[Federal Register Volume 66, Number 6 (Tuesday, January 9, 2001)]
[Rules and Regulations]
[Pages 1726-1748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-218]



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Part II





Environmental Protection Agency





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40 CFR Parts 35 and 735



Environmental Program Grants--State, Interstate, and Local Government 
Agencies; Final Rule

  Federal Register / Vol. 66, No. 6 / Tuesday, January 9, 2001 / Rules 
and Regulations  

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 35 and 735

[FRL-6929-4]
RIN 2030-AA55


Environmental Program Grants--State, Interstate, and Local 
Government Agencies

AGENCY: Environmental Protection Agency.

ACTION: Final rule.

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SUMMARY: This final rule revises and updates requirements in several 
Environmental Protection Agency (EPA) regulations governing grants to 
State, interstate and local government agencies under several 
environmental programs. The regulation advances ongoing efforts to 
build more effective State-EPA partnerships and to improve 
environmental conditions by providing States with increased flexibility 
to direct resources where they are needed most to address environmental 
and public health needs. This regulation updates, clarifies, and 
streamlines requirements governing environmental program grants and 
establishes requirements for the Performance Partnership Grant (PPG) 
program. The rule includes results-oriented approaches to planning and 
managing environmental programs. It also establishes requirements for 
grant programs that began after the original 40 CFR part 35, subpart A 
was published. (A regulation governing environmental program grants to 
Indian Tribes and Tribal Consortia will be published shortly in an 
upcoming issue of the Federal Register.)

DATES: This regulation is effective after February 8, 2001.
    Effective Date: This rule applies to grants awarded after February 
8, 2001 and it may be applied to currently active PPGs, if agreed to in 
writing by the Regional Administrator and the recipient.

ADDRESSES: Although this regulation is final, comments may be submitted 
at any time to the person identified in the section below.

FOR FURTHER INFORMATION CONTACT: Michelle McClendon, Grants Policy, 
Information, and Training Branch (3903R), United States Environmental 
Protection Agency, 1200 Pennsylvania Ave., NW, Washington, DC 20460, 
Telephone: (202) 564-5357.

SUPPLEMENTARY INFORMATION:

I. Regulated Entities

    Entities eligible to receive the environmental grants listed in 40 
CFR 35.100 are regulated by this rule. Regulated categories and 
entities include:

------------------------------------------------------------------------
            Category                        Regulated entities
------------------------------------------------------------------------
Government.....................  State Governments/Agencies.
                                 Local Governments/Agencies.
                                 Interstate Agencies.
------------------------------------------------------------------------

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities eligible under EPA's authorizing 
and appropriations statutes that EPA is now aware could potentially be 
regulated by this action. Other types of entities could also be 
regulated. To determine whether your organization is regulated by this 
action, you should carefully examine the applicability criteria in 
Sec. 35.134 and the program-specific provisions in Secs. 35.140 through 
35.418 of the rule. If you have questions regarding the applicability 
of this action to a particular entity, consult the person listed in the 
FOR FURTHER INFORMATION CONTACT section.

II. Comments and Record

    The record of this final rule includes copies of the proposed and 
final rules, comments received on the rule, EPA's responses to those 
comments, and other relevant documents that support the rule. It is 
available for inspection from 9 am to 4 pm (Eastern Time), Monday 
through Friday, excluding legal holidays, at the Water Docket, U.S. EPA 
Headquarters, 401 M Street, SW; East Tower Basement; Washington, DC 
20460. For access to docket materials, please call (202) 260-3027 to 
schedule an appointment.

III. Background

    EPA proposed a rule for environmental program grants for State, 
interstate, and local government agencies on July 23, 1999 (64 FR 
40064). EPA received eight letters of comment on the proposed rule. A 
summary of the comments and EPA's responses are included in this 
preamble. The preamble also summarizes a few changes to the rule EPA 
determined necessary to clarify various provisions. This publication 
makes the rule final.
    Since EPA was formed in 1970, State capacity and responsibility for 
implementing environmental and public health protection programs has 
grown steadily. Meanwhile, environmental problems and their solutions 
have become more complex. In light of these changes, State and EPA 
leaders recognized that continued environmental progress could be best 
achieved if EPA and States worked together more effectively--as 
partners.
    In 1995, they agreed to develop and implement the National 
Environmental Performance Partnership System (NEPPS). NEPPS is designed 
to: Promote joint planning and priority-setting by EPA and the States; 
provide States with greater flexibility to direct resources where they 
are needed most; foster use of integrated and innovative strategies for 
solving water, air, and waste problems; achieve a better balance in the 
use of environmental indicators and traditional activity measures for 
managing programs; and improve public understanding of environmental 
conditions and the strategies being used to address them.
    The changes in this rule are intended to promote State-EPA 
collaboration; provide opportunities for innovation; and reduce 
paperwork--while ensuring sound fiscal management and accountability 
for environmental performance--in a manner consistent with NEPPS. For 
example, EPA hopes to foster joint planning and priority-setting by 
explicitly requiring that State priorities and needs be considered, 
along with national and regional guidance, in negotiating grant work 
plans. Under this rule, a State can choose to organize its grant work 
plans in accordance with environmental goals and objectives or in other 
new ways rather than using categories predefined by EPA. However, EPA 
must be able to link the grant work plan to EPA's Government 
Performance and Results Act Goal and Objective Architecture, as 
discussed in Section VIII. The length of a grant budget period is 
negotiable. These flexibilities are available to all States, regardless 
of whether they are actively participating in other aspects of NEPPS.
    More than half of the States have elected to negotiate and enter 
into Performance Partnership Agreements (PPAs) with EPA as the primary 
mechanism for implementing NEPPS. Although each PPA is different, PPAs 
typically set out jointly developed goals, objectives, and priorities; 
the strategies to be used in meeting them; the roles and 
responsibilities of the State and EPA; and the measures to be used in 
assessing progress. (In some cases, comparable negotiated agreements 
are given a different name, such as Environmental Performance 
Agreements.) A PPA is generally based on information about the 
environmental and program conditions of the State as well as national 
and regional priorities and concerns. A State may apply for and receive 
any grant, including a Performance Partnership Grant (PPG),

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without negotiating a PPA. However, a PPA can provide the strategic 
underpinning for the work a State plans to carry out with EPA financial 
assistance, and the PPA can serve as a grant work plan if it meets 
other grant-related statutory and regulatory requirements.
    Recognizing the limitations of traditional categorical grants to 
allow full achievement of the NEPPS goals, EPA asked Congress for new 
authority that would give States greater flexibility in the use of 
federal grant funds. In the Omnibus Consolidated Rescissions and 
Appropriations Act of 1996 (Pub. L. 104-134, 110 Stat. 1321, 1321-299 
(1996)) and EPA's FY 1998 Appropriation Act (Pub. L. 105-65, 111 Stat. 
1344, 1373 (1997)), Congress authorized the award of Performance 
Partnership Grants (PPGs), in which State and interstate agencies (and 
Tribes and Intertribal Consortia) can choose to combine two or more 
environmental program grants.
    Under a PPG, a recipient can achieve cost and administrative 
savings by reductions in the amount of grant paperwork as well as 
simplified accounting requirements that do not require the recipient to 
account for expenditures in accordance with their original funding 
sources. With PPGs, recipients can negotiate work plans with EPA that 
direct federal funds where the recipients need them most to address 
environmental and public health problems. Recipients also can try new 
multi-media approaches and initiatives, such as children's health 
protection programs, multi-media inspections, compliance assistance 
programs, and ecosystem management that were difficult to fund under 
traditional categorical grants.
    This rule is designed to accommodate all potential variations in 
how EPA and individual States may work to build partnerships. The rule 
also is designed to minimize duplicative effort by allowing for 
multiple uses of information or processes wherever appropriate. A State 
may choose to negotiate a PPA or comparable strategic agreement with 
EPA. Where a State negotiates both a PPA and PPG, the processes and 
documentation can be integrated and, if appropriate, identical. Also, a 
State can receive a separate categorical grant for each environmental 
program, a PPG covering all programs eligible for inclusion, or a 
combination of separate categorical grants and PPGs covering only some 
programs.
    These regulations will be codified in 40 CFR part 35 as EPA's 
Environmental Program Grants regulation. Subpart A applies to State, 
interstate, and local agencies covering the following programs: Air 
Pollution Control; Water Pollution Control; Public Water System 
Supervision; Underground Water Source Protection; Hazardous Waste 
Management; Pesticide Cooperative Enforcement; Pesticide Applicator 
Certification and Training; Pesticide Program Implementation; Nonpoint 
Source Management; State Administration; Water Quality Management 
Planning; Performance Partnership Grants; Lead-Based Paint Grant 
Program; State Indoor Radon Grants; Toxic Substances Compliance 
Monitoring Grants; State Underground Storage Tank Grants; Pollution 
Prevention State Grants; Water Quality Cooperative Agreements; and 
State Wetlands Development Grants. EPA is also publishing subpart B in 
this issue of the Federal Register, which applies to Tribes and 
Intertribal Consortia.
    These regulations supplement EPA's Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State and Local 
Governments regulation (40 CFR part 31). Part 31 applies to grants and 
subawards to State governments, interstate agencies, and local 
governments, including councils of governments (whether or not 
incorporated as nonprofit organizations under State law), and any other 
regional or interstate governmental entity. (Under a few of the 
programs included in this rule, grants may be made directly to 
universities, non-profit organizations, and individuals. In those 
cases, the rule also supplements EPA's Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals, and Other Non-Profit Organizations (40 CFR part 
30).)
    This rule deletes 40 CFR 745.330, which authorizes EPA to make 
grants to States and Indian Tribes under section 404(g) of the Toxic 
Substances Control Act for lead-based paint programs. Provisions 
governing those grants are included in this rule and in the companion 
rule issued as subpart B of 40 CFR part 35 for Tribes and Intertribal 
Consortia.

