[Federal Register Volume 63, Number 113 (Friday, June 12, 1998)]
[Notices]
[Pages 32208-32209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15738]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
[FRL-6110-8]
Proposed Policies Affecting the Drinking Water State Revolving
Fund (DWSRF) Program and Announcement of Stakeholder Meeting
AGENCY: Environmental Protection Agency.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The U.S. Environmental Protection Agency (EPA) is proposing to
issue two policy decisions for the Drinking Water State Revolving Fund
(DWSRF) program. The first would allow eligible privately-owned public
water systems to be reimbursed for costs incurred after a State
notifies the system that it will provide a loan, but before the system
actually receives the loan. This will allow privately-owned systems to
move ahead with construction to take advantage of construction seasons.
The second policy would allow States to make loans for projects that
are needed to solve public health problems for residents currently
served by contaminated ground water wells. This policy would expand the
universe of eligible loan recipients by allowing loans to an entity
that is not currently a public water system, but which will become a
public water system upon completion of the project.
EPA has also developed a proposed strategy to be used, if
necessary, for implementing withholding of DWSRF funds in cases where
States fail to meet statutory requirements for ensuring capacity of new
systems commencing operation after October 1, 1999.
EPA is soliciting comments on these proposals until July 19, 1998.
Comments in writing should be directed to Veronica Blette,
Implementation and Assistance Division, Office of Ground Water and
Drinking Water, U.S. EPA, (4606), 401 M Street SW, Washington, D.C.
20460, by fax to (202) 260-4656 or by E-mail to
blette.veronica@epa.gov. EPA is also holding a stakeholders meeting on
July 13, 1998 in Washington, D.C. to discuss the proposals, and to
provide an opportunity for participants to comment, ask questions and
express their views.
Background
The DWSRF program was established by the reauthorized Safe Drinking
Water Act (SDWA) (Pub. L. 104-182), signed by President Clinton on
August 6, 1996. The SDWA Amendments authorizes $9.6 billion for the
DWSRF program and related programs from fiscal year 1994 through fiscal
year 2003. EPA's budget included $1.275 billion for the DWSRF program
and related programs in FY 1997 and $725 million in FY 1998. Final
Guidelines [EPA 816-R-97-005] for the program were released on February
28, 1997. Funding provided by EPA from the national DWSRF appropriation
is used by States to establish DWSRF loan programs. States can also use
part of the funds to support State and local programs related to source
water protection, operator certification and drinking water programs.
State DWSRF programs can make loans to both privately-owned and
publicly-owned community water systems and not-for-profit non-community
water systems. A community water system is a system that serves at
least 15 service connections used by year-round residents of the area
served by the system; or regularly serves at least 25 year-round
residents. A non-community water system is a public water system that
is not a community water system. States have the flexibility to tailor
DWSRF programs to address local needs as long as the programs meet
minimum Federal requirements. States must develop a priority system
which will be used to prioritize use of DWSRF funds. Funding priority
must be based on three criteria: projects needed to protect public
health, achieve or maintain SDWA compliance, and to help those systems
with the greatest economic need. States are required annually to
develop, and subject to public review, a comprehensive priority list of
projects that have applied for funding and a fundable list, which is a
list of the highest ranked projects which are expected to receive
funding in that year.
Proposals
(1) The Safe Drinking Water Act (SDWA) contains a provision which
allows State DWSRF programs to provide loans to municipally owned
systems to refinance debt incurred for eligible projects. Specifically,
section 1452(f)(2) allows States ``to buy or refinance the debt
obligation of a municipality, intermunicipal or interstate agency
within the State * * * in any case in which a debt obligation is
incurred after July 1, 1993.'' However, the SDWA does not have a
similar provision for privately-owned facilities.
A number of States have expressed concern that a strict
interpretation of this refinance provision could delay construction of
some privately-owned projects that are needed to solve public health
problems. States would like the option of reimbursing eligible
privately-owned systems for debt or costs incurred by the system after
it receives notification from the State that the State intends to offer
it a loan in the near future. Costs incurred after the notification,
but before the loan was made, would be eligible for reimbursement. This
would encourage systems to move ahead with construction in order to,
for example, take advantage of seasonal construction cycles.
EPA believes that projects which have been approved for funding
from the DWSRF, but move ahead with construction prior to the actual
award, should be able to include these short
[[Page 32209]]
term construction costs in the DWSRF loan under certain conditions. In
these cases, where a privately-owned project incurs a cost prior to
receiving a loan, even if by means of a short term debt, that debt will
be treated as a previously incurred cost that is eligible for loan
assistance.
