[Federal Register Volume 63, Number 238 (Friday, December 11, 1998)]
[Rules and Regulations]
[Pages 68648-68664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32882]



[[Page 68647]]

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Part VI





Department of Agriculture





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Rural Utilities Service



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7 CFR Part 1780 and 1794



Environmental Policies and Procedures; Final Rule

  Federal Register / Vol. 63, No. 238 / Friday, December 11, 1998 / 
Rules and Regulations  

[[Page 68648]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1780 and 1794

RIN 0572-AB33


Environmental Policies and Procedures

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Utilities Service (RUS) hereby revises its existing 
environmental regulations, Environmental Policies and Procedures, which 
have served as RUS implementation of the National Environmental Policy 
Act (NEPA) (42 U.S.C. 4321 et seq.) in compliance with the Council on 
Environmental Quality (CEQ) Regulations for Implementing the Procedural 
Provisions of the NEPA. Based on new Congressional mandates, changes in 
the electric industry, and RUS experience and review of its existing 
procedures, RUS has determined that several changes are necessary for 
its environmental review process to operate in a smooth, efficient, and 
effective manner.
    The implementation of this rule has required that certain changes 
be made to 7 CFR part 1780 regarding environmental compliance. The 
amendments published in this document consist of those necessary to 
make the provisions of Part 1780 subject to the environmental 
requirements of this rule.

EFFECTIVE DATE: December 11, 1998.

FOR FURTHER INFORMATION CONTACT: Gary J. Morgan, Director, or Lawrence 
R. Wolfe, Senior Environmental Protection Specialist, Engineering and 
Environmental Staff; Rural Utilities Service, Stop 1571, 1400 
Independence Ave., SW., Washington, DC 20250-1571. Telephone (202) 720-
1784. E-mail address [email protected] or [email protected].
    This rule and the guidance bulletins described in this rule will be 
available on the Internet via the RUS home page at www.usda.gov/rus/.

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget (OMB) under Executive Order 12866.

Civil Justice Reform

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. RUS has determined that this proposed rule meets the 
applicable standards provided in sec. 3 of the Executive Order.
    In accordance with the Executive Order and the rule; (1) all state 
and local laws and regulations that are in conflict with this rule will 
be preempted; (2) no retro-active effect will be given to the rule; and 
(3) administrative proceedings are required to be exhausted prior to 
initial litigation against the Department (7 U.S.C. 6912).

Regulatory Flexibility Act Certification

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b), RUS certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. If a rule 
has a significant economic impact on a substantial number of small 
entities, the Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. The application for financial assistance under the 
RUS Electric and Telecommunications programs and the application for 
loans and grants under the RUS Water and Waste program are 
discretionary; regulatory requirements will, therefore, apply only to 
those entities which choose to apply for financial assistance or 
funding.

Information Collection and Recordkeeping Requirements

    The recordkeeping and reporting burdens contained in this rule were 
approved by the Office of Management and Budget (OMB) pursuant to the 
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35,) under control 
number 0572-0117.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review to eliminate unnecessary regulations and improve 
those that remain in force.

Environmental Justice

    This rule is subject to the requirements of Executive Order 12898, 
Federal Actions to Address Environmental Justice in Minority 
Populations and Low-Income Populations. Implementation of these 
requirements will occur at the time of actions performed hereunder.

National Environmental Policy Act Certification

    The Administrator of RUS has determined that this rule will not 
significantly affect the quality of the human environment as defined by 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) 
Therefore, this action does not require an environmental impact 
statement or assessment.

Catalog of Federal Domestic Assistance

    The programs described by this proposed rule are listed in the 
Catalog of Federal Domestic Assistance programs under numbers 10.850, 
Rural Electrification Loans and Loan Guarantees, 10.851, Rural 
Telephone Loans and Loan Guarantees, 10.760, Water and Waste Disposal 
System for Rural Communities, 10.764, Resource Conservation Development 
Loans, and 10.765, Watershed Protection and Flood Prevention Loans. 
This catalog is available on a subscription basis from the 
Superintendent of Documents, the U.S. Government Printing Office, 
Washington, DC 20402.

Intergovernmental Review

    This rule excludes the Electric and Telecommunications Programs 
from the scope of Executive Order 12372, Intergovernmental 
Consultation, which may require consultation with State and local 
officials. A final rule related notice entitled, ``Department Program 
and Activities Excluded from Executive Order 12372,'' (50 FR 47034) 
determined that RUS loans and loan guarantees, and RTB bank loans, were 
not covered by Executive Order 12372. The Water and Waste Program is 
subject to the provisions of Executive Order 12372. Consultation will 
be completed at the time of actions performed hereunder.

Unfunded Mandates

    This rule contains no Federal mandates (under the regulatory 
provision of Title II of the Unfunded Mandates Reform Act) for State, 
local, and tribal governments or the private sector. Thus this rule is 
not subject to the requirements of section 202 and 205 of the Unfunded 
Mandates Reform Act.

Background

    On March 13, 1984, the Rural Electrification Administration 
(predecessor of RUS) published 7 CFR Part 1794, Environmental Policies 
and Procedures, as a final rule in the Federal Register (49 FR 9544) 
covering the actions of the Electric and Telecommunications programs. 
Based on new congressional mandates, changes in the electric industry, 
and RUS experience and review of its existing procedures, RUS has 
determined that several changes are necessary for its environmental 
review process to operate in a smooth, efficient, and effective manner.

[[Page 68649]]

    The existing 7 CFR part 1794 was designed to implement the 
requirements of NEPA and the CEQ regulations for RUS Electric and 
Telecommunications programs. As a result of the Federal Crop Insurance 
Reform and Department of Agriculture Reorganization Act of 1994 (Pub. 
L. 103-354, 108 Stat. 3178), the programs of the Rural Electrification 
Administration, were combined with the Water and Waste program from the 
former Farmers Home Administration (FmHA) into RUS. Most changes 
proposed to 7 CFR part 1794 result from the addition of the Water and 
Waste program to RUS.
    For further guidance in the preparation of public notices and 
environmental documents, RUS has prepared a series of guidance 
bulletins. Three program specific bulletins are available which provide 
guidance in preparing the Environmental Report (ER) for proposed 
actions classified as categorical exclusions and proposed actions which 
require an Environmental Assessment (EA). Further information on these 
bulletins is provided in Sec. 1794.7.
    This final rule contains a variety of substantive and procedural 
changes from the provisions of the current rule. Some of these 
revisions are minor (Sec. 1794.4, Trivial Violations was deleted) or 
are merely intended to clarify existing RUS policies and procedures 
(Sec. 1794.6, Definitions, was added). Other revisions reflect changes 
in RUS implementation of the CEQ regulations as outlined below.
    The relationship between RUS and its Electric and 
Telecommunications applicants has changed substantially since RUS 
issued the final rule in March of 1984. Changes that have occurred in 
the last 4 years have been particularly dramatic. Historically, RUS 
provided substantially all of its applicants' capital needs and 
established a lending relationship reflecting that dominant lending 
role. However, because of limited annual loan authorization levels, RUS 
no longer serves such a role. Moreover, in a 1993 amendment to section 
306E of the Rural Electrification Act of 1936 (RE Act), as amended (7 
U.S.C. 936e), Congress required RUS to abandon its close hands-on 
control of its applicants and instead follow the practices of private 
market lenders. RUS has done so through the development of new forms of 
loan agreements and security instruments and the publication of 7 CFR 
Part 1717, subpart M, Operational Controls, which reduce or eliminate 
much of the oversight and control historically exercised by RUS over 
its Electric applicants.
    Reflecting these changes and reforms, RUS has revised Sec. 1794.3 
of the rule. Environmental reviews will continue to be required in 
connection with the approval of financial assistance for applicants and 
the issuance of rules, regulations, and bulletins by RUS. However, no 
reviews will be required in connection with approvals provided by RUS 
pursuant to its loan contracts and security instruments with applicants 
such as approvals of lien accommodations or the use of general funds by 
applicants. These approvals are not major Federal actions significantly 
affecting the quality of the human environment.
    Within subpart C of this rule, a classification system defines the 
level of environmental review required for RUS and applicant proposed 
actions. In Section 1794.20 RUS has clarified its position for 
determining circumstances under which an applicant's participation in a 
project results in a Federal action. Sections 1794.21 through 1794.25 
of this subpart are further subdivided when appropriate to 
differentiate between actions being proposed by RUS and actions 
proposed by Electric, Telecommunications, and Water and Waste program 
applicants.
    A number of classification changes have been made within subpart C 
of this rule. These reclassifications involve minor actions proposed by 
applicants which rarely, if ever, result in significant environmental 
impact or public interest. RUS believes this rule includes adequate 
safeguards to identify any unusual circumstances that may require 
additional agency scrutiny.
    RUS has modified the thresholds for acreage (facility sites), and 
capacity (generation facilities) within Sec. 1794.22(a). In addition to 
modifying the thresholds for acreage and capacity, RUS has imposed 
different thresholds for construction of electric generating capacity 
at new sites versus existing sites within Sec. 1794.23(c). Acreage and 
capacity threshold changes within Sec. 1794.24, and a capacity 
threshold change within Sec. 1794.25 reflect changes that have been 
made in Secs. 1794.22(a), and 1794.23(c). No changes were made to the 
existing thresholds for transmission line length. Capacity thresholds 
have been eliminated for hydroelectric proposals in Secs. 1794.22 and 
1794.23. RUS will normally adopt the NEPA document prepared by the 
Federal licensing agency of hydroelectric projects in which RUS 
applicants participate.
    The thresholds for proposed actions in the Water and Waste program 
are classified in Secs. 1794.21(c) and 1794.22(b). Based on historical 
experience and a survey of the thresholds established by the 
Environmental Protection Agency which administers similar programs, RUS 
has eliminated the two tiered classification for EAs that is contained 
in 7 CFR Part 1940, Subpart G, the environmental regulation of the 
former FmHA, and adopted the more traditional classification scheme as 
outlined in 40 CFR 1508.9. Because RUS co-funds a significant portion 
of its projects with other Federal and state agencies, a more 
traditional classification and documentation scheme is thought to be 
more conducive to minimizing duplicative environmental review efforts.
    RUS has modified its procedures in subparts D through G of this 
part. The EA will be the subject document of the notice of availability 
requirements in Sec. 1794.42, where previously, the applicant's ER was 
the subject document. By this change, the notice requirements for all 
three programs will be consistent for both EA proposals and EA with 
scoping proposals. This change will encourage more public involvement 
by allowing public review of EA proposals prior to the issuance of a 
Finding of No Significant Impact (FONSI).
    RUS has also changed its notice requirements for Electric program 
projects requiring scoping. The timing of RUS Federal Register notice 
for public scoping meetings in Sec. 1794.52(b) has been reduced from 30 
days to 14 days prior to the meeting. No appreciable benefit resulted 
from an earlier notice requirement. The existing regulation allows RUS 
to adopt the applicant's ER as its EA but requires RUS to prepare its 
own EA from the applicant's Environmental Analysis (EVAL) where a 
proposed action requires scoping. RUS has changed this requirement by 
allowing the EVAL to serve as its EA (see Sec. 1794.53) consistent with 
40 CFR Sec. 1506.5(b).
    RUS has modified its policy regarding the use of contractor 
prepared EISs. Under the existing regulation, RUS was required to use 
agency funds when an independent contractor was chosen by RUS to 
prepare the EIS. In accordance with the provisions of 7 CFR Part 1789, 
``Use of Consultants Funded by Applicants'' and Section 759A of the 
Federal Agriculture Improvement and Reform Act of 1996, the draft and 
final EIS may be prepared by a consultant selected by RUS and funded by 
the applicant. A new requirement, publication of a notice of 
availability by RUS and the applicant for a Record of Decision is 
established in Sec. 1794.63.

