Document ID: EPA-HQ-OW-2006-0765-0001
Agency: epa
Document Type: Proposed Rule
Title: Grants; State and local assistance: Clean Water Act Section 106 grants; permit fee incentive; allotment formula
Posted Date: 2007-01-04T05:00Z

[Federal Register: January 4, 2007 (Volume 72, Number 2)]
[Proposed Rules]               
[Page 293-296]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ja07-19]                         

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================

[[Page 293]]

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 35

[EPA-HQ-OW-2006-0765; FRL-8263-1]

 
NPDES Permit Fee Incentive for Clean Water Act Section 106 
Grants; Allotment Formula

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document provides notice of a proposed rulemaking for 
public comment on EPA's National Pollutant Discharge Elimination System 
(NPDES) Permit Fee Incentive for Clean Water Act Section 106 Grants; 
Allotment Formula. With this notice, EPA proposes using its Clean Water 
Act (CWA) Section 106 authority to provide a financial incentive to 
States to utilize an adequate fee program when implementing an 
authorized NPDES permit program. EPA proposes to amend its existing CWA 
Section 106 grant allotment regulation to provide the Agency with the 
flexibility to allot separately a permit fee incentive amount. This 
action would not be effective prior to fiscal year 2008.

DATES: Comments must be received on or before March 5, 2007.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-OW-
2006-0765 by one of the following methods:
     http://www.regulations.gov: Follow the on-line instructions for 

submitting comments.
     E-mail: ow-docket@epa.gov Attention Docket ID No. OW-2006-
0765.
     Mail: Water Docket, Environmental Protection Agency, 
Mailcode: 2822T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
     Hand Delivery: EPA Docket Center, EPA West, Room 3334, 
1301 Constitution Avenue, NW., Washington, DC, Attention Docket ID No. 
OW-2006-0765. Such deliveries are only accepted during the Docket's 
normal hours of operation and special arrangements should be made for 
deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OW-2006-
0765. EPA's policy is that all comments received will be included in 
the public docket without change and may be made available online at 
http://www.regulations.gov, including any personal information provided, 

unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through http://www.regulations.gov or e-mail. 

The http://www.regulations.gov Web site is an ``anonymous access'' system, 

which means EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an e-
mail comment directly to EPA without going through http://www.regulations.gov, 

your e-mail address will be automatically captured and included as part 
of the comment that is placed in the public docket and made available 
on the Internet. If you submit an electronic comment, EPA recommends 
that you include your name and other contact information in the body of 
your comment and with any disk or CD-ROM you submit. If EPA cannot read 
your comment due to technical difficulties and cannot contact you for 
clarification, EPA may not be able to consider your comment. Electronic 
files should avoid the use of special characters, any form of 
encryption, and be free of any defects or viruses. For additional 
information about EPA's public docket, visit the EPA Docket Center 
homepage at http://www.epa.gov/epahome/dockets.htm. For additional 

instructions on submitting comments, go to Unit I.1 of the 
SUPPLEMENTARY INFORMATION section of this document.
    Docket: All documents in the docket are listed in the 
http://www.regulations.gov index. Although listed in the index, some 

information is not publicly available, e.g., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hard copy. 
Publicly available docket materials are available either electronically 
in http://www.regulations.gov or in hard copy at the Water Docket, EPA/DC, EPA 

West, Room 3334, 1301 Constitution Ave., NW., Washington, DC. The 
Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through 
Friday, excluding legal holidays. The telephone number for the Public 
Reading Room is (202) 566-1744, and the telephone number for the Water 
Docket is (202) 566-2426.

FOR FURTHER INFORMATION CONTACT: Lena Ferris, Office of Water, Office 
of Wastewater Management, 4201M, Environmental Protection Agency, 1200 
Pennsylvania Avenue, NW., Washington, DC 20460; telephone number: (202) 
564-8831; fax number: (202) 501-2399; e-mail address: 
ferris.lena@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

    Affected Entities: State Agencies that are eligible to receive 
grants under Section 106 of the Clean Water Act (CWA).
    1. Submitting CBI. Do not submit this information to EPA through 
http://www.regulations.gov or e-mail. Clearly mark the part or all of the 

information that you claim to be CBI. For CBI information on a disk or 
CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as 
CBI and then identify electronically within the disk or CD-ROM 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.
    2. Tips for Preparing Your Comments. When submitting comments, 
remember to:
     Identify the rulemaking by docket number and other 
identifying information (subject heading, Federal Register date, and 
page number).
     Follow directions--The agency may ask you to respond to 
specific questions or organize comments by referencing a Code of 
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives; 
and substitute language for your requested changes.

