\[Federal Register: September 29, 2003 (Volume 68, Number 188)\]

\[Rules and Regulations\]

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From the Federal Register Online via GPO Access \[wais.access.gpo.gov\]

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Part V

Department of Housing and Urban Development

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24 CFR Part 50, et al.

Environmental Review Procedures for Entities Assuming HUD\'s

Environmental Responsibilities; Final Rule

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 50, 58, 574, 582, 583, and 970

\[Docket No. FR-4523-F-02\]

RIN 2501-AC83

Environmental Review Procedures for Entities Assuming HUD\'s

Environmental Responsibilities

AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.

ACTION: Final rule.

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SUMMARY: This final rule updates the list of programs and statutory
authorities in HUD\'s environmental regulation for which other entities
may assume HUD\'s environmental responsibilities. This rule makes other
changes to update these regulations that address the assumption of
HUD\'s environmental responsibilities. This final rule also makes
conforming changes to the affected environmental provisions contained in
various program regulations. This final rule follows publication of a
June 26, 2002, proposed rule and takes into consideration the public
comments received on the proposed rule.

DATES: Effective Date: October 29, 2003.

FOR FURTHER INFORMATION CONTACT: Richard H. Broun, Director, Office of
Community Viability, Office of Community Planning and Development, Room
7244, Department of Housing and Urban Development, 451 Seventh Street,
SW., Washington, DC 20410-7000. For inquiry by phone or e-mail, contact
Walter Prybyla, Environmental Review Division, Office of Community
Planning and Development, at (202) 708-1201, extension 4466 (this is not
a toll-free number), or mail to: <Walter_Prybyla@hud.gov>.
Hearing-impaired or speech-impaired individuals may access the voice
telephone number listed above by calling the toll-free Federal
Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. The June 26, 2002, Proposed Rule

On June 26, 2002 (67 FR 43208), HUD published a proposed rule that would
make a number of changes to HUD regulations at 24 CFR part 58. For the
convenience of the reader, the Department summarizes here some of the
details of the proposed rule published in the preamble to the proposed
rule. Readers are referred to the Supplementary Information section of
the preamble of the published proposed rule at 67 FR 43208-43210 for a
fuller explanation of the rationale or justification for the various
revisions in the rule.

The regulations at 24 CFR part 58 implement statutory authorities that
permit certain entities other than HUD to assume HUD\'s environmental
responsibilities for various HUD programs. The proposed rule advised
that the Department would (1) update the list of programs and statutory
authorities covered by part 58, and (2) make conforming changes to
environmental provisions in certain program regulations to include a
cross-reference to part 58. In addition, the proposed rule would make
conforming changes in HUD\'s regulations at 24 CFR part 50, which govern
when HUD is responsible to perform environmental responsibilities in
accordance with the National Environmental Policy Act (NEPA) (42 U.S.C.
4321 et seq.), the Council on Environmental Quality Regulations (40 CFR
parts 1500-1508), and other environmental requirements (as specified in
24 CFR 50.4).

The proposed rule described the additional programs that would be added
to the list of programs in Sec. 58.1. Among these programs are (1)
Grants provided to private nonprofit organizations and housing agencies
under the Supportive Housing Program and the Shelter Plus Care Program
authorized by Title IV of the McKinney-Vento Homeless Assistance Act;
(2) Assistance provided under the Native American Housing Assistance and
Self-Determination Act of 1996 (NAHASDA); (3) Indian Housing Loan
Guarantees under section 184 of the Housing and Community Development
Act of 1992; (4) HOPE VI grants for FY 1999 and earlier and HOPE VI
grants under section 24 of the United States Housing Act of 1937; and
(5) Housing Opportunities for Persons With AIDS (HOPWA) grants under the
AIDS Housing Opportunity Act.

The proposed rule also advised that the Rental Rehabilitation Program
and the Housing Development Grant Program authorized by section 17 of
the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) are no
longer in use and would be removed from paragraph (b)(2) of the list in
24 CFR 58.1.

The proposed rule further indicated that the Department would add a new
Sec. 58.1(c) and Sec. 58.1(d) to Title 24. New Sec. 58.1(c) clarifies
that activities assisted with repayments to a revolving loan fund
initially assisted with HUD funds are subject to environmental
requirements only if HUD program rules treat the activity assisted with
repayments as being subject to federal requirements. New Sec. 58.1(d)
clarifies that the Assistant Secretary for Community Planning and
Development, to the extent permitted by applicable laws and the
regulations of the Council on Environmental Quality (CEQ), may, for good
cause and with appropriate conditions, approve waivers and exceptions or
establish criteria for exceptions from the requirements of this part.

The June 26, 2002, rule proposed changes in Sec. 58.2 to the definitions
of \`\`recipient\'\' and \`\`responsible entity\'\' (RE). A new Sec.
58.4(c) was proposed to clarify that under NAHASDA and the Section 184
program, Indian tribes have a choice whether or not to assume
environmental responsibilities under 24 CFR part 58.

The rule also proposed updating the list of NEPA-related environmental
authorities in Sec. 58.5 to add new requirements similar to those
identified in 24 CFR 50.3(i), which apply when HUD performs the
environmental review for a project. The proposed rule indicated that
environmental reviews for multifamily housing with five or more units
(including leasing) and non-residential property must include evaluation
of previous site uses and other evidence of contamination on or near the
site.

Further, the proposed rule noted revisions to Sec. 58.11 to exclude the
term \`\`Indian Housing\'\' recipient and to add the term \`\`HOPWA\'\'
recipient. Additionally, the rule announced that Sec. 58.22(a) would be
revised to make it clear that all participants in the development
process are subject to the provisions of part 58.

The proposed rule added a new paragraph to Sec. 58.22 to permit an
organization, consortium, or affiliate under the Self-Help Homeownership
Opportunity Program (SHOP) to advance nongrant funds to acquire land
prior to completion of the environmental review process.

The rule also detailed revisions to be made to Sec. 58.33(b) and Sec.
58.35, along with conforming changes to 24 CFR part 50. In addition, the
proposed rule included revisions to Sec. Sec. 58.34(b), 58.45, 58.72,
and 58.75. An additional proposal in the rule would add language to 24
CFR parts 574, 582, 583, and 970 to make conforming amendments to
reflect the applicability of part 58 procedures.

The proposed amendments to Sec. Sec. 58.34(b) and 58.35(d) regarding the
timing of environmental documentation have been omitted from the final
rule.

The proposed amendments to Sec. Sec. 50.20(a)(2)(i) and 58.35(a)(3)(i)
regarding conditions for eligibility for a

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categorical exclusion for rehabilitation of buildings for residential
use (with one to four units) are modified in the final rule. The
threshold that \`\`the dwellings do not result from a conversion of use
from a non-residential use\'\' is revised in the final rule to read
\`\`the land use is not changed.\'\' The threshold that \`\`the
footprint of the building is not increased in a floodplain or in a
wetland\'\' is added to the final rule.

The final rule updates the reference to the FHA Multifamily Housing
Finance Agency Pilot Program by removing the word \`\`Pilot\'\' because
the program is now a permanent program. The term \`\`Pilot\'\' appears
in the current regulation and the proposed rule at Sec. 58.2(a)(5)(vii)
and (6).

The Department has decided not to adopt the revisions to 24 CFR 970.4 as
published in the proposed rule, in favor of making a simple
cross-reference to part 58. The Office of Public Housing Investments, an
office under the Office of the Assistant Secretary for Public and Indian
Housing, plans to cover the removed guidance in an internal notice
dealing with demolition or disposition of public housing projects
pending issuance of a broader amendment to part 970 itself.

II\. This Final Rule

This final rule follows publication of the June 26, 2002, proposed rule
and takes into consideration the 64 public comments received on the
proposed rule. The public comment period on the rule closed on August
26, 2002. Comments were received from a federal agency, local housing
and community development authorities, housing professionals, an Indian
housing authority, city and county governments, housing associations,
home inspection services, and several private individuals. In accordance
with the consultation provision of the CEQ regulations at 40 CFR 1507.3,
HUD submitted for CEQ review and comment the proposed amendment to part
58. The final rule implements HUD\'s responsibility to identify and
regulate HUD-assisted activities subject to NEPA. Section 102 of NEPA
requires that all agencies of the federal government identify and
develop methods and procedures, in consultation with the CEQ, which will
ensure that presently unquantified environmental amenities and values
may be given appropriate consideration in decisionmaking along with
economic and technical considerations.

In response to the public comments, the following revisions, summarized
here and discussed more fully in Part III, are made to the proposed
rule.

Section 58.1(b)(10) is revised by adding the new program for Native
Hawaiian Housing Block Grants authorized under title VIII of the Native
American Housing Assistance and Self-Determination Act of 1996
(NAHASDA), in accordance with section 806 (25 U.S.C. 4226).

Section 58.2(a)(5)(ix) is revised by adding as a recipient, the
Department of Hawaiian Home Lands with respect to NAHASDA assistance
under Sec. 58.1(b)(10).

Section 58.2(a)(7)(ii) is revised by adding as a responsible entity, the
Department of Hawaiian Home Lands with respect to environmental
responsibilities under NAHASDA, when the Department of Hawaiian Home
Lands is the recipient.

Section 58.35(a)(3)(i) is revised to clarify the conditions for a
categorical exclusion for rehabilitation proposed in the case of
buildings for residential use (with one to four units). The conditions
are that the density is not increased beyond four units, the land use is
not changed, and the footprint of the building is not increased in a
floodplain or in a wetland. The effects of this provision are that: (1)
It corrects in the current rule at Sec. 58.35(a)(3) the apparent
omission of the topic of \`\`buildings for residential use (with one to
four units)\'\' by including an explicit reference to this topic in the
listing for building rehabilitation activities, because the current
listing cites categorical exclusions only for multifamily and
non-residential buildings. Although under current regulations neither
part 58 nor part 50 refers to the topic of rehabilitation proposed in
the case of buildings for residential use (with one to four units), the
topic was considered under part 58 as an \`\`individual action,\'\'
whereas under part 50 it was covered under the generic topic
\`\`rehabilitation of structures.\'\' The final rule removes this
ambiguity; (2) it removes the proposed rule reference at Sec.
58.35(a)(3)(i) to \`\`dwellings do not result from a conversion of use
from a non-residential use\'\' and substitutes \`\`the land use is not
changed\'; (3) it eliminates the need to perform environmental
assessments by removing thresholds listed in the current regulations
under both parts 50 and 58; (4) it adds a cross-reference within the
individual actions criteria at Sec. Sec. 58.35(a)(4) and 50.20(a)(3) to
exclude rehabilitation of buildings for residential use (with one to
four units) from the thresholds for individual actions; and (5) this
categorical exclusion continues, as in the current and proposed
regulations, to be subject to the Sec. Sec. 58.5 and 58.6 provisions. In
addition, this rule amends Sec. 50.20(a)(2) with identical language that
applies when HUD itself performs the environmental review under part 50.

III\. Discussion of Public Comments Received on the June 26, 2002,
Proposed Rule

Comment: HUD should mandate radon testing and remediation, if necessary,
of every home, because the Department\'s failure to enforce the
environmental responsibilities required by the rule is contributing to
thousands of preventable lung cancer deaths. Specifically, commenters
noted that 24 CFR 50.3(i)(1) states HUD\'s policy that all property
proposed for use in HUD programs be free of hazardous materials and
toxic substances, among other things, where a hazard could affect the
health and safety of occupants. They stated that radon is a carcinogen,
which can be inexpensively remediated, yet most home purchasers, in
spite of the EPA recommendation, do not order a radon test.