[[Page 68650]]

Preparation of the Rulemaking

    The proposed rule (7 CFR part 1794) was published in the Federal 
Register on November 24, 1997 (62 FR 62527). Public comment was invited 
for a 60-day period, ending on January 23, 1998.
    Eighty-nine written comments were received representing 32 specific 
organizations and individuals. These included two Federal agencies, 
eight Federal agency state offices, one regional commission, two 
electric cooperative associations, and seventeen rural electric 
cooperatives. All comments were fully considered when revising the 
proposed rule for publication as a final rulemaking.
    Every effort has been made to respond in detail in the preamble to 
every question raised or suggestion offered. Where commenters pointed 
out errors in spelling, syntax, and minor technical errors these errors 
were corrected and not mentioned further in the preamble. In addition, 
many commenters made similar suggestions or raised similar issues. In 
the interest of clarity, comments that were similar in nature were 
grouped and discussed in the most relevant section in the preamble. 
Some comments pointed out vague and unclear language. Clarifying and 
explanatory language was added to the rule and preamble as appropriate. 
The discussion under General Comments responds to general comments and 
clarification of misunderstandings as to RUS's intent. The statements 
under Comments on Specific Sections address the more significant 
comments received on particular provisions and how RUS responded to 
them.

General Comments

    Several comments focused on the background discussion of the 
preamble to the proposed rule regarding the proposed renumbered 
Sec. 1794.3, entitled ``Actions requiring environmental review.'' The 
background discussion explained that, because of changes in law and 
reforms in the Electric and Telecommunications industry, RUS proposed 
to revise that section to reflect that RUS would no longer treat as 
Federal actions subject to environmental reviews, approvals provided by 
RUS pursuant to its loan contracts and security instruments. The 
preamble explained that these approvals are ``ministerial'' and not 
major Federal actions for the purposes of NEPA. The commenters, who 
uniformly supported the proposed revision, asked that RUS identify all 
approvals that would no longer be subject to environmental review or 
clarify that only the approval of loans and loan guarantees will 
require an environmental review.
    Agency Response: The proposed revision to Sec. 1794.3 deletes 
reference to ``lien accommodations, and approvals provided pursuant to 
loan contracts and security instruments (e.g., approvals of the use of 
general funds).'' In pertinent part, the revised section identifies as 
actions requiring environmental review, ``the approval of financial 
assistance pursuant to the Electric, Telecommunications, and Water and 
Waste Programs.'' In response to the comments, RUS has added a 
clarifying sentence to Sec. 1794.3 stating that, ``Approvals provided 
by RUS pursuant to loan contracts and security instruments, including 
approvals of lien accommodations, are not actions for the purpose of 
this part and the provisions of this part shall not apply to the 
exercise of such approvals.'' RUS believes that, while it is 
principally the approvals of loans and loan guarantees to which 
environmental reviews attach, it is possible that other types of 
discretionary financial assistance could be available under the RUS 
program, which would trigger environmental reviews. Examples include 
lien subordinations under Sec. 306 of the RE Act (7 U.S.C. 936). The 
regulatory text should not limit those actions requiring environmental 
review to the approval of loans and loan guarantees. Consequently, no 
other change has been made in response to the comments.
    Ten commenters expressed concern about the two-tier classification 
that was created for ``categorically excluded'' proposals in 
Secs. 1794.21 and 1794.22, which they believe is overly burdensome and 
confusing. They further believe that many of the size, voltage, 
distance, and acreage thresholds have been arbitrarily determined and 
need to be reevaluated.
    Agency Response: RUS established the two-tier classification system 
for categorically excluded proposals specifically to reduce the burden 
on applicants without compromising the requirements of NEPA and the CEQ 
regulations. Categorically excluded proposals listed in Sec. 1794.21 
normally do not significantly impact the quality of the human 
environment. Therefore the submittal of an ER is not required. An ER is 
required for categorically excluded proposals listed in Sec. 1794.22 to 
provide for circumstances in which a normally excluded action may have 
a significant impact (see 40 CFR 1508.4). Prior to issuing the proposed 
rule, RUS reevaluated the thresholds established in the existing 
regulation and determined that the revised thresholds included in the 
proposed rule represent a reasonable delineation consistent with 40 CFR 
1508.4.
    The commenters also questioned why an environmental report should 
be required for a proposal that is normally categorically excluded and 
recommend that where appropriate, proposals listed in Sec. 1794.22 be 
incorporated into Sec. 1794.21.
    Agency Response: The changes proposed by these comments are not 
consistent with the definition of categorical exclusion in 40 CFR 
1508.4. In order to ensure that a proposed action does not 
significantly affect the quality of the human environment, RUS must 
conduct an environmental review. The two-tiered classification system 
for Categorical Exclusions establishes the level of information that 
must be provided by the applicant for proposals listed in each tier. 
This information is necessary so RUS can identify extraordinary 
circumstances in which a normally excluded action may have significant 
environmental effects.
    One commenter recommended incorporating language into Sec. 1794.21 
by which RUS could increase the level of environmental review for any 
categorically excluded project, which had a significant environmental 
effect. Other commenters point out that proposals in these two 
categories already must meet the requirements of Sec. 1794.31. 
Therefore a safeguard already exists whereby RUS can evaluate each 
project and determine if further environmental review is appropriate.
    Agency Response: This rule includes a requirement in 
Sec. 1794.22(a) by which RUS reserves the right to request 
environmental documentation for proposals listed in Sec. 1794.21(b) and 
(c) if significant environmental effects result from the implementation 
of the proposal. RUS believes that determining whether an ER should be 
prepared for all categorically excluded proposals on a case-by-case 
basis would be inconsistent with the CEQ regulations (40 CFR 1508.4) 
and would extend the RUS environmental review process.
    Three commenters assert that the thresholds established to 
differentiate between projects that require an environmental assessment 
(EA) with and without scoping (Secs. 1794.23 and 1794.24) were also 
arbitrarily determined and point out that a 1 MW increase in capacity 
can increase the level of review. The commenters recommend that all 
Sec. 1794.24 proposals which normally require scoping be incorporated 
into Sec. 1794.23 and that RUS adopt language allowing the agency to 
require scoping for projects which are expected to have significant 
impacts.

[[Page 68651]]

    Agency Response: RUS has reevaluated the thresholds that were 
established in the existing regulation for proposed actions listed in 
Secs. 1794.23 and 1794.24. The thresholds accurately delineate the 
difference between proposed actions which can be adequately reviewed 
with an EA and those actions which have a higher potential for needing 
an EIS. The latter required the preparation of an EVAL by the 
applicant. The EVAL will serve as the RUS EA, (40 CFR 1506.5(b)). 
Instead of establishing a single classification system for actions 
normally requiring an EA and determining the need for scoping on an 
individual basis, RUS agrees some flexibility is needed and has 
included a provision to modify or waive scoping requirements in 
Sec. 1794.52 for actions that normally require an EA with scoping.
    Two commenters expressed concern with the provisions of the 
proposed rule that allow the applicant or its consultant to prepare the 
environmental report (ER) which normally serves as RUS'' EA for Water 
and Waste proposals. These commenters assert that there may be an 
appearance of a conflict of interest.
    Agency Response: Agency responsibility is addressed in 40 CFR 
1506.5. The CEQ regulations allow an agency to require an applicant to 
submit environmental information for possible use by that agency (40 
CFR 1506.5(a)). The agency should assist the applicant by outlining the 
types of information required. The agency shall independently evaluate 
the information provided by the applicant and accept responsible for 
its accuracy. RUS has developed guidance Bulletin 1794A-602 for that 
purpose. An agency can permit an applicant to prepare an EA provided 
the agency makes its own evaluation of the environmental issues and 
takes responsibility for the scope and content of the EA (40 CFR 
1506.5(b)).
    One commenter recommends that the procedures defined in 7 CFR 1940-
G under which RUS reviews information submitted by the applicant and 
completes the assessment should be used for Water and Waste proposals.
    Agency Response: This rule provides for an agency-prepared EA. 
Section 1794.41 states that the ER will normally serve as the RUS EA. 
The decision of whether RUS uses the applicant's ER as its EA or 
prepares the EA from information provided in the ER will be made by the 
State Environmental Coordinator (SEC).
    Another commenter noted that by not allowing RUS employees to 
complete EAs, the agency is limiting the ability of its employees to 
provide technical assistance to rural areas.
    Agency Response: RUS does not agree with this statement. By 
improving the efficiency of document preparation, Rural Development 
staff will have more time to provide meaningful guidance and technical 
assistance to applicants.

Comments on Specific Sections

    Background: One commenter requested clarification of paragraph 9 of 
the proposed rules Background section that discusses exempting from 
review approvals provided by RUS pursuant to its loan contracts and 
security instruments.
    Agency Response: This comment is addressed in the response to the 
first general comment.
    Section 1794.2: One commenter questioned whether the item (d) in 
this section correctly characterized the roles RUS and the applicant 
play under NEPA and the CEQ regulations. He asserts that the applicant 
should be responsible for the accuracy of the information contained in 
environmental documents and the agency should be responsible for 
compliance with appropriate regulations.
    Agency Response: RUS agrees. The text of item (d) has been changed 
to clarify the role of the applicant. RUS is responsible for compliance 
with NEPA, including verifying the accuracy of the information it uses 
in its environmental review (40 CFR 1506.5). The applicant is 
responsible for compliance with all applicable RUS requirements.
    Section 1794.3: Six commenters recommended that this section 
clearly state that the rule applies only to direct loans and loan 
guarantee approvals.
    Agency Response: This comment is addressed in the response to the 
first general comment.
    Section 1794.5 (now Sec. 1794.4): Two commenters support the 
proposed format of placing metric units in parentheses following the 
non-metric equivalents which is the reverse of the current format. 
Another commenter questioned whether the change in metric system format 
would be contrary to the national effort to convert to the metric 
system and not in compliance with Executive Order 12770.
    Agency Response: It has been RUS experience that the current format 
in which metric units are followed by the non-metric equivalents in 
parentheses has been impractical and has confused readers. This rule's 
provisions for the use of metric units comply with Executive Order 
12770.
    Section 1794.7 (now Sec. 1794.6): One commenter suggested adding 
``the environment'' to the definition of Emergency Situation to account 
for threats to the environment and including a definition of 
``multiplexing sites.''
    Agency Response: The words ``or to the human environment'' have 
been added to the end of the definition of Emergency Situation and a 
definition has been included in this section for multiplexing sites.
    Another commenter suggested deleting the words ``document and'' 
from the definition of ER.
    Agency Response: RUS recognizes that the amount of documentation 
that can be included in an ER can vary for the types of proposals 
listed in Secs. 1794.22 and 1794.23 from a few pages to 100 pages or 
more. Since the word ``document'' does not add any significance to the 
definition of ER, the word has been deleted.
    A third commenter thought that the terms ER, EA and Environmental 
Impact Assessment were confusing and needed further explanation.
    Agency Response: RUS agrees and has reverted to the terminology 
used in the existing rule. RUS has in the past and proposes to continue 
to differentiate between the documentation submitted by the applicant 
for proposals that normally require an EA (Sec. 1794.23) and proposals 
that normally require an EA with scoping (Sec. 1794. 24) by titling the 
former an ER and the later an EVAL. The agency prepared document for 
proposals listed in Secs. 1794.23 and 1794.24 is still titled an EA (40 
CFR 1508.9).
    One commenter requested that this section be modified so the ER and 
EA can be stand-alone documents and not a mandatory part of the 
Preliminary Engineering Report (PER) for Water and Waste proposals. 
This commenter asserts that such a restriction precludes the use of 
other resources to complete the preparation of the environmental 
documentation.
    Agency Response: Although RUS intends for the ER to be submitted 
with the PER for Water and Waste proposals, there is no requirement 
that the ER be prepared exclusively by the engineering consultant that 
prepares the PER. The key issue is that environmental concerns be 
considered at the earliest planning stage of a proposal to ensure that 
environmental values are given appropriate consideration. The earliest 
planning stage of a proposal is the PER.
    Section 1794.8 (now Sec. 1794.7): Two commenters noted that RUS 
Bulletin 1780-26 already has been designated for guidance for another 
purpose.
    Agency Response: The designations for the guidance documents 
referenced in this section have been corrected.