[[Page 294]]

     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns and 
suggest alternatives.
     Explain your views as clearly as possible.
     Make sure to submit your comments by the comment period 
deadline identified.
    3. Specific Questions EPA is Soliciting for Comment. In addition to 
overall general comments on any/all portions of the rulemaking, EPA is 
specifically requesting comments on the following four questions:
    (1) Is the proposed rulemaking incentive amount sufficient to 
encourage States to establish or expand their permit fee programs? If 
not, what amount should EPA consider?
    (2) Are there any non-financial incentives States may prefer that 
would encourage States to establish or expand adequate permit fee 
programs?
    (3) Is the proposed permit fee collection formula, to be used in 
determining whether States receive a full share of the incentive, 
something that States can attain? If not, what barriers exist to States 
recovering the full 100% of NPDES program costs through permit fees? 
What alternatives would States recommend?
    (4) What impact may this rule have on the States and the NPDES 
permittees in the States?

II. Background

    Section 106 of the CWA authorizes the EPA to provide grants to 
State and interstate agencies to administer programs for the 
prevention, reduction, and elimination of water pollution, including 
the development and implementation of groundwater protection 
strategies. Section 106(b) of the CWA directs the EPA Administrator to 
make allotments ``in accordance with regulations promulgated by him on 
the basis of the extent of the pollution problem in the respective 
states.'' EPA's regulations implementing Section 106 can be found at 40 
CFR 35.160 et seq. EPA's current allotment formula for Section 106 
grants establishes an allotment ratio for each State based on six 
components selected to reflect the extent of the water pollution 
problem in the respective states. These six components are surface 
water area, ground water use, water quality impairment, potential point 
sources, nonpoint sources, and the population of urbanized areas. 40 
CFR 35.162(b)(1)(i). By including a component related to point sources, 
EPA recognizes the important role they play in determining the extent 
of pollution in a State.
    This proposed rule will amend the state allotment formula to 
incorporate financial incentives for States to implement adequate NPDES 
fee programs. The Clean Water Act generally requires that all 
discharges of pollutants from a point source into waters of the United 
States obtain a permit under the NPDES program. A NPDES permit 
establishes pollutant discharge limits based on treatment technology 
performance, the quality of the water into which pollutants are 
discharged, and the potential impact of the discharge on public health 
and the environment. The U.S. Environmental Protection Agency (EPA) 
oversees the NPDES program and also approves applications from States 
to administer and enforce the NPDES program in that State. Currently, 
45 States are authorized by EPA to administer all or some parts of the 
NPDES program.
    State water quality programs are funded with a mixture of State and 
Federal dollars. Grants awarded under CWA Section 106 are States' 
primary source of Federal funding. The growing complexity of water 
quality issues has prompted more States to implement NPDES permit fee 
programs. An estimated 41 States currently have permit fee programs in 
place, with such fees paying for all or a portion of the cost of the 
State's permit program.
    A number of States still operate their permit programs with little 
or no reliance on permit fees. States can address permit program budget 
shortfalls through the implementation of permit fee programs that 
collect funds to cover the cost of issuing and administering permits. 
Funding permit programs with the support of permit fees allows States 
to use CWA Section 106 funds for other critical water quality programs.
    EPA is committed to making our State surface water protection 
programs more sustainable through better resource management. As State 
Agencies carry out most of the day-to-day aspects of water quality 
functions, their responsibilities are expanding while they are 
simultaneously facing increasingly severe funding constraints. As a 
nation, billions of federal funds under the Water Pollution Control 
grants, together with State resources, have been spent to establish and 
maintain adequate measures for the prevention and control of surface 
and groundwater protection. Federal and State governments cannot carry 
out this responsibility alone. EPA is committed to finding effective 
and efficient solutions to maintaining sustainable State water 
pollution control programs that continue to provide this nation with 
clean and protected water. All levels of government and the private 
sector must share in this commitment. This rulemaking is designed to 
provide an incentive to States to move toward greater sustainability in 
the way they manage and budget for environmental programs and to shift 
part of the financial burden to those who benefit from NPDES permits.
    Under this proposal, EPA would allot funds for the permit fee 
incentive if there is an increase in the state allotment above the FY 
2006 level. The amount of any allotment would be limited to three 
percent of the funds allotted under 40 CFR 35.162(b) in FY 2006. Total 
funds allotted under 40 CFR 35.162(b) in FY 2006 amounts to 
approximately $169.3 million. Any funds above this amount would be 
allotted to States under 40 CFR 35.162(b). As a result of this change, 
EPA would allot the State and Interstate CWA 106 grant funds in the 
following order: 2.6 percent will be set-aside for allotment to the 
Interstates in accordance with the existing Interstate allotment 
formula in 40 CFR 35.162(c); next, funds may be allotted under 40 CFR 
35.162(d); and finally, EPA may allot funds to States in accordance 
with this proposed permit fee incentive allotment formula, with the 
balance allotted to the States in accordance with the existing 
allotment formula under 40 CFR 35.162(b).
    The only States which would be eligible for this set-aside are 
those States which have been authorized by EPA to implement the NPDES 
program by the first day of the fiscal year, October 1, for which funds 
are appropriated by Congress. These states must also submit annually, 
by October 1, a certification to EPA which meets two additional 
requirements. First, the certification must include the total 
percentage of NPDES program costs recovered by the State through permit 
fee collections during the most recently completed State fiscal year, 
and a statement that the amount of permit fees collected is used by the 
State to defray NPDES program costs. This proposal defines NPDES 
program costs as all activities relating to permitting, enforcement, 
and compliance. Second, the certification must include a statement that 
State recurrent expenditures for water quality programs have not 
decreased from the previous State fiscal year, or indicate that a 
decrease in such expenditures is attributable to a non-selective 
reduction