Many commenters cited 24 CFR 50.3(i)(1) in arguing that HUD should
enforce the regulation and mandate a radon test of residential property
for it to qualify for a Department of Veterans Affairs (VA), Department
of Housing and Urban Development (HUD), Federal National Mortgage
Association (Fannie Mae), or Federal Home Loan Mortgage Corporation
(Freddie Mac) mortgage. Commenters noted that the Government Sponsored
Enterprises (GSEs) (regulated by HUD) are the largest source of housing
finance in the country. They remarked that industry experts agree that
once HUD imposes mandatory testing of radon hazards, the majority of
primary market mortgage originators will follow suit.

HUD Response: After a careful review of the comments, the Department has
decided not to revise the proposed rule. Mandatory testing of homes for
radon hazards under HUD\'s mortgage insurance programs for single-family
home loans is outside the scope of this rulemaking. This rule deals
primarily with HUD\'s grant programs for which HUD\'s environmental
review responsibility is assumed by state, local, and tribal governments
for compliance with NEPA and the related laws and authorities.

The Department would add that conforming Sec. 58.5(i) in this final rule
to the existing language in Sec. 50.3(i)(1) signals its policy of
establishing a uniform standard for dealing with toxic hazards in cases
where an environmental review is required to

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comply with NEPA and/or the related laws and authorities cited at Sec.
58.5. As stated above, a requirement for mandatory testing for radon
hazards for single-family homes is not within the scope of this rule.
Nonetheless, the new language in Sec. 58.5 reflects HUD\'s policy that,
regardless of whether the environmental reviews are performed by HUD or
by the responsible entity, the same standards would be used. Further,
the conforming provision requires that the environmental review of
multifamily housing with five or more dwelling units (including leasing)
and non-residential property, must include the evaluation of previous
uses of the site and other evidence of contamination on or near the
site, to ensure that the occupants of proposed sites are not adversely
affected by any of the hazards listed in Sec. 58.5(i)(1). The provision
requires that particular attention should be given to any proposed site
on or in the general proximity of such areas as dumps, landfills,
industrial sites, or other locations that contain or may have contained
hazardous wastes. The new conforming provision would apply to addressing
radon hazards within the context of the environmental review whenever it
is known or suspected that such hazards exist.

The Department also notes that there is no HUD review or approval before
the completion of construction or rehabilitation and the loan closing
for single-family homes whose mortgages are endorsed by the FHA.
Consequently, the program is excluded from environmental review
regulations under part 50 (see Sec. 50.19(b)(17)). However,
environmental underwriting criteria for FHA mortgage insurance programs
are listed elsewhere at 24 CFR 203.12(b), relating to \`\`Builder\'s
Certification of Plans, Specifications and Site\'\' (Builder\'s
Certification) for mortgage insurance on proposed or new construction of
single-family homes. The Builder\'s Certification form covers \`\`Other
foreseeable hazards or adverse conditions.\'\' (See 24 CFR
203.12(b)(2)(vi)).

Comment: HUD should remove from the rule the language in part 58 that
makes units of general local government, counties, and states
responsible for environmental review of HOPE VI projects. The commenter
recommended that HUD directly perform environmental review of HOPE VI
projects and other projects undertaken by public housing agencies (PHAs)
under the programs listed in Sec. 58.1(b). The commenter stated that
imposing environmental review responsibilities upon non-recipient
entities for such projects diverts limited administrative staff time not
only to conduct the environmental review, but also to negotiate
agreements with recipients regarding the environmental review work. The
commenter noted that these agreements may need to be approved by one or
more legislative bodies. The commenter also noted that the statutory
authority under which HOPE VI is proposed to be added to part 58 does
not require HUD to delegate environmental responsibilities to the
non-recipient entities listed in Sec. 58.2(a)(7).

HUD Response: The Department has carefully considered this comment, but
declines to change the rule. Accordingly, the final rule is unchanged
from the proposed rule on this issue. At this time, many more
responsible entities perform environmental reviews for their own complex
capital projects and have sufficient experience to be able to do so for
other HUD-assisted recipients within their area. Where the responsible
entity staff lacks time or skills, then services of consultants are
recommended. Consultant support is also recommended in order to support
certain kinds of technical environmental analysis.

Generally, negotiating agreements is an established operating practice
and need not be viewed as a burden, but as an opportunity to partner.
HUD expects responsible entities to reach out to partners and to readily
negotiate agreements with public housing agencies and private non-profit
organizations seeking environmental services of the responsible entity
for their HUD-assisted project or activity. HUD understands that such
agreements must comply with state and local laws and in some cases may
need approval of the legislative body, as pointed out by respondents.

This rule is an environmental rule and therefore does not cover findings
of consistency with the Consolidated Plan; however, such findings are
required for the HOPE VI Program listed at 24 CFR 91.2(b)(12),
Revitalization of Severely Distressed Public Housing. HUD has the
discretion to perform environmental reviews, but such performance would
be inconsistent with HUD\'s general direction to devolve this federal
function for its grant programs to state, local, and tribal governments.
HUD believes that effective environmental review and administration is
best performed by the responsible entity. While HUD encourages units of
general local government, counties, and states to perform environmental
reviews for HOPE VI projects, such governments are not required to do so
when they are not the recipient of the HOPE VI assistance. HUD does not
believe it advisable to prohibit any unit of a local government, county,
or state from performing environmental reviews for PHAs under part 58
when many are willing to do so.

Comment: A commenter objected to the proposed change in Sec. Sec. 58.1
and 58.2 that would make a governmental jurisdiction that is not
providing the federal funding responsible for the environmental review
for the assisted project. The commenter expressed concern that this rule
change could force a certifying officer into court to defend a project
in which the officer has no influence. The commenter asserted that
effective environmental review and administration lies solely with the
funding agency.

HUD Response: The final rule makes no change to the proposed rule in
response to this comment. Generally, environmental litigation results
from failure of the project managers to perform the requisite
environmental review or to address environmental impacts satisfactorily.
HUD believes that certifying officers, who are generally the top elected
officials of the jurisdiction, are in a better position than the funding
agency alone to guide and defend projects within their jurisdiction. The
certifying officers live in their jurisdictions and are involved with
governing their jurisdictions\--including sitting on or appointing
directors to boards of public housing agencies and private non-profit
organizations. Responsible entities and their certifying officers, in
performing environmental reviews under part 58, have no less authority
than HUD under part 50. Either party is under the same legal duty to
ensure full compliance with statutory and regulatory requirements for
environmental quality irrespective of the type of HUD-assisted
recipient, developer, or project.

HUD disagrees with the comment that effective environmental review and
administration lies solely with the funding agency. HUD, as the funding
agency, has a partnership role to play, but HUD partners with the local
government that has jurisdiction and competency. At the project level,
the responsible entity is the local government that \`\`governs\'\' by
providing land use planning and consolidated planning; by permitting,
through zoning, building, and building occupancy approvals for projects
that are assisted by HUD; and by supplying infrastructure support for
these projects. Thus, HUD believes the certifying officers and
responsible entities are already involved with HUD-assisted projects.

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The assumption of federal environmental responsibilities by tribal,
local, and state governments is virtually unique among federal agencies.
This assumption reflects the transfer of full authority to local, state,
or tribal governments for environmental quality and protection for
HUD-assisted projects, including the monitoring and implementation of
any mitigation that the responsible entity requires. HUD believes that
effective environmental review and administration is best performed by
the responsible entity and not by the federal funding agency.

Comment: HUD\'s Office of Native American Programs requested the
addition to Sec. 58.1(b)(10) of the Native Hawaiian Housing Block Grants
program authorized by section 513 of American Homeownership and Economic
Opportunity Act of 2000 (Pub. L. 106-569, approved December 27, 2000)
and section 203 of the Omnibus Indian Advancement Act (Pub. L. 106-568,
approved December 27, 2000), each of which amended NAHASDA by adding a
new title VIII. Section 806 of NAHASDA, as amended, authorizes HUD to
permit the Director of the Department of Hawaiian Home Lands to assume
environmental review responsibilities.

HUD Response: The final rule adds the Native Hawaiian Housing Block
Grants program to Sec. 58.1(b)(10).

Comment: Several commenters felt that an American Society for Testing
and Materials (ASTM) Phase I assessment is a possible means for
complying with Sec. 58.5(i). As an alternative, some commenters
suggested a simple \`\`reasonableness\'\' test and recommended that the
regulation provide that grantees must determine to a reasonable level of
certainty, as determined by the grantee, that sites are free of
hazardous materials and other deleterious substances. One commenter
wrote that the proposed amendment would create significant new cost and
other burdens for Community Development Block Grant (CDBG) and HOME
grantees. Another commenter wrote that requiring properties to be free
of hazards without providing a safe harbor leaves a governmental
jurisdiction potentially liable for damages caused by unknown or
undiscovered hazards.

HUD Response: The final rule makes no change to the proposed rule in
response to this comment. The policy in proposed Sec. 58.5(i) requires
due diligence in accordance with the language in that section, but is
not intended to suggest any liability for damages caused by unknown or
undiscovered hazards where an appropriate review has been performed. In
addition, the policy that sites be free from hazardous materials, etc.,
does not require a complete absence of such materials, but only that the
property be free of hazards where the hazard could affect the health and
safety of occupants or conflict with the intended utilization of the
property. The policy also does not prescribe any specific form of
remediation, which may vary depending upon the nature of the hazard.

With respect to the issue of costs, in most cases, the cost of the
environmental study is eligible for HUD funding as administrative or
project costs. The potential remediation costs to owners of existing
property who are primarily interested in doing rehabilitation work or
facade-type improvements are all costs that are eligible for HUD funding
as project costs or for funding under other federal programs. There
should be no financial burden to affected property owners benefiting
from federal financial assistance to identify and remediate
environmental hazards on their property. Significant benefits accrue to
the value and desirability of the property. Generally, the benefits of
remediation outweigh the costs. Remediation provides a safer
environment, which the final rule advances in support of meeting a
national goal of a suitable living environment expressed in housing and
NEPA legislation.

The criteria in Sec. 58.5(i) rely on a general performance standard.
Section 58.5(i) does not require a Phase I environmental assessment for
toxics (American Society for Testing and Materials, ASTM E 1527).
Certainly, a Phase I report or equivalent analysis is a possible means
for complying with Sec. 58.5(i). Some HUD programs already require a
Phase I report, a standard of private real estate transactions. Visual
inspection of the property may not disclose enough information to
ascertain toxic contamination. Permission of the property owner is a
routine procedure for examining or testing on-site of a site that is not
under the control of the prospective purchaser or environmental
reviewer. Such permission includes testing, if the site is suspected or
known to contain toxic contaminants. Checking existing federal, state,
or local databases is routine procedure for the environmental review,
but such databases are not all inclusive and up-to-date. Due diligence
is required in making such determinations.

When HUD itself is responsible for performing the environmental review,
the policy under Sec. 50.3(i) is not to approve the provision of
financial assistance to residential properties located on contaminated
sites that are not found to meet the criterion in current

Sec. 50.3(i)(1). Sites known or suspected to be contaminated by toxic
chemicals or radioactive materials include, but are not limited to,
sites which: (1) Are listed on an Environmental Protection Agency (EPA)
Superfund National Priorities list or the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601 et
seq.) (CERCLA) list or equivalent state list; (2) are located within
3,000 feet of a toxic or solid waste landfill site; or (3) have an
underground storage tank that is not for residential fuel. For any of
these conditions, the recipient provides HUD with an American Society
for Testing and Materials (ASTM) Phase I environmental assessment for
toxics report or equivalent analysis.

Comment: Some commenters objected to the provision in Sec. Sec.
58.5(i)(2) and (3) requiring environmental review of multifamily housing
and non-residential properties to include evaluation of previous site
uses and other evidence of contamination on or near the site or in the
general proximity. Commenters said that it is not possible to identify
hidden conditions such as drug labs or other hazards out of plain sight.
Five commenters recommended that the requirement should be limited to a
reasonable determination of potential hazards that might include
checking existing federal, state, and local databases that contain
information on contaminated properties.

