[Federal Register Volume 60, Number 2 (Wednesday, January 4, 1995)]
[Rules and Regulations]
[Pages 365-372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-150]



=======================================================================
-----------------------------------------------------------------------
[[Page 366]]

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 35

[OAR-94-45; FRL-4921-3]
RIN 2060-AF03


Revisions to the Administrative Requirements and Provisions of 
the Clean Air Act Section 105 Grant Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interim final rule with request for comments.

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

SUMMARY: The Environmental Protection Agency (EPA) is promulgating an 
interim final rule revising the current regulations which govern the 
award of program grants under section 105 of the Clean Air Act (the 
Act). The revisions ensure consistency with and continue implementation 
of the Clean Air Act Amendments of 1990 (1990 Amendments). This 
promulgation revises the regulations to incorporate changes governing 
maintenance of effort (MOE) and cost-sharing requirements, including 
provisions allowing a temporary waiver of the cost-sharing amounts, and 
other miscellaneous changes contained in the 1990 Amendments.
DATES: This interim final rule is effective January 4, 1995.
    EPA solicits comments on this interim final rule until February 3, 
1995.

ADDRESSES: Supporting information used in the development of this 
interim final rule and copies of the public documents submitted are 
contained in Docket No. A-94-45. Comments on this interim final rule 
should be mailed in duplicate, if possible, to the EPA Air Docket. This 
docket is available for public inspection and copying between 8:00 a.m. 
and 5:30 p.m., Monday through Friday, except legal holidays. The 
address of the EPA Air Docket is: Air Docket, Environmental Protection 
Agency, Mailcode 6102, Room M-1500, Waterside Mall, 401 M St., SW., 
Washington, DC 20460. A reasonable fee may be charged for copying.
     Comments and data may also be submitted electronically by any of 
three different mechanisms: by sending electronic mail (e-mail) to: 
[email protected]; by sending a ``Subscribe'' message to 
[email protected] and once subcribed, send your 
comments to RIN-2060-AF03; or through the EPA Electronic Bulletin Board 
by dialing 202-488-3671, enter selection ``DMAIL,'' user name ``BB--
USER'' or 919-541-4642, enter selection ``MAIL,'' user name ``BB--
USER.'' Electronic comments must be submitted as an ASCII file avoiding 
the use of special control characters and any form of encryption. 
Comments and data will also be accepted on disks in WordPerfect in 5.1 
file format or ASCII file format. All comments and data in electronic 
form should be identified by the docket number A-94-45. Electronic 
comments on this interim final rule, but not the record, may be viewed 
or new comments filed online at many Federal Depository Libraries. 
Additional information on electronic submissions can be found in unit 
V. of this document.

FOR FURTHER INFORMATION CONTACT: Peggy Anthony or Alexander Wolfe, 
United States Environmental Protection Agency, Office of Air and 
Radiation, Office of Program Management Operations (Mailcode 6102), 401 
M St., SW., Washington, DC 20460 at (202) 260-7415.
SUPPLEMENTARY INFORMATION: This preamble is organized according to the 
following outline:
I. Background and Purpose
II. Discussion of Regulatory Changes
    A. Maintenance of Effort Requirements
      1. Definition of Recurrent and Nonrecurrent Expenditures
      2. Use of Prior Fiscal Year Data to Determine MOE Levels
      3. Accounting Relative to Title V Programs
    B. Cost-sharing Requirements
      1. Maximum Federal Share
      2. Waiver of Cost-sharing Requirement
    C. State Allotments and Reserves
III. Summary of Interim Final Rule
IV. Public Docket
V. Regulatory Assessment Requirements
    A. Office of Management and Budget Clearances
    B. Regulatory Flexibility Act
    C. Paperwork Reduction Act
    D. Unfunded Mandates


    The attached interim final rule revises the regulations at 40 CFR 
part 35 to ensure a common sense approach to implementing the 1990 
Amendments. The 1990 Amendments require our key stakeholders--state and 
authorized local jurisdictions, to implement new operating permit 
programs under Title V of the Act. The implementation of the new Title 
V programs involve the transition of many activities previously covered 
by Section 105 grant programs to the new Title V permit programs. Many 
state and local agencies expressed serious concern about being able to 
meet MOE requirements due to the reduction in activities; and may be 
unable to provide the required 40 percent cost-share. As discussed in 
unit II.A.3. of this preamble, EPA has determined that existing 
regulations permit states to recompute their MOE levels to reflect the 
transfer of state air quality program activities previously funded 
through section 105 grants to the Title V permit program. This rule 
provides state and local stakeholders with the additional regulatory 
framework necessary to make the transition workable on a common sense 
scale by allowing state and local government agencies to (1) 
temporarily waive the cost-share requirement; and, (2) determine 
recurrent and nonrecurrent expenditure levels with greater flexibility.
    The preamble makes frequent use of the term ``state,'' usually 
meaning the state air pollution control agency authorized to be the 
recipient agency for the section 105 grant, as defined under section 
302 of the Act. The reader should assume that when used here ``state'' 
also includes air pollution control agencies of the District of 
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
American Samoa, the Commonwealth of the Northern Mariana Islands, and 
local governments where a local agency is a direct-funded recipient of 
a section 105 air grant.
    The preamble is organized to enable a review of the origins of the 
part 35 changes being promulgated today. The preamble also describes 
the impact on the MOE requirements due to the transfer of section 105 
program activities to the Title V permit program. Although not the 
subject of this rulemaking, the impact was identified during the 
workgroup efforts described below and addressed in an opinion from 
EPA's Office of General Counsel.
    Proposed changes to part 35, subpart A affecting the award of air 
grant assistance to Indian Tribes are the subject of a separate 
rulemaking, ``Indian Tribes: Air Quality Planning and Management,'' and 
will not be discussed in this action. See 59 FR 43955, August 25, 1994. 
However, EPA intends that this rulemaking and the final Tribal air 
assistance regulation will be compatible.

