provide an assurance that the state

will not further reduce its nonfederal contribution below the level

authorized by the waiver. The waiver will only be for that portion of

the cost-sharing attributable to redirection of resources to Title V.

In addition to the information contained in this rule, EPA will

provide supplemental guidance on the waiver and other aspects of this

rule.

C. State Allotments and Reserves

The 1990 Amendments revised section 105(b)(2) to clarify that EPA

must make available to each state for application, but not necessarily

for award, one-half of 1 percent of the total national section 105

grant appropriation. While EPA must allot this amount per state for

planning purposes, a state's application must demonstrate that it

merits and can effectively utilize the funds it requests for purposes

acceptable to the Administrator. EPA is not obligated to provide the

full one-half of 1 percent amount. This rule revises 40 CFR 35.115 to

reflect this statutory change.

III. Summary of Interim Final Rule

The following is a summary of the changes the EPA intends to make

to the existing regulations at 40 CFR part 35, subpart A:

1. Section 35.105 Definitions. Modify the definition of ``recurrent

expenditures'' to show that it does not apply to agreements made

pursuant to section 105.

2. Amend Sec. 35.115 (a) (State allotments and reserves) so that it

is consistent with section 105 (b)(2), as amended, which requires that

each state have made available to it for application no less than one-

half of 1 percent nor more than 10 percent of the annual section 105

appropriations.

3. Establish Sec. 35.201 (Definitions under section 105) to provide

definitions for implementing, and recurrent and nonrecurrent

expenditures applicable to the section 105 assistance awards:

a. Add a definition for ``implementing''. Prior to the 1990

Amendments the Act provided for differing levels of Federal share for

grants for ``planning, developing, establishing, or improving'' air

programs and for grants for maintaining air programs. The amendments

provide for only one level of Federal share for ``implementing'' a

program.

b. Add a definition for ``nonrecurrent expenditures''. Use of the

definition of ``recurrent expenditures'' in the existing regulation

often resulted in the MOE amount being inequitably raised.

c. Add a revised definition for ``recurrent expenditures'' for

section 105 assistance agreements. The 1990 Amendments require that the

current language be revised.

4. Amend Sec. 35.205 (Maximum Federal Share) by deleting the

existing language and replacing it with one paragraph which reflects

the new statutory maximum Federal grant share of 60 percent. A second

paragraph provides a method by which grantees negatively-impacted by

the transfer of resources to the Title V program may request the EPA to

waive the cost-sharing requirement at Sec. 35.205(a).

5. Amend Sec. 35.210 (Maintenance of Effort) by revising

subparagraph (a) to reflect the statutory provision allowing the

Regional Administrator to base the initial determination of MOE level

on the second preceding fiscal year rather than the preceding fiscal

year.

IV. Public Docket

The docket for this regulatory action is A-94-45. The docket is an

organized and complete file of all the information submitted to, or

otherwise considered by EPA in the development of this interim final

rulemaking. The principal purposes of the docket are:

(1) To allow interested parties a means to identify and locate

documents so that they can effectively participate in the rulemaking

process, and

(2) To serve as the record in case of judicial review.

The public docket is located in M1500, 401 M Street SW.,

Washington, DC 20460. The information contained in this public docket,

including printed, paper versions of electronic comments is available

for inspection from 8:00 a.m. to 5:30 p.m., Monday thru Friday,

excluding legal holidays. [[Page 370]]

As part of an interagency ``streamlining'' initiative, EPA is

experimenting with submission of public comments on selected rulemaking

actions electronically through the Internet in addition to accepting

comments in traditional written form. This interim final rule is one of

the rulemaking actions selected by EPA for this experiment. From the

experiment, EPA will learn how electronic commenting works, and any

problems that arise can be addressed before EPA adopts electronic

commenting more broadly in its rulemaking activities. Electronic

commenting through posting to the EPA Bulletin Board or through the

Internet using the ListServe function raises some novel issues that are

discussed below in this Section.

To submit electronic comments, persons can either ``subscribe'' to

the Internet ListServe application or ``post'' comments to the EPA

Bulletin Board. To ``Subscribe'' to the Internet ListServe application

for this interim final rule, send an e-mail message to:

[email protected] that says `` Subscribe RIN-2060-AF03

.'' Once you are subscribed to the ListServe,

comments should be sent to: RIN-2060-AF[email protected].