HUD Response: The final rule makes no change to the proposed rule in
response to the commenters\' objections. In general, multifamily housing
refers to five or more units within one building. Properties are to be
\`\`free\'\' of hazards that affect the health and safety of occupants
or conflict with the intended utilization of the property. The rule sets
a performance standard that includes evaluation of previous uses of the
site and evidence of contamination on or near the site, to assure that
occupants of proposed sites are not adversely affected by the hazards.
Unacceptable sites are to be disapproved, unless the site can be made
acceptable by the remediation of the toxic contaminants. Due diligence
is the norm. The rule does not create a basis for liability of
responsible entities for contamination or the effects of contamination
that are not discovered as the result of the exercise of due diligence.
Certainly, checking federal, state, and local data banks on toxic
hazards is necessary, but the absence of the property in such data banks
is not always conclusive on the hazards issue.

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Comment: Some governmental jurisdictions may determine that under the
Sec. 58.5(i) standards, the potential legal or financial exposure is too
high and would limit the range of activities they fund with CDBG and
HOME funds. The commenter was of the opinion that property owners are
unlikely to enter into purchase agreements that include contingencies
allowing on-site testing of their property by a prospective purchaser or
environmental reviewer to determine the presence or absence of toxic
contamination.

HUD Response: Among HUD\'s missions is promotion of the national goal
that every American family be able to afford a decent home in a suitable
environment, and HUD\'s CDBG and HOME programs support that national
goal. Accordingly, we disagree with the commenter\'s opinion that the
potential legal or financial exposure is too high and would limit the
range of activities that local governments fund with CDBG and HOME
funds, should HUD implement Sec. 58.5(i). That section simply conforms
part 58 with identical policy at Sec. 50.3(i), which, since 1996, HUD
itself applies when HUD staff perform environmental reviews under part
50.

HUD does not share the commenter\'s opinion that property owners are
unlikely to enter into purchase agreements that include contingencies
allowing on-site testing of their property by a prospective purchaser or
environmental reviewer to determine the presence or absence of toxic
contamination for a HUD-assisted project. The federal subsidy is a
significant incentive to ensure the cooperation of most property owners
in this matter.

Comment: A commenter questioned the rationale for not requiring site
evaluation for residential buildings with fewer than five units. The
commenter wrote that a contaminated site would present environmental
issues regardless of the number of people who will be served by the
site.

HUD Response: The final rule makes no change to the proposed rule, but
in response to the comment, HUD provides this clarification. The final
rule renumbers the section in question. Section 58.5(i)(2)(i) of the
final rule applies to all properties (i.e., \`\`covered\'\' properties)
that are being proposed for use in HUD programs covered under Sec.
58.1(b) (i.e., \`\`covered\'\' programs). Section 58.5(i)(2)(ii) applies
specifically to multifamily residential properties and to
non-residential properties proposed for use in \`\`covered\'\' programs;
and it requires an evaluation of previous uses of the site or other
evidence of contamination on or near the site. HUD clarifies that the
language of Sec. Sec. 58.5(i)(2)(iii) and (iv) is not limited in its
application to multifamily residential properties and to non-residential
properties, but applies to all \`\`covered\'\' properties, including
buildings for residential use (with one to four units). The language of
Sec. 58.5(i)(2)(iii) requires that particular attention should be given
to any proposed site on or in the general proximity of such areas as
dumps, landfills, industrial sites, or other locations that contain, or
may have contained, hazardous wastes. The language of Sec.
58.5(i)(2)(iv) requires the responsible entity to use current techniques
by qualified professionals to undertake investigations determined
necessary. In addition, HUD clarifies that all \`\`covered\'\'
properties may include those properties subject to a categorical
exclusion under Sec. 58.35(b) in cases of extraordinary circumstances in
accordance with Sec. 58.35(c).

Comment: Not enough emphasis is made in the proposed rule on the high
level of priority that should be placed on expediting environmental
reviews, since the environmental review process can be a lengthy one
that slows the funding and expending of HUD grant funds. The commenter
suggested that the rule provide positive incentives to expedite the
environmental review process as HUD adds new programs and entities to
part 58.

HUD Response: The most significant incentive is intrinsic in the current
part 58 regulations, because delays can be prevented by the recipient
responsible entity since the calendar and pace of performing the
environmental procedures is under the control of the responsible entity
itself. With respect to non-recipient responsible entities, the final
rule makes no change to the proposed rule to provide additional
incentives to expedite the environmental review process as HUD adds new
programs and entities to part 58. HUD believes that the current
regulations provide the following incentives: (1) Sec. 58.23 provides
that the environmental review costs are eligible costs to the extent
allowable under the HUD assistance program regulations. The assurance of
payment for work performed is an incentive in expediting environmental
reviews. Also, Sec. Sec. 58.34(a)(1) and (3), respectively, exempt from
environmental review procedures both \`\`environmental and other
studies\'\' as well as \`\`administrative and management activities.\'\'
This exemption extends to the costs of environmental consultants and/or
payments to local governments for this service; (2) The regulations
provide an opportunity for closer partnering arrangements among all
local partners providing housing and economic opportunities to achieve
the responsible entity\'s Consolidated Plan targets. HUD\'s local
partners include local governments, public housing agencies, private
non-profit and for-profit organizations. Such local arrangements should
provide for time-efficient management of environmental reviews; (3) The
regulations provide policy guidance to private non-profit organizations
and public housing agencies requiring them to supply the responsible
entity with all available, relevant information necessary for the
responsible entity to perform for each property any environmental review
required under part 58; (4) This rulemaking would expedite environmental
reviews by simplifying the provision that provides a categorical
exclusion for rehabilitation assistance in the case of a building for
residential use (with one or four units) and a categorical exclusion for
the approval of supplemental assistance to a project previously approved
under this part; and (5) Often overlooked is the provision in the CEQ
regulations that requires responsible entities to integrate the NEPA
process with other planning \`\`at the earliest possible time\'\' to
ensure that planning and decisions reflect environmental values, to
avoid delays later in the process, and to head off potential conflicts
(40 CFR 1501.2).

Section 58.30(b) states that the environmental review process should
begin as soon as a recipient determines the projected use of HUD
assistance. The prohibition on commencing choice-limiting activities
under Sec. 58.22 and CEQ regulations at 40 CFR 1506.1 until after the
environmental review process is completed may be an additional incentive
to expedite the review.

Comment: The term \`\`any participant in the development process\'\' is
not defined in the rule. The commenter observed that proposed Sec. 58.22
would prohibit any participant in the development process from
committing non-HUD funds or undertaking an activity on a project that
would have an adverse environmental impact or limit the choice of
reasonable alternatives prior to release of funds. The commenter
recommended limiting the application of the prohibition to subrecipients
and adding the cited term to the definition of subrecipient in Sec.
58.2(a)(5).

HUD Response: The Department did not incorporate this recommendation in
the final rule. HUD does not believe that the phrase \`\`any participant
in the development process\'\' needs further

\[\[Page 56121\]\]

clarification. The phrase covers the recipient\'s clients and partners
that are project participants, such as public or private, non-profit or
for-profit entities and their contractors. To narrow the application of
this phrase to subrecipients is contrary to the intent of this provision
to provide a broad and all-inclusive application of the

phrase. The final rule would continue the generic usage contained in the
proposed rule.

Comment: The rule should allow responsible entities approving
supplemental assistance to a previously approved project to treat such
projects as categorically excluded and not subject to Sec. 58.5
authorities when the part 58 review and approval was conducted by a
different responsible entity from the one that conducted the
environmental review on the original project.

HUD Response: Section 58.35(b)(7) in both the proposed and final rule
requires that the approval for the supplemental assistance be made by
the original responsible entity. The original responsible entity has the
environmental review record for the project and is more knowledgeable
about the original project. For that reason, HUD believes that the
original responsible entity can best judge whether supplemental
assistance is eligible to be treated as a categorical exclusion not
subject to the related laws, particularly since this judgment requires a
determination by the original responsible entity under Sec. 58.47 as to
whether re-evaluation of the original environmental findings is
required. Additionally, the Department views all the participants in the
process as partners.

Comment: The existing requirement in Sec. 58.22 restricting development
before HUD approvals are received as \`\`choice-limiting\'\' actions is
unworkable and most likely is misinterpreted. The commenter recommended
modifying the restriction on \`\`committing\'\' HUD funds to a project
until HUD has approved a Request for Release of Funds (RROF). The
commenter said that many projects may have already been approved by
other environmental processes and that construction may be underway
before HUD funding is \`\`committed\'\' to the project. The commenter
suggested substituting the word \`\`expended\'\' for the word
\`\`committed\'\' to denote that while allocation of HUD funds is
permissible, the actual expenditure of HUD funds is not permissible
until the RROF has been approved.

HUD Response: The final rule makes no change to the proposed rule in
response to this comment. The term \`\`commit\'\' is broader and
includes the meaning of the term \`\`expend.\'\' The intent in using the
term \`\`commit\'\' is to prevent any \`\`choice-limiting\'\' action
from occurring prior to HUD or state approval of the environmental
certification of compliance and the request for the release of funds for
the HUD-assisted project. This provision does not affect the
recipient\'s general allocation of funds, but only restricts commitment
of such funds to choice-limiting actions, for example, site-specific
activities such as real property acquisition, leasing, demolition,
rehabilitation, and related site improvements.

The commitment to a HUD-assisted project of HUD and non-HUD funds by the
recipient and its partners prior to completion of the environmental
review and submission and approval of the recipient\'s environmental
certification of compliance and request for the release of funds
inherently diminishes and biases objective consideration of alternative
locations for the proposed project (including a no action alternative).
The Department believes that the consideration of alternatives is
fundamental to the environmental review process for HUD-assisted
projects complying with the procedures of part 58.

CEQ regulations at 40 CFR 1502.2(f) require that agencies not commit
resources prejudicing selection of alternatives before making a final
decision. The regulations at 40 CFR 1506.1 address limitations on
actions during the NEPA process. Applicable statutes and regulations set
decision points for environmental review and compliance for the various
authorities at Sec. Sec. 58.5 and 58.6. This standard is not in any way
diminished by the participation of non-federal funding of the project.

As more programs are added to Sec. 58.1(b) where the recipient is
different from the responsible entity, and based on HUD\'s recent
program experience, it is necessary for HUD to be clear in the
rulemaking regarding this important environmental compliance issue. This
demonstrates the need for responsible entities and recipients other than
responsible entities to help each other perform timely compliance with
part 58 with all partners selected to implement HUD-assisted projects.
Substituting the words \`\`not expend\'\' for the words \`\`not
commit\'\' as suggested by the respondent would not address HUD\'s
concern. The restriction on undertaking or committing funds for
choice-limiting actions does not apply to undertakings or commitments of
non-federal funds for a development by a party before the party applies
to the part 58 recipient for federal funds for the project. Thus, a
third party may begin a project in good faith as a private project and
by so doing is not precluded from later deciding to apply for federal
assistance. However, when the party applies for federal assistance, it
will generally need to cease further choice-limiting actions on the
project until the environmental review process is completed in
accordance with procedures under part 58.

Comment: The \`\`choice-limiting\'\' requirements in 24 CFR 58.22 are
overly restrictive. Two commenters wrote that there may be numerous
\`\`choice-limiting\'\' requirements imposed upon a development even
before HUD funding is available. The commenters want a distinction made
in Sec. 58.22 to recognize that \`\`choice-limiting\'\' requirements may
not always be negative. For example, the imposition of requirements
under the Endangered Species Act before the approval of the RROF should
not be considered as limiting environmental choices. Further, Sec. Sec.
58.22(a) and (c) would restrict development with non-HUD funds if an
application for HUD funding was under consideration and the grantee was
aware that some \`\`choice-limiting\'\' was going to or had already
taken place. The commenters argued that the recipient has no way of
knowing until the approval process is complete whether a particular
application will or will not be funded. Additionally, the recipient has
no legal authority to stop or limit development by an applicant before
HUD funds have been committed to the activity. Also, many of the
\`\`choice-limiting\'\' conditions would most likely be imposed upon the
development anyway. The commenters recommended that HUD reconsider its
policy of defining land acquisition as a \`\`choice-limiting\'\'
activity, asserting that neither NEPA nor the CEQ regulation at 40 CFR
1506.1 defines \`\`choice-limiting\'\' activity.

