Document ID: EPA-HQ-OW-2006-0765-0003
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2007-01-04T05:00Z

EPA Permit Fee Incentive Program Rulemaking

State/EPA MEETING # 2

July 26, 2006

Meeting Summary

Meeting Agenda

Introductions/Roll Call

Summary/Overview of Meeting #1 (Len Bechtel, Office of Wastewater
Management)

Definition of “Adequate Permit Fee Program” (Elaine Brenner, Office
of Wastewater Management, Water Permits Division)

Draft Proposed Rulemaking Options (Len Bechtel, Office of Wastewater
Management)

Current Level of Knowledge of State Permit Fee Resources (Lena Ferris,
Office of Wastewater Management)

meeting Participants

NAME	AGENCY/AFFILIATION	EMAIL

Leonard Bechtel	EPA Office of Wastewater Management	bechtel.len@epa.gov

Gul Beg	EPA Office of Wastewater Management	beg.gul@epa.gov

Laura Blake	The Cadmus Group, Inc.	lblake@cadmusgroup.com

James Blizzard	EPA Office of Congressional & Intergovernmental Relations
	blizzard.james@epa.gov 

Elaine Brenner	EPA  OWM -  Water Permits Division	brenner.elaine@epa.gov

Steve Brown	ECOS	sbrown@sso.org

David Bullard	Georgia Department of Natural Resources	  HYPERLINK
"mailto:david_bullard@mail.dnr.state.ga.us" 
david_bullard@mail.dnr.state.ga.us 

William Creal	Michigan Department of Environmental Quality
crealw@michigan.gov

Linda Eichmiller	ASIWPCA	l.eichmiller@asiwpca.org

Lena Ferris	EPA Office of Wastewater Management	ferris.lena@epa.gov

Bonnie Lovelace	Montana Department of Environmental Protection
blovelace@mt.gov

Chuck Correll	Iowa Department of Natural Resources
chuck.correll@dnr.state.ia.us

Kristen Dunne	ECOS	kdunne@sso.org

Andrew Fisk	ME DEP	andrew.fisk@maine.gov

Carolyn Gillette	The Cadmus Group, Inc.	cgillette@cadmusgroup.com

Ron Hammerschmidt	Kansas Department of Health and Environment
rhammers@kdhe.state.ks.us

Denise Koch	Alaska Department of Environmental Conservation
denise_koch@dec.state.ak.us

Roger Larson	Wisconsin Department of Natural Resources
roger.larsor@dnr.state.wi.us

Karl Mueldener	Kansas Department of Health and Environment
kmuelden@kdhe.state.ks.us

Bev Poston	Washington State Department of Ecology	bpos461@ecy.wa.gov

Duane Schuettpelz	Wisconsin Department of Natural Resources
duane.schuettpelz@dnr.state.wi.us

Sandra Stavnes	EPA Region 8	stavnes.sandra@epa.gov 

Susan Sylvester	Wisconsin Department of Natural Resources
susan.sylvester@dnr.state.wi.us

Mike Tate	Kansas Department of Health and Environment
mtate@kdhe.state.ks.us

Debrah Thomas	EPA Region 8	thomas.debrah@epa.gov 

Kyle Winter	Virginia Department of Environmental Quality
kiwinter@deq.virginia.gov

Nizanna Bathersfield	EPA OWM – Water Permits Division
bathersfield.nizanna@epa.gov

Lynn Stabenfeldt	EPA OWM – Water Permits Division
stabenfeldt.lynn@epa.gov

Robert Moyer	EPA OGC	moyer.robert@epa.gov

Lauren Willis	EPA OGC	willis.lauren@epa.gov

Introduction

Mr. Bechtel, Director of EPA Office of Wastewater Management’s (OWM)
Planning, Information, and Resources Management Staff (PIRMS), reviewed
the meeting agenda and referenced the various documents sent out from
the first meeting, including the meeting summary, a draft options paper
(for permit fee incentive programs), and a draft summarization/analysis
of States’ permit fee programmatic structures.  Mr. Bechtel
highlighted that the State permit fee summarization/analysis is in the
draft stages of development and therefore has not undergone a State
validation process.  