I. Background and Purpose

    Section 105 of the Act, 42 U. S. C. 7405, authorizes the award of 
grants to state, local, interstate, intermunicipal, and tribal air 
pollution control agencies to support programs for the prevention and 
control of air pollution. The Federal section 105 grant program has 
been a major force in helping to establish and expand the air pollution 
control programs of state and local agencies. Since including the 
program in the 1963 Clean Air Act, Congress has 
[[Page 367]] appropriated, and EPA has awarded, over $2.0 billion in 
Federal grant assistance.
    Section 105 contains two major administrative requirements to 
ensure the fiscal commitment and continued eligibility of a recipient 
agency. The recipient must: (1) contribute a share of the overall costs 
of its section 105-approved program (cost-share or match); and (2) 
expend annually an amount equal to or greater than its previous year's 
commitment (MOE). The amount of funding established under the second 
requirement is called the recipient's MOE level. These requirements 
have prompted state, local, and tribal agencies to contribute nearly 
$3.5 billion of their own funds over the last 30 years in support of 
their efforts to prevent and control air pollution and implement 
national ambient air quality standards.
    The 1990 Amendments, Public Law 101-549, amended the section 105 
provisions on cost-sharing, MOE, and state grant allotments. In 
addition, Title V of the 1990 Amendments requires all states to 
establish operating permit programs. The Title V permit programs must 
include fee provisions to cover the costs of the permit programs. Many 
activities previously funded through section 105 grants are now 
required to be included within and funded through the Title V permits 
and fees.
    This rulemaking amends the section 105 program grant regulations at 
40 CFR part 35, subpart A to (1) further implement the 1990 Amendments; 
(2) ensure consistency between the regulations and the Act as amended; 
and (3) address the fiscal impact of Title V permit fee provisions on 
section 105 program grant recipients. The rule promulgated here 
provides increased flexibility to grant recipients in determining and 
setting expenditure levels and provides the regulatory linkage 
necessary for reasonable implementation of statutory provisions under 
both Titles I and V of the Act.
    This interim final rule is consistent with Federal and Agency 
intent to: enhance the fiscal capacity of state and local governments 
to enable the effective implementation of their air pollution 
prevention and control responsibilities; reduce, where possible, any 
unnecessary administrative burdens associated with the receipt of 
Federal assistance; and help ensure the financial integrity of the air 
grant and permit fee programs.
    The rule is published as an interim final rule (rather than as a 
proposed rule) in accordance with the Administrative Procedure Act, 5 
U.S.C. 553(a), which exempts grant rules from the notice and comment 
requirements for rulemaking. Nevertheless, EPA solicits public comment 
on this interim final rule. The rule takes effect today in order to 
allow for the prompt implementation of the provisions affecting the 
section 105 grant program, including waivers of the cost-sharing 
requirement.

II. Discussion of Regulatory Changes

    This section provides a more detailed explanation of the regulatory 
changes EPA intends to make to the existing 40 CFR part 35, subpart A.