HUD Response: The Department declines to adopt the commenters\'
recommendation here. Use of the term \`\`choice-limiting\'\' in this
regulation does not apply to mitigation measures, as implied in the
comment. The term applies to limitations on actions during the
environmental review process as prescribed by the CEQ regulations for
implementing the procedural provisions of NEPA (40 CFR 1506.1(a)).

HUD has reviewed court decisions on whether land acquisition or similar
actions are choice-limiting activities under NEPA. Six federal circuit
courts including the DC Circuit Court have

\[\[Page 56122\]\]

considered this issue. All six have ruled that land acquisition is a
choice-limiting activity under NEPA. Two of these cases were appealed to
the Supreme Court, which denied certiorari both times. Accordingly, the
provisions of Sec. 58.22 prohibiting the commitment of HUD or non-

HUD funds for acquisition of property to be used in a HUD-assisted
project before an environmental review is completed reflect existing
case law on this point, which is law in all of the federal circuit
courts that have ruled on this point and law that the U.S. Supreme Court
has twice declined to overturn.

Comment: Four commenters wrote that any restriction on the ability to
invest HUD funds in developments that are already underway could have a
harmful effect on a grantee\'s ability to comply with CDBG program
requirements for timely expenditure of grant funds.

HUD Response: The final rule is unchanged from the proposed rule with
respect to this issue. In most cases, the cause of the delay in the
recipient\'s expenditure of grant monies may be attributed to factors
other than that of compliance with environmental review processing under
part 58. Part 58 allows state, local, and tribal governments and other
recipients to set and manage the schedule of their environmental review
processing. CEQ regulations at 40 CFR 1501.2 require agencies to
integrate the NEPA process with other planning at the earliest possible
time. This requirement is intended to ensure that planning and decisions
reflect environmental values, to avoid delays later in the process, and
to head off potential conflicts.

Moreover, as noted in response to a previous comment, the restriction on
undertaking or committing funds for choice-limiting actions does not
apply to undertakings or commitments of non-federal funds for a
development by a party before the party applies to the part 58 recipient
for federal funds for the project. Where a third party has begun a
project in good faith as a private project, the part 58 recipient is not
precluded from considering a later application for federal assistance
for the project, but must advise the third party applicant to cease
further choice-limiting actions on the project until the environmental
review is completed.

Comment: The final rule should clarify the term \`\`nominal\'\' as used
in current Sec. 58.22 for real estate options. The commenter asked
whether it is a percent of the purchase price.

HUD Response: The final rule makes no change to the proposed rule in
response to the commenter\'s request for clarification. Real estate
options are subject to the conditions regarding environmental
acceptability and nominal price at Sec. 58.22(d). The provision allows
some flexibility regarding the term \`\`nominal\'\' and any reasonable
interpretation is acceptable. In most instances, the deposit is not
refundable if the property buyer fails to exercise the real estate
option by purchasing the property within the defined time period.

Comment: The final rule should eliminate the proposed changes to Sec.
58.22, because the changes would place unenforceable burdens on
recipients to police the actions of subrecipients during the application
phase. The commenter objected to the proposed changes for two reasons.
The first concern is that recipients would be expected to analyze
whether potential subrecipients are \`\`about to take an action within
the jurisdiction of the recipient that is prohibited by Sec.
58.22(a).\'\' The second concern of the commenter is the requirement
that if the recipient becomes aware that a subrecipient is about to take
a prohibited action, \`\`the recipient will take appropriate action to
ensure that the objectives and procedures of NEPA are achieved.\'\' It
is unclear, in the view of the commenter, what would constitute
\`\`appropriate action\'\' and what the recipient\'s actual
responsibilities would be under this requirement. Some nationwide
recipients are not in a position to determine NEPA\'s objectives at the
local level nor to enforce them with their subrecipients. A recipient of
HUD funds can

ensure that its own and its subrecipients\' actions conform to the HUD
environmental review process once a legal relationship exists and HUD
funds have been allocated and disbursed. But, wrote the commenter,
recipients lack both the jurisdiction and enforcement power that would
be required by proposed Sec. 58.22(c) during the application phase.

HUD Response: The final rule makes no change to the proposed rule with
respect to the commenter\'s first concern. The disqualification for the
use of HUD assistance for violation of the limitation on activities
pending clearance itself serves to influence the behavior of potential
subrecipients. In fact, the rule provides the requisite power to enforce
appropriate action. The final rule at Sec. 55.22(c) states that \`\`if a
recipient is considering an application from a prospective subrecipient
or beneficiary and is aware that the prospective subrecipient or
beneficiary is about to take an action within the jurisdiction of the
recipient that is prohibited by Sec. 58.22(a), then the recipient will
take appropriate action to ensure that the objectives and procedures of
NEPA are achieved.\'\' To enforce compliance with this procedure, the
final rule requires that recipients, whether responsible entities or
recipients other than responsible entities, be effectively responsible
for establishing internal controls. The controls would prohibit the
recipients\' public and private development partners from the commitment
and expenditure of HUD and non-HUD funds to implement a HUD-assisted
project prior to compliance with part 58. These controls should apply to
applicants, potential awardees, or development partners selected by the
recipient.

The Department also carefully considered the commenter\'s second point,
but declines to change the proposed rule in response to the comment. As
stated earlier, HUD believes that the recipient has both the
jurisdiction and the power to act under this provision. In the first
place, the recipient, when seeking prospective applicants or potential
developers, has the authority to market its relationship with
conditions. The recipient may mandate that no implementation of the
project to be assisted with HUD funds is to occur until there is
compliance with part 58. During and after the application phase,
recipients must refuse HUD assistance to an applicant or developer who
has violated the provision for limitations on activities pending
environmental clearance. HUD looks to recipients to enforce this
provision as they approve or disapprove either applications for HUD
financial assistance or partners in the development of HUD-assisted
projects. The provision in Sec. 58.22(c) simply serves to emphasize a
provision in the CEQ regulations (40 CFR 1506.1(b)) that already applies
to responsible entities under part 58, and also to apply these
responsibilities to recipients regardless of whether they are the
responsible entity.

Comment: Four commenters suggested that HUD should not amend the public
comment periods in Sec. 58.45 to reflect that the periods are minimum
periods. The commenters objected to the proposed amendment on the basis
that a person who fails to respond within the 15-day period could
conceivably persuade a court that the comment period for a specific
project was not long enough. Thus, if no maximum period is stated, a
court could determine that the comment period could be any length of
time. The result would be to delay needed development and negatively
impact CDBG timeliness

\[\[Page 56123\]\]

requirements. Another commenter suggested eliminating the word
\`\`minimum\'\' to avoid confusion that may be caused by the different
interpretations of the word.

HUD Response: The Department was not persuaded to make changes to the
proposed rule on this matter. The provision requires the minimum number
of days for public comment periods. The rule does not require any longer
comment period, but provides the responsible entity with the authority
and flexibility to extend the number of days for public comment beyond
the minimum number of days. The Department does not share the
commenters\' view on the possible actions a court may take.

Comment: Proposed Sec. 58.75 language should be revised to parallel the
prohibition in Sec. 58.22 so that the basis for an objection is clearly
limited to projects that have an adverse environmental impact or limit
the choice of reasonable alternatives.

The commenters wrote that the proposed rule would allow objections on
the basis of a recipient or other participant having incurred costs or
committed funds even if there was no actual adverse environmental impact
or no actual limitation on the choice of reasonable alternatives.

HUD Response: The final rule makes no change to the proposed rule on
this matter. The objection in Sec. 58.75(e) as stated in the proposed
rule is similar to the current regulations, because the limitation on
activities pending clearance applies to both HUD and non-HUD funds for
HUD-assisted projects. In contrast, the reference in the last sentence
of Sec. 58.22(a) on limitations on actions that have an adverse
environmental impact or limit the choice of reasonable alternatives is
too restrictive to be repeated as a more general basis for objection in
Sec. 58.75, because the language applies only to limitation on the use
of non-HUD funds. The basis for objection in proposed Sec. 58.75(e) does
not refer to all incurring of costs or commitment of funds, but
specifically refers only to those commitments of funds, incurring of
costs and undertakings \`\`not authorized by this part.\'\'

Comment: The commenter welcomes the proposed change that clarifies the
categorical exclusions for (1) rehabilitation of one to four family
units, and (2) individual actions on one to four family units.\'\' The
commenter wrote that the intent to identify the rehabilitation of 1-4
unit residential buildings within this exclusion is a welcome
clarification, which codifies a practice HUD has endorsed for years. The
commenter wrote that it is not clear from the reading of the proposed
language whether this means all rehabilitation of buildings for
residential use (with one to four units) is categorically excluded, or
whether rehabilitation of these units needs to be less than 75 percent
of replacement value, as the current threshold is for multifamily
dwellings (or meet some other threshold value). The commenter wants the
Supplementary Information reference to \`\`minor rehabilitation\'\'
clarified in the final rule.

HUD Response: The final rule is not changed in response to the comment.
With respect to environmental review procedures for all rehabilitation
of buildings for residential use (with one to four units), the final
rule allows a categorical exclusion subject to Sec. 58.5 except that an
environmental assessment is required only in the following
circumstances: (1) the density is increased beyond four units; (2) the
land use is changed; (3) the footprint of the building is increased in a
floodplain or in a wetland; or (4) there are extraordinary circumstances
(Sec. 58.35(c)). Under the final rule, the limitation on rehabilitation
costs to 75 percent of replacement value applies only to multifamily
residential buildings and non-residential structures, and does not apply
to rehabilitation of buildings for residential use (with one to four
units).

The final rule replaces the following criterion contained in the

proposed rule: \`\`\* \* \* the dwellings do not result from a
conversion of

use from a non-residential use\'\' (proposed rule at Sec. Sec.

50.20(a)(2)(i) and 58.35(a)(3)(i)) with a criterion that \`\`the land
use is not changed.\'\' HUD wishes to clarify the application of the
provisions regarding \`\`change in land use\'\' found in the final rule
at Sec. 50.20(a)(2)(ii)(B) and (iii)(B) and its counterpart in part 58
in the current regulations, redesignated in the final rule as Sec. Sec.
58.35(a)(3)(ii)(B) and (iii)(B). As a condition of eligibility for this
categorical exclusion, the proposed project or activity must meet the
condition that there will be no change in land use. When one reads the
\`\`categorical exclusion\'\' sections of parts 50 and 58, the existing
land use of the property and not its future land use is always the
threshold to be used for determining eligibility for categorical
exclusion. Any conversion or \`\`change in land use\'\' made to an
existing property is ineligible for a categorical exclusion for
rehabilitation and a full environmental assessment is required. The
environmental assessment itself focuses its evaluation primarily on the
future land use of the property and the prospective and potential
impacts resulting from the proposed land use.

Comment: The final rule should clarify the terminology in Sec. Sec.
58.35(a)(3)(i) and (4). One commenter wrote that using the two phrases,
\`\`single-family residential building\'\' together with \`\`one to four
units\'\' conflicts because standard planning terminology suggests that
a single-family residential building is one family per building. This
term should be changed to read \`\`Single buildings for family
residential use (with one to four units)\'\'.