For online viewing of submissions and posting of comments, the

public-access EPA Bulletin Board is also available by dialing 202-488-

3671, enter selection ``DMAIL,'' user name ``BB--USER'' or 919-541-

4642, enter selection ``MAIL,'' user name ``BB--USER.'' When dialing

the EPA Bulletin Board type at the opening message. When the

``Notes>'' prompt appears, type ``open RIN-2060-AF03'' to access the

posted messages for this document. To get a listing of all files, type

``dir/all'' at the prompt line. Electronic comments can also be sent

directly to EPA at:

[email protected].

Electronic comments must be submitted as an ASCII file avoiding the

use of special control characters and any form of encryption.

To obtain further information on the electronic comment process, or

on submitting comments on this interim final rule electronically

through the EPA Bulletin Board or the Internet ListServe, please

contact John A. Richards (Telephone: 202-260-2253; FAX: 202-260-3884;

Internet: [email protected]).

Persons who comment, and those who view comments electronically,

should be aware that this experimental electronic commenting is

administered on a completely public system. Therefore, any personal

information included in comments and the electronic mail addresses of

those who make comments electronically are automatically available to

anyone else who views the comments.

Commenters and others outside EPA may choose to comment on the

comments submitted by others using the RIN-2060-AF03 ListServe or the

EPA Bulletin Board. If they do so, those comments as well will become

part of EPA's record and included in the public docket for this

rulemaking. Persons outside EPA wishing to discuss comments with

commenters or otherwise communicate with commenters but not have those

discussions or communications sent to EPA and included in the EPA

rulemaking record and public docket should conduct those discussions

and communications outside the RIN-2060-AF03 ListServe or the EPA

Bulletin Board.

EPA will transfer all comments received electronically in the RIN-

2060-AF03 ListServe or the EPA Bulletin Board, in accordance with the

instructions for electronic submission, into printed, paper form as

they are received and will place the paper copies in the official

rulemaking docket which will also include all comments submitted

directly in writing. All the electronic comments will be available to

everyone who obtains access to the RIN-2060-AF03 ListServe or the EPA

Bulletin Board; however, the official rulemaking docket is the paper

docket maintained at the address in ``ADDRESSES'' at the beginning of

this document. (Comments submitted only in written form will not be

transferred into electronic form and thus may be accessed only by

reviewing them in the EPA Docket as described above.)

Because the electronic comment process is still experimental, EPA

cannot guarantee that all electronic comments will be accurately

converted to printed, paper form. If EPA becomes aware, in transferring

an electronic comment to printed, paper form, of a problem or error

that results in an obviously garbled comment, EPA will attempt to

contact the commenter and advise the commenter to resubmit the comment

either in electronic or written form. Some commenters may choose to

submit identical comments in both electronic and written form to ensure

accuracy. In that case, EPA requests that commenters clearly note in

both the electronic and written submissions that the comments are

duplicated in the other medium. This will assist EPA in processing and

filing the comments in the rulemaking docket.

As with ordinary written comments, at the time of receipt, EPA will

not attempt to verify the identities of electronic commenters nor to

review the accuracy of electronic comments. Electronic and written

comments will be placed in the rulemaking docket without any editing or

change by EPA except to the extent changes occur in the process of

converting electronic comments to printed, paper form.

EPA will address significant electronic comments either in a notice

in the Federal Register or in a response to comments document placed in

the rulemaking docket for this Interim Final Rule. EPA will not respond

to commenters electronically other than to seek clarification of

electronic comments that may be garbled in transmission or conversion

to printed paper form as discussed above. Any communications from EPA

employees to electronic commenters, other than those described in this

paragraph, either through Internet or otherwise are not official

responses from EPA.

V. Regulatory Assessment Requirements

A. Executive Order 12866

Under Executive Order 12866, [58 FR 51735, October 4, 1993] the

Agency must determine whether the regulatory action is ``significant''

and therefore subject to OMB review and the requirements of the

Executive Order. The order defines ``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 the Executive Order. It has been determined

that this rule is a not a significant regulatory action under the terms

of Executive Order 12866 and is therefore not subject to formal OMB

review.