IV. Requirements for Environmental Program Grants

    Sections 35.100 through 35.118 of the rule apply to all 
environmental program grants covered by subpart A of part 35, including 
PPGs. This rule contains changes to foster State-EPA partnerships, 
improve accountability for environmental and program performance, and 
streamline administrative requirements. Some of the rule's key features 
are discussed below.
    State-EPA partnerships. To foster joint planning and priority-
setting, the rule explicitly requires consideration of State priorities 
along with national program and regional supplemental guidance in 
negotiating grants. However, the EPA Regional Administrator must 
consult with the National Program Manager before agreeing to a State 
work plan that differs substantially from national program guidance. A 
State is provided flexibility through the work plan negotiation 
process, and in particular through its ability to organize work plan 
components in whatever way fits best. States applying for PPGs will 
have still greater flexibility as described in the PPG discussion 
below. Where appropriate, the grant work plan will reflect both EPA and 
State roles and responsibilities and there will be a negotiated joint 
performance evaluation process.
    Accountability. The rule accommodates results-oriented approaches 
to planning and managing environmental programs. Definitions and other 
aspects of the rule are compatible with the Government Performance and 
Results Act (GPRA) and reflect efforts to establish goals and 
objectives as well as environmental and program performance measures at 
both the national and State levels. The rule recognizes the need for a 
mix of outcome (results and output (activity) measures for management 
purposes. While the rule encourages States to organize their work plans 
around goals and objectives, States may continue to use existing 
structures if they wish. However, EPA must be able to link the grant 
work plans to EPA's GPRA Goal and Objective Architecture.
    Administrative changes. Under the rule, States can negotiate 
funding periods of one or more years with EPA. EPA recommends, however, 
that funding periods not exceed five years because it is difficult to 
account for funds and maintain records for longer periods. (The term 
``funding period'' used in this preamble and 40 CFR 31.23 has the same 
meaning as the term ``budget period'' on EPA's grant and cooperative 
agreement and amendment forms.)
    The rule streamlines some requirements and eliminates other 
requirements associated with changes made to grant work plan 
commitments and budgets. These requirements replace those found in 40 
CFR 31.30. Prior written approval from EPA is still required for 
significant changes in a grantee's work plan commitments. Written, but 
not prior, approval is required for changes requiring increases

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in grant amounts and extensions of the funding period. EPA approval is 
no longer required for other changes in the work plan or budget, 
changes in key persons, or decisions to carry out portions of the work 
through subgrants or contracts, unless the Regional Administrator 
determines, on a case-by-case basis, that circumstances warrant 
imposing additional approval requirements on a particular recipient.
    Pre-award costs. Pre-award costs may be reimbursed under the grants 
without prior approval so long as they are incurred within the budget 
period, identified in the approval grant application, and would have 
been allowable if incurred after the award.
    Insular areas. This rule includes conforming changes to reflect the 
change in status of the Marshall Islands, the Federated States of 
Micronesia, and Palau. They were previously entities within the Trust 
Territory of the Pacific Islands, but they have entered into Compacts 
of Free Association with the Government of the United States. As a 
result, each is now a sovereign, self-governing entity and, as such, is 
no longer eligible to receive grants as a territory or possession of 
the United States. Because the Trust Territory of the Pacific Islands 
no longer exists, the rule's provisions regarding allotments omit any 
reference to the Trust Territory, and references to the Trust Territory 
in environmental program grant statutes, including the references in 
the definitions of ``State,'' no longer have legal effect.
    The Administrator of EPA is authorized to consolidate grants and 
waive administrative requirements for grants made to certain insular 
areas (48 U.S.C. 1469a). Through this regulation that authority is 
delegated to the Regional Administrators.

V. Performance Partnership Grants

    Sections 35.130 through 35.138 contain requirements that apply only 
to Performance Partnership Grants (PPGs). In a PPG, a State or 
interstate agency recipient can combine funds from two or more 
environmental program grants into a single grant under streamlined 
administrative requirements. Funds may be used for eligible cross-media 
activities or strategies and do not need to be accounted for in 
accordance with their original program sources. Key features of the PPG 
rule are discussed below.
    Funds and activities eligible for inclusion in a PPG. Funds for any 
particular environmental program grant may be included in a PPG only if 
the funds for that grant are appropriated in the same specific 
appropriation (earmark) as the funds for PPGs. EPA will announce any 
changes in its appropriation acts that affect the list of programs in 
Sec. 35.101. Currently, funds from all but two of the environmental 
program grants listed in Sec. 35.101 are eligible for inclusion in a 
PPG. Funds for Water Quality Management Planning grants under section 
205(j)(2) of the Clean Water Act are not available for inclusion in 
PPGs because funds for these grants are reserved from a different 
earmark in the Agency's appropriation act. In addition, there are no 
funds appropriated for State Administration grants under section 205(g) 
of the Clean Water Act.
    A State or interstate agency PPG recipient may use PPG funds to 
carry out any activity that would be authorized under at least one of 
the environmental program grants from which funds are combined in the 
PPG. This means that a PPG recipient may not spend PPG funds on an 
activity unless the PPG includes some funds from an environmental 
program grant under which that activity would be eligible. For example, 
a PPG recipient could not use PPG funds for an activity that is 
authorized only under sections 205(g) or 205(j)(2) of the Clean Water 
Act because no section 205(g) or 205(j)(2) funds will have been 
included in the PPG. On the other hand, if an activity would be 
authorized under section 106 of the Clean Water Act, and the PPG 
includes section 106 funds, then the activity may be funded by the PPG.
    A State or interstate agency must meet the requirements for award 
of each of the environmental programs from which funds are combined in 
the PPG, with a few specified exceptions. The exceptions are 
requirements that restrict how a specific environmental program grant 
can be used after award. These requirements are not appropriate to be 
carried over to PPGs because: (1) after funds are awarded in a PPG, 
they may be used for cross-media purposes and; (2) States and 
interstate agencies do not need to account for the funds in accordance 
with their original program sources.
    Entities eligible for PPGs. The types of organizations eligible for 
PPGs are determined by the authorizing statutes for the PPG program, 
which are EPA's FY 1996 and 1998 appropriation acts, (Omnibus 
Consolidated Rescissions and Appropriations Act of 1996, Pub. L. No. 
104-134, 110 Stat. 1321, 1321-299 (1996); Departments of Veterans 
Affairs and Housing and Urban Development, and Independent Agencies 
Appropriations Act, 1998, Pub. L. No. 105-65, 111 Stat. 1344, 1373 
(1997)). Consistent with those statutes, only States and interstate 
agencies are eligible for PPGs under this rule. Interstate agencies are 
only eligible for PPGs that combine funds from a few existing grant 
programs because interstate agencies are only authorized to receive 
grants under those few environmental programs. Specifically, interstate 
agencies are eligible for PPGs that include funds from the following 
programs: Air Pollution Control (section 105 of the Clean Air Act); 
Water Pollution Control (section 106 of the Clean Water Act); Wetlands 
Development Grants (section 104(b)(3) of the Clean Water Act); and 
Water Quality Cooperative Agreements (section 104(b)(3) of the Clean 
Water Act). Recipients must be interstate agencies as defined by either 
the Clean Water Act, the Clean Air Act, or both, depending on which 
funds are included in the PPG. Congress authorized EPA to award PPGs to 
interstate agencies, but only as provided in authorizing statutes; 
Congress did not intend to change any of the existing program grant 
eligibility requirements, including the definition of interstate 
agency. The ability of recipients to make subgrants is not affected by 
combining funds into a PPG.
    Competitive grants and PPGs. States must compete for some of the 
environmental programs eligible for a PPG (e.g., Pollution Prevention 
State Grants, Wetlands Program Development, and Water Quality 
Cooperative Agreements). States must first be selected in the 
competitive process in order to include these competitive grants in a 
PPG. In some programs, this process may include awarding funds to a 
State agency through decisions made during a joint planning process. To 
maintain the integrity of the competitive process and ensure that the 
work that was the basis for EPA's selection of the proposal is 
performed, the State must include the work plan commitments proposed in 
the competitive grant application in the PPG work plan. EPA will then 
consider the competitive grant work plan commitments in determining the 
funding mix of the PPG among EPA's GPRA Goal and Objective 
architecture. However, as with other program funds included in a PPG, 
the State does not need to account for these funds in accordance with 
the funds' original environmental program source. Although a State must 
agree to complete the work plan commitments proposed in the competitive 
work plan, it need not account for the funds spent on a specific 
environmental program or activity. Also, if the time required to 
complete work under the competitive