HUD Response: The final rule revises the phrase published in the
proposed rule to read \`\`a building for residential use (with one to
four units)\'\' in Sec. 58.35(a)(3)(i) and its counterpart Sec.
50.20(a)(2)(i). The rule removes from usage the phrase \`\`one-to
four-family dwelling\'\' appearing in the current regulations at Sec.
Sec. 50.20(a)(3) and 58.35(a)(4). Generally, HUD considers five or more
units within a residential building as multifamily housing, a term
established for the internal administration of its mortgage insurance
programs. Fewer than five units within a residential building are
generally considered single-family housing. This explains the origins of
the terms in HUD environmental and program regulations. The final rule
replaces the term \`\`one-to four-family dwelling\'\' that is used in
the current regulation.

Comment: The final rule should clarify the proposed language at Sec.
Sec. 58.35(a)(4)(i) and (ii) with respect to exclusion of an
\`\`individual action\'\' on a one-to four-unit dwelling when there are
no more than four dwelling units on any one site, whether in one or
multiple buildings. According to the commenter, this particular
categorical exclusion is unwieldy to apply in the field. A clear
definition is needed regarding what an \`\`individual action\'\' is on a
one-to four-family dwelling. The commenter asked the question, \`\`Is it
only new construction or new construction and substantial rehabilitation
(depending on the intent of Sec. 58.35(a)(3)(i))?\'\' The commenter also
wrote that the proposed language does not account for circumstances in a
program of \`\`scattered sites\'\' where sites may be widely dispersed,
but where there may be a limited number of homes that happen to be
within 2,000 feet of each other. If the project is classified as
categorically excluded, does the project sponsor have to guarantee that
every site will be more than 2,000 feet apart? The commenter suggested
adding the following language to Sec. 58.35(a)(4)(ii) \`\`or there are
not more than four units within 2,000 feet of each other.\'\'

\[\[Page 56124\]\]

HUD Response: In response to this comment, the final rule amends the
proposed rule language of the Sec. 58.35(a)(4) and 50.20(a)(3) provision
for \`\`individual actions\'\' by adding a cross-reference to the end of
Sec. Sec. 58.35(a)(4) and 50.20(a)(3) to exclude rehabilitation of a
building for residential use (with one to four units) from the
thresholds for individual actions. As discussed earlier, Sec. Sec.
58.35(a)(4) and 50.20(a)(3) of the final rule will no longer apply to
the rehabilitation of buildings for residential use (with one to four
units), because the topic is covered under a new, separate provision at
Sec. Sec. 50.20(a)(2)(i) and 58.35(a)(3)(i) located with related
rehabilitation thresholds for categorical exclusions pertaining to
multifamily residential buildings and non-residential structures.
Sections 58.35(a)(4) and 50.20(a)(3) of the final rule will continue to
apply to all other types of individual actions (including, but not
limited to, new construction, development, demolition, and acquisition,
disposition, or refinancing regardless of future use) with respect to
dwelling or housing units that meet the conditions in Sec. Sec.
50.20(a)(3)(i) and (ii) and Sec. Sec. 58.35(a)(4)(i) and (ii).

Although the 2000-foot standard was questioned, no other standards were
suggested in any of the comments. The rationale for this threshold for
an environmental assessment is based on the principle of aggregation and
the need to examine the cumulative environmental effects (40 CFR 1508.7)
of scattered site housing construction taking place in close proximity.
This is consistent with the current provision in Sec. 58.32, which calls
for project aggregation of activities that are related either on a
geographical or functional basis, or are logical parts of a composite of
contemplated actions.

Comment: The Environmental Protection Agency (EPA) requested that HUD
encourage responsible entities to limit distribution of the Findings of
No Significant Impact (FONSI) notices to EPA regional offices, and not
to send copies to EPA Headquarters in Washington, DC. The EPA also made
two recommendations: (1) That HUD\'s formats for FONSIs add provisions
to improve the description of the project and a good map; and (2) that
HUD clarify that the EPA may review HUD environmental assessments, but
that EPA does not reach a determination on the grant application;
however, EPA may provide its views on the environmental document to the
responsible entity or HUD.

HUD Response: Section 58.43(a) of the current rule remains unchanged.
However, in response to the EPA comment, HUD will incorporate in
guidance addressed to HUD staff and program participants the following
information: (1) When sending FONSI notices and Notices of Intent to
Request the Release of Funds (NOI/RROF) to EPA, responsible entities are
not to send copies to EPA Headquarters in Washington, DC, but only to
regional offices of the EPA having jurisdiction over the responsible
entity; (2) notices sent to EPA regional offices should include a full
description and location of the project; and (3) responsible entities
are discouraged from requesting that the EPA serve as a lead or
cooperating agency in preparing environmental assessments and impact
statements for HUD-assisted projects. The role of the EPA is not to
prepare, but rather to evaluate and comment on these documents.

Comment: The EPA suggested that HUD further define the categorical
exclusion in Sec. 58.35(a)(3)(i) by adding the following language at the
end of Sec. 58.35(a)(3)(i): \`\`and which exterior building dimensions
are not increased in a floodplain or in a wetland.\'\'

HUD Response: HUD agrees, but has substituted the wording \`\`and the
footprint of the building is not increased in a floodplain or in a
wetland\'\' in lieu of EPA suggested wording. The wording \`\`and the
footprint of the building is not increased in a floodplain or in a
wetland\'\' is added to the final regulation at Sec. 58.35(a)(3)(i) for
the environmental review of proposed rehabilitation of buildings for
residential use (with one to four units). The added language serves as a
threshold for requiring an environmental assessment so as to evaluate
and alleviate the environmental effects in cases where rehabilitation
assistance is proposed for expanding the footprint of buildings for
residential use (with one to four units) where such expansion is located
within or would enter the floodplain or wetland. The added language is
directly relevant in the case of minor repairs or improvements to one-to
four-family properties that are currently excluded from HUD floodplain
management decision-making procedures under 24 CFR 55.12(b)(2). The
exclusion allowed at Sec. 55.12(b)(2) does not apply to financial
assistance for proposed rehabilitation of multifamily residential
buildings and non-residential buildings. The exclusion is limited to
\`\`\[f\]inancial assistance for minor repairs or

improvements on one-to four-family properties that do not meet the
thresholds for \`substantial improvement\' under Sec. 55.2(b)(8).\'\'

Comment: Partially exempt projects in Sec. 50.20 should be exempt from
all federal environmental laws and should be moved to Sec. 50.19. The
commenter asserted that since these uses of federal funds involve no
significant changes to structures that already exist, a presumption
should apply that their repair or purchase cannot affect any federal
environmental interest protected by federal law. The commenter said that
compliance with the numerous laws listed in Sec. 50.4 imposes a
significant and costly administrative burden on Indian tribes that
assume NEPA responsibilities. The commenter recommends moving to Sec.
50.19 the categorical exclusions in Sec. Sec. 50.20(a)(2) and (a)(4)
when there is no change in the use of the structure, and revising Sec.
50.19 to require compliance with the Historic Preservation Act only if
the structure is over 50 years old.

HUD Response: The final rule makes no change to the proposed rule in
response to this comment. First, HUD notes that part 58\--not part
50\--is applicable to Indian tribes that assume NEPA responsibilities.
Under Sec. Sec. 58.34 and 58.35(b), HUD has excluded from review those
actions that by their nature do not trigger compliance requirements
under NEPA and related authorities listed in Sec. 58.5. However,
environmental laws listed in Sec. 50.4 and Sec. 58.5 can apply to the
actions listed in Sec. Sec. 50.20(a)(2) and (4) and the comparable
actions in Sec. Sec. 58.35(a)(3) and (5). HUD lacks the authority to
provide exemptions and exclusions from applicable statutory requirements
and therefore cannot do what the commenter suggests under either part 50
or part 58. Compliance is mandatory whenever HUD funds are proposed for
projects and activities subject to any of the related federal
environmental laws and authorities cited in Sec. Sec. 58.5, 58.6 and
50.4 \`\`as applicable.\'\' To the extent that HUD has authority, the
rule provides relief in the case of categorical exclusions from the
environmental assessment required under NEPA as allowed by the CEQ
regulations. However, there are certain national objectives that each of
the related federal environmental laws and authorities is designed to
achieve at the project level through the support of federal financial
assistance. The national objectives cover historic preservation,
protection from toxic chemicals or radioactive materials, protection
from flood hazards, protection of wetlands and coastal barrier
resources, protection of endangered species, protection of sole

\[\[Page 56125\]\]

source aquifers, environmental justice, environmental standards, and
others.

The current provision at Sec. 58.34(a)(12) allows an exemption for any
categorical exclusion listed in Sec. 58.35(a), provided that there are
no circumstances that require compliance with any other federal laws and
authorities cited in Sec. 58.5. A recipient does not have to submit an
environmental certification and request for the release of funds, and no
further approval from HUD or the state is needed by the recipient for
the drawdown of funds to carry out exempt activities and projects.
However, the responsible entity must document in writing its
determination that each activity or project is exempt and meets the
conditions specified for such exemption under Sec. 58.34. The conversion
to exempt status does not remove the need to comply with the other
requirements at Sec. 58.6 \`\`as applicable.\'\'

Comment: The final rule should clarify the phrase \`\`except in
extraordinary circumstances\'\' as used in proposed Sec. 58.22(b).

HUD Response: The final rule makes no change to the proposed rule on
this matter. The phrase \`\`except in extraordinary circumstances\'\' is
taken from CEQ regulations (40 CFR 1508.4) and is already defined at
Sec. 58.2(a)(3) of the current regulations. The term means a situation
in which an environmental assessment (EA) or environmental impact
statement (EIS) is not normally required, but due to unusual conditions,
an EA or EIS is appropriate. Indicators of unusual conditions are: (1)
Actions that are unique or without precedent; (2) actions that are
substantially similar to those that normally require an EIS; (3) actions
that are likely to alter existing HUD policy or HUD mandates; or (4)
actions that, due to unusual physical conditions on the site or in the
vicinity, have the potential for a significant impact on the environment
or in which the environment could have a significant impact on users of
the facility.

Comment: Regarding Sec. 582.230(b), the restrictions on a recipient and
others limiting proposed acquisition for a project under Shelter Plus
Care until HUD approves the recipient\'s environmental certification of
compliance and request for the release of funds would totally restrict a
housing authority\'s ability to move forward with a project. The
commenter asserted that this will defeat HUD\'s stated desires to
achieve a speedy start-up in Shelter Plus Care projects, will discourage
the housing authority\'s partners from participating in such endeavors,
and is an unwarranted incursion into their rights to perform standard
business activities.

HUD Response: The final rule makes no change to the proposed rule in
response to this comment. It appears that the commenter incorrectly
construed the provision. The added language makes conforming amendments
to the Shelter Plus Care program regulations, which do not currently
adequately reflect the applicability of part 58 procedures (see Sec.
58.1(b)(3)). Also, the Shelter Plus Care program is designed to link
rental assistance to supportive services for hard-to-serve homeless
persons with disabilities. The current regulation excludes tenant-based
rental assistance from any environmental review. Other eligible
activities may be subject to reviews. Moreover, the restriction on the
recipient, project \`\`partners\'\' and their contractors\' undertaking
or committing funds for acquisition and development actions does not
apply to undertakings or commitments of non-federal funds for a
development by a party before the party applies to the Shelter Plus Care
recipient for federal funds for the project. Where a third party has
begun a project in good faith as a private project, the recipient is not
precluded from considering a later application for federal assistance
for the project, but must advise the third party applicant to cease
further choice-limiting actions on the project until the environmental
review is completed.

IV\. List of HUD Programs Covered by 24 CFR Part 58

For ready reference and convenience of the reader, the below list
indicates the HUD programs that are covered by 24 CFR part 58 by program
name, program regulation, program office, and OMB number found in the
Catalog of Federal Domestic Assistance. This list is not exhaustive as
other programs may be added in the future. The final rule at Sec.
58.1(b) includes the references to the statutory authorization of
assumption of HUD environmental responsibilities by state, local, and
tribal governments.