A. Maintenance of Effort Requirements

    1. Definition of recurrent and nonrecurrent expenditures. Section 
105 (c)(1) of the Act provides that no agency shall receive a section 
105 grant during any fiscal year when its ``recurrent expenditures'' of 
non-Federal funds for air pollution control programs will be less than 
its expenditures were for such programs during the preceding fiscal 
year. The 1990 Amendments require EPA to revise the current regulations 
which define applicable recurrent and nonrecurrent expenditures, and in 
so doing, to ``give due consideration to exempting an agency from the 
limitations of this paragraph [MOE requirements] and subsection (a) of 
this section [cost-sharing requirements] due to periodic increases 
experienced by that agency from time to time in its annual expenditures 
for purposes acceptable to the Administrator for that fiscal year.'' 
Section 105(c)(1) of the Act, as amended. This rule revises the 
definition for recurrent expenditures and adds a new definition for 
nonrecurrent expenditures for the air grant program. As discussed in 
unit B.2. of this preamble, the regulations also provide for an 
exemption from the cost-sharing requirements in certain limited 
circumstances.
    The current regulatory definition of ``recurrent expenditures'' in 
40 CFR 35.105 provides that all expenditures, except those for 
equipment purchases with a unit acquisition cost of $5,000 or more, are 
considered recurrent unless justified by the applicant as unique and 
approved by the Regional Administrator in the grant agreement. The 
revised definition being promulgated for the air grant program removes 
the $5,000 limitation to recognize price changes due to inflation and 
changes in the nature and design of air pollution control equipment. 
Such changes have occurred since the last promulgation and are likely 
to continue. The revised definition will provide greater flexibility to 
air pollution control agencies in the MOE requirements by not 
subjecting them to an artificial dollar ceiling and administratively 
burdensome justifications for basic purchases. This rule leaves in 
place the current definition of ``recurrent expenditures'' at 40 CFR 
35.105 which will continue to be used in other continuing environmental 
programs governed by 40 CFR part 35, subpart A.
    2. Use of prior fiscal year data to determine MOE levels. While the 
MOE provision requires that each recipient expend annually at least the 
same or greater amount of its own resources on its section 105 program 
as it did in the previous year, it often takes several months beyond 
the end of a fiscal year for EPA to determine the final expenditure 
amounts for the grants. In order to permit EPA to award the section 105 
grants in a timely manner, even when the required fiscal data is not 
yet available, the 1990 Amendments revised section 105(c)(1) to allow 
EPA to compare an agency's prospective expenditure level to that of its 
second preceding fiscal year. When the preceding year's final fiscal 
data is received, EPA will then provide an official verification that 
the MOE requirements have been met. Section 35.210(a) has been revised 
to permit the use of data from the second preceding fiscal year as 
provided in the 1990 Amendments.
    3. Accounting relative to Title V programs. States have expressed 
concern over how the transfer of resources from their section 105 grant 
program to their Title V program will affect the MOE requirement and 
their ability to continue to receive a Federal grant.
    This concern and other grant and fee program transition issues 
prompted EPA to initiate, in May 1994, a workgroup to develop clear 
transition policies and procedures for regions and states to follow. 
The workgroup effort resulted in the issuance of a June 27, 1994 
opinion from the Office of General Counsel on the ability of states to 
adjust MOE levels once Title V programs are approved. EPA also issued 
transition guidance on July 21, 1994 and August 28, 1994.
    Based on the June 27, 1994 opinion, EPA has determined that a 
state's MOE level may be reduced to reflect the transfer of activities 
previously funded through its section 105 program to the Title V 
program without jeopardizing the state's continued eligibility for a 
section 105 grant. However, a state must maintain the level of effort 
associated with recurrent expenditures for activities that continue to 
be supported with section 105 program grants. This principle applies 
not only to the year in which the Title V program is initially 
[[Page 368]] approved but in subsequent years as well.
    Section 105(c)(1) of the Act provides that ``No agency shall 
receive any grant under this section during any fiscal year when its 
expenditures of nonfederal funds for recurrent expenditures for air 
pollution control programs will be less than its expenditures were for 
such programs during the preceding fiscal year.'' The MOE regulations 
implementing this provision state that: ``To receive funds under 
section 105, an agency must expend annually for recurrent section 105 
program expenditures an amount of nonfederal funds at least equal to 
such expenditures during the preceding fiscal year.'' 40 CFR 35.120.
    Because the regulations describe the term ``recurrent expenditures 
for air pollution control programs,'' as ``recurrent section 105 
program expenditures,'' EPA believes a reasonable interpretation of the 
MOE provisions is that they require states to maintain only their 
effort associated with activities that are included within the section 
105 grant program.
    Because many of the activities previously funded through section 
105 program grants are now included within the Title V permit fee 
program and permit program activity costs are no longer allowable costs 
under the section 105 program, expenditures for permit activities are 
no longer ``recurrent section 105 program expenditures'' for which the 
MOE level must be maintained. A new MOE level should be calculated that 
reflects the expenditures associated with the remaining section 105 
activities.

