[Federal Register Volume 83, Number 123 (Tuesday, June 26, 2018)]
[Rules and Regulations]
[Pages 29691-29694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13714]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 35

[EPA-HQ-OW-2016-0569; FRL-9979-90-OW]


Previously-Incurred Costs in the WIFIA Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interim final rule.

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SUMMARY: With this interim final rule Environmental Protection Agency 
(EPA) is amending the Water Infrastructure Finance and Innovation Act 
(WIFIA) regulations to clarify the process for, and conditions under 
which, a recipient of WIFIA credit assistance can include costs 
incurred, and the value of integral in-kind contributions made, before 
receipt of assistance in the calculation of total eligible costs, and 
can be reimbursed for certain of those costs by WIFIA loan proceeds. 
This interim final rule pertains to a matter involving a federal loan 
and loan guarantee program and is therefore exempt from the rulemaking 
requirements of the Administrative Procedure Act. As such, EPA is 
issuing this rule as interim final.

DATES: This rule is effective on June 26, 2018. Comments must be 
received on or before August 27, 2018.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OW-
2016-0569, at http://www.regulations.gov. Follow the online 
instructions for submitting comments. Once submitted, comments cannot 
be edited or removed from Regulations.gov. The EPA may publish any 
comment received to its public docket. Do not submit electronically any 
information you consider to be Confidential

[[Page 29692]]

Business Information (CBI) or other information whose disclosure is 
restricted by statute. Multimedia submissions (audio, video, etc.) must 
be accompanied by a written comment. The written comment is considered 
the official comment and should include discussion of all points you 
wish to make. The EPA will generally not consider comments or comment 
contents located outside of the primary submission (i.e., on the web, 
cloud, or other file sharing system). For additional submission 
methods, the full EPA public comment policy, information about CBI or 
multimedia submissions, and general guidance on making effective 
comments, please visit https://www.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Jordan Dorfman, Water Infrastructure 
Division, Office of Wastewater Management, Mail Code 4201C, 
Environmental Protection Agency, 1200 Pennsylvania Avenue NW, 
Washington, DC, 20460; telephone number: (202) 564-0614; email address: 
<a href="/cdn-cgi/l/email-protection#5c38332e3a313d327236332e383d321c392c3d723b332a"><span class="__cf_email__" data-cfemail="a9cdc6dbcfc4c8c787c3c6dbcdc8c7e9ccd9c887cec6df">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. General Information

A. Does this action apply to me?

    This action only applies to entities seeking credit assistance 
under the WIFIA program for the development and construction of a water 
infrastructure project. EPA has promulgated regulations to implement 
this program. A list of eligible entities and eligible projects can be 
found at 33 U.S.C. 3904 and 3905 and the Interim Final Rule at 40 CFR 
35.10005.

B. What should I consider as I prepare my comments for EPA?

    Submitting Confidential Business Information (CBI). Do not submit 
this information to EPA through regulations.gov or email. Clearly mark 
the part or all of the information that you claim to be CBI. For CBI 
information on a disk, CD-ROM, or flash drive that you mail to EPA, 
mark the outside of the disk, CD-ROM, or flash drive as CBI and then 
identify electronically within the disk, CD-ROM, or flash drive the 
specific information that is claimed as CBI. In addition to one 
complete version of the comment that includes information claimed as 
CBI, a copy of the comment that does not contain the information 
claimed as CBI must be submitted for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with 
procedures set forth in 40 CFR part 2.
    Tips for preparing your comments. When submitting comments, 
remember to:
    <bullet> Identify the document by docket ID number and other 
identifying information (subject heading, Federal Register date and 
page number).
    <bullet> Explain why you agree or disagree; suggest alternatives 
and substitute language for your requested changes.
    <bullet> Describe any assumptions and provide any technical 
information and/or data that you used.
    <bullet> If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
    <bullet> Provide specific examples to illustrate your concerns and 
suggest alternatives.
    <bullet> Explain your views as clearly as possible.
    <bullet> Make sure to submit your comments by the comment period 
deadline identified.