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

OMB number Name of program Regulation citation Program office

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

14.188\...\...\...\...\...\...\...\...\...\.... Housing Finance Agencies
24 CFR part 266\...\..... Housing \\1\\

Risk Sharing Project.

14.218\...\...\...\...\...\...\...\...\...\.... Community Development 24
CFR part 570\...\..... CPD \\2\\

Block Grants/Entitlement

Grants.

14.219\...\...\...\...\...\...\...\...\...\.... Community Development 24
CFR part 570\...\..... CPD

Block Grants/Small

Cities Program.

14.225\...\...\...\...\...\...\...\...\...\.... Community Development 24
CFR part 570\...\..... CPD

Block Grants/Special

Purpose Grants/Insular

Areas.

14.228\...\...\...\...\...\...\...\...\...\.... Community Development 24
CFR part 570\...\..... CPD

Block Grants/State

Program.

14.231\...\...\...\...\...\...\...\...\...\.... Emergency Shelter Grants
24 CFR part 576\...\..... CPD

Program.

14.235\...\...\...\...\...\...\...\...\...\.... Supportive Housing 24
CFR part 583\...\..... CPD

Program.

14.238\...\...\...\...\...\...\...\...\...\.... Shelter Plus
Care\...\..... 24 CFR part 582\...\..... CPD

14.239\...\...\...\...\...\...\...\...\...\.... HOME Investment 24 CFR
part 92\...\...\... CPD

Partnerships Program.

14.241\...\...\...\...\...\...\...\...\...\.... Housing Opportunities
for 24 CFR part 574\...\..... CPD

Persons with AIDS.

14.246\...\...\...\...\...\...\...\...\...\.... Economic Development
CFR: N.A. \[NOFA \\3\\ CPD

Initiative Grants. references 24 CFR part

570\].

14.246\...\...\...\...\...\...\...\...\...\.... Brownfield Economic CFR:
N.A. \[NOFA CPD

Development Initiative references 24 CFR part

Grants. 570\].

14.246\...\...\...\...\...\...\...\...\...\.... Economic Development
\...\...\...\...\...\...\..... COD

Initiative\--Special

Projects

(Congressionally

earmarked).

14.247\...\...\...\...\...\...\...\...\...\.... Self-Help Homeownership
NOFA\...\...\...\...\...\.... CPD

Opportunity Program.

\[\[Page 56126\]\]

14.248\...\...\...\...\...\...\...\...\...\.... Community Development 24
CFR part 570\...\..... CPD

Block Grants/Section 108

Loan Guarantees.

14.249\...\...\...\...\...\...\...\...\...\.... Section 8 Moderate 24
CFR part 582\...\..... CPD

Rehabilitation Single

Room Occupancy.

14.850\...\...\...\...\...\...\...\...\...\.... Public Housing Operating
24 CFR part 990\...\..... PIH

Fund Program.

14.862\...\...\...\...\...\...\...\...\...\.... Indian Community 24 CFR
part 1003\...\.... PIH \\4\\

Development Block Grant

Program.

14.865\...\...\...\...\...\...\...\...\...\.... Loan Guarantees for 24
CFR part 1005\...\.... PIH

Indian Housing.

14.866\...\...\...\...\...\...\...\...\...\.... Demolition and NOFA, 24
CFR part 970.. PIH

Revitalization of

Severely Distressed

Public Housing.

14.867\...\...\...\...\...\...\...\...\...\.... Indian Housing Block 24
CFR part 1000\...\.... PIH

Grants.

14.869\...\...\...\...\...\...\...\...\...\.... Title VI Federal 24 CFR
part 1000\...\.... PIH

Guarantee for Financing

Tribal Housing

Activities.

14.871\...\...\...\...\...\...\...\...\...\.... Section 8 Project-Based
24 CFR part 983\...\..... PIH

Voucher Program.

14.872\...\...\...\...\...\...\...\...\...\.... Public Housing Capital
24 CFR part 905\...\..... PIH

Fund.

14.873\...\...\...\...\...\...\...\...\...\.... Native Hawaiian Housing
24 CFR part 1006\...\.... PIH

Block Grants.

14.900\...\...\...\...\...\...\...\...\...\.... Lead-Based Paint Hazard
NOFA\...\...\...\...\...\.... OHHLHC \\5\\

Control in Privately-

Owned Housing.

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

\\1\\ Office of Housing\--Federal Housing Commissioner.

\\2\\ Office of Community Planning and Development.

\\3\\ Notice of Funding Availability.

\\4\\ Office of Public and Indian Housing.

\\5\\ Office of Healthy Homes and Lead Hazard Control.

Findings and Certifications

Environmental Impact

A Finding of No Significant Impact with respect to the environment for
this rule was made at the proposed rule stage in accordance with HUD
regulations at 24 CFR part 50, which implement section 102(2)(C) of
NEPA. The Finding of No Significant Impact is available for public
inspection between 7:30 a.m. and 5:30 p.m. weekdays in the Office of
Regulations, Office of the General Counsel, Department of Housing and
Urban Development, Room 10276, 451 Seventh Street, SW., Washington, DC

20410-5000.

Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, \`\`Regulatory Planning and Review.\'\' OMB
determined that this rule is a \`\`significant regulatory action\'\' as
defined in section 3(f) of the Order (although not an economically
significant regulatory action under the Order). Any changes made to this
rule as a result of that review are identified in the docket file, which
is available for public inspection in the Office of Regulations, Office
of the General Counsel, Department of Housing and Urban Development,
Room 10276, 451 Seventh Street, SW., Washington, DC 20410-5000.

Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
establishes requirements for federal agencies to assess the effects of
their regulatory actions on state, local, and tribal governments and the
private sector. This final rule does not impose a federal mandate on any
state, local, or tribal government, or on the private sector, within the
meaning of the Unfunded Mandates Reform Act of 1995.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule would not have a significant
economic impact on a substantial number of small entities. There are no
anti-competitive discriminatory aspects of the rule with regard to small
entities, and there are not any unusual procedures that would need to be
complied with by small entities.

Executive Order 13132, Federalism

Executive Order 13132 (entitled \`\`Federalism\'\') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This final rule does not have
Federalism implications and does not impose substantial direct
compliance costs on state and local governments nor preempt state law
within the meaning of the Executive Order.

List of Subjects

24 CFR Part 50

Environmental impact statements.

24 CFR Part 58

Community Development Block Grants, Environmental Impact

Statements, Grant programs\--housing and community development,
Reporting and recordkeeping requirements.

24 CFR Part 574

Community facilities, Grant programs\--health programs, Grant
programs\--housing and community development, Grant programs\--social
programs, HIV/AIDS, Low and moderate income housing, Reporting and
recordkeeping requirements.

24 CFR Part 582

Grant programs\--housing and community development, Homeless, Rent
subsidies, Reporting and recordkeeping requirements.

24 CFR Part 583

Community facilities, Grant programs\--housing and community
development, Reporting and recordkeeping requirements.

24 CFR Part 970

Grant programs\--housing and community development, Public housing,

Reporting and recordkeeping requirements.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance numbers are 14.165-

18.900.

\[\[Page 56127\]\]

Also see section IV of the Supplementary Information.

0

Accordingly, for the reasons described in the preamble, the Department
amends 24 CFR parts 50, 58, 574, 582, 583, and 970 as follows:

PART 50\--PROTECTION AND ENHANCEMENT OF ENVIRONMENTAL QUALITY

0

1\. The authority citation for part 50 continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 4332; and Executive Order

11991, 3 CFR, 1977 Comp., p. 123.

0

2\. Amend Sec. 50.19 by revising paragraph (b)(15) to read as follows:

Sec. 50.19 Categorical exclusions not subject to the Federal laws and

authorities cited in Sec. 50.4.

\* \* \* \* \*

\(b\) \* \* \*

\(15\) Activities to assist homebuyers to purchase existing dwelling
units or dwelling units under construction, including closing costs and
downpayment assistance, interest buydowns, and similar activities that
result in the transfer of title.

\* \* \* \* \*

0

3\. Amend Sec. 50.20 by revising paragraphs (a)(2), (a)(3), and (a)(4),
to read as follows:

Sec. 50.20 Categorical exclusions subject to the Federal laws and
authorities cited in Sec. 50.4.

\(a\) \* \* \*

\(2\) Rehabilitation of buildings and improvements when the following
conditions are met:

\(i\) In the case of a building for residential use (with one to four
units), the density is not increased beyond four units, the land use is
not changed, and the footprint of the building is not increased in a
floodplain or in a wetland;

\(ii\) In the case of multifamily residential buildings:

\(A\) Unit density is not changed more than 20 percent;

\(B\) The project does not involve changes in land use from residential
to non-residential; and

\(C\) The estimated cost of rehabilitation is less than 75 percent of
the total estimated cost of replacement after rehabilitation.

\(iii\) In the case of non-residential structures, including commercial,
industrial, and public buildings:

\(A\) The facilities and improvements are in place and will not be
changed in size nor capacity by more than 20 percent; and

\(B\) The activity does not involve a change in land use, such as from
non-residential to residential, commercial to industrial, or from one
industrial use to another.

(3)(i) An individual action on up to four dwelling units where there is
a maximum of four units on any one site. The units can be four one-unit
buildings or one four-unit building or any combination in between; or

\(ii\) An individual action on a project of five or more housing units
developed on scattered sites when the sites are more than 2,000 feet
apart and there are not more than four housing units on any one site.

\(iii\) Paragraphs (a)(3)(i) and (ii) of this section do not apply to
rehabilitation of a building for residential use (with one to four
units) (see paragraph (a)(2)(i) of this section).

\(4\) Acquisition (including leasing) or disposition of, or equity loans
on an existing structure, or acquisition (including leasing) of vacant
land provided that the structure or land acquired, financed, or disposed
of will be retained for the same use.

\* \* \* \* \*

PART 58\--ENVIRONMENTAL REVIEW PROCEDURES FOR ENTITIES ASSUMING HUD

ENVIRONMENTAL RESPONSIBILITIES

0

4\. The authority citation for part 58 is revised to read as follows:

Authority: 12 U.S.C. 1707 note, 1715z-13a(k); 25 U.S.C. 4115 and 4226;
42 U.S.C. 1437x, 3535(d), 3547, 4332, 4852, 5304(g), 11402, 12838, and
12905(h); title II of Pub. L. 105-276; E.O. 11514 as amended by E.O
11991, 3 CFR 1977 Comp., p. 123.

0

5\. Amend Sec. 58.1 by removing paragraph (b)(2) and designating it as
\`\`reserved,\'\' redesignating and revising existing paragraph (b)(3)
as paragraph (b)(3)(i), adding paragraph (b)(3)(ii), revising paragraphs
(b)(6)(i), (ii), and (iii), deleting \`\`and\'\' at the end of paragraph
(b)(8), replacing the period at the end of paragraph (b)(9) with a
semicolon, and adding new paragraphs (b)(10), (11), (12), and new
paragraphs (c) and (d), to read as follows:

Sec. 58.1 Purpose and applicability.