B. Cost-sharing Requirements

    1. Maximum Federal share. Prior to the 1990 Amendments, EPA was 
authorized to award Section 105 program grants that, depending upon the 
purposes of the grants and recipients' identities, provided up to one-
half to three-quarters of the approved program costs. Distinctions were 
made among types of recipients and between cost-sharing requirements 
for planning, developing, establishing, and improving programs and 
maintaining programs. The 1990 Amendments eliminated the distinctions 
between the types of recipients and activities along with the varying 
Federal funding percentages associated with each. Instead all funded 
activity is now termed as 'implementation' which is now defined in this 
rulemaking to encompass virtually every type of program activity.
    The Amendments revised section 105(a) to authorize grant awards up 
to three-fifths (60 percent) of the costs of ``implementing'' the air 
programs. Section 105 (a)(1)(A) defines ``implementing'' as ``any 
activity related to the planning, developing, establishing, carrying-
out, improving, or maintaining of such programs.''
    The 1990 Amendments further provided that air pollution control 
agencies contributing less than two-fifths (40 percent) of the approved 
program costs had 3 years from the date of enactment (November 15, 
1990) to meet the required nonfederal minimum or face a reduction in 
their EPA funding. Section 105 (a)(1)(B) of the Act. The change in the 
cost-share requirement was phased-in to prevent the disruption of 
affected grantee's current air program operations.
    This rulemaking revises the current regulations by deleting the 
existing regulations at 40 CFR 35.205 and inserting new provisions for 
a uniform cost-sharing requirement for all program activities and a 3-
year phase-in period. The statutory definition of the term 
``implementing'' has been included in the new definitions section at 40 
CFR 35.201.
    2. Waiver of cost-sharing requirement. In accordance with section 
105(c)(1) EPA has determined that an exemption from the cost-sharing 
requirement is appropriate in certain very limited circumstances 
because of increased expenditures experienced by states as a result of 
the transfer of resources to the Title V permit program.
    In the 1980's, many states enacted operating permit programs as 
part of their air pollution control programs. The costs of these state 
permit programs were allowable under section 105 grants and many states 
used the permit fees they collected to satisfy the cost-sharing 
requirement of the section 105 grant program. The 1990 Amendments, 
however, added Title V to the Act. Title V requires all states to 
establish operating permit programs supported by permit fees. Many 
activities previously funded through section 105 grants are now 
required to be included and funded through the Title V permit fee 
programs. In order to obtain a permit, sources of pollution must pay to 
the state an annual fee that is sufficient to cover all the costs of 
the permitting program. (Section 502(b)(3)(A)). Title V and EPA 
regulations require that any such permit fees collected be utilized 
solely to cover the costs of the permit programs. (Section 
502(b)(3)(C)(iii) and 40 CFR 70.9(d)).
    Some states assumed the fees collected under Title V could be used 
to pay a portion or all of the 40 percent cost-share for their section 
105 grant, like the fees under previous state permit programs. Other 
states without previously existing permit programs also planned to use 
Title V fees in lieu of state general revenues and other sources to 
meet the cost-share requirement. Relying on the assumption that Title V 
fees could be used for cost-sharing, some state legislatures did not 
authorize and appropriate funds sufficient to meet the cost-share 
requirements beyond the funds anticipated from the fees.
    However, Title V permit fees cannot be used to meet the cost-
sharing requirements of section 105 program grants. In order to qualify 
for cost-sharing, costs incurred by a grantee must be allowable under 
its grant with EPA. (40 CFR 31.24(a)). A grantee may not count costs 
that are not part of its grant program. Because Title V requires that 
the permit program be funded solely from the fees collected, and that 
the fees collected be used only for that purpose, Title V permit 
program costs cannot be funded from a section 105 grant. As a result, 
the permit program cost are not allowable section 105 grant costs and, 
therefore, the costs and the fees used to pay them cannot be used to 
meet the section 105 cost-sharing requirements.
    Because the Title V fees cannot be used for cost-sharing, some 
state and local agencies have indicated that they will not be able to 
meet the 40 percent cost-sharing obligation once their Title V programs 
are approved. As a result, some states need additional time to identify 
other sources of funds or obtain additional funds from their 
legislatures. If a state cannot meet its cost-share it would either be 
ineligible for a section 105 award or would have its grant award 
reduced as a result. Section 105 grants fund a large portion of state 
air pollution control programs. Without grant support some states have 
indicated an inability to fulfill responsibilities under the Act and 
would not be able to meet all of the statutory deadlines. Consequently, 
states would risk the imposition of severe growth sanctions.
    To prevent significant shortfalls in near-term funding, states 
requested relief from the cost-sharing requirements. The EPA has noted 
three regulatory and administrative remedies that would help provide 
states relief and additional time to secure the necessary funding 
support: deferral of cost-sharing to the end of the budget period; use 
of revenue generated from fees during program development for cost-
sharing; and promulgation of this rule to provide a temporary waiver of 
the cost-sharing requirement. [[Page 369]] 
    \ Deferral of cost-sharing. States can request deferral of the 
cost-sharing requirements until later in the annual grant budget period 
in order to provide additional time to obtain cost-sharing resources. 
Regulations governing cost-sharing require only that the costs be 
incurred under the assistance agreement, i.e., during the budget period 
identified in the assistance agreement (40 CFR 31.24). This is 
consistent with the decisions of the Comptroller General. See e.g., 60 
Comp. Gen. 208 (1981) (Cost-share requirements are met when nonfederal 
share is provided by the end of the grant budget period).
    \ Use of fees generated prior to Title V implementation. As part of 
approved section 105 grant workplans, states have used section 105 
grant funds in the development (``ramp-up'') of their Title V programs. 
Fees generated to help develop these Title V programs prior to their 
approval by EPA, unless otherwise specifically directed by the state to 
support its Title V program once it is approved, can be used for cost-
sharing.
    \ Waiver of cost-sharing requirements. The promulgation of this 
rulemaking will provide temporary relief in the form of waivers from 
the cost-sharing requirement in certain very limited circumstances 
under the authority provided in section 105(c)(1) of the Act. That 
section authorizes EPA to provide an exemption from both the section 
105(c)(1) MOE requirements and the cost-sharing requirements of section 
105(a) due to periodic increases experienced by states in their annual 
expenditures for purposes acceptable to EPA. Because some states 
assumed they could use the Title V fees for cost-sharing, they are now 
confronted with unanticipated increases in their expenditures in order 
to meet the cost-sharing requirements. EPA believes these increases 
fall within the scope of section 105 waiver authority.
    The rule provides that a waiver may be permitted only when the 
reduction of a state or local agency's nonfederal grant contribution of 
the required cost-share is due to the redirection of its grant matching 
resources to the Title V operating permit program.
    The waiver will be temporary and available on a case-by-case basis 
for a 1-year period. The waiver may be renewed for no more than 2 
additional years so long as the total waiver period does not expire 
later than 3 years from the date of initial approval of a state's Title 
V program. EPA believes the 3-year timeframe is reasonable because it 
will provide the state legislatures with both annual and biennial 
sessions the opportunity to take corrective fiscal action. In addition, 
EPA believes it could take 3 years for a state to refocus its programs 
and resources.
    The Governor of the state or the Governor's designee, (or in the 
case of a local air pollution control agency, the accountable 
authorizing official) must request a waiver from the Regional 
Administrator on an annual basis. A relevant showing of financial need, 
which meets the criteria set forth by EPA in Sec. 35.205(b), and any 
criteria in companion guidance to be issued by the Agency, must be 
provided by the state to the responsible EPA region. The waiver request 
should describe the nature and timing of the corrective fiscal action 
the state intends to take to restore its contribution to at least a 40 
percent level.
    The Governor of the state or the Governor's designee, (or in the 
case of a local air pollution control agency, the accountable 
authorizing official) must also provide an assurance that the state 
will not further reduce its nonfederal contribution below the level 
authorized by the waiver. The waiver will only be for that portion of 
the cost-sharing attributable to redirection of resources to Title V.
    In addition to the information contained in this rule, EPA will 
provide supplemental guidance on the waiver and other aspects of this 
rule.