B. Regulatory Flexibility Act

EPA did not develop a Regulatory Flexibility Analysis for this

grant- [[Page 371]] related rule because it is exempt from notice and

comment rulemaking under section 553(a)(2) of the Administrative

Procedure Act (5 U.S.C. 553(a)(2)), and therefore is not subject to the

analytical requirements of sections 603 and 604 of the Regulatory

Flexibility Act (5 U.S.C. 603 and 604).

C. Paperwork Reduction Act

The information collection activities associated with the

administrative requirements of assistance programs have already been

approved under the provisions of the Paperwork Reduction Act at 44

U.S.C. 3501 et seq and have been assigned OMB control number 2030-0020.

The collection of information associated with the administrative

requirements of assistance programs to state and local government

agencies is estimated to have a public reporting burden averaging 25

hours annually. This includes time for reviewing instructions,

searching existing data sources, gathering and maintaining the data

needed, and completing and reviewing the collection of information.

The interim final regulation will cause a modest increase in

information collection activity for some respondents above that

associated with the normal administrative requirements of assistance

programs. This is primarily attributable to the financial demonstration

of need required for the approval of a waiver. Approximately 11 to 15

State and local agencies are anticipated to request a waiver.

D. Unfunded Federal Mandates: Enhancing the Intergovernmental

Partnership, Executive Order 12875

We believe this regulation will provide relief to State and local

governments negatively impacted by the transfer of program activities

and resources in compliance with section 502(b) of the Act. While

additional funds are not being provided, this rule allows state and

local agencies to request waivers of the Act's cost-sharing

requirements. The Office of Management and Budget was provided

information and documents concerning consultations with state and local

governments made directly, and indirectly through state and local

groups. Affected state and local officials were also provided the means

to participate in the development of this rulemaking through surveys,

conference discussions, information papers, formal and informal

comments, and communications with a variety of state and local

associations.

We also believe, by including provisions for the cost-sharing

requirements to be waived (as discussed above), the rulemaking

increases the ``flexibility for state and local waivers.'' Furthermore,

in accordance with the Act's requirements, the term ``implementing'' is

being defined to encompass all grant activities in lieu of separately-

based cost-share percentages for planning, developing, establishing, or

improving programs and program maintenance.

We do not anticipate that these regulations will impose any

burdensome effects on the national economy. Indeed, this rule is

intended to provide administrative and fiscal relief to affected state

and local agencies.

List of Subjects in 40 CFR Part 35

Accounting, Administrative practice and procedures, Environmental

protection, Grant programs, Grants administration, Intergovernmental

relations, Reporting and recordkeeping requirements.

Dated: December 23, 1994.

Carol M. Browner,

Administrator.

For the reasons set forth in the preamble, 40 CFR part 35, subpart

A is amended as follows:

PART 35-- STATE AND LOCAL ASSISTANCE

1. The authority citation for part 35, subpart A, continues to read

as follows:

Authority: Secs. 105 and 301(a) of the Clean Air Act, as amended

(42 U.S.C. 7405 and 7601(a)); secs. 106, 205(g), 205(j), 208, 319,

501(a), and 518 of the Clean Water Act, as amended (33 U.S.C. 1256,

1285(g), 1285(j), 1288, 1361(a) and 1377); secs.1443, 1450, and 1451

of the Safe Drinking Water Act (42 U.S.C. 300j-2,300j-9 and 300j-

11); secs. 2002(a) and 3011 of the Solid Waste Disposal Act, as

amended by the Resource Conservation and Recovery Act of 1976 (42

U.S.C. 6912(a), 6931, 6947, and 6949); and secs. 4, 23, and 25(a) of

the Federal Insecticide, Fungicide and Rodenticide Act, as amended

(7 U.S.C. 136(b), 136(u), and 136w(a)).

2. Section 35.105 is amended by revising the definition of

``Recurrent expenditures'' to read as follows:

Sec. 35.105 Definitions.

* * * * *

Recurrent expenditures, except for the purposes of section 105 of

the Clean Air Act (See Sec. 35.201), means those expenditures

associated with the activities of a continuing environmental program.