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program is longer than the funding period for the States' PPG, States 
must make provisions to carry the activities (and funds, if 
appropriate) to subsequent PPG funding periods to complete them.
    Administrative flexibility. A primary advantage of PPGs is the 
administrative flexibility provided to all PPG recipients. A PPG 
requires only a single application, work plan, and budget, regardless 
of how many environmental programs provide the funds for the PPG. Once 
funds are awarded in a PPG, recipients can direct the funds as needed 
to achieve work plan commitments and need not account for funds in 
accordance with their original funding program sources. The minimum 
cost share required for a PPG is the sum of the cost share amounts 
required for each of the environmental program grants combined in the 
PPG. If a program has both a match and a maintenance of effort 
requirement, the greater of the two amounts will be used to calculate 
the minimum cost share attributed to that program. Just as federal 
funds in the PPG do not need to be accounted for on the basis of their 
original program source, the non-federal share of a PPG may be expended 
on work plan commitments without regard to the original source of the 
cost share requirement. These administrative features also make it 
possible for States to negotiate a work plan that includes cross-media 
or innovative strategies for addressing environmental problems.
    Programmatic flexibility. If approved by the EPA Regional 
Administrator, a PPG can also provide the State with programmatic 
flexibility to increase efforts in some program areas where the State's 
needs are greater and decrease them in others where the State's needs 
are less. In applying for programmatic flexibility, the State agency 
must provide a rationale commensurate with the type and amount of 
flexibility being proposed, explaining the basis for the State's 
priorities and the environmental or other benefits it expects to 
achieve. The State must also assure that basic programs are maintained 
for all programs combined in the grant. The Regional Administrator and 
State agency will negotiate regarding the environmental and other 
information that EPA needs to make a decision regarding the application 
for flexibility. Information useful in supporting a State's proposal 
for programmatic flexibility may already exist, such as in a PPA, a 
recent water quality report, or a previous grant evaluation. Such 
information should be used to the extent possible to minimize 
duplication of effort.
    Performance incentives. One goal of the Performance Partnership 
Grant program is to find ways to encourage and reward outstanding State 
recipient performance. EPA believes this regulation establishes the 
foundation for such an incentive program by assuring--
     States and EPA's regions agree to measurable outcomes and 
outputs when awards are signed in accordance with the agreement on core 
measures.
     Outcome and output accomplishments are measured and 
documented through the joint evaluation process developed and agreed to 
by the States and EPA under the rule.
    We would expect such a program to be based on each year's 
performance evaluation and might include incentive approaches such as--
     Using a part of each year's funds to provide incentive 
bonuses to States which are most successful in meeting commitments, and
     Using a part of each year's funds to provide bonuses to 
States which assume primacy/authorization for programs such as drinking 
water and hazardous waste.
    EPA requested but received no comments on a performance incentive 
program. We are not including requirements for a performance incentive 
program at this time. Nevertheless, EPA may develop such a program in 
the future and may use this rule as a foundation.

VI. Response to Comments

    EPA received eight letters commenting on the proposed rule. In 
general, the comments supported the rule as written but suggested a few 
changes. Specifically:
    1. Two commenters expressed concern that Sec. 35.107(a) codifies 
EPA guidance, increasing the time period for development of an approved 
work plan; further limiting the flexibility given to grantees to tailor 
work plans to local needs; and, effectively precluding local air 
agencies from negotiating a work plan that targets resources to areas 
of greatest need within the community.
    Section 35.107(a)(2) requires the Regional Administrator and 
applicants to consider the national program guidance in place at the 
time of the award in negotiating a work plan, and if an applicant 
proposes a work plan that deviates significantly from the goals and 
objectives, priorities, or core performance measures in the national 
program guidance associated with the proposed activities, then the 
Regional Administrator must consult with the appropriate National 
Program Manager (NPM) before agreeing to the work plan. The requirement 
that the Regional Administrator consult with the relevant NPM before 
agreeing to a work plan that significantly deviates from national 
program guidance does not require anything of States; it governs EPA's 
internal operations. More specifically, Sec. 35.107 is intended to 
assure that the appropriate NPM is informed of significant deviations 
from the national program guidance and has an opportunity to 
participate in the Regional Administrator's decision to agree to a work 
plan that deviates significantly from national program guidance. Thus, 
for example, the NPM would be informed, and have an opportunity to 
consider the implications of a proposed State work plan that does not 
include core program activities which EPA would be required by law to 
carry out if the State did not do so. Finally, Sec. 35.107(a)(3) states 
that applicants should ``base'' grant applications on the national 
program guidance in place at the time the application is being 
prepared. The purpose of this provision is to clarify that applicants 
may use the guidance that is in effect to develop work plans when EPA 
is late in issuing current guidance.
    2. Several commenters expressed concern about the addition of 
Sec. 35.143(c) which provides that the Administrator may award Clean 
Air Act section 105 funds on a competitive basis. Section 105(b) of the 
Clean Air Act directs the Administrator to award funds upon such terms 
and conditions as the Administrator may find are necessary to carry out 
the purpose of section 105.
    The statute also directs the Administrator to give due 
consideration, so far as practicable, to the factors of population, the 
extent of the actual or potential air pollution problem, and the 
financial need of the respective agencies in establishing regulations 
for the award of funds. Working in concert with State and local 
agencies over the years, the Agency has found that a limited amount of 
funds made available to air pollution control agencies on a competitive 
basis for section 105 grants has led to innovative and productive 
approaches for the prevention and control of air pollution (e.g., 
market-based programs, mobile source public outreach) which are of 
benefit to all air pollution control agencies and applicable in other 
areas. Section 35.143(c) simply articulates this long-standing practice 
of awarding a limited amount of section 105 funds to air pollution 
control agencies based on a competition. It is not intended to signal a 
shift on the part of the Agency

[[Page 1730]]

in determining how section 105 resources to State and local agencies 
are distributed.
    3. Two commenters stated that Sec. 35.268(d)(5) of the Nonpoint 
Source Management program regulation requires a level of project 
reporting that is not required by the statute (section 319 of the Clean 
Water Act) and out of keeping with the spirit of the National 
Environmental Performance Partnership System (NEPPS). They recommended 
that Sec. 35.268(d)(5) be dropped in its entirety.
    EPA disagrees with this recommendation. Section 35.268(d)(5) 
requires recipients to include specific information in their work plan 
for watershed projects whose costs exceed $50,000. The section 319 
program is different from most programs under this rule in several 
respects. The program does not implement or support the implementation 
of a national regulatory program. Thus, States' use of the current 
annual appropriation of $200 million is not guided by a regulatory 
framework with objective technical or environmentally based standards 
or guidelines. Rather, under section 319(b) of the Clean Water Act, 
States are free to implement their programs with or without regulatory 
standards, using any combination of technical assistance, financial 
assistance, education or demonstration projects, and other techniques 
as the States see fit.
    In the absence of clear regulations and standards and a reasonable 
amount of information on funded projects, it would be very difficult 
for EPA and the States to achieve the information transfer goals of 
section 319 or to assure that the funds are being used effectively to 
achieve program goals. In the early years of the national nonpoint 
source program (1990-1996), EPA addressed these difficulties by using a 
competitive approach to awarding the State grants. In May, 1996, based 
on a cooperative EPA/State development process, EPA published, with 
cover letters of endorsement by both the President of the Association 
of State and Interstate Water Pollution Control Administrators 
(ASIWPCA) and the Chairman of ASIWPCA's Nonpoint Source Task Force, a 
new national nonpoint source program and grants guidance which remains 
in effect. In this guidance, EPA eliminated the competitive approach 
and reduced reporting burdens for States and EPA and the States also 
agreed that the States would upgrade their nonpoint source programs.
    While agreeing to minimize the grant application burdens for 
States, however, the guidance also requires States to include in their 
work plan for watershed projects which cost more than $50,000, a brief 
(e.g., two or three page) synopsis of the watershed implementation plan 
outlining the problems to be addressed, the project's goals and 
objectives; and the performance measures or environmental indicators 
that will be used to evaluate the results of the project. Section 
35.268(d)(5) reflects this EPA-State understanding.
    It is EPA's belief that preparing a two or three page summary of 
$50,000 projects is a small time burden that will have great benefits 
to the public. It will enable citizens, sister State agencies, and 
practitioners in any other State to easily learn what projects the 
State is implementing, where they are located, and what types of 
measures or practices will be implemented. This will facilitate the 
involvement of citizens in watershed projects and also the transfer of 
technology development to other professionals. These are the hallmarks 
of successful State nonpoint source programs. The summaries will also 
help assure, in the absence of regulatory benchmarks, that States apply 
their funds to their highest-priority environmental needs.
    4. One commenter objected to Sec. 35.290(b)(4), stating that the 
language will prevent States from using funds for a State radon 
proficiency rating program.
    It was not EPA's intention to restrict the use of radon funds in 
this way. We have clarified the language to make it clear that the 
restriction applies to the use of State radon program grant funds for a 
federal proficiency rating program, not a State one.
    5. One commenter was concerned that EPA awards are often late, 
causing States to use non-federal resources to finance federal 
activities in the beginning of many fiscal years.
    Unfortunately, delays in awards are most often caused by delays in 
appropriations, apportionment of funds, and approval of operating 
plans. While all of these steps are necessary in order for the EPA to 
determine the final amounts that will be available to the States for 
grants under the environmental programs, they are not controlled by 
EPA. Delays occur most often when EPA begins the fiscal year with 
funding under a Continuing Resolution rather than an annual 
appropriation act. Under Continuing Resolutions, affected agencies 
typically receive limited funds for a short period of time covered by 
the Resolution, making it difficult or impossible for EPA regional 
offices to fully fund their continuing environmental program grants 
until EPA's annual appropriation act is enacted. In response to the 
commenter's characterization of the activities performed with EPA grant 
funds as ``federal'' activities, EPA would like to clarify that the 
principal purpose of these grants is to finance State, local, and 
interstate environmental programs, not federal activities.
    6. One commenter was concerned that because ``significant'' is not 
defined in Sec. 35.114(a), it may lead to inconsistent enforcement.
    Section 35.114 requires recipients to obtain the Regional 
Administrator's prior written approval before making significant 
changes to the grant work plan or budget after the work plan has been 
negotiated. Under the Uniform Administrative Regulations for Grant and 
Cooperative Agreements to State and local Governments (40 CFR part 31), 
recipients are required to get EPA's prior written approval for ``any 
revision of the scope or objectives of the project (regardless of 
whether there is an associated budget revision requiring prior 
approval).'' 40 CFR 31.30(d)(1). EPA believes that, for the continuing 
environmental program grants covered by this rule, prior written 
approval for changes is necessary only for significant changes, and 
that the grantee, with assistance from its EPA project officer, if 
necessary, is in the best position to distinguish significant from 
insignificant changes in the context of its particular work plan. 
Further, we believe that defining the term would reduce management 
discretion and flexibility which we believe essential to the 
regulation. Accordingly, EPA has decided not to define ``significant'' 
in Sec. 35.114(a). If there is any question as to whether a post-award 
change in the work plan is significant, grantees are encouraged to 
consult with the EPA project officer for the grant before making the 
change.
    7. One commenter questioned whether Sec. 35.145(b) is necessary.
    Section 35.145(b) of the proposed rule provided for a waiver of the 
match requirement for section 105 grants under the Clean Air Act for up 
to three years after the approval of the recipient's Section 502(b) 
operating permit program (Title V program). The previous final rule 
included a similar provision at 40 CFR 35.205(b). Title V permit fees 
cannot be used to meet the cost share requirement of Section 105 
grants. Since Title V fees replaced most recipients' existing fee 
systems, which had been a significant source of revenue for meeting the 
cost share requirements of section 105 grants, some air pollution 
control agencies needed additional time to adjust their programs and 
meet their match requirements without using Title V fee revenue. 
However, all affected air