The Agency is proposing that any project that has been given
approval, authorization to proceed, or any similar action by the State
prior to the actual project construction will be eligible for
reimbursement of construction expenses incurred after such State
action, provided that the project meets all of the requirements of the
DWSRF program. Such a project must be on the State's fundable list,
developed using a priority system approved by EPA. A project on the
comprehensive list which is funded when a project on the fundable list
is bypassed using the State's bypass procedures may also be eligible
for reimbursement of costs incurred after the system has been informed
that it will receive funding. These requirements would apply regardless
of whether the system financed costs using a short-term debt instrument
or internal capital.
Projects receiving reimbursement of incurred costs would be subject
to all other Federal requirements required of a recipient of Federal
funds, including an environmental review which must consider the
impacts of the project based on the preconstructing site conditions.
Failure to comply with the State's environmental review process cannot
be justified on the grounds that costs had already been incurred,
environmental impacts had already been caused, or contractual
obligations had been made prior to the binding commitment.
(2) Section 1452(a)(2) of the SDWA Amendments states that
``financial assistance under this section may be used by a public water
system only for expenditures * * * which * * * will facilitate
compliance with national primary drinking water regulations * * *.''
The Act defines a public water system (PWS) as a ``system * * * (of)
pipes or other constructed conveyances'' which regularly serves at
least 15 service connections or at least 25 individuals. Several States
have indicated that a strict interpretation of this provision would
prevent them from providing funds to an entity (e.g., homeowners'
association) that has a public health problem and is not currently a
PWS, but which would become a PWS upon construction of a piped system.
States want the flexibility to provide DWSRF funds to these entities in
order to solve public health problems posed by contaminated wells.
While the SDWA does allow States to lend funds to an existing PWS to
extend lines to solve these types of public health problems, not all of
these situations have an existing PWS nearby that is willing or able to
help.
EPA believes that the statute permits the DWSRF to create a
federally regulated PWS in limited circumstances to solve the public
health problems intended to be addressed by the statute; for example,
health risks faced by homeowners currently served by individual wells.
The conditions which would have to be met are: (a) upon completion of
the project, the entity responsible for the loan must meet the
definition of a Federal community public water system; (b) funding is
limited to projects on the State's fundable list where an actual public
health problem with serious risks exists; (c) the project must be
limited in scope to the specific geographic area affected by
contamination; (d) the project can only be sized to accomodate a
reasonable amount of growth expected over the life of the facility--
growth cannot be a substantial portion of the project; and (e) the
project must meet the same technical, financial and managerial capacity
requirements that the SDWA requires of all DWSRF assistance recipients.
(3) Section 1452(a)(1)(g) of the SDWA Amendments requires the
Administrator to withhold 20% of a State's DWSRF allotment unless the
State has the legal authority or other means to ensure that all new
community water systems and new nontransient, noncommunity water
systems commencing operation after October 1, 1999 demonstrate
technical, managerial, and financial capacity with respect to each
drinking water regulation in effect, or likely to be in effect, on the
date operations commence (section 1420(a)). EPA proposes that for award
of FY99 funds, a State will receive 100% of its allotment if it has the
statutory authority and has completed or is in the process of a
scheduled administrative rulemaking or equivalent approach with the
realistic expectation that the State will have a fully functional
program as of 10/1/99. States failing to meet this will have 20% of
their allotment held back. If a State subsequently meets these
requirements by 9/30/99 the held back funds will be released. If the
State fails to meet the requirements by 9/30/99 the funds will be
permanently withheld and reallotted to other States.
For FY2000 funds and beyond, EPA is proposing to withhold and
reallot 20% of the State's allotment if the State fails to demonstrate
that it has, and is implementing, a fully functional program to ensure
that new systems have capacity. The assessment will be performed as
part of the capitalization grant application review, but will be based
on the status of the State program as of October 1 of the fiscal year
that the funds were allotted to the State.
DATES: A Stakeholder meeting to address these proposals and other
implementation issues associated with the DWSRF program has been
scheduled for July 13, 1998 from 1 p.m. to 5 p.m. The meeting will be
held at the Washington Information Center (WIC) at EPA Headquarters,
401 M Street SW, Washington, DC 20460.
To register for the meeting, contact the Safe Drinking Water Act
Hotline, telephone (800) 426-4791. Interested parties who cannot attend
the meeting may participate via conference call and should register
with the Safe Drinking Water Hotline by July 6, 1998 to guarantee
availability.
FOR FURTHER INFORMATION CONTACT: The Safe Drinking Water Act Hotline,
telephone (800) 426-4791. Information about the DWSRF program,
including program guidelines and State contact information, is
available from the EPA Office of Ground Water and Drinking Water Web
Site at the URL address ``http://www.epa.gov/OGWDW.''
Dated: June 5, 1998.
Cynthia C. Dougherty,
Director, Office of Ground Water and Drinking Water.
[FR Doc. 98-15738 Filed 6-11-98; 8:45 am]
BILLING CODE 6560-50-P