\* \* \* \* \*

\(b\) \* \* \*

\(2\) \[Reserved\]

(3)(i) Grants to states and units of general local government under the
Emergency Shelter Grant Program, Supportive Housing Program (and its
predecessors, the Supportive Housing Demonstration Program (both
Transitional Housing and Permanent Housing for Homeless Persons with
Disabilities) and Supplemental Assistance for Facilities to Assist the
Homeless), Shelter Plus Care Program, Safe Havens for Homeless
Individuals Demonstration Program, and Rural Homeless Housing
Assistance, authorized by Title IV of the McKinney-Vento Homeless
Assistance Act, in accordance with section 443 (42 U.S.C. 11402);

\(ii\) Grants beginning with Fiscal Year 2001 to private non-profit
organizations and housing agencies under the Supportive Housing Program
and Shelter Plus Care Program authorized by Title IV of the
McKinney-Vento Homeless Assistance Act, in accordance with section 443
(42 U.S.C. 11402);

\* \* \*

(6)(i) Public Housing Programs under Title I of the United States
Housing Act of 1937, including HOPE VI grants authorized under section
24 of the Act for Fiscal Year 2000 and later, in accordance with section
26 (42 U.S.C. 1437x);

\(ii\) Grants for the revitalization of severely distressed public
housing (HOPE VI) for Fiscal Year 1999 and prior years, in accordance
with Title II of the Departments of Veterans Affairs and Housing and
Urban Development, and Independent Agencies Appropriations Act, 1999
(Pub. L. 105-276, approved October 21, 1998); and

\(iii\) Assistance administered by a public housing agency under section
8 of the United States Housing Act of 1937, except for assistance
provided under part 886 of this title, in accordance with section 26 (42
U.S.C. 1437x);

\* \* \*

\(10\) Assistance provided under the Native American Housing Assistance
and Self-Determination Act of 1996 (NAHASDA), in accordance with:

\(i\) Section 105 for Indian Housing Block Grants and Federal Guarantees
or Financing for Tribal Housing Authorities (25 U.S.C. 4115 and 4226);
and

\(ii\) Section 806 for Native Hawaiian Housing Block Grants (25 U.S.C.
4226);

\(11\) Indian Housing Loan Guarantees authorized by section 184 of the
Housing and Community Development Act of 1992, in accordance with
section 184(k) (12 U.S.C. 1715z-13a(k)); and

\(12\) Grants for Housing Opportunities for Persons with AIDS (HOPWA)
under the AIDS Housing Opportunity Act, as follows: competitive grants
beginning with Fiscal Year 2001 and all formula grants, in accordance
with section 856(h) (42 U.S.C. 12905(h)); all grants for Fiscal Year
1999 and prior years, in accordance with section 207(c) of the
Departments of Veterans Affairs and Housing and Urban Development, and
Independent Agencies Appropriations

\[\[Page 56128\]\]

Act, 1999 (Pub. L. 105-276, approved October 21, 1998).

\(c\) When HUD assistance is used to help fund a revolving loan fund
that is administered by a recipient or another party, the activities
initially receiving assistance from the fund are subject to the
requirements in this part. Future activities receiving assistance from
the revolving loan fund, after the fund has received loan repayments,
are subject to the environmental review requirements if the rules of the
HUD program that initially provided assistance to the fund continue to
treat the activities as subject to the Federal requirements. If the HUD
program treats the activities as not being subject to any Federal
requirements, then the activities cease to become Federally-funded
activities and the provisions of this part do not apply.

\(d\) To the extent permitted by applicable laws and the applicable
regulations of the Council on Environmental Quality, the Assistant
Secretary for Community Planning and Development may, for good cause and
with appropriate conditions, approve waivers and exceptions or establish
criteria for exceptions from the requirements of this part.

0

6\. Amend Sec. 58.2 by revising paragraphs (a)(5)(v) and (a)(5)(vii),
adding new paragraphs (a)(5)(ix) and (x), revising paragraphs (a)(6),

(a)(7) introductory text, (a)(7)(i) and (a)(7)(ii) introductory text,
and removing paragraphs (a)(7)(ii)(D) and (E), to read as follows:

Sec. 58.2 Terms, abbreviations and definitions.

\(a\) \* \* \*

\(5\) \* \* \*

\(v\) With respect to Public Housing Programs under Sec.

58.1(b)(6)(i), fiscal year 1999 and prior HOPE VI grants under Sec.
58.1(b)(6)(ii) or Section 8 assistance under Sec. 58.1(b)(6)(iii), a
public housing agency;

\* \* \*

\(vii\) With respect to the FHA Multifamily Housing Finance Agency
Program under 58.1(b)(8), a qualified housing finance agency;

\* \* \*

(ix)(A) With respect to NAHASDA assistance under Sec. 58.1(b)(10), the
Indian tribe or the Department of Hawaiian Home Lands; and

\(B\) With respect to the Section 184 Indian Housing Loan Guarantee
program under Sec. 58.1(b)(11), the Indian tribe.

\(x\) With respect to the Shelter Plus Care and Supportive Housing
Programs under Sec. 58.1(b)(3)(ii), nonprofit organizations and other
entities.

\(6\) Release of funds. In the case of the FHA Multifamily Housing
Finance Agency Program under Sec. 58.1(b)(8), Release of Funds, as used
in this part, refers to HUD issuance of a firm approval letter, and
Request for Release of Funds refers to a recipient\'s request for a firm
approval letter. In the case of the Section 184 Indian Housing Loan
Guarantee program under Sec. 58.1(b)(11), Release of Funds refers to
HUD\'s issuance of a commitment to guarantee a loan, or if there is no
commitment, HUD\'s issuance of a certificate of guarantee.

\(7\) Responsible Entity. Responsible Entity means:

\(i\) With respect to environmental responsibilities under programs
listed in Sec. 58.1(b)(1), (2), (3)(i), (4), and (5), a recipient under
the program.

\(ii\) With respect to environmental responsibilities under the programs
listed in Sec. 58.1(b)(3)(ii) and (6) through (12), a state, unit of
general local government, Indian tribe or Alaska Native Village, or the
Department of Hawaiian Home Lands, when it is the recipient under the
program. Under the Native American Housing Assistance and
Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.) listed in Sec.
58.1(b)(10)(i), the Indian tribe is the responsible entity whether or
not a Tribally Designated Housing Entity is authorized to receive grant
amounts on behalf of the tribe. The Indian tribe is also the responsible
entity under the Section 184 Indian Housing Loan Guarantee program
listed in Sec. 58.1(b)(11). Regional Corporations in Alaska are
considered Indian tribes in this part. Non-recipient responsible
entities are designated as follows:

\* \* \* \* \*

0

7\. Amend Sec. 58.4 by revising paragraph (b)(2), removing paragraph
(b)(3), and adding a new paragraph (c) to read as follows:

Sec. 58.4 Assumption authority.

\* \* \* \* \*

\(b\) \* \* \*

\(2\) States must exercise HUD\'s responsibilities in accordance with
Sec. 58.18, with respect to approval of a unit of local government\'s
environmental certification and RROF for a HUD assisted project funded
through the state. Approval by the state of a unit of local
government\'s certification and RROF satisfies the Secretary\'s
responsibilities under NEPA and the related laws cited in Sec. 58.5.

\(c\) Particular responsibilities of Indian tribes. An Indian tribe may,
but is not required to, assume responsibilities for environmental
review, decision-making and action for programs authorized by the Native
American Housing Assistance and Self-Determination Act of 1996 (25
U.S.C. 4101 et seq.) (other than title VIII) or section 184 of the
Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a). The
tribe must make a separate decision regarding assumption of
responsibilities for each of these Acts and communicate that decision in
writing to HUD. If the tribe assumes these responsibilities, the
requirements of this part shall apply. If a tribe formally declines
assumption of these responsibilities, they are retained by HUD and the
provisions of part 50 of this title apply.

0

8\. Amend Sec. 58.5 by revising paragraphs (a)(1) and (i) to read as
follows:

Sec. 58.5 Related Federal laws and authorities.

\* \* \* \* \*

\(a\) Historic properties. (1) The National Historic Preservation Act of
1966 (16 U.S.C. 470 et seq.), particularly sections 106 and 110 (16
U.S.C. 470 and 470h-2).

\* \* \* \* \*

\(i\) HUD environmental standards. (1) Applicable criteria and standards
specified in part 51 of this title, other than the runway clear zone
notification requirement in Sec. 51.303(a)(3).

(2)(i) Also, it is HUD policy that all properties that are being
proposed for use in HUD programs be free of hazardous materials,
contamination, toxic chemicals and gases, and radioactive substances,
where a hazard could affect the health and safety of occupants or
conflict with the intended utilization of the property.

\(ii\) The environmental review of multifamily housing with five or more
dwelling units (including leasing), or non-residential property, must
include the evaluation of previous uses of the site or other evidence of
contamination on or near the site, to ensure that the occupants of
proposed sites are not adversely affected by any of the hazards listed
in paragraph (i)(2)(i) of this section.

\(iii\) Particular attention should be given to any proposed site on or
in the general proximity of such areas as dumps, landfills, industrial
sites, or other locations that contain, or may have contained, hazardous
wastes.

\(iv\) The responsible entity shall use current techniques by qualified
professionals to undertake investigations determined necessary.

\* \* \* \* \*

0

9\. Revise Sec. 58.10 to read as follows:

\[\[Page 56129\]\]

Sec. 58.10 Basic environmental responsibility.

In accordance with the provisions of law cited in Sec. 58.1(b), except
as otherwise provided in Sec. 58.4(c), the responsible entity must
assume the environmental responsibilities for projects under programs
cited in Sec. 58.1(b). In doing so, the responsible entity must comply
with the provisions of NEPA and the CEQ regulations contained in 40 CFR
parts 1500 through 1508, including the requirements set forth in this
part.

0

10\. Amend Sec. 58.11 by revising paragraph (b) to read as follows:

Sec. 58.11 Legal capacity and performance.

\* \* \* \* \*

\(b\) If a public housing, special project, HOPWA, Supportive Housing,
Shelter Plus Care, or Self-Help Homeownership Opportunity recipient that
is not a responsible entity objects to the non-recipient responsible
entity conducting the environmental review on the basis of performance,
timing, or compatibility of objectives, HUD will review the facts to
determine who will perform the environmental review.

\* \* \* \* \*

Sec. 58.17 \[Removed\]

0

11\. Remove and reserve Sec. 58.17.

0

12\. Revise Sec. 58.18 to read as follows:

Sec. 58.18 Responsibilities of States assuming HUD environmental
responsibilities.

States that elect to administer a HUD program shall ensure that the
program complies with the provisions of this part. The state must:

\(a\) Designate the state agency or agencies that will be responsible
for carrying out the requirements and administrative responsibilities
set forth in subpart H of this part and which will:

\(1\) Develop a monitoring and enforcement program for post-review
actions on environmental reviews and monitor compliance with any
environmental conditions included in the award.

\(2\) Receive public notices, RROFs, and certifications from recipients
pursuant to Sec. Sec. 58.70 and 58.71; accept objections from the public
and from other agencies (Sec. 58.73); and perform other related
responsibilities regarding releases of funds.

\(b\) Fulfill the state role in subpart H relative to the time period
set for the receipt and disposition of comments, objections and appeals
(if any) on particular projects.

0

13\. Revise Sec. 58.22 to read as follows:

Sec. 58.22 Limitations on activities pending clearance.

\(a\) Neither a recipient nor any participant in the development
process, including public or private nonprofit or for-profit entities,
or any of their contractors, may commit HUD assistance under a program
listed in Sec. 58.1(b) on an activity or project until HUD or the state
has approved the recipient\'s RROF and the related certification from
the responsible entity. In addition, until the RROF and the related
certification have been approved, neither a recipient nor any
participant in the development process may commit non-HUD funds on or
undertake an activity or project under a program listed in Sec. 58.1(b)
if the activity or project would have an adverse environmental impact or
limit the choice of reasonable alternatives.

\(b\) If a project or activity is exempt under Sec. 58.34, or is
categorically excluded (except in extraordinary circumstances) under
Sec. 58.35(b), no RROF is required and the recipient may undertake the
activity immediately after the responsible entity has documented its
determination as required in Sec. 58.34(b) and Sec. 58.35(d), but the
recipient must comply with applicable requirements under Sec. 58.6.

\(c\) If a recipient is considering an application from a prospective
subrecipient or beneficiary and is aware that the prospective
subrecipient or beneficiary is about to take an action within the
jurisdiction of the recipient that is prohibited by paragraph (a) of
this section, then the recipient will take appropriate action to ensure
that the objectives and procedures of NEPA are achieved.