[[Page 1731]]

pollution control agencies have now received at least interim approval 
of their Title V program and those few agencies that needed a waiver 
have requested and received it. As there is no need to retain this 
provision in the regulations, it has been deleted from the final rule.
    8. One commenter suggested that the requirement to identify funding 
amounts for each work plan component contained in Sec. 35.107(b)(2)(ii) 
appears to undermine the purpose of PPGs, which is to allow flexibility 
in shifting funds to address public health and environmental 
priorities. The commenter believes targeting the funding amounts during 
work plan development restricts a State's ability to shift funds to 
address these priorities. EPA is clarifying that Sec. 35.107(b)(2)(ii) 
requires recipients to specify the estimated work years and the 
estimated funding amounts for each work plan component. EPA believes 
that estimating the resources necessary to carry out work plan 
components in the planning stages of the grant represents prudent 
management practices. However, this requirement will not preclude 
recipients from shifting funds prior to award to address environmental 
and programmatic needs and priorities. The negotiated work plan 
components can be cross-media and supported with any of the funds 
combined into the PPG. Nor will this requirement preclude recipients 
from making such changes after the grant has been awarded. Recipients 
may make changes to grant work plans and budgets in accordance with 
Sec. 35.114, which requires prior approval or approval for certain 
types of changes, but requires no approval for all other changes.
    9. A commenter questioned whether the data gathered from grant 
applications and work plans could be correlated in a manner that would 
allow EPA to determine the costs of implementing GPRA goals and 
objectives.
    EPA agrees that this is not the most precise method of determining 
the costs of each GPRA subobjective. However, the alternative would be 
to place a greater burden on recipients by requiring more complex 
recipient accounting systems which is contrary to the simplification 
goal of this regulation. EPA does not think that the added benefits of 
more exact accounting would justify the additional costs associated 
with obtaining such accounting precision.
    10. One commenter stated that there is a conflict between the 
definition of outcomes and the requirement that work plan commitments 
include a time frame for accomplishment.
    The definition of outcome notes that outcomes may not necessarily 
be achievable during a grant funding period, whereas 
Sec. 35.107(b)(2)(iii) (``Work plan requirements'') requires that the 
work plan include the work plan commitments (which include outcomes) 
and a time frame for their accomplishment. Nothing in 
Sec. 35.107(b)(2)(iii) requires that the time frame for accomplishment 
of the work plan commitments, including outcomes, be within the funding 
period. Therefore, we have decided not to change the definition of 
outcome or the requirements for work plans in the final rule.
    11. A commenter asked how the requirement of Sec. 35.107(b)(2)(iv) 
differs from EPA's annual program reviews.
    Section 35.107(b)(2)(iv) requires recipients to specify in their 
work plans a performance evaluation process in accordance with 
Sec. 35.115 (``Evaluation of Performance''). EPA's annual program 
review is the joint evaluation process described in Sec. 35.115.

VII. Other Changes in the Proposed Rule

    EPA made several changes to the proposed rule to clarify certain 
provisions even though the provisions were not the subject of comments.
    1. On May 3, 1999, EPA published an amendment related to grant fund 
allotment for its regulations implementing the Water Pollution Control 
Program under section 106 of the Clean Water Act (40 CFR 35.252). These 
provisions were not included in the proposed regulation due to timing 
of the publication. We added the provisions at Sec. 35.162..
    2. EPA made editorial changes to the provisions related to the PPG 
cost share requirements for the Air Pollution Control Program under 
section 105 of the Clean Air Act to assure this rule is consistent with 
the Act. There is no substantive change in the final rule, but EPA 
believes the editorial changes will help grantees to understand and 
comply with the match and maintenance of effort requirements for 
section 105 funds when they are included in a PPG and when an air 
agency withdraws from the PPG.
    EPA added a new provision in the final rule to the section 
governing grants for Air Pollution Control Programs under section 105 
of the Clean Air Act. Paragraph (b) of Sec. 35.145 (``Maximum federal 
share'') provides that ``revenue collected pursuant to a State's Title 
V operating permit program may not be used to meet the cost share 
requirements of Section 105.'' This is not a new restriction; it was 
the basis for the temporary cost share waiver which has been omitted 
from the final rule because it is obsolete. This restriction was 
discussed at length in the preamble announcing changes to the Section 
105 regulations in 1995 (60 FR 366, 368, Jan. 4, 1995).
    EPA added two new provisions to the regulation governing grants for 
Air Pollution Control Programs to clarify that (1) When expenditure 
data for the preceding fiscal year is complete, the Regional 
Administrator shall use that information to determine the agency's 
compliance with its maintenance of effort requirement (MOE) and (2) if 
a state does not meet the MOE requirement, EPA will recover the grant 
funds. This is because section 105 explicitly provides that ``[n]o 
agency shall receive any grant under this section during any fiscal 
year when its expenditures of non-Federal funds for recurrent 
expenditures for air pollution control programs will be less than its 
expenditures were for such programs during the preceding fiscal year'' 
(42 U.S.C. Sec. 7405(c)(1)). EPA dos not intend to establish any new 
requirements with these changes; these provisions have been added to 
the final rule only to clarify the existing MOE requirements.
    3. EPA changed the name of the Pollution Prevention program from 
Pollution Prevention Incentives for States as identified in the 
proposed regulation to Pollution Prevention State Grants to make it 
clear that we award several types of Pollution Prevention grants under 
section 6605 of the Pollution Prevention Act. Pollution Prevention 
Incentive Grants are just one type of grant awarded under section 6605.
    4. Finally, while the regulation uses the term ``Regional 
Administrator'' throughout, grants subject to these provisions may also 
be approved and awarded by officials in EPA Headquarters from time to 
time. Accordingly, the final rule has been modified by adding 
Sec. 35.101(c) to clarify that this subpart applies and the phrase 
``Regional Administrator'' means ``Assistant Administrator'' in the 
case of grants awarded from EPA headquarters.

VIII. Implementing GPRA

     The Agency has developed an integrated approach for implementing 
GPRA, the Chief Financial Officers Act (CFOA), and the Federal 
Financial Management Improvement Act of 1996 (FFMIA). These laws 
provide EPA with a framework to demonstrate to Congress and the 
taxpayers the costs to the federal government of EPA's program

[[Page 1732]]

goals and objectives. The States, by virtue of delegated program 
authorities and as recipients of EPA grant funds, play an integral part 
in achieving those goals and objectives. Thus EPA's reports of Agency 
resources associated with outcomes and outputs will incorporate--at the 
GPRA goal, objective, and subobjective level--expenditures incurred in 
the form of payments under grants and cooperative agreements . In order 
to comply with the Paperwork Reduction Act and the federal government's 
general grant regulations, EPA also has a responsibility to minimize 
additional administrative reporting requirements and costs borne by the 
States. In addition, under current regulations EPA generally may not 
impose accounting requirements on States beyond those currently 
required by 40 CFR part 31.
    EPA will therefore use the budget information that States provide 
in grant applications as a basis for linking the Agency's actual 
expenditures with outcomes. EPA will be able to rely on State budget 
information to determine the costs of EPA's results based outcomes 
according to the requirements of this rule:
    (1) States provide the program budget information required as part 
of the application (see Sec. 35.107(b)(2)(ii));
    (2) EPA and the States explicitly define work plan activities, 
outcomes, and outputs, as well as the program flexibility contained in 
the work plan (see Sec. 35.107(b)(2)(i)); and
    (3) States report back on work plan accomplishments (see 
Sec. 35.115).
    The rule will ensure that these three requirements are met. 
Additionally, in accordance with Sec. 35.114(a), recipients may make 
significant changes to the work plan commitments only after obtaining 
the Regional Administrator's prior written approval. The regional 
office, in consultation with the recipient, will document these 
revisions including budgeted amounts associated with the revisions. If 
necessary, the EPA funding office will make adjustments to original 
budget linking work plan components to EPA's Goal and Objective 
Architecture. Once these requirements are met, they provide a 
reasonable basis for using State grant program budgets to estimate 
State contributions to the costs of achieving EPA's result's based 
outcomes.
    EPA, in consultation with recipients, is responsible for cross-
walking the State budget information (grant application and work plan 
data) into the GPRA Goal and Objective architecture. Cross-walk 
information is developed by EPA during the work plan/PPA negotiation 
process with the State.

IX. Program-Specific Provisions

     Requirements applicable to each environmental grant program are 
located in Secs. 35.140 through 35.418.
    Eligibility. The requirements that recipients must meet to qualify 
to receive funds under specific environmental programs are included in 
the program-specific provisions (see Secs. 35.140 through 35.418).
    Cost share. The required cost share for each environmental program 
is identified in the program-specific sections. Some programs do not 
have cost share requirements, while others have percentage matching 
share requirements, level of effort requirements, or both.