Summary/Overview of Meeting #1

The first State/EPA permit fee meeting occurred on July 13, 2006. 
EPA’s central focus of this first meeting was to provide background
information on the Agency’s efforts regarding the development of an
incentive program that would facilitate State efforts in establishing
“adequate” permit fee programs.  The significant highlight of this
meeting was the development of programmatic assumptions, gained through
participant input, for EPA’s consideration as it moves forward with
the development of this rulemaking. 

Mr. Bechtel asked the meeting participants for corrections or additions
to meeting summary #1 before its finalization in the formal record of
this rulemaking initiative. He suggested that participants e-mail him
any suggested comments they may have on the first meeting summary.  

Definition of “Adequate Permit Fee Program”

EPA introduced its proposed options paper outlining five possible
options, based on input received from meeting participants at the July
13th meeting, that could be pursued in order to not only meet the
President’s Budget directive of establishing adequate permit fee
programs on a State-level basis, but also provide States with a certain
degree of flexibility. In order to qualify for an incentive, States
would need to demonstrate the adequacy of their permit fees.  Mr.
Bechtel continuously highlighted the importance of obtaining participant
feedback as related to the five specific distribution ideas. 

Elaine Brenner, deputy director of the Water Permits Division,
introduced the proposed definitions of what constitutes an “adequate
permit fee program.” She highlighted the fact that EPA wants to avoid,
to the extent possible, the involvement of fee structures when defining
such a program.  The adequacy of State permit fee programs would be
defined by the percentage of permit program costs supported by permit
fee revenue. The three levels proposed by EPA, in terms of defining an
“adequate permit fee program,” include:

Collect at least 60% of total permit program costs

Collect at least 80% of total permit program costs

Collect 100% of total permit program costs (Reflective of OMB’s
Directive)

The regulation, when finalized, would provide States with a one-year
implementation time period if new or updated State regulations were
required, and a maximum two-year implementation phase if only new
legislation was required.  Under either proposed implementation phase,
States would continue to have flexibility in development of their
individual permit fee structures.  

One State suggested that EPA also consider a 50% option, whereby States
would cover 50% of program costs and EPA would cover the remaining 50%.

Some States made reference to partially funding their permit programs
using State general funds.  Meeting participants asked whether State
usage of general funds could account toward the 60%, 80%, or 100% goals.
 Participants emphasized that if States partially or fully fund their
permit programs with State funds, they should not be penalized for not
collecting fees.  EPA indicated that this may possibly be a flexible
issue that warrants further consideration.  For example, the rule could
be developed allowing State contributions to be counted toward the
permit program’s adequacy goals.  The negative aspect of permitting
the usage of both fees and State contributions is the non-encouragement
of additional revenue into State water quality programs, hindering the
achievement of the OMB goal.  Meeting participants suggested that EPA
re-approach OMB to further discuss this issue.

Two State representatives expressed concerns that State legislatures
will be unlikely to double or triple permit fees in order to meet even
the minimum 60% programmatic adequacy goal.  Meeting participants
stressed that EPA needs to be prepared for State petitions for
re-delegation if asked for 100% permit fee coverage.

One participant inquired about the reasoning behind the development of
the 60% and 80% adequacy goals, especially as related to the twenty
percent gap between the two.   EPA responded by indicating that these
two adequacy goals were developed taking into consideration the fact
that OMB would not be satisfied with less than 100% attainment, and that
probably attaining less than sixty percent would not even be accepted.  

