Comment submitted by Marcy Leavitt, New Mexico Environment Department (NMED)

Comments on Notice of Proposed Rulemaking Docket ID No. EPA-HQ-OW-2006-0765; FRL-8263-1 40 CFR Part 35 NPDES Permit Fee Incentive for Clean Water Act Section 106 Grants; Allotment Formula Federal Register Volume 72, No. 2 January 4, 2007 Submitted by: New Mexico Environment Department (NMED) Ron Curry, Cabinet Secretary P.O. Box 26110 Santa Fe, NM 87502 A. GENERAL COMMENTS 1. EPA should allow states to fund NPDES programs using state revenue in lieu of permit fees as long as the state fully funds its NPDES program and can meet the certification requirements of 35.162(e)(5)(iii). (a) Any fee incentive rule imposed by the Environmental Protection Agency (EPA) that essentially mandates permit fees in lieu of other state funding sources could derail the state?s NPDES delegation efforts. The New Mexico Environment Department (NMED) has been working toward delegation of the NPDES program for several years. As part of this process, we have been meeting with stakeholders and legislators to develop program plans, including funding proposals. Prior to the inception of federal fee incentive proposals, NMED had committed to seek state sources of funding to offset NPDES permit fees. Non-fee funding options that have been considered include general fund revenue and existing state funds generated by an assessment on wholesale petroleum products. (b) EPA should be required to implement its own NPDES fee requirements to level the playing field for states seeking primacy. New Mexico dischargers currently pay no fees for NPDES permits issued by the U.S. Environmental Protection Agency (EPA). Attempts by NMED to develop fee schedules and rules for NPDES permits have been met with tremendous resistance because permittees are accustomed to permit issuance by EPA with no assessed fees. New Mexico?s proposed plan to address these concerns has been to fund the NPDES program, to the extent possible, with non- fee generated state revenue. (c) NMED feels strongly that states are in the best position to evaluate their financial landscape and should have the flexibility to decide what combination of fees and other state revenues are appropriate to fund an adequate NPDES program. State legislatures contribute general fund dollars to administer NPDES programs because NPDES permits and the water quality protections they afford provide a clear public benefit. In New Mexico, a largely rural state, we have few permits over which NPDES program costs can be shared. New Mexico?s NPDES program costs are estimated to be $1.9 million per year which, in a fee driven program, would be covered primarily by the state?s 120 individual NPDES permittees. More than half of these individual permits are for municipal discharges, therefore local governments would bear the greatest burden of a fully fee-funded program. Furthermore, as a largely rural state many communities have limited revenue and do not have the resources necessary to fully cover NPDES permitting costs. Nearly half (48%) of New Mexico?s municipalities have a population of less than 1500 people. (d) The cumulative effect of environmental fees adopted by states to supplement federal grants that have not kept pace with increasing federal requirements should also be considered. By targeting the NPDES program for increased fees, a disproportionate burden is placed on small local governments because they make up the majority of the New Mexico?s NPDES permit inventory. If EPA?s goal is to decrease reliance on federal funds, this should be implemented across all environmental programs so costs can be shared among the entire universe of environmental permittees, including industrial and federal government facilities. (e) The amount of fees a state generates is a poor measure of NPDES success. EPA should measure and reward success of NPDES programs based on water quality improvement attributed to NPDES activities, timeliness of permit issuance and renewal, and the level of service provided by agencies to the public and regulated community. B. SPECIFIC QUESTIONS EPA IS SOLICITING FOR COMMENT 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? No. As stated above, states are in the best position to evaluate their financial landscape and should have the flexibility to decide what combination of fees and other state revenues are appropriate to fund an adequate NPDES program. 2. Are there any non-financial incentives States may prefer that would encourage States to establish or expand adequate permit fee programs. Incentives, financial or otherwise, cannot overcome obstacles that states face in gaining support for raising permit fees. EPA must be realistic in its expectations regarding the ability of states to gain political support for fees to pay for permitting activities that are provided for free by EPA. This is an issue that has been brought up repeatedly in our meetings with stakeholders regarding state the state?s pursuit of NPDES authorization. EPA?s push for New Mexico to require a high percentage of program costs to be paid by permit fees could result in failure of state authorization efforts, and thus EPA continuing to bear the bulk of NPDES permitting costs. Furthermore, the proposed fee incentive rule could backfire in authorized states that are unable to collect permit fees that amount to more than 75 percent of their NPDES program costs. For those states, the rule?s proposed allocation formula for future 106 funding increases could be a disincentive to maintaining NPDES authorization. Returning a state NPDES program to EPA for administration would free up 106 funding for other necessary water quality programs. EPA would then have to take over the entire financial burden of the state?s NPDES program. 3. Is the proposed permit fee collection formula 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? New Mexico cannot attain the proposed fee collection formula for the reasons stated above. If it is EPA?s goal to reduce the dependence of NPDES programs on federal revenue sources such as the 106 grant, then all state funding sources should be treated equally with regard to eligibility for financial incentives. Additionally, as stated above, all EPA environmental programs should undertake a similar analysis and approach so the cumulative impact can be assessed and considered. 4. What impact may this rule have on the States and the NPDES permittees in the States? Clean Water Act Section 106 funds currently pay for New Mexico?s water quality standards development (triennial review) efforts, total maximum daily load (TMDL) development, statewide surface water quality monitoring and assessment activities, and NPDES permit certifications and inspections. Costs of these activities increase each year, and eligibility limitations for future 106 grant increases will impact NMED?s ability to sustain the level of water quality surveillance and protection that it currently provides. The proposed fee incentive rule could very likely derail NMED?s efforts to gain legislative approval for a state NPDES program because of the financial burden to New Mexico?s small communities. Without NPDES authorization the state?s ability to share in future 106 funding increases and the resultant water quality services provided will diminish over time as program costs increase and revenues remain flat. For additional information please contact Marcy Leavitt, Chief, Surface Water Quality Bureau at marcy.leavitt@state.nm.us or (505) 827-2795.