X. Conclusion

    This regulation will be the foundation for continuing efforts to 
improve partnerships between EPA and its State, interstate, and local 
environmental protection partners. All recipients will benefit from the 
streamlined and simplified requirements of the regulation. In addition, 
it will provide recipients choosing to participate in the PPG program 
with programmatic flexibility to better use funds to address 
environmental priorities.

Regulatory Flexibility Act

    This final rule is not subject to the Regulatory Flexibility Act 
(RFA), which generally requires an agency to prepare a regulatory 
flexibility analysis for any rule that will have a significant economic 
impact on a substantial number of small entities. The RFA applies only 
to rules notice and comment rulemaking requirements under the 
Administrative Procedure Act (APA) or any another statute. Grant award 
and administration matters, such as this rule, are explicitly exempt 
from the notice and comment requirements of the APA (5 U.S.C. 
553(a)(1)). Nor is this rule required to undergo notice and comment 
rulemaking under any other statute.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, 2 U.S.C. 1501 et seq., 109 Stat. 48 (1995), establishes 
requirements for federal agencies to assess the effects of their 
regulatory actions on State, local, and Tribal governments and the 
private sector. Under section 202 of the UMRA, EPA generally must 
prepare a written statement, including a cost-benefit analysis, for 
proposed and final rules with ``federal mandates'' that may result in 
expenditures by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year. This 
regulation contains no federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, or Tribal 
governments or the private sector. The UMRA excludes from the 
definitions of ``federal intergovernmental mandate'' and ``federal 
private sector mandates'' duties that arise from conditions of federal 
assistance.

National Technology Transfer and Advancement Act

    Under section 12(d) of the National Technology Transfer and 
Advancement Act (NTTAA), EPA is required to use voluntary consensus 
standards in its regulatory activities unless to do so would be 
inconsistent with applicable law or otherwise impracticable. Voluntary 
consensus standards are technical standards (e.g., materials 
specifications, test methods, sampling procedures, business practices, 
etc.) that are developed or adopted by voluntary consensus standards 
bodies. Where available and potentially applicable voluntary consensus 
standards are not used, the Act requires EPA to provide Congress, 
through the Office of Management and Budget, an explanation of the 
reasons for not using such standards.
    This rule does not involve any technical standards. Therefore, EPA 
did not consider the use of any voluntary consensus standards.

Executive Order 13045--Protection of Children From Environmental Health 
Risks and Safety Risks

    Executive Order 13045 applies to any rule that is determined to be: 
(1) ``Economically significant'' as defined under Executive Order 
12866, and (2) concerns an environmental health or safety risk that EPA 
has reason to believe may have a disproportionate effect on children. 
If the regulatory action meets both criteria, EPA must evaluate the 
environmental health or safety effects of the planned rule on children; 
and explain why the planned regulation is preferable to other 
potentially effective and reasonably feasible alternatives considered 
by the Agency.
    EPA interprets E.O. 13045 as applying only to those regulatory 
actions that are based on health or safety risks, such that the 
analysis required under section 5-501 of the Order has the potential to 
influence the regulation. This rule is not subject to E.O. 13045 
because it does not establish an environmental standard intended to 
mitigate health or safety risks.

[[Page 1733]]

Executive Order 12866

    Under Executive Order 12866, (58 FR 51735 (October 4, 1993)) a 
significant regulatory action is subject to OMB review and the 
requirements of the Executive Order. The Order defines ``significant 
regulatory action'' as one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    It has been determined that this rule is a ``significant regulatory 
action'' under the terms of Executive Order 12866 because the 
Performance Partnership Grant authority is a new type of grant 
authority and therefore raises novel policy issues. As such, this 
action was submitted to the Office of Management and Budget (OMB) for 
review. Changes made in response to OMB suggestions and recommendations 
will be documented in the public record.

Paperwork Reduction Act

    In keeping with the requirements of the Paperwork Reduction Act 
(PRA), as amended, 44 U.S.C. 3501 et seq., the information collection 
requirements contained in this rule have been approved by OMB under 
information collection request number 0938.06 (OMB Control Number 2030-
0020) and Quality Assurance Specifications and Requirements information 
request number 0866.05 (OMB Control Number 2080-0033). This rule does 
not contain any collection of information requirements beyond those 
already approved. Since this action imposes no new or additional 
information collection, reporting or record-keeping requirements 
subject to the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., no 
information request has been or will be submitted to the Office of 
Management and Budget for review.

Executive Order 13084

     Under Executive Order 13084, Consultation and Coordination with 
Indian Tribal Governments, EPA may not issue a regulation that is not 
required by statute, that significantly or uniquely affects the 
communities of Indian Tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the Tribal governments, or EPA consults with those 
governments. If EPA complies by consulting, Executive Order 13084 
requires EPA to provide to the Office of Management and Budget, in a 
separately identified section of the preamble to the rule, a 
description of the extent of EPA's prior consultation with 
representatives of affected Tribal governments, a summary of the nature 
of their concerns, and a statement supporting the need to issue the 
regulation. In addition, Executive Order 13084 requires EPA to develop 
an effective process permitting elected and other representatives of 
Indian Tribal governments ``to provide meaningful and timely input in 
the development of regulatory policies on matters that significantly or 
uniquely affect their communities.''
    This rule does not significantly or uniquely affect the communities 
of Indian Tribal governments, because environmental program grants to 
Tribes and intertribal consortia are not covered in this rule; they are 
covered under 40 CFR part 35, subpart B, published elsewhere in this 
Federal Register. Accordingly, the requirements of section 3(b) of 
Executive Order 13084 do not apply.

Executive Order 13132--Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    Under section 6 of Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing the proposed regulation. EPA also may not issue a regulation 
that has federalism implications and that preempts State law, unless 
the Agency consults with State and local officials early in the process 
of developing the proposed regulation.
    This final rule does not have federalism implications. It will not 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. Thus, the requirements of 
section 6 of the Executive Order do not apply to this rule. Further, 
because this rule regulates the use of federal financial assistance, it 
will not impose substantial direct compliance costs on States. Although 
section 6 of Executive Order 13132 does not apply to this rule, EPA did 
consult with State and local officials in developing the proposed rule 
and all States and local governments have had an opportunity to comment 
on the proposed rule after it was published. Before promulgating this 
final rule, EPA considered all of the comments it received regarding 
this rule.

Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective thirty days after publication in 
the Federal Register.

List of Subjects

40 CFR Part 35

    Environmental protection, Air pollution control, Coastal zone, 
Grant programs-environmental protection, Grant programs-Indians, 
Hazardous waste, Indians, Intergovernmental relations, Pesticides and 
pests, Reporting and recordkeeping requirements, Superfund, Waste

[[Page 1734]]

treatment and disposal, Water pollution control, Water supply.

40 CFR Part 745

    Environmental protection, Administrative practice and procedures, 
Hazardous substances.

    Dated: December 28, 2000.
Carol M. Browner,
Administrator.

    For the reasons set forth in this preamble, title 40, Chapter I of 
the Code of Federal Regulations is to be amended as follows:

PART 35--STATE AND LOCAL ASSISTANCE

    1. The authority citation for part 35 is revised to read as 
follows:


    Authority: 42 U.S.C. 4368b, unless otherwise noted.

    2. Revise Sec. 35.001 to read as follows:


Sec. 35.001  Applicability.

    This part codifies policies and procedures for financial assistance 
awarded by the Environmental Protection Agency (EPA) to State, 
interstate, and local agencies, Indian Tribes and Intertribal Consortia 
for pollution abatement and control programs. These provisions 
supplement the EPA general assistance regulations in 40 CFR part 31.

    3. Subpart A is revised to read as follows:

Subpart A--Environmental Program Grants

Sec.

General

35.100   Purpose of the subpart.
35.101   Environmental programs covered by the subpart.
35.102   Definitions of terms.

Preparing an Application

35.104   Components of a complete application.
35.105   Time frame for submitting an application.
35.107   Work plans.
35.108   Funding period.
35.109   Consolidated grants.

EPA Action on Application

35.110   Time frame for EPA action.
35.111   Criteria for approving an application.
35.112   Factors considered in determining award amount.
35.113   Reimbursement for pre-award costs.

Post-Award Requirements

35.114   Amendments and other changes.
35.115   Evaluation of performance.
35.116   Direct implementation.
35.117   Unused funds.
35.118   Unexpended balances.

Performance Partnership Grants

35.130   Purpose of Performance Partnership Grants.
35.132   Requirements summary.
35.133   Programs eligible for inclusion.
35.134   Eligible recipients.
35.135   Activities eligible for funding.
35.136   Cost share requirements.
35.137   Application requirements.
35.138   Competitive grants.

Air Pollution Control (Section 105)

35.140   Purpose.
35.141   Definitions.
35.143   Allotment.
35.145   Maximum federal share.
35.146   Maintenance of effort.
35.147   Minimum cost share for a Performance Partnership Grant.
35.148   Award limitations.

Water Pollution Control (Section 106)

35.160   Purpose.
35.161   Definition.
35.162   Basis for allotment.
35.165   Maintenance of effort.
35.168   Award limitations.