Permit Program Components

EPA discussed the various elements that would be considered to
constitute individual States’ NPDES programs (including stormwater,
biosolids, industrial pretreatment programs, and ambient monitoring only
in support of permit development), including activities related to
permitting, compliance, and enforcement.  Example activities include:

Permit Activities

Review permit applications

Enter data into ICIS database

Review monitoring data in support of permit development

Conduct modeling and other technical services to support permit
development

Draft individual NPDES permits

Draft general permits

Issue public notices/hold public hearings

Issue final permits

Review Notices of Intent (NOIs) to be covered by general permits 

Process administrative challenges to permits

Compliance & Enforcement Activities

Conduct inspections to determine permit compliance

Review monitoring reports and other submittals to assess compliance

Enter data into ICIS

Investigate complaints concerning noncomplying discharges

Review discharge and ambient water quality monitoring to assess
compliance with permit limits

Take enforcement actions for violations of permit conditions

Provide technical assistance to the general public, municipalities, and
industrial facilities

EPA indicated that this list is meant to provide examples of general
permit-related programmatic activities, and by no means should be
considered exhaustive in nature.  EPA also asked States for feedback on
this list, especially pertaining to whether the list should remain
general as is, or whether any additional activities should be
incorporated.  Individual States continuously stressed the importance of
keeping this programmatic activity list as general as possible, since
the inclusion of additional program-specific activities would require
fees to be collected for those specific activities.  Also, meeting
participants mentioned that by having a broad definition of adequacy,
more State legislatures would be willing to provide additional
assistance in the implementation of this rulemaking.

Lena Ferris, of EPA OWM, emphasized EPA’s efforts in providing States
with an adequate comment period, regardless of which time schedule this
rulemaking follows.  She highlighted that the final rule will be
published in the Federal Register for an official sixty-day comment
period.    

Draft Proposed Options for Rulemaking

Mr. Bechtel presented the proposed rulemaking allocation concepts and
their associated pros/cons, which were developed by EPA taking into
account input obtained from the prior meeting on July 13th. Mr. Bechtel
highlighted the fact that OMB would like to see additional revenue
streams entering State water quality programs.  He also responded to an
inquiry regarding the amount of clarification OMB has provided regarding
the rulemaking.  He indicated that there has not been a high level of
communication between EPA and OMB at this stage, adding that EPA wanted
to obtain further input before proceeding with senior management and
possibly OMB.  However, OMB provided clear direction through their
discussions and recommended follow-up action items resulting from the
Section 106 Program Assessment Rating Tool (PART) review; one of the
recommendations was EPA’s development of this permit rulemaking. 
Before beginning the discussion of the proposed options, Mr. Bechtel
indicated that these options were not necessarily mutually exclusive,
and therefore perhaps the meeting participants could assist in working
several of the concepts into a recommended option. The proposed rule
concepts follow below:

1. CWA Section 106 Future Funding Increase for Adequate Permit Fee
Programs

Under this option, only States with adequate permit fee programs would
be eligible for future increases in Section 106 funding.  States without
adequate permit fee programs would not be eligible for future increases
in Section 106 funding.  This option protects the core program
activities.

2. CWA Section 106 5% Funding Reduction for Inadequate Permit Fee
Programs & Supplemental Incentive Funding for Adequate Permit Fee
Programs

Under this option, States that do not have adequate permit fee programs
would receive a 5% reduction in Section 106 funding.  The funds
generated from the 5% reduction would serve as an “incentive pool”
and be distributed to States with adequate permit fee programs.  This
might be viewed by some States as being more of a disincentive option
than an incentive option.

3. CWA Section 106 Overall Funding Reduction & Supplemental Incentive
Funding for Adequate Permit Fee Programs

Under this option, the overall Section 106 base funding allocation would
be reduced by 5%.  The funds generated from the 5% reduction would serve
as an “incentive pool” and be distributed to States with adequate
permit fee programs.

-EPA highlighted that the net effect of options 2 & 3 above would be the
same.  States need to look at both options from the perspective of being
a disincentive vs. an incentive.

4. CWA Section 106 Overall $3 Million Funding Reduction & Competitive
Grants to Support the Development of Permit Fee Programs

Under this option, the overall Section 106 base funding allocation would
be reduced by $3 million.  This $3 million would be used to fund a
competitive grant program to support capacity building for State permit
fee programs.  States would compete for funding that they could use to
conduct analyses or organizational/financial work to establish adequate
permit fee programs.  Remaining funds (after grants are allocated) would
be given to States with adequate permit fee programs.  This option is
based on direct suggestions made at the July 13th meeting.  Meeting
participants commented that while funding assistance could assist with
some of the information gathering needs necessary for the development of
a permit program, individual States would still have to receive
legislative authority to charge fees in the first place.