[[Page 68652]]

    One commenter recommended that a standard format be developed for 
applicants to follow in the preparation of an ER or EA.
    Agency Response: The appropriate bulletins referenced in this 
section will contain a standard format for preparing an ER; the 
applicant does not prepare an EA.
    The same commenter further recommended that State Directors be able 
to issue supplements with less than approval by the Administrator.
    Agency Response: State Directors have the ability to issue 
supplements. However, to ensure compliance with environmental laws and 
regulations and maintain uniformity with neighboring states and within 
a region, requires Administrator review and approval of supplements.
    Six commenters urged RUS to consult with interested parties 
regarding the referenced electric and telecommunications guidance 
documents prior to taking final action on this rule.
    Agency Response: RUS has considered all comments received on the 
current versions of Bulletins 1794A-600 and 1794A-601 in preparing the 
revisions to these two Bulletins. Both Bulletins will be made available 
to applicants via the Internet prior to the effective date of this 
final rule.
    Two commenters believe that the referenced Water and Waste bulletin 
(RUS Bulletin 1794A-602) should be published for comment and one 
commenter requested a 60-day extension to the comment period on the 
proposed rule following the release of that draft bulletin.
    Agency Response: RUS Bulletin 1794A-602 was reviewed by Rural 
Development staff prior to the effective date of this final rule. RUS 
does not agree that the comment period on the proposed rule should be 
extended subject to the release of the draft bulletin.
    Section 1794.10: One commenter recommended replacing ``under RUS 
direct guidance and supervision'' with ``with advise from RUS'' 
instead.
    Agency Response: The referenced language has been revised. RUS will 
assist applicants by outlining the types of information required and 
provide guidance and oversight in the development of the documentation 
(40 CFR 1506.5).
    This commenter also recommended that the language in Secs. 1794.10 
and 1794.31(b) be consistent and refer to the SEC or neither.
    Agency Response: The language in Sec. 1794.10 applies to all three 
RUS programs. Therefore, a specific agency official is only identified 
in Sec. 1794.31(b), which is specific to the Water and Waste program.
    Section 1794.13: One commenter recommended that in (a)(3) all 
comments on Water and Waste proposals be sent directly to the RUS State 
Office instead of through the applicant.
    Agency Response: Applicant notices must state that comments should 
be sent to the RUS appropriate office for Water and Waste proposals and 
to the Washington, DC, office for Electric and Telecommunications 
proposals. However, RUS recognizes that both verbal and written 
comments on a proposal are sometimes directed to the applicant. This 
subsection accounts for this possibility by requiring the applicant to 
submit comments to RUS.
    Seven commenters were concerned that the requirement in 
Sec. 1794.13(a)(4) making all environmental documents and documentation 
related to the proposed action available in specific locations was too 
broad and created an overly burdensome and onerous responsibility for 
the applicant. They recommended that RUS narrow the scope of 
information that the applicant is required to make available in a 
public setting and require the applicant to designate a contact person 
to respond to requests for additional and supporting information.
    Agency Response: RUS agrees that the requirement making all 
environmental documents and documentation available in specific 
locations creates an overly burdensome and onerous responsibility for 
the applicant and does not enhance public participation in the 
environmental process. The language in Sec. 1794.13(a)(4) has been 
revised. RUS will determine which project related environmental 
documents will be made available for review at locations convenient for 
the public. To ensure full public disclosure, a list of all documents 
not provided for public review will be included. Documents not provided 
will be available for inspection through a designated RUS or applicant 
contact person.
    Two commenters requested that Sec. 1794.13(a)(5) be expanded to 
note that public hearings are to be confined to the environmental 
aspects of a proposed action.
    Agency Response: RUS believes that the purpose of the public 
hearings or meetings has been adequately identified in this section.
    One commenter requested that RUS coordinate its meetings with 
meetings, hearings, and environmental reviews, which may be held and/or 
required by others.
    Agency Response: RUS agrees with this comment and has revised 
Sec. 1794.13(a)(5) to include coordination of its meetings with the 
requirements of other interested agencies and groups.
    Six commenters questioned why RUS has established differing 
thresholds for publication of notices in the Federal Register with 
respect to the Electric and Telecommunications programs in 
Sec. 1794.13(b) and the Water and Waste program in Sec. 1794.13(c). 
They recommended that the language in Sec. 1794.13(c) be consistent for 
all three programs.
    Agency Response: RUS agrees and has decided to revise the language 
in Secs. 1794.13(b) and 1794.42(b) thereby making the thresholds for 
publication of notices consistent for all three programs. RUS will 
provide interested agencies with notification of its FONSI 
determinations through direct mailings or, at its option, the Federal 
Register, when appropriate.
    Section 1794.14: One commenter endorsed the flexibility provided in 
this section and recommended that this flexibility be more clearly 
stated. The commenter also suggested that the duties of a cooperating 
agency are unclear and a brief list should be included.
    Agency Response: The duties of a cooperating agency are described 
in 40 CFR 1501.6 and are incorporated by reference.
    Section 1794.17: One commenter questioned whether the mitigative 
measures would be discussed in the FONSI memo to the file in addition 
to the FONSI public notice. Two commenters noted that the provisions of 
(b)(3) appear to expand the responsibilities of field staff beyond that 
of development specialists. One commenter suggested that a better role 
for the agency would be to notify the appropriate regulatory agency to 
enforce the mitigative measures.
    Agency Response: Mitigation measures shall be discussed in both the 
FONSI memo and public notice. The responsibilities of field staff have 
not been expanded. In the routine process of checking on-site 
conditions for compliance with relevant loan or grant provisions, it is 
appropriate for staff to document the applicant's compliance status 
with regard to mitigation measures that were agreed upon as part of the 
conditions for the loan/grant. If discrepancies are noted, the agency 
may need to notify the appropriate regulatory agency for action.
    Section 1794.21(a): Six commenters recommended that in addition to 
defining ``emergency situation'' this

[[Page 68653]]

section be expanded to account for such situations.
    Agency Response: RUS has added action (4) to account for emergency 
situations.
    Section 1794.21(b): One commenter questioned why a ``detailed 
description'' was required for 12 actions in this category when all 
actions in this category had to be sufficiently described. That 
commenter recommended this requirement be deleted.
    Agency Response: RUS has determined through experience that the 
types of proposals contained in this section normally do not 
significantly affect the quality of the human environment. Thus the 
submission of an ER is not normally required. However, in order to 
waive the ER requirement for the 12 actions in this category so 
designated, the RUS reviewer must have a complete description of what 
is being proposed, how it will be constructed, and the setting in which 
the proposed project will be located. Evaluating these 12 actions on a 
case-by-case basis is more effective than uniformly requiring the 
mandatory submittal of an ER.
    Another commenter was concerned that the submittal of an 
environmental document was not required for proposed actions described 
in Sec. 1794.21(b) (4), (8), (14), (15) and (16), which could under 
certain circumstances provide a hazard to birds.
    Agency Response: RUS agrees that under certain circumstances 
actions described in Sec. 1794.21(b) (4), (8), (14), (15), and (16) 
could result in significant effects to the human environment, such as 
presenting a hazard to birds. The description of the facilities to be 
constructed that must be provided for these actions and others so noted 
in Sec. 1794.21(b) is used by RUS to determine whether the current 
level of review is adequate or a higher level of review is warranted.
    One commenter expressed concern over the provision in action 
Sec. 1794.21(b)(18) which require the applicant obtain certification 
from the utility owner that the facilities to be purchased are in 
compliance with applicable environmental laws and regulations. This 
commenter believes that the normal environmental review process should 
be sufficient to identify and resolve issues that may be encountered.
    Agency Response: RUS agrees that obtaining a certification of 
compliance for the purchase of existing facilities is not the 
appropriate form of documentation. Upon further review, RUS has 
determined that establishing two separate levels of review for the 
purchase of existing facilities, specifically action (18) in 
Sec. 1794.21(b) and action (7) in Sec. 1794.23(b), is not warranted. 
Both references to these actions have been deleted from the final rule 
and replaced by new action (11) in Sec. 1794.22(a). Under the new 
requirement applicants will have the option of submitting an ER or the 
results of a facility environmental audit. A higher level of review may 
be required before RUS approves an applicant's purchase of facilities 
that are determined to be in violation of Federal, state, or local 
environmental laws or regulations.
    One commenter recommended that the threshold for action described 
in Sec. 1794.21(b)(21), standby diesel generators, be increased from 1 
megawatt (MW) to 2 MW and also be utilized for load management purposes 
in addition to emergency power.
    Agency Response: RUS does not agree. The purpose of this category 
is to exclude standby diesel generators that would be subject to 
limited use (i.e. emergency outages). Utilizing such facilities for 
load management purposes increases the hours of usage and thus increase 
potential effects to the quality of the human environment.
    A commenter asserts that the action described in 
Sec. 1794.21(b)(24) could create a major change in local air quality.
    Agency Response: RUS agrees that wording describing action (24) 
could be misinterpreted and has added the following statement: 
``Repowering or uprating that results in an increased fuel consumption 
or the substitution of one fuel combustion technology with another is 
excluded from this classification.'' Because this action does not 
include an increase in fuel consumption, no change in local air quality 
is anticipated.
    This commenter further recommended that the type of customer 
facilities covered in Sec. 1794.21(b)(24) include commercial and 
agricultural.
    Agency Response: RUS agrees to add commercial and agriculture 
facilities to item (24).
    Section 1794.22: Three commenters noted that proposals identified 
in Sec. 1794.22(a)(11) and Sec. 1794.21(b)(20) which discuss facilities 
that will reduce the amount of pollutants released into the environment 
are redundant and the reference in Sec. 1794.22 should be deleted.
    Agency Response: RUS agrees that the requirements of 
Sec. 1794.22(a)(11) and Sec. 1794.21(b)(20) are redundant. Accordingly, 
action #11 in Sec. 1794.22(a) of the proposed rule has been deleted.
    One commenter asserted that proposals listed in Sec. 1794.22(b)(3) 
and (4) have the potential to impact important resources but will be 
excluded from environmental review.
    Agency Response: Applicants are required to prepare and submit an 
ER for all proposed actions listed in Sec. 1794.22(b). RUS will review 
the ER to determine whether a normally categorically excluded action 
may have a significant environmental effect (40 CFR 1508.4).
    One commenter suggested that Sec. 1794.22(c) belongs in 
Sec. 1794.23 which describes EA proposals.
    Agency Response: Proposals listed in Sec. 1794.22(c) were so 
designated to parallel the level of documentation required by the EPA 
in 40 CFR 6.505(c) for similar proposals. Agencies with similar 
programs are encouraged by CEQ to consult with each other to coordinate 
their procedures, especially for programs requesting similar 
information from applicants (40 CFR 1507.3(a)). RUS believes that these 
actions are correctly described in Sec. 1794.22(c).
    One commenter noted that Sec. 1794.22(c)(1) and (2) only apply to 
discharges and need to be expanded to include water withdrawals.
    Agency Response: RUS agrees and has expanded the discussion in 
Sec. 1794.22(c) to clarify this issue.
    Two commenters requested that ``substantial increases'' in 
Sec. 1794.22 (c)(2) be defined and one commenter also questioned how 
this term applied to a new facility.
    Agency Response: The term ``substantial increases'' has not been 
defined because its interpretation depends on local conditions and 
regulatory requirements. RUS agrees that this action should not include 
new facilities and has revised the language accordingly.
    One commenter noted that Sec. 1794.22 (c)(3) stipulates no greater 
than a 30 percent growth factor whereas Sec. 1794.22 (b)(3) stipulates 
a modest growth potential and requests consistency within the rule.
    Agency Response: The 30 percent growth factor is an established 
threshold, whereas the term ``modest growth'' applies to local 
conditions and regulatory requirements.
    Another commenter asserts that the thresholds in Sec. 1794.22(c)(3) 
need to be changed because it appears that a small system (20-30 EDU's) 
could be expanded up to 500 EDU's and still be a categorically excluded 
proposal.
    Agency Response: RUS believes the capacity criteria as stated is 
sufficient for the purposes of classifying an action