Public Water System Supervision (Section 1443(a))

35.170   Purpose.
35.172   Allotment.
35.175   Maximum federal share.
35.178   Award limitations.

Underground Water Source Protection (Section 1443(b))

35.190   Purpose.
35.192   Basis for allotment.
35.195   Maximum federal share.
35.198   Award limitation.

Hazardous Waste Management (Section 3011(a))

35.210   Purpose.
35.212   Basis for allotment.
35.215   Maximum federal share.
35.218   Award limitation.

Pesticide Cooperative Enforcement (Section 23(a)(1))

35.230   Purpose.
35.232   Basis for allotment.
35.235   Maximum federal share.

Pesticide Applicator Certification and Training (Section 23(a)(2))

35.240 Purpose.
35.242   Basis for allotment.
35.245   Maximum federal share.

Pesticide Program Implementation (Section 23(a)(1))

35.250   Purpose.
35.251   Basis for allotment.
35.252   Maximum federal share.

Nonpoint Source Management (Section 319(h))

35.260   Purpose.
35.265   Maximum federal share.
35.266   Maintenance of effort.
35.268   Award limitations.

Lead-Based Paint Program (Section 404(g))

35.270   Purpose.
35.272   Funding coordination.

State Indoor Radon Grants (Section 306)

35.290   Purpose.
35.292   Basis for allotment.
35.295   Maximum federal share.
35.298   Award limitations.

Toxic Substances Compliance Monitoring (Section 28 )

35.310   Purpose.
35.312   Competitive process.
35.315   Maximum federal share.
35.318   Award limitation.

State Underground Storage Tanks (Section 2007(f)(2))

35.330   Purpose.
35.332   Basis for allotment.
35.335   Maximum federal share.

Pollution Prevention State Grants (Section 6605)

35.340   Purpose.
35.342   Competitive process.
35.343   Definitions.
35.345   Eligible applicants.
35.348   Award limitation.
35.349   Maximum federal share.

Water Quality Cooperative Agreements (Section 104(b)(3))

35.360   Purpose.
35.362   Competitive process.
35.364   Maximum federal share.

State Wetlands Development Grants (Section 104(b)(3))

35.380   Purpose.
35.382   Competitive process.
35.385   Maximum federal share.

State Administration (Section 205(g))

35.400   Purpose.
35.402   Allotment.
35.405   Maintenance of effort.
35.408   Award limitations.

Water Quality Management Planning (Section 205(j)(2))

35.410   Purpose.
35.412   Allotment.
35.415   Maximum federal share.
35.418   Award limitations.

Subpart A--Environmental Program Grants

    Authority: 42 U.S.C. 7401 et seq.; 33 U.S.C. 1251 et seq.; 42 
U.S.C. 300f et seq.; 42 U.S.C. 6901 et seq.; 7 U.S.C. 136 et seq.; 
15 U.S.C. 2601 et seq.; 42 U.S.C. 13101 et seq.; Pub. L. 104-134, 
110 Stat. 1321, 1321-299 (1996); Pub. L. 105-65, 111 Stat. 1344, 
1373 (1997).

General


Sec. 35.100  Purpose of the subpart.

    This subpart establishes administrative requirements for all grants 
awarded to State, interstate, and local agencies and other entities for 
the environmental programs listed in Sec. 35.101. This subpart 
supplements requirements in EPA's general grant regulations found at 40 
CFR parts 30 and 31. Sections 35.100--35.118 contain administrative 
requirements that apply

[[Page 1735]]

to all environmental program grants included in this subpart. Sections 
35.130-35.418 contain requirements that apply to specified 
environmental program grants. Many of these environmental programs also 
have programmatic and technical requirements that are published 
elsewhere in the Code of Federal Regulations.


Sec. 35.101  Environmental programs covered by the subpart.

    (a) The requirements in this subpart apply to all grants awarded 
for the following programs:
    (1) Performance partnership grants (Omnibus Consolidated 
Rescissions and Appropriations Act of 1996, Pub. Law 104-134, 110 Stat. 
1321, 1321-299 (1996) and Departments of Veterans Affairs and Housing 
and Urban Development, and Independent Agencies Appropriations Act, 
1998, Pub. Law 105-65, 111 Stat. 1344, 1373 (1997)).
    (2) Air pollution control (section 105 of the Clean Air Act).
    (3) Water pollution control (section 106 of the Clean Water Act).
    (4) Public water system supervision (section 1443(a) of the Safe 
Drinking Water Act).
    (5) Underground water source protection (section 1443(b) of the 
Safe Drinking Water Act).
    (6) Hazardous waste management (section 3011(a) of the Solid Waste 
Disposal Act).
    (7) Pesticide cooperative enforcement (section 23(a)(1) of the 
Federal Insecticide, Fungicide, and Rodenticide Act).
    (8) Pesticide applicator certification and training (section 
23(a)(2) of the Federal Insecticide, Fungicide, and Rodenticide Act).
    (9) Pesticide program implementation (section 23(a)(1) of the 
Federal Insecticide, Fungicide, and Rodenticide Act).
    (10) Nonpoint source management (sections 205(j)(5) and 319(h) of 
the Clean Water Act).
    (11) Lead-based paint program (section 404(g) of the Toxic 
Substances Control Act).
    (12) State indoor radon grants (section 306 of the Toxic Substances 
Control Act).
    (13) Toxic substances compliance monitoring (section 28 of the 
Toxic Substances Control Act).
    (14) State underground storage tanks (section 2007(f)(2) of the 
Solid Waste Disposal Act).
    (15) Pollution prevention state grants (section 6605 of the 
Pollution Prevention Act of 1990).
    (16) Water quality cooperative agreements (section 104(b)(3) of the 
Clean Water Act).
    (17) Wetlands development grants program (section 104(b)(3) of the 
Clean Water Act).
    (18) State administration of construction grant, permit, and 
planning programs (section 205(g) of the Clean Water Act).
    (19) Water quality management planning (section 205(j)(2) of the 
Clean Water Act).
    (b) Unless otherwise prohibited by statute or regulation, the 
requirements in Sec. 35.100 through Sec. 35.118 of this subpart also 
apply to grants under environmental programs established after this 
subpart becomes effective if specified in Agency guidance for such 
programs.
    (c) In the event a grant is awarded from EPA headquarters for one 
of the programs listed in paragraph (a) of this section, this subpart 
shall apply and the term ``Regional Administrator'' shall mean 
``Assistant Administrator'.


Sec. 35.102  Definitions of terms.

    Terms are defined as follows when they are used in this subpart.
    Allotment. EPA's calculation of the funds that may be available to 
an eligible recipient for an environmental program grant. An allotment 
is not an entitlement.
    Consolidated grant. A single grant made to a recipient 
consolidating funds from more than one environmental grant program. 
After the award is made, recipients must account for grant funds in 
accordance with the funds' original environmental program sources. 
Consolidated grants are not Performance Partnership Grants.
    Funding period. The period of time specified in the grant agreement 
during which the recipient may expend or obligate funds for the 
purposes set forth in the agreement.
    Environmental program. A program for which EPA awards grants under 
the authorities listed in Sec. 35.101. The grants are subject to the 
requirements of this subpart.
    National program guidance. Guidance issued by EPA's National 
Program Managers for establishing and maintaining effective 
environmental programs. This guidance establishes national goals, 
objectives, and priorities as well as the core performance measures and 
other information to be used in monitoring progress. The guidance may 
also set out specific environmental strategies, criteria for evaluating 
programs, and other elements of program implementation.
    Outcome. The environmental result, effect, or consequence that will 
occur from carrying out an environmental program or activity that is 
related to an environmental or programmatic goal or objective. Outcomes 
must be quantitative, and they may not necessarily be achievable during 
a grant funding period. See ``output.''
    Output. An environmental activity or effort and associated work 
products related to an environmental goal or objective that will be 
produced or provided over a period of time or by a specified date. 
Outputs may be quantitative or qualitative but must be measurable 
during a grant funding period. See ``outcome.''
    Performance Partnership Agreement. A negotiated agreement signed by 
the EPA Regional Administrator and an appropriate official of a State 
agency and designated as a Performance Partnership Agreement. Such 
agreements typically set out jointly developed goals, objectives, and 
priorities; the strategies to be used in meeting them; the roles and 
responsibilities of the State and EPA; and the measures to be used in 
assessing progress. A Performance Partnership Agreement may be used as 
all or part of a work plan for a grant if it meets the requirements for 
a work plan set out in Sec. 35.107.
    Performance Partnership Grant. A single grant combining funds from 
more than one environmental program. A Performance Partnership Grant 
may provide for administrative savings or programmatic flexibility to 
direct grant resources where they are most needed to address public 
health and environmental priorities (see also Sec. 35.130). Each 
Performance Partnership Grant has a single, integrated budget and 
recipients do not need to account for grant funds in accordance with 
the funds' original environmental program sources.
    Planning target. The amount of funds that the Regional 
Administrator suggests a grant applicant consider in developing its 
application, including the work plan, for an environmental program.
    Regional supplemental guidance. Guidance to environmental program 
applicants prepared by the Regional Administrator, based on the 
national program guidance and specific regional and applicant 
circumstances, for use in preparing a grant application.
    Work plan commitments. The outputs and outcomes associated with 
each work plan component, as established in the grant agreement.
    Work plan component. A negotiated set or group of work plan 
commitments established in the grant agreement. A

[[Page 1736]]

work plan may have one or more work plan components.

Preparing an Application


Sec. 35.104  Components of a complete application.

    A complete application for an environmental program must:
    (a) Meet the requirements in 40 CFR part 31, subpart B;
    (b) Include a proposed work plan (Sec. 35.107); and
    (c) Specify the environmental program and the amount of funds 
requested.


Sec. 35.105  Time frame for submitting an application.

    An applicant should submit a complete application to EPA at least 
60 days before the beginning of the proposed funding period.


Sec. 35.107  Work plans.