5. Non-Monetary Incentives

Under this option, non-monetary incentives, such as regulatory relief or
measures to streamline the permitting process, would be given to States
with adequate permit fee programs.  EPA recognized that this option
would need to be further discussed with Regions and appropriate general
counsel, in order to identify adequate non-monetary incentives.

ECOS referenced options #2, #3, and #4 as being contrary to ECOS’
policy.  The Section 106 program is classified as a core environmental
program, only warranting the consideration of future increases, not
reductions.

One State participant suggested that an incentive of five percent,
referenced in options #2 and #3 above, would not be sufficient to cover
States’ administration fees associated with fee collection activities.
 Further information regarding realistic States’ fee administration
costs would be needed in order to conduct an analysis and provide an
option with a more adequate incentive than the one currently proposed.  

Another State participant questioned EPA as to whether there was any
indication of OMB’s preference among the various options.  EPA
responded by stating no such indication currently existed, but EPA
believes that OMB would probably favor the first three options,
considering that these three options emphasize the mechanism of
distribution and the size of the incentive. 

An additional State participant highlighted option #4 as being
limited-term, to which EPA agreed.  A short discussion occurred
regarding whether this option, if chosen, would meet OMB’s
expectations, and the high likelihood of OMB requiring a change in the
nature of the proposed incentive. 

Current Level of Knowledge of State Permit Fee Resources

Mr. Bechtel indicated that EPA lacked comprehensive and detail-oriented
information/data regarding the current status of State permit fee
programs, such as information detailing what percentage of State program
costs are currently covered through permit fees.  This type of
information would definitely prove to be value-added to EPA as it
attempts to initiate a rulemaking that is both reasonable and achievable
from a State standpoint.

Lena Ferris, of EPA OWM, referred meeting participants to the draft
summarization/analysis of States’ permit fee programmatic structures,
sent out prior to this meeting to illustrate estimated permit fees
currently being charged by States.  EPA stressed that the document is
still in draft form and reflects the results of research conducted only
through the use of State web-sites.   Therefore, the data is only
reflective of publicly-available information, through usage of State
web-sites, and has not yet been State-validated.  As much as EPA is
cognizant of the need to perform State data validation, this would
require the development and approval of an Information Collection
Request (ICR).  Undergoing this type of effort would be extremely
time-consuming, deterring EPA from keeping pace with the accelerated
schedule for this rulemaking, leading to further hinderance in meeting
the established target rulemaking completion date of December 2006.   
However, EPA could possibly work with the Association of State and
Interstate Water Pollution Control Administrators (ASIWPCA) to
facilitate such data collection efforts involving the States.

Ideally, EPA needs data regarding not only the dollars that each State
is currently collecting through permit fee programs, but also the total
cost of running each State’s permit fee program (including the total
dollar costs of the permitting and compliance/enforcement activities
listed above), in order to make this rulemaking the most beneficial it
can possibly be.  Meeting participants generally agreed that it would be
beneficial, in terms of the development of this rulemaking, to have the
following information on a per-State basis: 1) total permit program cost
and 2) the amount/percent of that cost covered by: a) federal funds; b)
State funds; and c) permit fees.

One State participant highlighted EPA’s possible use of Permitting for
Environmental Results (PER) profiles to determine a State’s
contribution as well as the federal contribution regarding implementing
a State’s permit fee program.  It was also suggested that EPA
undertake data collection efforts regarding quantifying the
amount/percent of overhead costs States incur from the administration of
their individual permit fee programs.

Wrap-Up

To provide closure to this second meeting, Mr. Bechtel indicated that
feedback provided by the individual  participants during not only this
second meeting, but also the first meeting, will be taken into
consideration and appropriately relayed to Office of Water (OW) Senior
Management. 

The next meeting is scheduled for August 22nd.  EPA will send out any
relevant documents prior to this meeting.  Mr. Bechtel expressed EPA’s
appreciation for everyone’s time, thoughts, and suggestions as related
to this rulemaking.

 PAGE   

 PAGE   2