[[Page 68654]]

as a categorical exclusion. Two other provisions may be applicable to 
the commenter's point. First, the ER would provide sufficient 
information to determine if there are any extraordinary circumstances 
in which a normally categorically excluded action may have a 
significant environmental effect (see 40 CFR 1508.4). Second, under 
Sec. 1794.22(b)(2), RUS could determine that the facility improvements 
are not modest in use, size, capacity, purpose, or location and would 
require an EA.
    Section 1794.23: One commenter recommended that for consistency, 
this section be titled ``Proposals normally requiring an EA without 
scoping.''
    Agency Response: RUS disagrees. Early public involvement may be 
appropriate for any level of environmental review and should not be 
explicitly dismissed by excluding scoping for certain thresholds.
    Section 1794.31: One commenter stated that RUS should not be 
supervising or giving direct guidance to the applicant. He suggested 
modifying the wording in (b) to ``with advice from RUS.''
    Agency Response: This issue is addressed in the response to the 
comment on Sec. 1794.10.
    Another commenter noted that the SEC would be unable to devote the 
time necessary to supervise all applicants.
    Agency Response: High volume states have been provided additional 
environmental specialist positions in anticipation of the increased 
workload.
    Section 1794.32: One commenter wanted clarification in (b) on the 
criteria used to determine when public notice would be required if 
important land resources are affected. Another commenter suggested that 
in (b) reference should be made to Sec. 1794.7 or the RUS Bulletin 
1794A-602.
    Agency Response: RUS agrees with this suggestion and has referenced 
the two bulletins that provide guidance in preparing an ER.
    Section 1794.33: One commenter noted that this section allows RUS 
to act on an application without any environmental review.
    Agency Response: The commenter's interpretation of Sec. 1794.33 is 
incorrect. RUS shall conduct an environmental review for all proposed 
actions covered by this section. Proposals listed in Sec. 1794.21(b) 
and (c) normally require the submittal of a project description. 
Whereas, proposals listed in Sec. 1794.22(a) and (b) normally require 
the submittal of an ER. RUS reserves the right to require additional 
environmental information on any proposal the agency believes may have 
significant effects on the quality of the human environment 
(Sec. 1794.30).
    Section 1794.41: One commenter noted that the typical applicant 
would need assistance from their consulting engineer in preparing the 
ER, resulting in a fee increase to the applicant. If the SEC retains 
approval authority for the ER, another layer of review is added before 
the ER is accepted.
    Agency Response: RUS anticipates that the applicant's engineer will 
prepare the ER at the same time that project planning is done. RUS 
further anticipates that any increase in the engineering fee should be 
modest since the engineer in most projects has been preparing the 
applicant's environmental information for the agency. The SEC should be 
the only agency approval official for the ER.
    Section 1794.44: Two commenters noted that it appears RUS will take 
final action on proposals covered by this section without waiting for 
public input.
    Agency Response: Actions listed in Sec. 1794.23 are subject to 
public input when the EA is made available for review through applicant 
notice. Normally there is no provision for additional public input when 
RUS makes a FONSI determination for actions listed in Sec. 1794.23.
    These commenters also noted that draft RUS Bulletin 1794A-602 calls 
for a 15-day review period if significant comments are received on the 
draft EA.
    Agency Response: The reference to the 15-day review period was 
inadvertently omitted from the proposed rule. Section 1794.44 has been 
modified to include an opportunity for the public to review the RUS 
FONSI determination if substantive comments are received on the EA.
    Section 1794.51: One commenter noted that no mention is made in (a) 
where the applicant's notice will be published.
    Agency Response: The commenter is correct that Sec. 1794.51 does 
not state where the applicant's notice will be published. That 
information is provided in Sec. 1794.13(a)(1) and (2).
    Section 1794.61: Two commenters asserted that the cost of an EIS 
would be prohibitive for nearly all Water and Waste applicants which 
could result in even high priority projects being canceled due to the 
inability of the applicant to fund the EIS.
    Agency Response: RUS agrees that an EIS can be an expensive 
document to prepare and has identified certain methods of funding an 
EIS in Sec. 1794.61(a).
    Section 1794.70: One commenter recommends that this section be 
expanded to allow the adoption of environmental documents prepared by 
state or local agencies or other parties in accordance with the 
provisions of Sec. 1794.84 of the existing regulation.
    Agency Response: The CEQ regulations in 40 CFR 1506.3 only permit a 
Federal agency to adopt documents prepared by or for another Federal 
Agency. In 40 CFR 1506.2, Federal agencies are required to cooperate 
with state and local agencies to the fullest extent possible to reduce 
duplication between NEPA and state and local requirements by jointly 
preparing EAs and EISs. RUS acknowledges that its policy on the 
incorporation of environmental documents prepared by others was omitted 
from the proposed rule. This omission has been corrected with the 
addition of Sec. 1794.74.
    One commenter suggested that RUS be more flexible in its adoption 
procedures and not duplicate another agency's public notice and comment 
period.
    Agency Response: RUS believes that its decisions must be subject to 
public notification regardless of who prepares the environmental 
documentation. The preferred strategy to avoid duplication of effort 
would be for RUS to participate with other agencies in the preparation 
of the initial environmental documents as stated in Sec. 1794.14.
    This commenter also recommended that RUS accept environmental 
documents prepared by states under the State Revolving Fund (SRF) 
programs as its own documents or at a minimum adopt the subject 
documents.
    Agency Response: RUS may adopt environmental documents prepared by 
state agencies administering SRF programs under the Clean Water Act (32 
U.S.C. 1251) and the Safe Drinking Water Act (42 U.S.C. 300). Where 
appropriate, the State Director will enter into an agreement with 
appropriate state agencies to establish the necessary procedures.
    Any environmental document accepted or prepared by RUS prior to the 
effective date of these regulations may be developed in accordance with 
RUS environmental requirements in effect at the time the document was 
accepted or prepared by RUS.

List of Subjects in 7 CFR Part 1780

    Business and industry, Community development, Community facilities, 
Grant programs--housing and community development, Reporting and 
recordkeeping requirements, Rural areas, Waste treatment and disposal, 
Water supply, Watersheds.

[[Page 68655]]

List of Subjects in 7 CFR Part 1794

    Environmental impact statements, Reporting and recordkeeping 
requirements.

    Therefore RUS amends chapter XVII of title 7 of the Code of Federal 
Regulations as follows:

PART 1780--WATER AND WASTE LOANS AND GRANTS

Subpart B--Loan and Grant Application Processing

    1. Section 1780.31 is amended by revising paragraph (e) to read as 
follows:


Sec. 1780.31  General.

* * * * *
    (e) Starting with the earliest discussion with prospective 
applicants, the State Environmental Coordinator shall discuss with 
prospective applicants and be available for consultation during the 
application process the environmental review requirements for 
evaluating the potential environmental consequences of the project. 
Pursuant to 7 CFR part 1794 and guidance in RUS Bulletin 1794A-602, the 
environmental review requirements shall be performed by the applicant 
simultaneously and concurrently with the project's engineering planning 
and design. This should provide flexibility to consider reasonable 
alternatives to the project and development methods to mitigate 
identified adverse environmental effects. Mitigation measures necessary 
to avoid or minimize any adverse environmental effects must be 
integrated into project design.
    2. Section 1780.33 is amended by revising paragraphs (c)(3), and 
(f) to read as follows:


Sec. 1780.33  Application requirements.

* * * * *
    (c) * * *
    (3) The State staff engineer will consult with the applicant's 
engineer as appropriate to resolve any questions concerning the PER. 
Written comments will be provided by the State staff engineer to the 
processing office to meet eligibility determination time lines.
* * * * *
    (f) Environmental Report. For those actions listed in 
Secs. 1794.22(b) and 1794.23(b), the applicant shall submit, in 
accordance with RUS Bulletin 1794A-602, two copies of the completed 
Environmental Report.
    (1) Upon receipt of the Environmental Report, the processing office 
shall forward one copy of the report with comments and recommendation 
to the State Environmental Coordinator for review.
    (2) The State Environmental Coordinator will consult with the 
applicant as appropriate to resolve any environmental concerns. Written 
comments will be provided by the State Environmental Coordinator to the 
processing office to meet eligibility determination time lines.
* * * * *
    3. Section 1780.39 is amended by revising paragraph (b) 
introductory text and removing and revising paragraph (h).


Sec. 1780.39  Application processing.

* * * * *
    (b) Professional services and contracts related to the facility. 
Fees provided for in contracts or agreements shall be reasonable. The 
Agency shall consider fees to be reasonable if they are not in excess 
of those ordinarily charged by the profession as a whole for similar 
work when RUS financing is not involved. Applicants will be responsible 
for providing the services necessary to plan projects including design 
of facilities, environmental review and documentation requirements, 
preparation of cost and income estimates, development of proposals for 
organization and financing, and overall operation and maintenance of 
the facility. Applicants should negotiate for procurement of 
professional services, whereby competitors' qualifications are 
evaluated and the most qualified competitor is selected, subject to 
negotiations of fair and reasonable compensation. Contracts or other 
forms of agreement between the applicant and its professional and 
technical representatives are required and are subject to RUS 
concurrence.
* * * * *
    4. Section 1780.41 is amended by revising paragraph (a)(8) to read 
as follows:


Sec. 1780.41  Loan or grant approval.

    (a) * * *
    (8) Completed environmental review documents including copies of 
public notices and appropriate proof of publication, if applicable; and
* * * * *

SUBPART C--PLANNING, DESIGN, BIDDING, CONTRACTING, CONSTRUCTING AND 
INSPECTIONS

    5. Section 1780.55 is revised to read as follows:


Sec. 1780.55  Preliminary engineering reports.

    Preliminary engineering reports and Environmental Reports. 
Preliminary engineering reports (PERs) must conform to customary 
professional standards. PER guidelines for water, sanitary sewer, solid 
waste, and storm sewer are available from the Agency. Environmental 
Reports must meet the policies and intent of the National Environmental 
Policy Act and RUS procedures. Guidelines for preparing Environmental 
Reports are available in RUS Bulletin 1794A-602.
    6. Section 1780.57 is amended by revising paragraph (a) to read as 
follows:


Sec. 1780.57  Design policies.

* * * * *
    (a) Environmental review. Facilities financed by the Agency must 
undergo an environmental impact analysis in accordance with the 
National Environmental Policy Act and RUS procedures. Facility planning 
and design must not only be responsive to the owner's needs but must 
consider the environmental consequences of the proposed project. 
Facility design shall incorporate and integrate, where practicable, 
mitigation measures that avoid or minimize adverse environmental 
impacts. Environmental reviews serve as a means of assessing 
environmental impacts of project proposals, rather than justifying 
decisions already made. Applicants may not take any action on a project 
proposal that will have an adverse environmental impact or limit the 
choice of reasonable project alternatives being reviewed prior to the 
completion of the Agency's environmental review.
* * * * *
    7. Part 1794 is revised to read as follows:

PART 1794--ENVIRONMENTAL POLICIES AND PROCEDURES

Subpart A--General

Sec.
1794.1  Purpose.
1794.2  Authority.
1794.3  Actions requiring environmental review.
1794.4  Metric units.
1794.5  Responsible officials.
1794.6  Definitions.
1794.7  Guidance.
1794.8-1794.9  [Reserved]

Subpart B--Implementation of the National Environmental Policy Act

1794.10  Applicant responsibilities.
1794.11  Apply NEPA early in the planning process.
1794.12  Consideration of alternatives.
1794.13  Public involvement.
1794.14  Interagency involvement and coordination.
1794.15  Limitations on actions during the NEPA process.
1794.16  Tiering.

[[Page 68656]]

1794.17  Mitigation.
1794.18-1794.19  [Reserved]

Subpart C--Classification of Proposals

1794.20  Control.
1794.21  Categorically excluded proposals without an ER.
1794.22  Categorically excluded proposals requiring an ER.
1794.23  Proposals normally requiring an EA.
1794.24  Proposals normally requiring an EA with scoping.
1794.25  Proposals normally requiring an EIS.
1794.26-1794.29  [Reserved]

Subpart D--Procedure for Categorical Exclusions

1794.30  General.
1794.31  Classification.
1794.32  Environmental report.
1794.33  Agency action.
1794.34-1794.39  [Reserved]

Subpart E--Procedure for Environmental Assessments

1794.40  General.
1794.41  Document requirements.
1794.42  Notice of availability.
1794.43  Agency finding.
1794.44  Timing of agency action.
1794.45-1794.49  [Reserved]

Subpart F--Procedure for Environmental Assessments With Scoping

1794.50  Normal sequence.
1794.51  Preparation for scoping.
1794.52  Scoping meetings.
1794.53  Environmental analysis.
1794.54  Agency determination.
1794.55-1794.59  [Reserved]

Subpart G--Procedure for Environmental Impact Statements

1794.60  Normal sequence.
1794.61  Environmental impact statement.
1794.62  Supplemental EIS.
1794.63  Record of decision.
1794.64  Timing of agency action.
1794.65-1794.69  [Reserved]

Subpart H--Adoption of Environmental Documents

1794.70  General.
1794.71  Adoption of an EA.
1794.72  Adoption of an EIS.
1794.73  Timing of agency action.
1794.74  Incorporation of environmental materials.
1794.75-1794.79  [Reserved]

    Authority: 7 U.S.C. 6941 et seq., 42 U.S.C. 4321 et seq.; 40 CFR 
Parts 1500-1508.