    (a) Bases for negotiating work plans. The work plan is negotiated 
between the applicant and the Regional Administrator and reflects 
consideration of national, regional, and State environmental and 
programmatic needs and priorities.
    (1) Negotiation considerations. In negotiating the work plan, the 
Regional Administrator and applicant will consider such factors as 
national program guidance; any regional supplemental guidance; goals, 
objectives, and priorities proposed by the applicant; other jointly 
identified needs or priorities; and the planning target.
    (2) National program guidance. If an applicant proposes a work plan 
that differs significantly from the goals and objectives, priorities, 
or core performance measures in the national program guidance 
associated with the proposed activities, the Regional Administrator 
must consult with the appropriate National Program Manager before 
agreeing to the work plan.
    (3) Use of existing guidance. An applicant should base the grant 
application on the national program guidance in place at the time the 
application is being prepared.
    (b) Work plan requirements. (1) The work plan is the basis for the 
management and evaluation of performance under the grant agreement.
    (2) An approvable work plan must specify:
    (i) The work plan components to be funded under the grant;
    (ii) The estimated work years and the estimated funding amounts for 
each work plan component;
    (iii) The work plan commitments for each work plan component and a 
time frame for their accomplishment;
    (iv) A performance evaluation process and reporting schedule in 
accordance with Sec. 35.115 of this subpart; and
    (v) The roles and responsibilities of the recipient and EPA in 
carrying out the work plan commitments.
    (3) The work plan must be consistent with applicable federal 
statutes; regulations; circulars; executive orders; and EPA 
delegations, approvals, or authorizations.
    (c) Performance Partnership Agreement as work plan. An applicant 
may use a Performance Partnership Agreement or a portion of a 
Performance Partnership Agreement as the work plan for an environmental 
program grant if the portions of the Performance Partnership Agreement 
that serve as all or part of the grant work plan:
    (1) Are clearly identified and distinguished from other portions of 
the Performance Partnership Agreement; and
    (2) Meet the requirements in Sec. 35.107(b).


Sec. 35.108  Funding period.

    The Regional Administrator and applicant may negotiate the length 
of the funding period for environmental program grants, subject to 
limitations in appropriations acts.


Sec. 35.109  Consolidated grants.

    (a) Any applicant eligible to receive funds from more than one 
environmental program may submit an application for a consolidated 
grant. For consolidated grants, an applicant prepares a single budget 
and work plan covering all of the environmental programs included in 
the application. The consolidated budget must identify each 
environmental program to be included, the amount of each program's 
funds, and the extent to which each program's funds support each work 
plan component. Recipients of consolidated grants must account for 
grant funds in accordance with the funds' environmental program 
sources; funds included in a consolidated grant from a particular 
environmental program may be used only for that program.
    (b) Insular areas that choose to consolidate environmental program 
grants may be exempted by the Regional Administrator from requirements 
of this subpart in accordance with 48 U.S.C. 1469a.

EPA Action on Application


Sec. 35.110  Time frame for EPA action.

    The Regional Administrator will review a complete application and 
either approve, conditionally approve, or disapprove it within 60 days 
of receipt. This period may be extended by mutual agreement between EPA 
and the applicant. The Regional Administrator will award the funds for 
approved or conditionally approved applications when the funds are 
available.


Sec. 35.111  Criteria for approving an application.

    (a) The Regional Administrator may approve an application upon 
determining that:
    (1) The application meets the requirements of this subpart and 40 
CFR part 31;
    (2) The application meets the requirements of all applicable 
federal statutes; regulations; circulars; executive orders; and 
delegations, approvals, or authorizations;
    (3) The proposed work plan complies with the requirements of 
Sec. 35.107; and
    (4) The achievement of the proposed work plan is feasible, 
considering such factors as the applicant's existing circumstances, 
past performance, program authority, organization, resources, and 
procedures.
    (b) If the Regional Administrator finds the application does not 
satisfy the criteria in paragraph (a) of this section, the Regional 
Administrator may either:
    (1) Conditionally approve the application if only minor changes are 
required, with grant conditions necessary to ensure compliance with the 
criteria, or
    (2) Disapprove the application in writing.


Sec. 35.112  Factors considered in determining award amount.

    (a) After approving an application under Sec. 35.111, the Regional 
Administrator will consider such factors as the applicant's allotment, 
the extent to which the proposed work plan is consistent with EPA 
guidance and mutually agreed upon priorities, and the anticipated cost 
of the work plan relative to the proposed work plan components, to 
determine the amount of funds to be awarded.
    (b) If the Regional Administrator finds the requested level of 
funding is not justified or the work plan does not comply with the 
requirements of Sec. 35.107, the Regional Administrator will attempt to 
negotiate a resolution of the issues with the applicant before 
determining the award amount. The Regional Administrator may determine 
that the award amount will be less than the amount allotted or 
requested.


Sec. 35.113  Reimbursement for pre-award costs.

    (a) Notwithstanding the requirements of 40 CFR 31.23(a) and OMB 
cost principles, EPA may reimburse recipients for pre-award costs 
incurred

[[Page 1737]]

from the beginning of the funding period established in the grant 
agreement if such costs would have been allowable if incurred after the 
award and the recipients submitted complete grant applications before 
the beginning of the budget period. Such costs must be identified in 
the grant application EPA approves.
    (b) The applicant incurs pre-award costs at its own risk. EPA is 
under no obligation to reimburse such costs unless they are included in 
an approved grant award.

Post-Award Requirements


Sec. 35.114  Amendments and other changes.

    The provisions of 40 CFR 31.30 do not apply to environmental 
program grants awarded under this subpart. The following provisions 
govern amendments and other changes to grant work plans and budgets 
after the work plan is negotiated and a grant awarded.
    (a) Changes requiring prior approval. Recipients may make 
significant changes in work plan commitments only after obtaining the 
Regional Administrator's prior written approval. EPA, in consultation 
with the recipient, will document these revisions including budgeted 
amounts associated with the revisions.
    (b) Changes requiring approval. Recipients must request, in 
writing, grant amendments for changes requiring increases in 
environmental program grant amounts and extensions of the funding 
period. Recipients may begin implementing a change before the amendment 
has been approved by EPA, but do so at their own risk. If EPA approves 
the change, EPA will issue a grant amendment. EPA will notify the 
recipient in writing if the change is disapproved.
    (c) Changes not requiring approval. Other than those situations 
described in paragraphs (a) and (b) of this section, recipients do not 
need to obtain approval for changes, including changes in grant work 
plans, budgets, or other components of grant agreements, unless the 
Regional Administrator determines approval requirements should be 
imposed on a specific recipient for a specified period of time.
    (d) OMB cost principles. The Regional Administrator may waive in 
writing approval requirements for specific recipients and costs 
contained in OMB cost principles.
    (e) Changes in consolidated grants. Recipients of consolidated 
grants under Sec. 35.109 may not transfer funds among environmental 
programs.
    (f) Subgrants. Subgrantees must request required approvals in 
writing from the recipient and the recipient shall approve or 
disapprove the request in writing. A recipient will not approve any 
work plan or budget revision which is inconsistent with the purpose or 
terms and conditions of the federal grant to the recipient. If the 
revision requested by the subgrantee would result in a significant 
change to the recipient's approved grant which requires EPA approval, 
the recipient will obtain EPA's approval before approving the 
subgrantee's request.


Sec. 35.115  Evaluation of performance.

    (a) Joint evaluation process. The applicant and the Regional 
Administrator will develop a process for jointly evaluating and 
reporting progress and accomplishments under the work plan. A 
description of the evaluation process and a reporting schedule must be 
included in the work plan (see Sec. 35.107(b)(2)(iv)). The schedule 
must require the recipient to report at least annually and must satisfy 
the requirements for progress reporting under 40 CFR 31.40(b).
    (b) Elements of the evaluation process. The evaluation process must 
provide for:
    (1) A discussion of accomplishments as measured against work plan 
commitments;
    (2) A discussion of the cumulative effectiveness of the work 
performed under all work plan components;
    (3) A discussion of existing and potential problem areas; and
    (4) Suggestions for improvement, including, where feasible, 
schedules for making improvements.
    (c) Resolution of issues. If the joint evaluation reveals that the 
recipient has not made sufficient progress under the work plan, the 
Regional Administrator and the recipient will negotiate a resolution 
that addresses the issues. If the issues cannot be resolved through 
negotiation, the Regional Administrator may take appropriate measures 
under 40 CFR 31.43. The recipient may request review of the Regional 
Administrator's decision under the dispute processes in 40 CFR 31.70.
    (d) Evaluation reports. The Regional Administrator will ensure that 
the required evaluations are performed according to the negotiated 
schedule and that copies of evaluation reports are placed in the 
official files and provided to the recipient.


Sec. 35.116  Direct implementation.

    If funds remain in a State's allotment for an environmental program 
grant either after grants for that environmental program have been made 
or because no grant was made, the Regional Administrator may, subject 
to any limitations contained in appropriation acts, use all or part of 
the funds to support a federal program required by law in the State in 
the absence of an acceptable State program.


Sec. 35.117  Unused funds.

    If funds for an environmental program grant remain in a State's 
allotment either after an initial environmental program grant has been 
made or because no grant was made, and the Regional Administrator does 
not use the funds under Sec. 35.116 of this subpart, the Regional 
Administrator may award the funds to any eligible recipient in the 
region, including the same State or an Indian Tribe or Tribal 
consortium, for the same environmental program or for a Performance 
Partnership Grant, subject to any limitations in appropriation acts.


Sec. 35.118  Unexpended balances.

    Subject to any relevant provisions of law, if a recipient's 
Financial Status Report shows unexpended balances, the Regional 
Administrator will deobligate the unexpended balances and make them 
available, to either the same recipient in the same region or other 
eligible recipients, including Indian Tribes and Tribal Consortia, for 
environmental program grants.

Performance Partnership Grants


Sec. 35.130  Purpose of Performance Partnership Grants.