C. State Allotments and Reserves

    The 1990 Amendments revised section 105(b)(2) to clarify that EPA 
must make available to each state for application, but not necessarily 
for award, one-half of 1 percent of the total national section 105 
grant appropriation. While EPA must allot this amount per state for 
planning purposes, a state's application must demonstrate that it 
merits and can effectively utilize the funds it requests for purposes 
acceptable to the Administrator. EPA is not obligated to provide the 
full one-half of 1 percent amount. This rule revises 40 CFR 35.115 to 
reflect this statutory change.

III. Summary of Interim Final Rule

    The following is a summary of the changes the EPA intends to make 
to the existing regulations at 40 CFR part 35, subpart A:
    1. Section 35.105 Definitions. Modify the definition of ``recurrent 
expenditures'' to show that it does not apply to agreements made 
pursuant to section 105.
    2. Amend Sec. 35.115 (a) (State allotments and reserves) so that it 
is consistent with section 105 (b)(2), as amended, which requires that 
each state have made available to it for application no less than one-
half of 1 percent nor more than 10 percent of the annual section 105 
appropriations.
    3. Establish Sec. 35.201 (Definitions under section 105) to provide 
definitions for implementing, and recurrent and nonrecurrent 
expenditures applicable to the section 105 assistance awards:
    a. Add a definition for ``implementing''. Prior to the 1990 
Amendments the Act provided for differing levels of Federal share for 
grants for ``planning, developing, establishing, or improving'' air 
programs and for grants for maintaining air programs. The amendments 
provide for only one level of Federal share for ``implementing'' a 
program.
    b. Add a definition for ``nonrecurrent expenditures''. Use of the 
definition of ``recurrent expenditures'' in the existing regulation 
often resulted in the MOE amount being inequitably raised.
    c. Add a revised definition for ``recurrent expenditures'' for 
section 105 assistance agreements. The 1990 Amendments require that the 
current language be revised.
    4. Amend Sec. 35.205 (Maximum Federal Share) by deleting the 
existing language and replacing it with one paragraph which reflects 
the new statutory maximum Federal grant share of 60 percent. A second 
paragraph provides a method by which grantees negatively-impacted by 
the transfer of resources to the Title V program may request the EPA to 
waive the cost-sharing requirement at Sec. 35.205(a).
    5. Amend Sec. 35.210 (Maintenance of Effort) by revising 
subparagraph (a) to reflect the statutory provision allowing the 
Regional Administrator to base the initial determination of MOE level 
on the second preceding fiscal year rather than the preceding fiscal 
year.