Subpart A--General


Sec. 1794.1  Purpose.

    (a) This part contains the policies and procedures of the Rural 
Utilities Service (RUS) for implementing the requirements of the 
National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 
4321-4346); the Council on Environmental Quality (CEQ) Regulations for 
Implementing the Procedural Provisions of NEPA (40 CFR parts 1500 
through 1508) and certain related Federal environmental laws, statutes, 
regulations, and Executive Orders (EO) that apply to RUS programs and 
administrative actions.
    (b) The policies and procedures contained in this part are intended 
to help RUS officials make decisions that are based on an understanding 
of environmental consequences, and take actions that protect, restore, 
and enhance the environment. In assessing the potential environmental 
impacts of its actions, RUS will consult early with appropriate 
Federal, State, and local agencies and other organizations to provide 
decision-makers with information on the issues that are truly 
significant to the action in question.


Sec. 1794.2  Authority.

    (a) This part derives its authority from and is intended to be 
compliant with NEPA, CEQ Regulations for Implementing the Procedural 
Provisions of NEPA, and other RUS regulations.
    (b) Where practicable, RUS will use NEPA analysis and documents and 
review procedures to integrate the requirements of related 
environmental statutes, regulations, and orders.
    (c) This part integrates the requirements of NEPA with other 
planning and environmental review procedures required by law, or by RUS 
practice including but not limited to:
    (1) Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.);
    (2) The National Historic Preservation Act (16 U.S.C. 470 et seq.);
    (3) Farmland Protection Policy Act (7 U.S.C. 4201 et seq.);
    (4) E.O. 11593, Protection and Enhancement of the Cultural 
Environment (3 CFR, 1971 Comp., p. 154);
    (5) E.O. 11514, Protection and Enhancement of Environmental Quality 
(3 CFR, 1970 Comp., p. 104);
    (6) E.O. 11988, Floodplain Management (3 CFR, 1977 Comp., p. 117);
    (7) E.O. 11990, Protection of Wetlands (3 CFR, 1977 Comp., p. 121); 
and
    (8) E.O. 12898, Federal Actions to Address Environmental Justice in 
Minority Populations and Low-Income Populations (3 CFR, 1994 Comp., p. 
859).
    (d) Applicants are responsible for ensuring that proposed actions 
are in compliance with all appropriate RUS requirements. Environmental 
documents submitted by the applicant shall be prepared under the 
oversight and guidance of RUS. RUS will evaluate and be responsible for 
the accuracy of all information contained therein.


Sec. 1794.3  Actions requiring environmental review.

    The provisions of this part apply to actions by RUS including the 
approval of financial assistance pursuant to the Electric, 
Telecommunications, and Water and Waste Programs, the disposal of 
property held by RUS pursuant to such programs, and the issuance of new 
or revised rules, regulations, and bulletins. Approvals provided by RUS 
pursuant to loan contracts and security instruments, including 
approvals of lien accommodations, are not actions for the purposes of 
this part and the provisions of this part shall not apply to the 
exercise of such approvals.


Sec. 1794.4  Metric units.

    RUS normally will prepare environmental documents using non-metric 
equivalents with one of the following two options; metric units in 
parentheses immediately following the non-metric equivalents or a 
metric conversion table as an appendix. Environmental documents 
prepared by or for a RUS applicant should follow the same format.


Sec. 1794.5  Responsible officials.

    The Administrator of RUS has the responsibility for Agency 
compliance with all environmental laws, regulations, and EOs that apply 
to RUS programs and administrative actions. Responsibility for ensuring 
environmental compliance for actions taken by RUS has been delegated as 
follows:
    (a) Electric and Telecommunications Programs. The appropriate 
Assistant Administrator is responsible for ensuring compliance with 
this part for the respective programs.
    (b) Water and Waste Program. The Assistant Administrator for this 
program is responsible for ensuring compliance with this part at the 
national level. The State Director is the responsible official for 
ensuring compliance with this part for actions taken at the State 
Office level.


Sec. 1794.6  Definitions.

    The following definitions, as well as the definitions contained in 
40 CFR part 1508 of the CEQ regulations, apply to the implementation of 
this part:
    Applicant. The organization applying for financial assistance or 
other approval from either the Electric or Telecommunications programs 
or the organization applying for a loan or grant from the Water and 
Waste program.
    Construction Work Plan (CWP). The document required by 7 CFR part 
1710.
    Emergency Situation. A natural disaster or system failure that may

[[Page 68657]]

involve an immediate or imminent threat to public health, safety, or 
the human environment.
    Environmental Analysis (EVAL). The document submitted by the 
applicant for proposed actions subject to compliance with Sec. 1794.24 
and under special circumstances Sec. 1794.25.
    Environmental Report (ER). The environmental documentation normally 
submitted by applicants for proposed actions subject to compliance with 
Secs. 1794.22 and 1794.23. An ER for the Water and Waste Program refers 
to the environmental review documentation normally included as part of 
the Preliminary Engineering Report.
    Environmental review. Any one or all of the levels of environmental 
analysis described under subpart C of this part.
    Equivalent Dwelling Unit (EDU). Level of water or waste service 
provided to a typical rural residential dwelling.
    Important Land Resources. Defined pursuant to the U.S. Department 
of Agriculture's Departmental Regulation 9500-3, Land Use Policy, as 
important farmland, prime forestland, prime rangeland, wetlands, and 
floodplains. Copies of this Departmental Regulation are available from 
USDA, Rural Utilities Service, Washington, DC 20250.
    Loan Design. Document required by 7 CFR part 1737.
    Multiplexing Center. A field site where a telecommunications 
provider houses a device that combines individual subscriber circuits 
onto a single system for economical connection with a switching center. 
The combiner, or ``multiplexer,'' may be mounted on a pole, on a 
concrete pad, or in a partial or full enclosure such as a shelter, or 
small building.
    Natural Resource Management Guide. Inventory of natural resources, 
land uses, and environmental factors specified by Federal, State, and 
local authorities as deserving some degree of protection or special 
consideration. The guide describes the standards or types of protection 
that apply.
    Preliminary Engineering Report (PER). Document required by 7 CFR 
part 1780 for Water and Waste Programs. A PER is prepared by an 
applicant's engineering consultant documenting a proposed action's 
preliminary engineering plan and design and the applicable 
environmental review activities as required in this part. Upon approval 
by RUS, the PER, or a portion thereof, shall serve as the RUS 
environmental document.
    Supervisory Control and Data Acquisition System (SCADA). Electronic 
monitoring and control equipment installed at electric substations and 
switching stations.
    Third party Consultant. A party selected by RUS to prepare the EIS 
for proposed actions described in Sec. 1794.25 where the applicant 
initiating the proposal agrees to fund preparation of the document in 
accordance with the provisions of 7 CFR Part 1789, ``Use of Consultants 
Funded by Borrowers'' and Section 759A of the Federal Agriculture 
Improvement and Reform Act of 1996 (7 U.S.C. 2204b(b)).


Sec. 1794.7  Guidance.

    (a) Electric and Telecommunications Programs. For further guidance 
in the preparation of public notices and environmental documents, RUS 
has prepared a series of program specific guidance bulletins. RUS 
Bulletin 1794A-600 provides guidance in preparing the ER for proposed 
actions classified as categorical exclusions (CEs) (Sec. 1794.22(a)) 
and RUS Bulletin 1794A-601 provides guidance in preparing the ER for 
proposed actions which require EAs (Sec. 1794.23(b) Telecommunications 
only and (c));. Copies of these bulletins are available upon request by 
contacting Rural Utilities Service, Publications Office, PDRA, Stop 
1522; 1400 Independence Avenue, SW; Washington, DC 20250-1522.
    (b) Water and Waste Program. RUS Bulletin 1794A-602 provides 
guidance in preparing the ER for proposed actions classified as CEs 
(Sec. 1794.22(b)) and EAs (Sec. 1794.23(b)). A copy of this bulletin is 
available upon request by contacting the appropriate State Director. 
State Directors may provide supplemental guidance to meet state and 
local laws and regulations and to provide for orderly application 
procedures and efficient service to applicants. State Directors shall 
obtain the Administrator's approval for all supplements to RUS Bulletin 
1794A-602. Each State Office shall maintain an updated Natural Resource 
Management Guide and provide applicants with pertinent sections or a 
copy of the current edition thereof.


Secs. 1794.8-1794.9  [Reserved]

Subpart B--Implementation of the National Environmental Policy Act


Sec. 1794.10  Applicant responsibilities.

    As described in subpart C of this part, applicants shall prepare 
the applicable environmental documentation concurrent with a proposed 
action's engineering, planning, and design activities. RUS shall assist 
applicants by outlining the types of information required and shall 
provide guidance and oversight in the development of the documentation. 
Documentation shall not be considered complete until all public review 
periods, as applicable, have expired and RUS concurrence, as set forth 
in the appropriate decision document and associated public notice, has 
been issued.


Sec. 1794.11  Apply NEPA early in the planning process.

    The environmental review process requires early coordination with 
and involvement of RUS. Applicants should consult with RUS at the 
earliest stages of planning for any proposal that may require RUS 
action. For proposed actions that normally require an EIS, applicants 
shall consult with RUS prior to obtaining the services of an 
environmental consultant.


Sec. 1794.12  Consideration of alternatives.

    In determining what are reasonable alternatives, RUS considers a 
number of factors. These factors may include, but are not limited to, 
the proposed action's size and scope, state of the technology, economic 
considerations, legal and socioeconomic concerns, availability of 
resources, and the timeframe in which the identified need must be 
fulfilled.


Sec. 1794.13  Public involvement.

    (a) In carrying out its responsibilities under NEPA, RUS shall make 
diligent efforts to involve the public in the environmental review 
process through public notices and public hearings and meetings.
    (1) All public notices required by this part shall describe the 
nature, location, and extent of the proposed action and indicate the 
availability and location of additional information. They shall be 
published in newspaper(s) of general circulation within the proposed 
action's area of environmental impact and the county(s) in which the 
proposed action will take place or such other places as RUS determines.
    (2) The number of editions in which the notices should be published 
will be specified in the Bulletins referenced in Sec. 1794.7 or 
established on a project-by-project basis. Alternative forms of notice 
may also be necessary to ensure that residents located in the area 
affected by the proposed action are notified. The applicant should not 
publish notices for compliance with this part until so notified by RUS.
    (3) A copy of all comments received by the applicant concerning 
environmental aspects of the proposed action shall be provided to RUS 
in a timely manner. RUS and applicants shall assess and consider public 
comments both individually and collectively. Responses to public 
comments will be appended to the applicable environmental document.

[[Page 68658]]

    (4) RUS and applicants shall make available to the public those 
project related environmental documents that RUS determines will 
enhance public participation in the environmental process. These 
materials shall be placed in locations convenient for the public as 
determined by RUS in consultation with applicants. Included with the 
documentation shall be a list of other project-related information that 
shall be available for inspection through a designated RUS or applicant 
contact person.
    (5) Public hearings or meetings shall be held at reasonable times 
and locations concerning environmental aspects of a proposed action in 
all cases where, in the opinion of RUS, the need for hearings or 
meetings is indicated in order to develop adequate information on the 
environmental implications of the proposed action. Public hearings or 
meetings conducted by RUS will be coordinated to the extent practicable 
with other meetings, hearings, and environmental reviews which may be 
held or required by other Federal, state and local agencies. Applicants 
shall, as necessary, participate in all RUS conducted public hearings 
or meeting.
    (6) Scoping procedures, in accordance with 40 CFR 1501.7, are 
required for proposed actions normally requiring an EA with scoping 
(Sec. 1794.24) or an EIS (Sec. 1794.25). RUS may require scoping 
procedures to be followed for other proposed actions where appropriate 
to achieve the purposes of NEPA.
    (b) The applicant shall have public notices described in this 
section published in a newspaper(s). Applicants shall obtain proof of 
publication from the newspaper(s) for inclusion into the applicable 
environmental document. Where the proposed action requires an EIS RUS 
shall, in addition to applicant published notices, publish notice in 
the Federal Register. In all cases, RUS may publish notices in the 
Federal Register as appropriate.


Sec. 1794.14  Interagency involvement and coordination.