[[Page 295]]

of the programs of all executive branch agencies of the State 
government. The concept of non-selective reduction is taken from the 
statutory requirements related to maintenance of effort from the Clean 
Air Act Section 105(c) and EPA's implementing regulations found at 40 
CFR 35.146. Under the Clean Air Act, EPA is prohibited from awarding 
grants to air pollution control agencies if state recurrent 
expenditures are not at least equal to such expenditures during the 
preceding state fiscal year. EPA can still award a grant even if there 
are decreases in such expenditures if EPA determines that the reduction 
is attributable to a non-selective reduction of all state programs. For 
example, a state legislature enacts budget cuts across all state 
agencies and does not target the air program. EPA is proposing to adopt 
a similar approach in this rulemaking.
    After EPA determines the number of eligible states, each state will 
be eligible to receive up to a full share of the set-aside amount. EPA 
will determine the amount of a full share by dividing the set-aside 
amount by the number of eligible states. A full share will be the same 
amount for each eligible state. The percent of a full share that each 
eligible state will receive, however, will be determined by the 
following formula, based on the certification information described 
above.
    (A) A State will receive 25 percent of a full share if that State 
has collected permit fees which equal or exceed 75 percent of total 
State NPDES program costs; or
    (B) A State will receive 50 percent of a full share if that State 
has collected permit fees which equal or exceed 90 percent of total 
NPDES program costs; or
    (C) A State will receive a full share if that State has collected 
permit fees which equal 100 percent of total NPDES program costs.
    In other words, in its certification, a State must inform EPA of 
its total NPDES program costs and the percentage of which are recovered 
through permit fees. EPA would use the information from this 
certification to determine any additional amount a State would receive 
in its Section 106 grant based on this financial incentive allotment 
formula. If, for example, a State's total NPDES program costs are $1 
million, and the State collected $750,000 in NPDES permit fees, a state 
would receive 25% of a full share in addition to the grant amount 
allotted to it under the current CWA Section 106 allotment formula.

III. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and is therefore not 
subject to OMB review. Because this grant action is not subject to 
notice and comment requirements under the Administrative Procedures Act 
or any other statute, it is not subject to the Regulatory Flexibility 
Act (5 U.S.C. 601 et.) or Sections 202 and 205 of the Unfunded Mandates 
Reform Act of 1999 (UMRA) (Pub. L. 104-4). In addition, this action 
does not significantly or uniquely affect small governments. Although 
this action proposes to create new binding legal requirements, such 
requirements do not substantially and directly affect Indian Tribes 
under Executive Order 13175 (63 FR 67249, November 9, 2000). This 
action will not have federalism implications, as specified in Executive 
Order 13132 (64 FR 43255, August 10, 1999). This action is not subject 
to Executive Order 13211, ``Actions Concerning Regulations that 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001), because it is not a significant regulatory action 
under Executive Order 12866. This action does not involve technical 
standards; thus, the requirements of Section 12(d) of the National 
Technology Transfer and Advancement Act of 1995 (15 U.S.C. Section 272 
note) do not apply. This action does not impose an additional 
information collection burden under the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. Section 3501 et seq.). The 
Congressional Review Act, 5 U.S.C. Section 801 et seq., generally 
provides that before certain actions may take effect, the agency 
promulgating the action must submit a report, which includes a copy of 
the action, to each House of the Congress and to the Comptroller 
General of the United States. Since this grant action, when finalized, 
will contain legally binding requirements, it is subject to the 
Congressional Review Act, and EPA will submit its final action in its 
report to Congress under the Act.

List of Subjects in 40 CFR Part 35

    Environmental protection, Administrative practices and procedures, 
Environmental program grants, Water pollution control.

    Dated: December 21, 2006.
Benjamin H. Grumbles,
Assistant Administrator, Office of Water.
    EPA proposes to amend 40 CFR part 35 as follows:
    1. The authority for citation for part 35, subpart A 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 (1966); Pub. L. 105-65, 111 Stat. 1344, 1373 
(1997).

    2. Section 35.162 is amended by adding paragraph (e) to read as 
follows:

Sec.  35.162  Basis for allotment.

* * * * *
    (e) Permit fee incentive allotment formula. If there is an increase 
above the FY 2006 level in the total amount of funds allotted to States 
under paragraph (b) of this section, EPA may award this increase as the 
permit fee incentive allotment to eligible States in accordance with 
this section. The amount of this annual allotment shall not be greater 
than three percent of the funds allotted under paragraph (b) of this 
section in FY 2006, and any funds above this amount shall be allotted 
to States under paragraph (b) of this section.
    (1) Each eligible State may receive up to a full share of this 
allotment, as determined by the following formula. A full share is the 
allotment amount divided by the number of eligible States:
    (i) A State will receive 25 percent of a full share if that State 
has collected permit fees which equal or exceed 75 percent of total 
State NPDES program costs; or
    (ii) A State will receive 50 percent of a full share if that State 
has collected permit fees which equal or exceed 90 percent of total 
NPDES program costs; or
    (iii) A State will receive a full share if that State has collected 
permit fees which equal 100 percent of total NPDES program costs.
    (2) The maximum share to any State under this subsection shall not 
exceed 50 percent of the State's previous year's total Section 106 
allotment determined under paragraph (b) of this section.
    (3) Any funds left remaining after all shares have been allotted 
under this subsection will be re-allotted to the States under paragraph 
(b) of this section.
    (4) In order for a State to be eligible for this incentive, a State 
must: Be authorized by EPA to implement the NPDES program by the first 
day of the Federal fiscal year, October 1, for which the funds have 
been appropriated; and submit to EPA a certification meeting the 
requirements of paragraph (e)(5) of this section.

[[Page 296]]

    (5) The certification required under paragraph (e)(4) of this 
section must meet the following requirements:
    (i) The certification must be submitted annually to EPA by October 
1; and
    (ii) The certification must include the total percentage of NPDES 
program costs, as defined in paragraph (e)(6) of this section, 
recovered by the State through permit fee collections during the most 
recently completed State fiscal year, and a statement that the amount 
of permit fees collected is used by the State to defray NPDES program 
costs; and
    (iii) The certification must include a statement that State 
recurrent expenditures for water quality programs have not decreased 
from the previous State fiscal year or indicate that a decrease in such 
expenditures is attributable to a non-selective reduction of the 
programs of all executive branch agencies of the State government.
    (6) NPDES program costs are defined as all permitting, enforcement, 
and compliance costs.

[FR Doc. E6-22549 Filed 1-3-07; 8:45 am]

BILLING CODE 6560-50-P