\(d\) An option agreement on a proposed site or property is allowable
prior to the completion of the environmental review if the option
agreement is subject to a determination by the recipient on the
desirability of the property for the project as a result of the
completion of the environmental review in accordance with this part and
the cost of the option is a nominal portion of the purchase price. There
is no constraint on the purchase of an option by third parties that have
not been selected for HUD funding, have no responsibility for the
environmental review and have no say in the approval or disapproval of
the project.

\(e\) Self-Help Homeownership Opportunity Program (SHOP). In accordance
with section 11(d)(2)(A) of the Housing Opportunity Program Extension
Act of 1996 (42 U.S.C. 12805 note), an organization, consortium, or
affiliate receiving assistance under the SHOP program may advance
nongrant funds to acquire land prior to completion of an environmental
review and approval of a Request for Release of Funds (RROF) and
certification, notwithstanding paragraph (a) of this section. Any
advances to acquire land prior to approval of the RROF and certification
are made at the risk of the organization, consortium, or affiliate and
reimbursement for such advances may depend on the result of the
environmental review. This authorization is limited to the SHOP program
only and all other forms of HUD assistance are subject to the
limitations in paragraph (a) of this section.

\(f\) Relocation. Funds may be committed for relocation assistance
before the approval of the RROF and related certification for the
project provided that the relocation assistance is required by 24 CFR
part 42.

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14\. Amend Sec. 58.33 by revising paragraph (b) to read as follows:

Sec. 58.33 Emergencies.

\* \* \* \* \*

\(b\) If funds are needed on an emergency basis and adherence to
separate comment periods would prevent the giving of assistance during a
Presidentially declared disaster, or during a local emergency that has
been declared by the chief elected official of the responsible entity
who has proclaimed that there is an immediate need for public action to
protect the public safety, the combined Notice of FONSI and Notice of
Intent to Request Release of Funds (NOI/RROF) may be disseminated and/or
published simultaneously with the submission of the RROF. The combined
Notice of FONSI and NOI/RROF shall state that the funds are needed on an
emergency basis due to a declared disaster and that the comment periods
have been combined. The Notice shall also invite commenters to submit
their comments to both HUD and the responsible entity issuing the notice
to ensure that these comments will receive full consideration.

0

15\. Amend Sec. 58.35 as follows:

a\. Redesignating paragraphs (a)(3)(i) and (a)(3)(ii) as paragraphs

(a)(3)(ii) and (a)(3)(iii);

b\. Adding a new paragraph (a)(3)(i);

c\. Revising paragraphs (a)(4) and (a)(5); and

d\. Adding a new paragraph (b)(7).

The additions and revisions read as follows:

Sec. 58.35 Categorical exclusions.

\(a\) \* \* \*

\(3\) \* \* \*

\[\[Page 56130\]\]

\(i\) In the case of a building for residential use (with one to four
units), the density is not increased beyond four units, the land use is
not changed, and the footprint of the building is not increased in a
floodplain or in a wetland;

\(ii\) \* \* \*

\(iii\) \* \* \*

(4)(i) An individual action on up to four dwelling units where there is
a maximum of four units on any one site. The units can be four one-unit
buildings or one four-unit building or any combination in between; or

\(ii\) An individual action on a project of five or more housing units
developed on scattered sites when the sites are more than 2,000 feet
apart and there are not more than four housing units on any one site.

\(iii\) Paragraphs (a)(4)(i) and (ii) of this section do not apply to
rehabilitation of a building for residential use (with one to four
units) (see paragraph (a)(3)(i) of this section).

\(5\) Acquisition (including leasing) or disposition of, or equity loans
on an existing structure, or acquisition (including leasing) of vacant
land provided that the structure or land acquired, financed, or disposed
of will be retained for the same use.

\* \* \* \* \*

\(b\) \* \* \*

\(7\) Approval of supplemental assistance (including insurance or
guarantee) to a project previously approved under this part, if the
approval is made by the same responsible entity that conducted the
environmental review on the original project and re-evaluation of the
environmental findings is not required under Sec. 58.47.

\* \* \* \* \*

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16\. Revise Sec. 58.45 to read as follows:

Sec. 58.45 Public comment periods.

Required notices must afford the public the following minimum comment
periods, counted in accordance with Sec. 58.21:

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

\(a\) Notice of Finding of No Significant Impact (FONSI).. 15 days when
published or, if no publication, 18 days

when mailing and posting

\(b\) Notice of Intent to Request Release of Funds (NOI- 7 days when
published or, if no publication, 10 days

RROF). when mailing and posting

\(c\) Concurrent or combined notices\...\...\...\...\...\...\.... 15
days when published or, if no publication, 18 days

when mailing and posting

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

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17\. Amend Sec. 58.72 by revising paragraph (b) to read as follows:

Sec. 58.72 HUD or State actions on RROFs and certifications.

\* \* \* \* \*

\(b\) HUD (or the state) may disapprove a certification and RROF if it
has knowledge that the responsible entity or other participants in the
development process have not complied with the items in Sec. 58.75, or
that the RROF and certification are inaccurate.

\* \* \* \* \*

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18\. Amend Sec. 58.75 by revising paragraph (e) to read as follows:

Sec. 58.75 Permissible bases for objections.

\* \* \* \* \*

\(e\) The recipient or other participants in the development process
have committed funds, incurred costs or undertaken activities not
authorized by this part before release of funds and approval of the
environmental certification by HUD (or the state).

\* \* \* \* \*

PART 574\--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS

0

19\. The authority citation for part 574 continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 12901-12912.

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20\. Revise Sec. 574.510 to read as follows:

Sec. 574.510 Environmental procedures and standards.

\(a\) Activities under this part are subject to HUD environmental
regulations in part 58 of this title, except that HUD will perform an
environmental review in accordance with part 50 of this title for any
competitive grant for Fiscal Year 2000.

\(b\) The recipient, its project partners and their contractors may not
acquire, rehabilitate, convert, lease, repair, dispose of, demolish, or
construct property for a project under this part, or commit or expend
HUD or local funds for such eligible activities under this part, until
the responsible entity (as defined in Sec. 58.2 of this title) has
completed the environmental review procedures required by part 58 and
the environmental certification and RROF have been approved (or HUD has
performed an environmental review and the recipient has received HUD
approval of the property). HUD will not release grant funds if the
recipient or any other party commits grant funds (i.e., incurs any costs
or expenditures to be paid or reimbursed with such funds) before the
recipient submits and HUD approves its RROF (where such submission is
required).

\(c\) For activities under a grant to a nonprofit entity that would
generally be subject to review under part 58, HUD may make a finding in
accordance with Sec. 58.11(d) and may itself perform the environmental
review under the provisions of part 50 of this title if the recipient
nonprofit entity objects in writing to the responsible entity\'s
performing the review under part 58. Irrespective of whether the
responsible entity in accord with part 58 (or HUD in accord with part
50) performs the environmental review, the recipient shall supply all
available, relevant information necessary for the responsible entity (or
HUD, if applicable) to perform for each property any environmental
review required by this part. The recipient also shall carry out
mitigating measures required by the responsible entity (or HUD, if
applicable) or select alternate eligible property.

PART 582\--SHELTER PLUS CARE

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21\. The authority citation for part 582 continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 11403-11407b.

0

22\. Revise Sec. 582.230 to read as follows:

Sec. 582.230 Environmental review.

\(a\) Activities under this part are subject to HUD environmental
regulations in part 58 of this title, except that HUD will perform an
environmental review in accordance with part 50 of this title prior to
its approval of any conditionally selected applications from PHAs for
Fiscal Year 2000 and prior years for other than the SRO component. For
activities under a grant to a PHA that generally would be subject to
review under part 58, HUD may make a finding in accordance with Sec.
58.11(d) and may itself perform the environmental review under the
provisions of part 50 of this title if the recipient PHA objects in
writing to the responsible entity\'s performing the review under part
58. Irrespective of whether the responsible entity in accord with part
58 (or HUD in accord with

\[\[Page 56131\]\]

part 50) performs the environmental review, the recipient shall supply
all available, relevant information necessary for the responsible entity
(or HUD, if applicable) to perform for each property any environmental
review required by this part. The recipient also shall carry out
mitigating measures required by the responsible entity (or HUD, if
applicable) or select alternate eligible property. HUD may eliminate
from consideration any application that would require an Environmental
Impact Statement (EIS).

\(b\) The recipient, its project partners and their contractors may not
acquire, rehabilitate, convert, lease, repair, dispose of, demolish, or
construct property for a project under this part, or commit or expend
HUD or local funds for such eligible activities under this part, until
the responsible entity (as defined in Sec. 58.2 of this title) has
completed the environmental review procedures required by part 58 and
the environmental certification and RROF have been approved or HUD has
performed an environmental review under part 50 and the recipient has
received HUD approval of the property. HUD will not release grant funds
if the recipient or any other party commits grant funds (i.e., incurs
any costs or expenditures to be paid or reimbursed with such funds)
before the recipient submits and HUD approves its RROF

(where such submission is required).

PART 583\--SUPPORTIVE HOUSING

0

23\. The authority citation for part 583 continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 11389.

0

24\. Revise Sec. 583.230 to read as follows:

Sec. 583.230 Environmental review.

\(a\) Activities under this part are subject to HUD environmental
regulations in part 58 of this title, except that HUD will perform an
environmental review in accordance with part 50 of this title prior to
its approval of any conditionally selected applications for Fiscal Year
2000 and prior years that were received directly from private nonprofit
entities and governmental entities with special or limited purpose
powers. For activities under a grant that generally would be subject to
review under part 58, HUD may make a finding in accordance with Sec.
58.11(d) and may itself perform the environmental review under the
provisions of part 50 of this title if the recipient objects in writing
to the responsible entity\'s performing the review under part 58.
Irrespective of whether the responsible entity in accord with part 58
(or HUD in accord with part 50) performs the environmental review, the
recipient shall supply all available, relevant information necessary for
the responsible entity (or HUD, if applicable) to perform for each
property any environmental review required by this part. The recipient
also shall carry out mitigating measures required by the responsible
entity (or HUD, if applicable) or select alternate eligible property.
HUD may eliminate from consideration any application that would require
an Environmental Impact Statement (EIS).

\(b\) The recipient, its project partners and their contractors may not
acquire, rehabilitate, convert, lease, repair, dispose of, demolish or
construct property for a project under this part, or commit or expend
HUD or local funds for such eligible activities under this part, until
the responsible entity (as defined in Sec. 58.2 of this title) has
completed the environmental review procedures required by part 58 and
the environmental certification and RROF have been approved or HUD has
performed an environmental review under part 50 and the recipient has
received HUD approval of the property. HUD will not release grant funds
if the recipient or any other party commits grant funds (i.e., incurs
any costs or expenditures to be paid or reimbursed with such funds)
before the recipient submits and HUD approves its RROF (where such
submission is required).

PART 970\--PUBLIC HOUSING PROGRAM\--DEMOLITION OR DISPOSITION OF PUBLIC
HOUSING PROJECTS

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25\. The authority citation for part 970 continues to read as follows:

Authority: 42 U.S.C. 1437p and 3535(d).

0

26\. Amend Sec. 970.4 by revising paragraph (b), removing paragraph (c)
and designating it as reserved, to read as follows:

Sec. 970.4 General requirements for HUD approval of applications for
demolition or disposition.

\* \* \* \* \*

\(b\) Environmental review. Activities under this part are subject to
HUD environmental regulations in part 58 of this title. However, HUD may
make a finding in accordance with Sec. 58.11(d) and may itself perform
the environmental review under the provisions of part 50 of this title
if a PHA objects in writing to the responsible entity\'s performing the
review under part 58.

\(c\) \[Reserved\]

\* \* \* \* \*

Dated: September 15, 2003.

Mel Martinez,

Secretary.

\[FR Doc. 03-24265 Filed 9-26-03; 8:45 am\]

BILLING CODE 4210-29-P