II. Background

A. What action is the Agency taking?

    Section 5008(c)(2) of the Water Infrastructure Improvements for the 
Nation Act, Public Law 114-322, added section 5029(b)(10) (33 U.S.C. 
3908(b)(10)) to the WIFIA authorizing legislation. This section 
requires that any eligible project costs incurred, and the value of any 
integral in-kind contributions made, before receipt of assistance be 
credited toward the 51 percent of project costs to be provided by 
sources of funding other than a WIFIA loan. 33 U.S.C. 3908(b)(10). This 
section provides WIFIA borrowers the opportunity to include costs 
incurred prior to receipt of assistance and the value of integral in-
kind contributions made before receipt of assistance, in the 
calculation of total eligible costs in order to calculate the size of 
the loan. However, it does not address what costs can be reimbursed. 
The size of the project is important in determining the amount of 
funding that may be awarded to the WIFIA borrower (``size of the 
loan'') because the statute, at 33 U.S.C. 3908(b)(2)(A), limits the 
size of the loan to 49 percent of the total reasonably anticipated 
eligible costs for the project. Instead of addressing the reimbursement 
of costs, 33 U.S.C. 3908(b)(10) uses the term ``credited'' and directs 
that certain costs be credited toward a category of costs, the 51 
percent to be provided by a non-WIFIA source. Importantly, the statute 
does not prohibit the use of a WIFIA loan to reimburse eligible costs 
incurred prior to receipt of assistance. The WIFIA loan can therefore 
be used to reimburse any eligible cost, whether or not incurred prior 
to the receipt of assistance, except for the value of in-kind 
contributions which do not represent out-of-pocket costs to a borrower 
and are not costs for which a borrower would typically seek 
reimbursement or payment.
    For these reasons, EPA is clarifying current regulations by adding 
to 40 CFR 35.10010(c) the clause ``value of any integral in-kind 
contributions made'' to allow these costs to be included in the 
calculation of eligible project costs and by changing ``prior to a 
project sponsor's submission of an application for credit assistance'' 
to ``before receipt of credit assistance'' to ensure that all such 
costs and integral in-kind contributions are included. EPA is also 
adding the clause, ``such costs, excluding the value of any integral 
in-kind contributions, are payable from the proceeds of the WIFIA 
credit instrument'' to ensure that such costs may be reimbursed from 
WIFIA loan proceeds.
    Crediting prior costs and the value of integral in-kind 
contributions to the project increases the size of the project and, by 
extension, may increase the size of the WIFIA loan. For example, if a 
borrower has incurred $110 million in costs prior to the receipt of 
assistance, and anticipates incurring $90 million in costs after 
receipt of assistance, the size of the project would be $200 million. 
Looking at 33 U.S.C. 3908(b)(2)(A) in isolation, EPA could potentially 
fund up to 49 percent of that $200 million, or $98 million. However, by 
further directing that the costs incurred and contributions made prior 
to receipt of assistance be credited toward the 51 percent of project 
costs to be provided by sources of funding other than WIFIA, 
3908(b)(10) serves to limit the size of the loan if the borrower has 
completed a substantial portion of the overall project. In this example 
project, the size of the loan would be limited to $90 million because 
the $110 million of costs incurred prior to receipt of assistance must 
be credited to the 51 percent category of costs to be provided by non-
WIFIA sources of funding, leaving only $90 million to be funded by 
WIFIA.
    Costs and in-kind contributions must be directly related to the 
development or execution of the project including, for example, 
preliminary design, right-of-way acquisition, National Environmental 
Policy Act (NEPA) compliance related costs, and construction related 
costs. The WIFIA program retains the right to ask for appropriate 
documentation as evidence of such costs and in-kind contributions for 
sizing of the WIFIA loan and, in the

[[Page 29693]]

case of incurred costs, for reimbursement.
    In addition, 40 CFR 35.10010(c) is amended by removing ``[i]n 
addition, applicants shall not include application charges or any other 
expenses associated with the application process (such as charges 
associated with obtaining the required preliminary rating opinion 
letter) among the eligible project costs.'' This sentence is redundant 
because 40 CFR 35.10005 provides a definition of eligible project costs 
from which the determination of eligibility of a cost can be 
determined. It causes confusion because it implies that fees charged by 
the WIFIA program cannot be included as an eligible project cost even 
though they are specifically allowed to be financed as part of a WIFIA 
loan by statute at 33 U.S.C. 3908(b)(7)(B). Furthermore, EPA has 
determined that the cost of obtaining rating opinion letters is 
eligible under 33 U.S.C. 3906(4) which states that ``capitalized 
interest necessary to meet market requirements, reasonably required 
reserve funds, capital issuance expenses, and other carrying costs 
during construction'' are eligible costs.

B. What is the Agency's authority for taking this action?

    This interim final rule is issued under the authority of 33 U.S.C. 
3908(b)(10) and 3911.

III. Statutory and Executive Orders Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is not a significant regulatory action.

B. Executive Order 13771

    This rule is not an E.O. 13771 regulatory action because this rule 
is not significant under E.O. 12866.

C. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the PRA because this rule merely establishes the process for, and 
conditions under which, a recipient of WIFIA credit assistance can 
include costs incurred, and the value of integral in-kind contributions 
made, before receipt of assistance in the calculation of total eligible 
costs, and can be reimbursed for certain of those costs by WIFIA loan 
proceeds.

D. Regulatory Flexibility Act

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. In 
making this determination, the impact of concern is any significant 
adverse economic impact on small entities. An agency may certify that a 
rule will not have a significant economic impact on a substantial 
number of small entities if the rule relieves regulatory burden, has no 
net burden or otherwise has a positive economic effect on the small 
entities subject to the rule. With this interim final rule, the EPA is 
amending the WIFIA regulations to clarify the process for, and 
conditions under which, a recipient of WIFIA credit assistance can 
include costs incurred, and the value of integral in-kind contributions 
made, before receipt of assistance in the calculation of total eligible 
costs, and can be reimbursed for certain of those costs by WIFIA loan 
proceeds. This interim final rule does not impose costs on small 
entities applying for a WIFIA loan. I have therefore concluded that 
this action will have no net regulatory burden for all directly 
regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or 
more as described in UMRA, 2 U.S.C. 1531-1538, and does not 
significantly or uniquely affect small governments. The action imposes 
no enforceable duty on any state, local, or tribal governments or the 
private sector.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

G. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. While a tribal government, or a consortium of 
tribal governments may apply for WIFIA credit assistance, this action 
does not have substantial direct effects on one or more Indian tribes, 
on the relationship between the Federal Government and Indian tribes, 
or on the distribution of power and responsibilities between the 
Federal Government and Indian tribes.

H. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    This action is not subject to Executive Order 13045 because it is 
not economically significant as defined in Executive Order 12866, and 
because environmental health or safety risks are not addressed by this 
action.

I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution or use of energy. This rulemaking simply establishes the 
process for, and conditions under which, a recipient of WIFIA credit 
assistance can include costs incurred, and the value of integral in-
kind contributions made, before receipt of assistance in the 
calculation of total eligible costs, and can be reimbursed for certain 
of those costs by WIFIA loan proceeds.

J. National Technology Transfer and Advancement Act (NTTAA)

    This rulemaking does not involve technical standards.

K. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    This action is not subject to Executive Order 12898 (59 FR 7629, 
February 16, 1994) because it does not establish an environmental 
health or safety standard.

L. National Environmental Policy Act

    Each project obtaining assistance under this program is required to 
adhere to the National Environmental Policy Act of 1969, as amended (42 
U.S.C. 4321-4370). This rulemaking simply establishes the process for, 
and conditions under which, a recipient of WIFIA credit assistance can 
include costs incurred, and the value of integral in-kind contributions 
made, before receipt of assistance in the calculation of total eligible 
costs, and can be reimbursed for certain of those costs by WIFIA loan 
proceeds; therefore, by itself, this rulemaking will not have any 
effect on the quality of the environment.

List of Subjects in 40 CFR Part 35

    Environmental protection, Reporting and recordkeeping requirements, 
and Water finance.


[[Page 29694]]


    Dated: June 18, 2018.
E. Scott Pruitt,
Administrator.

    For the reasons set forth in the preamble, 40 CFR part 35 is 
amended as follows:

PART 35--STATE AND LOCAL ASSISTANCE

0
1. The authority citation for part 35 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.; 33 U.S.C. 1251 et seq.; 42 
U.S.C. 300f et seq.; 42 U.S.C. 6901 et seq.; 7 U.S.C. 136 et seq.; 
15 U.S.C. 2601 et seq.; 42 U.S.C. 13101 et seq.; Pub. L. 104-134, 
110 Stat. 1321, 1321-299 (1996); Pub. L. 105-65, 111 Stat. 1344, 
1373 (1997), 2 CFR 200.


0
2. Amend Sec.  35.10010 by revising paragraph (c) to read as follows:


Sec.  35.10010   Limitations on assistance.

* * * * *
    (c) Costs incurred, and the value of any integral in-kind 
contributions made, before receipt of credit assistance may be 
considered in calculating eligible project costs only upon approval of 
the Administrator. Such costs and integral in-kind contributions must 
be directly related to the development or execution of the project and 
must be eligible project costs as defined in Sec.  35.10005. In 
addition, such costs, excluding the value of any integral in-kind 
contributions, are payable from the proceeds of the WIFIA credit 
instrument and shall be considered incurred costs for purposes of 
paragraph (f) of this section. Capitalized interest on the WIFIA credit 
instrument is not eligible for calculating eligible project costs.
* * * * *

[FR Doc. 2018-13714 Filed 6-25-18; 8:45 am]
 BILLING CODE 6560-50-P


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