    In an attempt to reduce or eliminate duplication of effort with 
state or local procedures, RUS will, to the extent possible and in 
accordance with 40 CFR 1506.2, actively participate with any 
governmental agency to cooperatively or jointly prepare environmental 
documents so that one document will comply with all applicable laws. 
Where RUS has agreed to participate as a cooperating agency, in 
accordance with 40 CFR 1501.6, RUS may rely upon the lead agency's 
procedures for implementing NEPA procedures. In addition, RUS shall 
request that:
    (a) The lead agency indicates that RUS is a cooperating agency in 
all NEPA-related notices published for the proposed action;
    (b) The scope and content of the EA or EIS satisfies the statutory 
and regulatory requirements applicable to RUS; and
    (c) The applicant shall inform RUS in a timely manner of its 
involvement in a proposed action where another Federal agency is 
preparing an environmental document so as to permit RUS to adequately 
fulfill its duties as a cooperating agency.


Sec. 1794.15  Limitations on actions during the NEPA process.

    (a) General. Until RUS concludes its environmental review process, 
the applicant shall take no action concerning the proposed action which 
would have an adverse environmental impact or limit the choice of 
reasonable alternatives being considered in the environmental review 
process (40 CFR 1506.1).
    (b) Electric Program. In determining which applicant activities 
related to a proposed action can proceed prior to completion of the 
environmental review process, RUS must determine, among other matters 
that:
    (1) The activity shall not have an adverse environmental impact and 
shall not preclude the search for other alternatives. For example, 
purchase of water rights, optioning or transfer of land title, or 
continued use of land as historically employed will not have an adverse 
environmental impact. However, site preparation or construction at or 
near the proposed site (e.g. rail spur) or development of a related 
facility (e.g. opening a captive mine) normally will have an adverse 
environmental impact.
    (2) Expenditures are minimal. To be minimal, the expenditure must 
not exceed the amount of loss which the applicant could absorb without 
jeopardizing the Government's security interest in the event the 
proposed action is not approved by the Administrator, and must not 
compromise the objectivity of RUS environmental review. Not 
withstanding other considerations, expenditures equivalent to up to 10 
percent of the proposed action's cost normally will not compromise RUS 
objectivity. Expenditures for the purpose of producing documentation 
required for RUS environmental review are excluded from this 
limitation.


Sec. 1794.16  Tiering.

    It is the policy of RUS to prepare programmatic level analysis in 
order to tier an EIS and an EA where:
    (a) It is practicable, and
    (b) There will be a reduction of delay and paperwork, or where 
better decision making will be fostered (40 CFR 1502.20).


Sec. 1794.17  Mitigation.

    (a) General. In addition to complying with the requirements of 40 
CFR 1502.14(f), it is RUS policy that a discussion of mitigative 
measures essential to render the impacts of the proposed action not 
significant will be included in or referenced in the Finding of No 
Significant Impact (FONSI) and the Record of Decision (ROD).
    (b) Water and Waste Program. (1) Mitigation measures which involve 
protective measures for environmental resources cited in this part or 
restrictions or limitations on real property located in the service 
areas of the proposed action shall be negotiated with applicants and 
any relevant regulatory agency so as to be enforceable. All mitigation 
measures incorporating land use issues shall recognize the rights and 
responsibilities of landholders in making private land use decisions 
and recognize the responsibility of governments in influencing how land 
may be used to meet public needs.
    (2) Mitigation measures shall be included in the letter of 
conditions.
    (3) RUS has the responsibility for the post approval construction 
or security inspections or monitoring to ensure that all mitigation 
measures included in the environmental documents have been implemented 
as specified in the letter of conditions.


Secs. 1794.18-1794.19  [Reserved]

Subpart C--Classification of Proposals


Sec. 1794.20  Control.

    Electric and Telecommunications Programs. For environmental review 
purposes, RUS has identified and established categories of proposed 
actions (Secs. 1794.21 through 1794.25). An applicant may propose to 
participate with other parties in the ownership of a project where the 
applicant(s) does not have sufficient control to alter the development 
of the project. In such a case, RUS shall determine whether the 
applicant participants have sufficient control and responsibility to 
alter the development of the proposed project prior to determining its 
classification. Where the applicant proposes to participate with other 
parties in the

[[Page 68659]]

ownership of a proposed project and all applicants cumulatively own:
    (a) Five percent or less of a project is not considered a Federal 
action subject to this part;
    (b) Thirty-three and one-third percent or more of a project shall 
be treated in its usual category;
    (c) More than five percent but less than 33\1/3\ percent of a 
project, RUS shall determine whether the applicant participants have 
sufficient control and responsibility to alter the development of the 
proposal such that RUS's action will be considered a Federal action 
subject to this part. Consideration shall be given to such factors as:
    (1) Whether construction would be completed regardless of RUS 
financial assistance or approval;
    (2) The stage of planning and construction;
    (3) Total participation of the applicant;
    (4) Participation percentage of each utility; and
    (5) Managerial arrangements and contractual provisions.


Sec. 1794.21  Categorically excluded proposals without an ER.

    (a) General. Certain types of actions taken by RUS do not normally 
require an ER. Proposed actions within this classification are:
    (1) The issuance of bulletins and information publications that do 
not concern environmental matters or substantial facility design, 
construction, or maintenance practices;
    (2) Procurement activities related to the operation of RUS;
    (3) Personnel and administrative actions; and
    (4) Repairs made because of an emergency situation to return to 
service damaged facilities of an applicant's system.
    (b) Electric and Telecommunications Programs. Applications for 
financial assistance for the types of proposed actions listed in this 
paragraph (b) normally do not require the submission of an ER. These 
types of actions are subject to the requirements of Sec. 1794.31. 
Applicants shall sufficiently identify all proposed actions so their 
proper classification can be determined. Detailed descriptions shall be 
provided for each proposal noted in this section. RUS normally requires 
additional information in addition to a description of what is being 
proposed, to ensure that proposals are properly classified. In order to 
provide for extraordinary circumstances, RUS may require development of 
an ER for proposals listed in this section. Proposed actions within 
this classification are:
    (1) Purchase of land where use shall remain unchanged, or the 
purchase of existing water rights where no associated construction is 
involved;
    (2) Additional or substitute financial assistance for proposed 
actions which have previously received environmental review and 
approval from RUS, provided the scope of the proposal and environmental 
considerations have not changed;
    (3) Rehabilitation or reconstruction of transportation facilities 
within existing rights-of-way (ROW) or generating facility sites. A 
description of the rehabilitation or reconstruction shall be provided 
to RUS;
    (4) Changes or additions to microwave sites, substations, switching 
stations, telecommunications switching or multiplexing centers, 
buildings, or small structures requiring new physical disturbance or 
fencing of less than one acre (0.4 hectare). A description of the 
additions or changes and the area to be impacted by the expansion shall 
be provided to RUS;
    (5) Internal modifications or equipment additions (e.g., computer 
facilities, relocating interior walls) to structures or buildings;
    (6) Internal or minor external changes to electric generating or 
fuel processing facilities and related support structures where there 
is negligible impact on the outside environment. A description of the 
changes shall be provided to RUS;
    (7) Ordinary maintenance or replacement of equipment or small 
structures (e.g., line support structures, line transformers, microwave 
facilities, telecommunications remote switching and multiplexing 
sites);
    (8) The construction of telecommunications facilities within the 
fenced area of an existing substation, switching station, or within the 
boundaries of an existing electric generating facility site. A 
description of the facilities to be constructed shall be provided to 
RUS;
    (9) SCADA and energy management systems involving no new external 
construction;
    (10) Testing or monitoring work (e.g., soil or rock core sampling, 
monitoring wells, air monitoring);
    (11) Studies and engineering undertaken to define proposed actions 
or alternatives sufficiently so that environmental effects can be 
assessed;
    (12) Construction of electric power lines within the fenced area of 
an existing substation, switching station, or within the boundaries of 
an electric generating facility site;
    (13) Contracts for certain items of equipment which are part of a 
proposed action for which RUS is preparing an EA or EIS, and which meet 
the limitations on actions during the NEPA process as established in 40 
CFR 1506.1(d) and contained in Sec. 1794.15(b)(2);
    (14) Rebuilding of power lines or telecommunications cables where 
road or highway reconstruction requires the applicant to relocate the 
lines either within or adjacent to the new road or highway easement or 
right-of-way. A description of the facilities to be constructed shall 
be provided to RUS;
    (15) Phase or voltage conversions, reconductoring or upgrading of 
existing electric distribution lines, or telecommunication facilities. 
A description of the facilities to be constructed shall be provided to 
RUS;
    (16) Construction of new power lines, substations, or 
telecommunications facilities on industrial or commercial sites, where 
the applicant has no control over the location of the new facilities. 
Related off-site facilities would be treated in their normal category. 
A description of the facilities to be constructed shall be provided to 
RUS;
    (17) Participation by an applicant(s) in any proposed action where 
total applicant financial participation will be five percent or less;
    (18) Construction of a battery energy storage system at an existing 
generating station or substation site. A description of the facilities 
to be constructed shall be provided to RUS.
    (19) Additional bulk commodity storage (e.g., coal, fuel oil, 
limestone) within existing generating station boundaries. A 
certification attesting to the current state of compliance of the 
existing facilities and a description of the facilities to be added 
shall be provided to RUS;
    (20) Proposals designed to reduce the amount of pollutants released 
into the environment (e.g., precipitators, baghouse or scrubber 
installations, and coal washing equipment) which will have no other 
environmental impact outside the existing facility site. A description 
of the facilities to be constructed shall be provided to RUS;
    (21) Construction of standby diesel electric generators (one 
megawatt or less total capacity) and associated facilities, for the 
primary purpose of providing emergency power, at an existing applicant 
headquarters or district office, telecommunications switching or 
multiplexing site, or at an industrial, commercial or agricultural 
facility served by the applicant. A description of the facilities to be 
constructed shall be provided to RUS;
    (22) Construction of onsite facilities designed for the transfer of 
ash, scrubber wastes, and other byproducts from coal-

[[Page 68660]]

fired electric generating stations for recycling or storage at an 
existing coal mine (surface or underground). A description of the 
facilities to be constructed shall be provided to RUS;
    (23) Changes or additions to an existing water well system, 
including new water supply wells and associated pipelines within the 
boundaries of an existing well field or generating station site. A 
description of the changes or additions shall be provided; and
    (24) Repowering or uprating of an existing unit(s) at a fossil-
fueled generating station in order to improve the efficiency or the 
energy output of the facility. Repowering or uprating that results in 
increased fuel consumption or the substitution of one fuel combustion 
technology with another is excluded from this classification.
    (c) Water and Waste Program. Applications for financial assistance 
for certain proposed actions do not normally require the submission of 
an ER. Applicants shall sufficiently identify all proposed actions so 
their proper classification can be determined. These types of actions 
are subject to the requirements of Sec. 1794.31. In order to provide 
for extraordinary circumstances, RUS may require development of an ER 
for proposals listed in this section. Proposed actions within this 
classification are:
    (1) Management actions relating to invitation for bids, award of 
contracts, and the actual physical commencement of construction 
activities;
    (2) Proposed actions that primarily involve the purchase and 
installation of office equipment or motorized vehicles;
    (3) The award of financial assistance for technical assistance, 
planning purposes, environmental analysis, management studies, or 
feasibility studies; and
    (4) Loan closing and servicing activities that do not alter the 
purpose, operation, location, or design of the proposal as originally 
approved, such as subordinations, amendments and revisions to approved 
actions, and the provision of additional financial assistance for cost 
overruns.


Sec. 1794.22  Categorically excluded proposals requiring an ER.