IV. Public Docket

    The docket for this regulatory action is A-94-45. The docket is an 
organized and complete file of all the information submitted to, or 
otherwise considered by EPA in the development of this interim final 
rulemaking. The principal purposes of the docket are:
    (1) To allow interested parties a means to identify and locate 
documents so that they can effectively participate in the rulemaking 
process, and
    (2) To serve as the record in case of judicial review.
     The public docket is located in M1500, 401 M Street SW., 
Washington, DC 20460. The information contained in this public docket, 
including printed, paper versions of electronic comments is available 
for inspection from 8:00 a.m. to 5:30 p.m., Monday thru Friday, 
excluding legal holidays. [[Page 370]] 
    As part of an interagency ``streamlining'' initiative, EPA is 
experimenting with submission of public comments on selected rulemaking 
actions electronically through the Internet in addition to accepting 
comments in traditional written form. This interim final rule is one of 
the rulemaking actions selected by EPA for this experiment. From the 
experiment, EPA will learn how electronic commenting works, and any 
problems that arise can be addressed before EPA adopts electronic 
commenting more broadly in its rulemaking activities. Electronic 
commenting through posting to the EPA Bulletin Board or through the 
Internet using the ListServe function raises some novel issues that are 
discussed below in this Section.
    To submit electronic comments, persons can either ``subscribe'' to 
the Internet ListServe application or ``post'' comments to the EPA 
Bulletin Board. To ``Subscribe'' to the Internet ListServe application 
for this interim final rule, send an e-mail message to: 
[email protected] that says `` Subscribe RIN-2060-AF03 
 .'' Once you are subscribed to the ListServe, 
comments should be sent to: RIN-2060-AF[email protected].
     For online viewing of submissions and posting of comments, the 
public-access EPA Bulletin Board is also available by dialing 202-488-
3671, enter selection ``DMAIL,'' user name ``BB--USER'' or 919-541-
4642, enter selection ``MAIL,'' user name ``BB--USER.'' When dialing 
the EPA Bulletin Board type  at the opening message. When the 
``Notes>'' prompt appears, type ``open RIN-2060-AF03'' to access the 
posted messages for this document. To get a listing of all files, type 
``dir/all'' at the prompt line. Electronic comments can also be sent 
directly to EPA at:
    [email protected].


    Electronic comments must be submitted as an ASCII file avoiding the 
use of special control characters and any form of encryption.
    To obtain further information on the electronic comment process, or 
on submitting comments on this interim final rule electronically 
through the EPA Bulletin Board or the Internet ListServe, please 
contact John A. Richards (Telephone: 202-260-2253; FAX: 202-260-3884; 
Internet: [email protected]).
    Persons who comment, and those who view comments electronically, 
should be aware that this experimental electronic commenting is 
administered on a completely public system. Therefore, any personal 
information included in comments and the electronic mail addresses of 
those who make comments electronically are automatically available to 
anyone else who views the comments.
    Commenters and others outside EPA may choose to comment on the 
comments submitted by others using the RIN-2060-AF03 ListServe or the 
EPA Bulletin Board. If they do so, those comments as well will become 
part of EPA's record and included in the public docket for this 
rulemaking. Persons outside EPA wishing to discuss comments with 
commenters or otherwise communicate with commenters but not have those 
discussions or communications sent to EPA and included in the EPA 
rulemaking record and public docket should conduct those discussions 
and communications outside the RIN-2060-AF03 ListServe or the EPA 
Bulletin Board.
    EPA will transfer all comments received electronically in the RIN-
2060-AF03 ListServe or the EPA Bulletin Board, in accordance with the 
instructions for electronic submission, into printed, paper form as 
they are received and will place the paper copies in the official 
rulemaking docket which will also include all comments submitted 
directly in writing. All the electronic comments will be available to 
everyone who obtains access to the RIN-2060-AF03 ListServe or the EPA 
Bulletin Board; however, the official rulemaking docket is the paper 
docket maintained at the address in ``ADDRESSES'' at the beginning of 
this document. (Comments submitted only in written form will not be 
transferred into electronic form and thus may be accessed only by 
reviewing them in the EPA Docket as described above.)
    Because the electronic comment process is still experimental, EPA 
cannot guarantee that all electronic comments will be accurately 
converted to printed, paper form. If EPA becomes aware, in transferring 
an electronic comment to printed, paper form, of a problem or error 
that results in an obviously garbled comment, EPA will attempt to 
contact the commenter and advise the commenter to resubmit the comment 
either in electronic or written form. Some commenters may choose to 
submit identical comments in both electronic and written form to ensure 
accuracy. In that case, EPA requests that commenters clearly note in 
both the electronic and written submissions that the comments are 
duplicated in the other medium. This will assist EPA in processing and 
filing the comments in the rulemaking docket.
    As with ordinary written comments, at the time of receipt, EPA will 
not attempt to verify the identities of electronic commenters nor to 
review the accuracy of electronic comments. Electronic and written 
comments will be placed in the rulemaking docket without any editing or 
change by EPA except to the extent changes occur in the process of 
converting electronic comments to printed, paper form.
    EPA will address significant electronic comments either in a notice 
in the Federal Register or in a response to comments document placed in 
the rulemaking docket for this Interim Final Rule. EPA will not respond 
to commenters electronically other than to seek clarification of 
electronic comments that may be garbled in transmission or conversion 
to printed paper form as discussed above. Any communications from EPA 
employees to electronic commenters, other than those described in this 
paragraph, either through Internet or otherwise are not official 
responses from EPA.