All expenditures, except those for equipment purchases with a unit

acquisition cost of $5,000 or more, are considered recurrent unless

justified by the applicant as unique and approved as such by the

Regional Administrator in the assistance award.

* * * * *

3. In Sec. 35.115 paragraph (a) is amended by revising the last

sentence to read as follows:

Sec. 35.115 State allotments and reserves.

* * * * *

(a) * * * However, no state shall have made available to it for

application an allotment of less than one-half of 1 percent nor more

than 10 percent of the annual appropriation for section 105 grants.

* * * * *

4. A new Sec. 35.201 is added to read as follows:

Sec. 35.201 Definitions applicable to Section 105.

For purposes of section 105 of the Clean Air Act the following

definitions are to be used in addition to the definitions in

Sec. 35.105; except that the definition of ``Recurrent expenditures''

has the meaning set forth below:

Implementing means, within the context of section 105 of the Clean

Air Act, as amended, any activity related to planning, developing,

establishing, carrying-out, improving, or maintaining programs for the

prevention and control of air pollution or implementation of national

primary and secondary ambient air quality standards.

Nonrecurrent expenditures means those expenditures which are shown

by the recipient to be of a nonrepetitive, unusual, or singular nature

such as would not reasonably be expected to recur in the foreseeable

future. Costs categorized as nonrecurrent must be approved in the

assistance agreement or an amendment thereto. All other approved

project costs are deemed to be recurrent.

Recurrent expenditures means those expenses associated with the

activities of a continuing environmental program. All expenditures are

considered recurrent unless justified by the applicant as nonrecurrent

and approved in the assistance award or an amendment thereto.

5. Section 35.205 is revised to read as follows:

Sec. 35.205 Maximum Federal share.

(a) The Regional Administrator may provide state, local,

interstate, or intermunicipal agencies up to three-fifths of the

approved costs of implementing programs for the prevention and control

of air pollution or implementing national primary and secondary ambient

air quality standards. Air pollution control agencies currently

[[Page 372]] receiving grants and contributing less than the required

minimum of two-fifths of the approved program costs shall have until

November 15, 1993 to increase their contribution to the required level.

(b) Subject to the conditions set forth below, the Regional

Administrator may, at the request of the Governor of a State or the

Governor's designee, or in the case of a local jurisdiction, the

authorized local official, waive, for a 1-year period, all or a portion

of the cost-sharing requirement of paragraph (a) of this section. The

Regional Administrator may renew the waiver for no more than 2 years so

long as the total waiver period does not exceed 3 years from the

approval date of a state's permit program required under section 502 of

the Clean Air Act (Act).

(1) The waiver may be approved on a case-by-case basis and only

when a state or local government's nonfederal contribution is reduced

below the required two-fifths minimum as a result of the redirection of

its nonfederal air resources to meet the requirements of section 502(b)

of the Act.

(2) In applying for a waiver the Governor or the Governor's

designee, or in the case of a local jurisdiction, the authorized local

official, must:

(i) Describe the extent of fiscal and programmatic impact on the

agency's section 105 program as a result of the transfer of nonfederal

resources to support the program approved by EPA under section 502(b)

of the Act.

(ii) Provide documentation of the amount of the cost-sharing

shortfall and the programmatic activities that would not be able to be

carried out if the section 105 grant is reduced or not awarded as a

result of a state or local air pollution control agency's inability to

meet the cost-sharing requirements.

(iii) Assure that there is no source of funding that may reasonably

be used to meet the cost-sharing requirement for the affected grant

budget period; and

(iv) Assure that during the section 105 grant period the non-

federal share of the program costs will not be reduced in an amount

greater than that authorized by the waiver.

6. Section 35.210 is amended by adding a sentence at the end of

paragraph (a) to read as follows:

Sec. 35.210 Maintenance of effort.

(a) * * * In order for the Regional Administrator to award grants

in a timely manner each fiscal year, the Regional Administrator shall

compare an agency's proposed expenditure level, as detailed in the

agency's application for grant assistance, to that agency's expenditure

level in the second preceding fiscal year.

* * * * *

[FR Doc. 95-150 Filed 1-3-95; 8:45 am]

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