    (a) Electric and Telecommunications Programs. Applications for 
financial assistance for the types of proposed actions listed in this 
section normally require the submission of an ER and are subject to the 
requirements of Sec. 1794.32. Proposed actions within this 
classification are:
    (1) Construction of electric power lines and associated facilities 
designed for or capable of operation at a nominal voltage of either:
    (i) Less that 69 kilovolts (kV);
    (ii) Less than 230 kV if no more than 25 miles (40.2 kilometers) of 
line are involved; or
    (iii) 230 kV or greater involving no more than three miles (4.8 
kilometers) of line;
    (2) Construction of buried and aerial telecommunications lines, 
cables, and related facilities;
    (3) Construction of microwave facilities, SCADA, and energy 
management systems involving no more than five acres (2 hectares) of 
physical disturbance at any single site;
    (4) Construction of cooperative or company headquarters, 
maintenance facilities, or other buildings involving no more than 10 
acres (4 hectares) of physical disturbance or fenced property;
    (5) Changes to existing transmission lines that involve less than 
20 percent pole replacement, or the complete rebuilding of existing 
distribution lines within the same ROW. Changes to existing 
transmission lines that require 20 percent or greater pole replacement 
will be considered the same as new construction;
    (6) Changes or additions to existing substations, switching 
stations, telecommunications switching or multiplexing centers, or 
external changes to buildings or small structures requiring one acre 
(0.4 hectare) or more but no more than five acres (2 hectares) of new 
physically disturbed land or fenced property;
    (7) Construction of substations, switching stations, or 
telecommunications switching or multiplexing centers requiring no more 
than five acres (2 hectares) of new physically disturbed land or fenced 
property;
    (8) Construction of diesel electric generating facilities of five 
megawatts (MW) (nameplate rating) or less either at an existing 
generation or substation sites. This category also applies to a diesel 
electric generating facility of five MW or less that is located at or 
adjacent to an existing landfill site and supplied with refuse derived 
fuel. All new associated facilities and related electric power lines 
shall be covered in the ER;
    (9) Additions to or the replacement of existing generating units at 
a hydroelectric facility or dam which result in no change in the normal 
maximum surface area or normal maximum surface elevation of the 
existing impoundment. All new associated facilities and related 
electric power lines shall be covered in the ER;
    (10) Construction of new water supply wells and associated 
pipelines not located within the boundaries of an existing well field 
or generating station site; and
    (11) Purchase of existing facilities or a portion thereof where use 
or operation will remain unchanged. The results of a facility 
environmental audit can be substituted for the ER.
    (b) Water and Waste Program. For certain proposed actions, 
applications for financial assistance normally require the submittal of 
an ER as part of the PER. These types of actions are subject to the 
requirements of Sec. 1794.32. Proposed actions within this 
classification are:
    (1) Rehabilitation of existing facilities, functional replacement 
or rehabilitation of equipment, or the construction of new ancillary 
facilities adjacent or appurtenant to existing facilities, including 
but not limited to, replacement of utilities such as water or sewer 
lines and appurtenances for existing users with modest or moderate 
growth potential, reconstruction of curbs and sidewalks, street 
repaving, and building modifications, renovations, and improvements;
    (2) Facility improvements to meet current needs with a modest 
change in use, size, capacity, purpose or location from the original 
facility. The proposed action must be designed for predominantly 
residential use with other new or expanded users being small-scale, 
commercial enterprises having limited secondary impacts;
    (3) Construction of new facilities that are designed to serve not 
more than 500 EDUs and with modest growth potential. The proposed 
action must be designed for predominantly residential use with other 
users being small-scale, commercial enterprises having limited 
secondary impacts;
    (4) The extension, enlargement or construction of interceptors, 
collection, transmission or distribution lines within a one-mile (1.6-
kilometer) limit from existing service areas estimated from any 
boundary listed as follows:
    (i) The corporate limits of the community being served;
    (ii) If there are developed areas immediately contiguous to the 
corporate limits of a community, the limits of these developed areas; 
or
    (iii) If an unincorporated area is to be served, the limits of the 
developed areas;
    (5) Installation of new water supply wells or water storage 
facilities that are required by a regulatory authority or standard 
engineering practice as a backup to existing production well(s) or as 
reserve for fire protection;
    (6) Actions described in Sec. 1794.21(c)(4) which alter the 
purpose,

[[Page 68661]]

operation, location, or design of the proposed action as originally 
approved, and such alteration is equivalent in magnitude or type as 
described in paragraphs (b)(1) through (b)(5) of this section; and
    (7) The lease or disposal of real property by RUS, which may result 
in a change in use of the real property in the reasonably foreseeable 
future and such change, is equivalent in magnitude or type as described 
in paragraphs (b)(1) through (b)(5).
    (c) Specialized criteria for not granting a CE for Water and Waste 
Projects. An EA must be prepared if a proposed action normally 
classified as a CE meets any of the following:
    (1) Will either create a new or relocate an existing discharge to 
or a withdrawal from surface or ground waters;
    (2) Will result in substantial increases in the volume or the 
loading of pollutants from an existing discharge to receiving waters;
    (3) Will cause a substantial increase in the volume of withdrawal 
from surface or ground waters at an existing site; or
    (4) Would provide capacity to serve more than 500 EDUs or a 30 
percent increase in the existing population whichever is larger.


Sec. 1794.23  Proposals normally requiring an EA.

    RUS will normally prepare an EA for all proposed actions which are 
neither categorical exclusions (Secs. 1794.21 and 1794.22) nor normally 
requiring an EIS (Sec. 1794.25). For certain actions within this class, 
scoping and document procedures contained in Secs. 1794.50 through 
1794.54 shall be followed (see Sec. 1794.24). The following are 
proposed actions which normally require an EA and shall be subject to 
the requirements of Secs. 1794.40 through 1794.44.
    (a) General. Issuance or modification of RUS regulations concerning 
environmental matters.
    (b) Telecommunications and Water and Waste Programs. An EA shall be 
prepared for applications for financial assistance for all proposed 
actions not specifically defined as a CE or otherwise specifically 
categorized by the Administrator on a case-by-case basis.
    (c) Electric Program. Applications for financial assistance for 
certain proposed actions normally require the preparation of an EA. 
Proposed actions falling within this classification are:
    (1) Construction of combustion turbine or diesel generating 
facilities of 50 MW (nameplate rating) or less at a new site (no 
existing generating capacity) except for items covered by 
Sec. 1794.22(a)(8). All new associated facilities and related electric 
power lines shall be covered in the EA;
    (2) Construction of combustion turbine or diesel generating 
facilities of 100 MW (nameplate rating) or less at an existing 
generating site, except for items covered by Sec. 1794.22(a)(8). All 
new associated facilities and related electric power lines shall be 
covered in the EA;
    (3) Construction of any other type of new electric generating 
facilities of 10 MW (nameplate rating) or less. All new associated 
facilities and related electric power lines shall be covered in the EA;
    (4) Repowering or uprating of an existing unit(s) at a fossil-
fueled generating station where the existing fuel combustion technology 
of the affected unit(s) is substituted for another (e.g. coal or oil-
fired boiler is converted to a fluidized bed boiler or replaced with a 
combustion turbine unit);
    (5) Installation of new generating units at an existing 
hydroelectric facility or dam, or the replacement of existing 
generating units at a hydroelectric facility or dam which will result 
in a change in the normal maximum surface area or normal maximum 
surface elevation of the existing impoundment. All new associated 
facilities and related electric power lines shall be covered in the EA;
    (6) A new drilling operation or the expansion of a mining or 
drilling operation;
    (7) Construction of cooperative headquarters, maintenance, and 
equipment storage facilities involving more than 10 acres (4 hectares) 
of physical disturbance or fenced property;
    (8) The construction of electric power lines and related facilities 
designed for and capable of operation at a nominal voltage of 230 kV or 
more involving more than three miles (4.8 kilometers) but not more than 
25 miles (40 kilometers) of line;
    (9) The construction of electric power lines and related facilities 
designed for or capable of operation at a nominal voltage of 69 kV or 
more but less than 230 kV where more than 25 miles (40 kilometers) of 
power line are involved;
    (10) The construction of substations or switching stations 
requiring greater than five acres (2 hectares) of new physical 
disturbance at a single site; and
    (11) Construction of facilities designed for the transfer and 
storage of ash, scrubber wastes, and other byproducts from coal-fired 
electric generating stations that will be located beyond the existing 
facility site boundaries.


Sec. 1794.24  Proposals normally requiring an EA with scoping.

    (a) General. Applications for financial assistance for certain 
proposed actions require the use of a scoping procedure in the 
development of the EA. These types of actions are subject to the 
requirements of Secs. 1794.50 through 1794.54. RUS has the discretion 
to modify or waive the requirements listed in Sec. 1794.52 for a 
proposed action in this category.
    (b) Electric Program. Proposed actions falling within this 
classification are:
    (1) The construction of electric power lines and related facilities 
designed for and capable of operation at a nominal voltage of 230 kV or 
more where more than 25 miles (40 kilometers) of power line are 
involved;
    (2) Construction of combustion turbines and diesel generators of 
more than 50 MW at a new site or more than 100 MW at an existing site; 
and the construction of any other type of electric generating facility 
of more than 10 MW but not more than 50 MW (nameplate rating). All new 
associated facilities and related electric power lines shall be covered 
in any EA or EIS that is prepared.
    (c) Telecommunications and Water and Waste Programs. There are no 
actions normally falling within this classification.


Sec. 1794.25  Proposals normally requiring an EIS.

    Applications for financial assistance for certain proposed actions 
that may significantly affect the quality of the human environment 
shall require the preparation of an EIS.
    (a) Electric Program. An EIS will normally be required in 
connection with proposed actions involving the following types of 
facilities:
    (1) New electric generating facilities of more than 50 MW 
(nameplate rating) other than diesel generators or combustion turbines. 
All new associated facilities and related electric power lines shall be 
covered in the EIS; and
    (2) A new mining operation when the applicants have effective 
control (e.g., dedicated mine or purchase of a substantial portion of 
the mining equipment).
    (b) Proposals listed above are subject to the requirements of 
Secs. 1794.60, 1794.61, 1794.63, and 1794.64. Preparation of a 
supplemental draft or final EIS in accordance with 40 CFR 1502.9 shall 
be subject to the requirements of Secs. 1794.62 and 1794.64.
    (c) Telecommunications and Water and Waste Programs. No groups or 
sets of proposed actions normally require the preparation of an EIS. 
The

[[Page 68662]]

environmental review process, as described in this part, shall be used 
to identify those proposed actions for which the preparation of an EIS 
is necessary. If an EIS is required, RUS shall proceed directly to its 
preparation. Prior completion of an EA is not mandatory.


Secs. 1794.26-1794.29  [Reserved]

Subpart D--Procedure for Categorical Exclusions


Sec. 1794.30  General.

    The procedures of this subpart which apply to proposed actions 
classified as CEs in Secs. 1794.21 and 1794.22 provide RUS with 
information necessary to determine if the proposed action meets the 
criteria for a CE. Where, because of extraordinary circumstances, a 
normally categorically excluded action may have a significant effect on 
the quality of the human environment, RUS may require additional 
environmental documentation.


Sec. 1794.31  Classification.

    (a) Electric and Telecommunications Programs. RUS will normally 
determine the proper environmental classification of projects based on 
its evaluation of the project description set forth in the construction 
work plan or loan design which the applicant is required to submit with 
its application for financial assistance. Each project must be 
sufficiently described to ensure its proper classification. RUS may 
require the applicant to provide additional information on a project 
where appropriate.
    (b) Water and Waste Program. RUS will normally determine the proper 
environmental classification for projects based on its evaluation of 
the preliminary planning and design information.


Sec. 1794.32  Environmental report.

    (a) For proposed actions listed in Sec. 1794.21(b) and (c), the 
applicant is normally not required to submit an ER.
    (b) For proposed actions listed in Sec. 1794.22(a) and (b), the 
applicant shall normally submit an ER. Guidance in preparing the ER for 
Electric and Telecommunication proposals is contained in RUS Bulletin 
1794A-600. Guidance in preparing the ER for Water and Waste proposals 
is contained in RUS Bulletin 1794A-602. The applicant may be required 
to publish public notices and provide evidence of such if the proposed 
action is located in, impacts, or converts important land resources.


Sec. 1794.33  Agency action.

    RUS may act on an application for financial assistance upon 
determining, based on the review of documents as set forth in 
Sec. 1794.32 and such additional information as RUS deems necessary, 
that the project is categorically excluded.


Secs. 1794.34-1794.39  [Reserved]

Subpart E--Procedure for Environmental Assessments


Sec. 1794.40  General.

    This subpart applies to proposed actions described in Sec. 1794.23. 
Where appropriate to carry out the purposes of NEPA, RUS may impose, on 
a case-by-case basis, additional requirements associated with the 
preparation of an EA. If at any point in the preparation of an EA, RUS 
determines that the proposed action will have a significant effect on 
the quality of the human environment, the preparation of an EIS shall 
be required and the procedures in subpart G of this part shall be 
followed.