V. Regulatory Assessment Requirements

A. Executive Order 12866

    Under Executive Order 12866, [58 FR 51735, October 4, 1993] the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to OMB review and the requirements of the 
Executive Order. The order defines ``significant regulatory action'' as 
one that is likely to result in a rule that may: (1) have an annual 
effect on the economy of $100 million or more or adversely affect in a 
material way the economy, a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities; (2) create a serious 
inconsistency or otherwise interfere with an action taken or planned by 
another agency; (3) materially alter the budgetary impact of 
entitlements, grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raise novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order. It has been determined 
that this rule is a not a significant regulatory action under the terms 
of Executive Order 12866 and is therefore not subject to formal OMB 
review.

B. Regulatory Flexibility Act

    EPA did not develop a Regulatory Flexibility Analysis for this 
grant- [[Page 371]] related rule because it is exempt from notice and 
comment rulemaking under section 553(a)(2) of the Administrative 
Procedure Act (5 U.S.C. 553(a)(2)), and therefore is not subject to the 
analytical requirements of sections 603 and 604 of the Regulatory 
Flexibility Act (5 U.S.C. 603 and 604).

C. Paperwork Reduction Act

    The information collection activities associated with the 
administrative requirements of assistance programs have already been 
approved under the provisions of the Paperwork Reduction Act at 44 
U.S.C. 3501 et seq and have been assigned OMB control number 2030-0020.
    The collection of information associated with the administrative 
requirements of assistance programs to state and local government 
agencies is estimated to have a public reporting burden averaging 25 
hours annually. This includes time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information.
    The interim final regulation will cause a modest increase in 
information collection activity for some respondents above that 
associated with the normal administrative requirements of assistance 
programs. This is primarily attributable to the financial demonstration 
of need required for the approval of a waiver. Approximately 11 to 15 
State and local agencies are anticipated to request a waiver.

D. Unfunded Federal Mandates: Enhancing the Intergovernmental 
Partnership, Executive Order 12875

    We believe this regulation will provide relief to State and local 
governments negatively impacted by the transfer of program activities 
and resources in compliance with section 502(b) of the Act. While 
additional funds are not being provided, this rule allows state and 
local agencies to request waivers of the Act's cost-sharing 
requirements. The Office of Management and Budget was provided 
information and documents concerning consultations with state and local 
governments made directly, and indirectly through state and local 
groups. Affected state and local officials were also provided the means 
to participate in the development of this rulemaking through surveys, 
conference discussions, information papers, formal and informal 
comments, and communications with a variety of state and local 
associations.
    We also believe, by including provisions for the cost-sharing 
requirements to be waived (as discussed above), the rulemaking 
increases the ``flexibility for state and local waivers.'' Furthermore, 
in accordance with the Act's requirements, the term ``implementing'' is 
being defined to encompass all grant activities in lieu of separately-
based cost-share percentages for planning, developing, establishing, or 
improving programs and program maintenance.
    We do not anticipate that these regulations will impose any 
burdensome effects on the national economy. Indeed, this rule is 
intended to provide administrative and fiscal relief to affected state 
and local agencies.

List of Subjects in 40 CFR Part 35

    Accounting, Administrative practice and procedures, Environmental 
protection, Grant programs, Grants administration, Intergovernmental 
relations, Reporting and recordkeeping requirements.

    Dated: December 23, 1994.

Carol M. Browner,
Administrator.

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

PART 35-- STATE AND LOCAL ASSISTANCE

    1. The authority citation for part 35, subpart A, continues to read 
as follows:
    Authority: Secs. 105 and 301(a) of the Clean Air Act, as amended 
(42 U.S.C. 7405 and 7601(a)); secs. 106, 205(g), 205(j), 208, 319, 
501(a), and 518 of the Clean Water Act, as amended (33 U.S.C. 1256, 
1285(g), 1285(j), 1288, 1361(a) and 1377); secs.1443, 1450, and 1451 
of the Safe Drinking Water Act (42 U.S.C. 300j-2,300j-9 and 300j-
11); secs. 2002(a) and 3011 of the Solid Waste Disposal Act, as 
amended by the Resource Conservation and Recovery Act of 1976 (42 
U.S.C. 6912(a), 6931, 6947, and 6949); and secs. 4, 23, and 25(a) of 
the Federal Insecticide, Fungicide and Rodenticide Act, as amended 
(7 U.S.C. 136(b), 136(u), and 136w(a)).