Sec. 1794.41  Document requirements.

    Applicants will provide an ER in accordance with the appropriate 
guidance documents referenced in Sec. 1794.7. After RUS has evaluated 
the ER and has determined the ER adequately addresses all applicable 
environmental issues, the ER will normally serve as RUS' EA. However, 
RUS reserves the right to prepare its own EA from the information 
provided in the ER. RUS will take responsibility for the scope and 
content of an EA.


Sec. 1794.42  Notice of availability.

    Prior to RUS making a finding in accordance with Sec. 1794.43 and 
upon RUS authorization and guidance, the applicant shall have a notice 
published which announces the availability of the EA and solicits 
public comments on the EA.


Sec. 1794.43  Agency finding.

    (a) General. If RUS finds, based on an EA that the proposed action 
will not have a significant effect on the quality of the human 
environment, RUS will prepare a FONSI. Upon authorization of RUS, the 
applicant shall have a notice published which informs the public of the 
RUS finding and the availability of the EA and FONSI. The notice shall 
be prepared and published in accordance with RUS guidance.
    (b) Electric and Telecommunications Programs. RUS shall have a 
notice published in the Federal Register that announces the 
availability of the EA and FONSI.


Sec. 1794.44  Timing of agency action.

    RUS may take its final action on proposed actions requiring an EA 
(Sec. 1794.23) at any time after publication of the RUS and applicant 
notices that a FONSI has been made and any required review period has 
expired. When substantive comments are received on the EA, RUS may 
provide an additional period (15 days) for public review following the 
publication of its FONSI determination. Final action shall not be taken 
until this review period has expired.


Secs. 1794.45-1794.49  [Reserved]

Subpart F--Procedure for Environmental Assessments With Scoping


Sec. 1794.50  Normal sequence.

    For proposed actions covered by Sec. 1794.24 and other actions 
determined by the Administrator to require an EA with Scoping, RUS and 
the applicant will follow the same procedures for scoping and the 
requirements for notices and documents as for proposed actions normally 
requiring an EIS through the point at which the Environmental Analysis 
(EVAL) is submitted (see Sec. 1794.54). After the EVAL has been 
submitted, RUS will make a judgment to utilize the EVAL as its EA and 
issue a FONSI or prepare an EIS.


Sec. 1794.51  Preparation for scoping.

    (a) As soon as practicable after RUS and the applicant have 
developed a schedule for the environmental review process, RUS shall 
have its notice of intent to prepare an EA or EIS (Sec. 1794.13) 
published in the Federal Register (see 40 CFR 1508.22). The applicant 
shall have published, in a timely manner, a notice similar to RUS' 
notice.
    (b) As part of the early planning, the applicant should consult 
with appropriate Federal, state, and local agencies to inform them of 
the proposed action, identify permits and approvals which must be 
obtained, and administrative procedures which must be followed.
    (c) Before formal scoping is initiated, RUS will require the 
applicant to submit an Alternative Evaluation Study and either a Siting 
Study (generation) or a Macro-Corridor Study (transmission lines).
    (d) The applicant is encouraged to hold public information meetings 
in the general location of the proposed action and any reasonable 
alternatives when such applicant meetings will make the scoping process 
more meaningful. A written summary of the comments made

[[Page 68663]]

at such meetings must be submitted to RUS as soon as practicable after 
the meetings.


Sec. 1794.52  Scoping meetings.

    (a) Both RUS and the applicant shall have a notice published which 
announces a public scoping meeting is to be conducted, either in 
conjunction with the notice of intent or as a separate notice.
    (b) The RUS notice shall be published in the Federal Register at 
least 14 days prior to the meeting(s). The applicant's notice shall be 
published in a newspaper at least 10 days prior to the meeting(s). 
Other forms of media may also be used by the applicant to notice the 
meetings.
    (c) Where an environmental document is the subject of the hearing 
or meeting, that document will be made available to the public at least 
10 days in advance of the meeting.
    (d) The scoping meeting(s) will be held in the area of the proposed 
action at such place(s) as RUS determines will best afford an 
opportunity for public involvement. Any person or representative of an 
organization, or government body desiring to make a statement at the 
meeting may make such statement in writing or orally. The format of the 
meeting may be one of two styles. It can either be of the traditional 
style which features formal presentations followed by a comment period, 
or the open house style in which attendees are able to individually 
obtain information on topics or issues of interest within an 
established time period. A transcript will be made of the scoping 
meeting.
    (e) As soon as practicable after the scoping meeting(s), RUS, as 
lead agency, shall determine the significant issues to be analyzed in 
depth and identify and eliminate from detailed study the issues which 
are not significant or which have been covered by prior environmental 
review. RUS will develop a proposed scope for further environmental 
study and review. RUS shall send a copy of this proposed scope to 
cooperating agencies and the applicant, and allow recipients 30 days to 
comment on the scope's adequacy and emphasis. After expiration of the 
30-day period, RUS shall provide written guidance to the applicant 
concerning the scope of environmental study to be performed and 
information to be gathered.


Sec. 1794.53  Environmental analysis.

    (a) After scoping procedures have been completed, RUS shall require 
the applicant to develop and submit an EVAL. The EVAL shall be prepared 
under the supervision and guidance of RUS staff and RUS shall evaluate 
and be responsible for the accuracy of all information contained 
therein.
    (b) The EVAL will normally serve as the RUS EA. The EVAL can also 
serve as the basis for an EIS, and under such circumstances will be 
made an appendix to the EIS. After RUS has reviewed and found the EVAL 
to be satisfactory, the applicant shall provide RUS with a sufficient 
number of copies of the EVAL to satisfy the RUS distribution plan.
    (c) The EVAL shall include a summary of the construction and 
operation monitoring and mitigation measures for the proposed action. 
These measures may be revised as appropriate in response to comments 
and other information. and shall be incorporated by summary or 
reference into the FONSI or ROD.


Sec. 1794.54  Agency determination.

    Following the scoping process and the development of a satisfactory 
EA, RUS shall determine whether the proposed action is a major Federal 
action significantly affecting the quality of the human environment. If 
RUS determines the action is significant, RUS will continue with the 
procedures in subpart G of this part. If RUS determines the action is 
not significant, RUS will proceed in accordance with Secs. 1794.42 
through 1794.44.


Secs. 1794.55-1794.59  [Reserved]

Subpart G--Procedure for Environmental Impact Statements


Sec. 1794.60  Normal sequence.

    For proposed actions requiring an EIS (see Sec. 1794.25), the NEPA 
process shall proceed in the same manner as for proposed actions 
requiring an EA with scoping through the point at which the scoping 
process is completed (see Sec. 1794.52).


Sec. 1794.61  Environmental impact statement.

    (a) General. An EIS shall be prepared in accordance with 40 CFR 
part 1502. Funding, in whole or in part, for an EIS can be obtained 
from any lawful source (e.g., cooperative agreements developed in 
accordance with Section 759A, Federal Agricultural Improvement and 
Reform Act of 1996, Pub. L. 104-127 and 31 U.S.C. 6301). A third-party 
consultant selected by RUS and funded by the applicant (7 CFR part 
1789) may prepare the EIS.
    (1) After a draft or final EIS has been prepared, RUS and the 
applicant shall concurrently have a notice of availability for the 
document published. The time period allowed for review will be a 
minimum of 45 days for a draft EIS and 30 days for a final EIS. This 
period is measured from the date that the U.S. Environmental Protection 
Agency (EPA) publishes a notice in the Federal Register in accordance 
with 40 CFR 1506.10.
    (2) In addition to circulation required by 40 CFR 1502.19, the 
draft and final EIS (or summaries thereof, at RUS discretion) shall be 
circulated to the appropriate state, regional, and metropolitan 
clearinghouses.
    (3) Where a final EIS does not require substantial changes from the 
draft EIS, RUS may document required changes through errata sheets, 
insertion pages, and revised sections to be incorporated into the draft 
EIS. In such cases, RUS shall circulate such changes together with 
comments on the draft EIS, responses to comments, and other appropriate 
information as its final EIS. RUS will not circulate the draft EIS 
again, although RUS will provide the draft EIS if requested within 30 
days of publication of notice of availability of the final EIS.
    (b) Electric Program. Where the applicant or its consultant has 
prepared an EVAL, RUS will develop its draft and final EIS from the 
EVAL. An EVAL will not be required if a third-party consultant prepares 
the draft and final EIS.


Sec. 1794.62  Supplemental EIS.

    (a) A supplement to a draft or final EIS shall be prepared, 
circulated, and given notice by RUS and the applicant in the same 
manner (exclusive of scoping) as a draft and final EIS (see 
Sec. 1794.61).
    (b) Normally RUS and the applicant will have published notices of 
intent to prepare a supplement to a final EIS in those cases where a 
ROD has already been issued.
    (c) RUS, at its discretion, may issue an information supplement to 
a final EIS where RUS determines that the purposes of NEPA are 
furthered by doing so even though such supplement is not required by 40 
CFR 1502.9(c)(1). RUS and the applicant shall concurrently have a 
notice of availability published. The notice requirements shall be the 
same as for a final EIS and the information supplement shall be 
circulated in the same manner as a final EIS. RUS shall take no final 
action on any proposed modification discussed in the information 
supplement until 30 days after the RUS notice of availability or the 
applicant's notice is published, whichever occurs later.

[[Page 68664]]

Sec. 1794.63  Record of decision.

    (a) Upon completion of the review period for a final EIS, RUS will 
have its ROD prepared in accordance with 40 CFR 1505.2.
    (b) Separate RUS and applicant notices of availability shall be 
published concurrently. The notices shall summarize the RUS decision 
and announce the availability of the ROD. Copies of the ROD will be 
made available upon request from the point of contact identified in the 
notice.


Sec. 1794.64  Timing of agency action.

    (a) RUS may take its final action or execute commitments on 
proposed actions requiring an EIS or Supplemental EIS at any time after 
the ROD has been published.
    (b) For budgetary purposes some financial assistance may be 
approved conditionally with a stipulation that no funds shall be 
advanced until a ROD has been prepared.


Secs. 1794.65-1794.69  [Reserved]

Subpart H--Adoption of Environmental Documents


Sec. 1794.70  General.

    This subpart covers the adoption of environmental documents 
prepared by other Federal agencies. Where applicants participate in 
proposed actions for which an EA or EIS has been prepared by or for 
another Federal agency, RUS may adopt the existing EA or EIS in 
accordance with 40 CFR 1506.3.


Sec. 1794.71  Adoption of an EA.

    RUS may adopt a Federal EA or EIS or a portion thereof as its EA. 
RUS shall make the EA available and assure that notice is provided in 
the same manner as if RUS had prepared the EA.


Sec. 1794.72  Adoption of an EIS.

    (a) Where RUS determines that an existing Federal EIS requires 
additional information to meet the standards for an adequate statement 
for RUS proposed action, RUS may adopt all or a portion of the EIS as a 
part of its draft EIS. The circulation and notice provisions for a 
draft and final EIS (see Sec. 1794.61) apply.
    (b) If RUS was not a cooperating agency but determines that another 
Federal agency's EIS is adequate, RUS shall adopt that agency's EIS as 
its final EIS. RUS and the applicant shall have separate notices 
published advising of RUS adoption of the EIS and independent 
determination of its adequacy.
    (c) If the adopted EIS is generally available and meets RUS 
standards, RUS shall have a public notice published informing the 
public of its action and availability of the EIS to interested parties 
upon request. If the adopted EIS is not generally available, RUS shall 
have a public notice published informing the public of its action and 
will circulate copies of the EIS in accordance with 40 CFR 1502.19 and 
40 CFR 1506.3.


Sec. 1794.73  Timing of agency action.

    Where RUS has adopted another agency's environmental documents, the 
timing of the action shall be subject to the same requirements as if 
RUS had prepared the required EA or EIS.


Sec. 1794.74  Incorporation of environmental materials.

    RUS may incorporate into its environmental documents, environmental 
documents or portions thereof prepared by state, or local agencies or 
other parties for purposes other than compliance with the requirements 
of NEPA. RUS will circulate the incorporated documents as a part of its 
EA or draft and final EIS in the same manner as if prepared by RUS.


Sec. 1794.75-1794.79  [Reserved]

    Dated: December 7, 1998.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 98-32882 Filed 12-10-98; 8:45 am]
BILLING CODE 3410-15-P