    2. Section 35.105 is amended by revising the definition of 
``Recurrent expenditures'' to read as follows:


Sec. 35.105   Definitions.

*      *      *      *      *      
    Recurrent expenditures, except for the purposes of section 105 of 
the Clean Air Act (See Sec. 35.201), means those expenditures 
associated with the activities of a continuing environmental program. 
All expenditures, except those for equipment purchases with a unit 
acquisition cost of $5,000 or more, are considered recurrent unless 
justified by the applicant as unique and approved as such by the 
Regional Administrator in the assistance award.
*      *      *      *      *      
    3. In Sec. 35.115 paragraph (a) is amended by revising the last 
sentence to read as follows:


Sec. 35.115  State allotments and reserves.

*      *      *      *      *      
    (a) * * * However, no state shall have made available to it for 
application an allotment of less than one-half of 1 percent nor more 
than 10 percent of the annual appropriation for section 105 grants.
*      *      *      *      *      
    4. A new Sec. 35.201 is added to read as follows:


Sec. 35.201   Definitions applicable to Section 105.

    For purposes of section 105 of the Clean Air Act the following 
definitions are to be used in addition to the definitions in 
Sec. 35.105; except that the definition of ``Recurrent expenditures'' 
has the meaning set forth below:
    Implementing means, within the context of section 105 of the Clean 
Air Act, as amended, any activity related to planning, developing, 
establishing, carrying-out, improving, or maintaining programs for the 
prevention and control of air pollution or implementation of national 
primary and secondary ambient air quality standards.
    Nonrecurrent expenditures means those expenditures which are shown 
by the recipient to be of a nonrepetitive, unusual, or singular nature 
such as would not reasonably be expected to recur in the foreseeable 
future. Costs categorized as nonrecurrent must be approved in the 
assistance agreement or an amendment thereto. All other approved 
project costs are deemed to be recurrent.
    Recurrent expenditures means those expenses associated with the 
activities of a continuing environmental program. All expenditures are 
considered recurrent unless justified by the applicant as nonrecurrent 
and approved in the assistance award or an amendment thereto.
    5. Section 35.205 is revised to read as follows:


Sec. 35.205   Maximum Federal share.

    (a) The Regional Administrator may provide state, local, 
interstate, or intermunicipal agencies up to three-fifths of the 
approved costs of implementing programs for the prevention and control 
of air pollution or implementing national primary and secondary ambient 
air quality standards. Air pollution control agencies currently 
[[Page 372]] receiving grants and contributing less than the required 
minimum of two-fifths of the approved program costs shall have until 
November 15, 1993 to increase their contribution to the required level.
    (b) Subject to the conditions set forth below, the Regional 
Administrator may, at the request of the Governor of a State or the 
Governor's designee, or in the case of a local jurisdiction, the 
authorized local official, waive, for a 1-year period, all or a portion 
of the cost-sharing requirement of paragraph (a) of this section. The 
Regional Administrator may renew the waiver for no more than 2 years so 
long as the total waiver period does not exceed 3 years from the 
approval date of a state's permit program required under section 502 of 
the Clean Air Act (Act).
    (1) The waiver may be approved on a case-by-case basis and only 
when a state or local government's nonfederal contribution is reduced 
below the required two-fifths minimum as a result of the redirection of 
its nonfederal air resources to meet the requirements of section 502(b) 
of the Act.
    (2) In applying for a waiver the Governor or the Governor's 
designee, or in the case of a local jurisdiction, the authorized local 
official, must:
    (i) Describe the extent of fiscal and programmatic impact on the 
agency's section 105 program as a result of the transfer of nonfederal 
resources to support the program approved by EPA under section 502(b) 
of the Act.
    (ii) Provide documentation of the amount of the cost-sharing 
shortfall and the programmatic activities that would not be able to be 
carried out if the section 105 grant is reduced or not awarded as a 
result of a state or local air pollution control agency's inability to 
meet the cost-sharing requirements.
    (iii) Assure that there is no source of funding that may reasonably 
be used to meet the cost-sharing requirement for the affected grant 
budget period; and
    (iv) Assure that during the section 105 grant period the non-
federal share of the program costs will not be reduced in an amount 
greater than that authorized by the waiver.
    6. Section 35.210 is amended by adding a sentence at the end of 
paragraph (a) to read as follows:


Sec. 35.210   Maintenance of effort.

    (a) * * * In order for the Regional Administrator to award grants 
in a timely manner each fiscal year, the Regional Administrator shall 
compare an agency's proposed expenditure level, as detailed in the 
agency's application for grant assistance, to that agency's expenditure 
level in the second preceding fiscal year.
*      *      *      *      *

[FR Doc. 95-150 Filed 1-3-95; 8:45 am]
BILLING CODE 6560-50-F