    (a) Purpose of section. Sections 35.130 through 35.138 govern 
Performance Partnership Grants to States and interstate agencies 
authorized in the Omnibus Consolidated Rescissions and Appropriations 
Act of 1996, (Pub. L. 104-134; 110 Stat. 1321, 1321-299 (1996)) and the 
Departments of Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act, 1998, (Pub. L. 105-65; 111 
Stat. 1344, 1373 (1997)).
    (b) Purpose of program. Performance Partnership Grants enable 
States and interstate agencies to combine funds from more than one 
environmental program grant into a single grant with a single budget. 
Recipients do not need to account for Performance Partnership Grant 
funds in accordance with the funds' original environmental program 
sources; they need only account for total Performance Partnership Grant 
expenditures subject to the requirements of this subpart. The 
Performance Partnership Grant program is designed to:
    (1) Strengthen partnerships between EPA and State and interstate 
agencies

[[Page 1738]]

through joint planning and priority-setting and better deployment of 
resources;
    (2) Provide State and interstate agencies with flexibility to 
direct resources where they are most needed to address environmental 
and public health priorities;
    (3) Link program activities more effectively with environmental and 
public health goals and program outcomes;
    (4) Foster development and implementation of innovative approaches 
such as pollution prevention, ecosystem management, and community-based 
environmental protection strategies; and
    (5) Provide savings by streamlining administrative requirements.


Sec. 35.132  Requirements summary.

    Applicants and recipients of Performance Partnership Grants must 
meet:
    (a) The requirements in Secs. 35.100 to 35.118, which apply to all 
environmental program grants, including Performance Partnership Grants; 
and
    (b) The requirements in Secs. 35.130 to 35.138, which apply only to 
Performance Partnership Grants.


Sec. 35.133  Programs eligible for inclusion.

    (a) Eligible programs. Except as provided in paragraph (b) of this 
section, the environmental programs eligible, in accordance with 
appropriation acts, for inclusion in a Performance Partnership Grant 
are listed in Sec. 35.101(a)(2) through (17). (Funds available from the 
section 205(g) State Administration Grants program (Sec. 35.100(b)(18)) 
and the Water Quality Management Planning Grant program 
(Sec. 35.100(b)(19)) may not be included in Performance Partnership 
Grants.)
    (b) Changes in eligible programs. The Administrator may, in 
guidance or regulation, describe subsequent additions, deletions, or 
changes to the list of environmental programs eligible for inclusion in 
Performance Partnership Grants.


Sec. 35.134  Eligible recipients.

    (a) Eligible agencies. All State agencies (including environmental, 
health, agriculture, and other agencies) and interstate agencies 
eligible to receive funds from more than one environmental program may 
receive Performance Partnership Grants
    (b) Designated agency. A State agency must be designated by a 
Governor, State legislature, or other authorized State process to 
receive grants under each of the environmental programs to be combined 
in the Performance Partnership Grant. If it is not the designated 
agency for a particular grant program to be included in the Performance 
Partnership Grant, the State agency must have an agreement with the 
State agency that does have the designation regarding how the funds 
will be shared between the agencies.
    (c) Programmatic requirements. In order to include funds from an 
environmental program grant listed in Sec. 35.101 of this subpart in a 
Performance Partnership Grant, applicants must meet the requirements 
for award of each of the environmental programs from which funds are 
combined in the agency's Performance Partnership Grant, except the 
requirements at Secs. 35.268(b) and (c), 35.272, and 35.298 (c), (d), 
(e), and (g). These requirements can be found in this regulation 
beginning at Sec. 35.140.


Sec. 35.135  Activities eligible for funding.

    (a) A recipient may use a Performance Partnership Grant, subject to 
the requirements of paragraph (c) of this section, to fund any activity 
that is eligible for funding under at least one of the environmental 
programs from which funds are combined into the grant.
    (b) A recipient may also use a Performance Partnership Grant to 
fund multi-media activities that are eligible in accordance with 
paragraph (a) of this section and have been agreed to by the Regional 
Administrator. Such activities may include multi-media permitting and 
enforcement and pollution prevention, ecosystem management, community-
based environmental protection, and other innovative approaches.
    (c) A recipient may not use a Performance Partnership Grant to fund 
activities eligible only under a specific environmental program grant 
unless some or all of the recipient's allotted funds for that program 
have been included in the Performance Partnership Grant.


Sec. 35.136  Cost share requirements.

    (a) An applicant for a Performance Partnership Grant must provide a 
non-federal cost share that is not less than the sum of the minimum 
non-federal cost share required under each of the environmental 
programs that are combined in the Performance Partnership Grant. Cost 
share requirements for the individual environmental programs are 
described in Secs. 35.140 to 35.418.
    (b) When an environmental program included in the Performance 
Partnership Grant has both a matching and maintenance of effort 
requirement, the greater of the two amounts will be used to calculate 
the minimum cost share attributed to that environmental program.


Sec. 35.135  Application requirements.

    (a) An application for a Performance Partnership Grant must 
contain:
    (1) A list of the environmental programs and the amount of funds 
from each program to be combined in the Performance Partnership Grant;
    (2) A consolidated budget;
    (3) A consolidated work plan that addresses each program being 
combined in the grant and that meets the requirements of Sec. 35.107; 
and,
    (4) A rationale, commensurate with the extent of any programmatic 
flexibility (i.e., increased effort in some programs and decreased 
effort in others) indicated in the work plan, that explains the basis 
for the applicant's priorities, the expected environmental or other 
benefits to be achieved, and the anticipated impact on any 
environmental programs or program areas proposed for reduced effort.
    (b) The applicant and the Regional Administrator will negotiate 
regarding the information necessary to support the rationale for 
programmatic flexibility required in paragraph (a)(4) of this section. 
The rationale may be supported by information from a variety of 
sources, including a Performance Partnership Agreement or comparable 
negotiated document, the evaluation report required in Sec. 35.125, and 
other environmental and programmatic data sources.
    (c) A State agency seeking programmatic flexibility is encouraged 
to include a description of efforts to involve the public in developing 
the State agency's priorities.


Sec. 35.138  Competitive grants.

    (a) Some environmental program grants are awarded through a 
competitive process. An applicant and the Regional Administrator may 
agree to add funds available for a competitive grant to a Performance 
Partnership Grant. If this is done, the work plan commitments that 
would have been included in the competitive grant must be included in 
the Performance Partnership Grant work plan. After the funds have been 
added to the Performance Partnership Grant, the recipient does not need 
to account for these funds in accordance with the funds' original 
environmental program source.
    (b) If the projected completion date for competitive grant work 
plan commitments added to a Performance Partnership Grant is after the 
end of the

[[Page 1739]]

Performance Partnership Grant funding period, the Regional 
Administrator and the applicant will agree in writing as to how the 
work plan commitments will be carried over into future work plans.

Air Pollution Control (Section 105)


Sec. 35.140  Purpose.

    (a) Purpose of section. Sections 35.140 through 35.148 govern Air 
Pollution Control Grants to State, local, interstate, or intermunicipal 
air pollution control agencies (as defined in section 302(b) of the 
Clean Air Act) authorized under section 105 of the Act.
    (b) Purpose of program. Air Pollution Control Grants are awarded to 
administer programs that prevent and control air pollution or implement 
national ambient air quality standards.
    (c) Program regulations. Refer to 40 CFR parts 49, 50, 51, 52, 58, 
60, 61, 62, and 81 for associated program regulations.


Sec. 35.141  Definitions.

    In addition to the definitions in Sec. 35.102, the following 
definitions apply to the Clean Air Act's section 105 grant program:
    Implementing means any activity related to planning, developing, 
establishing, carrying-out, improving, or maintaining programs for the 
prevention and control of air pollution or implementation of national 
primary and secondary ambient air quality standards.
    Nonrecurrent expenditures are those expenditures which are shown by 
the recipient to be of a nonrepetitive, unusual, or singular nature 
that would not reasonably be expected to recur in the foreseeable 
future. Costs categorized as nonrecurrent must be approved in the grant 
agreement or an amendment thereto.
    Recurrent expenditures are those expenses associated with the 
activities of a continuing environmental program. All expenditures are 
considered recurrent unless justified by the applicant as nonrecurrent 
and approved as such in the grant award or an amendment thereto.


Sec. 35.143  Allotment.

    (a) The Administrator allots air pollution control funds under 
section 105 of the Clean Air Act based on a number of factors, 
including:
    (1) Population;
    (2) The extent of actual or potential air pollution problems; and
    (3) The financial need of each agency.
    (b) The Regional Administrator shall allot to a State not less than 
one-half of one percent nor more than 10 percent of the annual section 
105 grant appropriation.
    (c) The Administrator may award funds on a competitive basis.


Sec. 35.145  Maximum federal share.

    (a) The Regional Administrator may provide air pollution control 
agencies, as defined in section 302(b) of the Clean Air Act, up to 
three-fifths of the approved costs of implementing programs for the 
prevention and control of air pollution or implementing national 
primary and secondary ambient air quality standards.
    (b) Revenue collected pursuant to a State's Title V operating 
permit program may not be used to meet the cost share requirements of 
section 105.


Sec. 35.146  Maintenance of effort.

    (a) To receive funds under section 105, an agency must expend 
annually, for recurrent section 105 program expenditures, an amount of 
non-federal funds at least equal to such expenditures during the 
preceding fiscal year.
    (b) In order to award grants in a timely manner each fiscal year, 
the Regional Administrator shall compare an agency's proposed 
expenditure level, as detailed in the agency's grant application, to 
that agency's expenditure level in the second preceding fiscal year. 
When expenditure data for the preceding fiscal year is complete, the 
Regional Administrator shall use this information to determine the 
agency's compliance with its maintenance of effort requirement.
    (c) If the expenditure data for the preceding fiscal year shows 
that an agency did not meet the requirements of Sec. 35.146, the 
Regional Administrator will take action to recover the grant funds for 
the year in which the agency did not maintain its level of effort.
    (d) The Regional Administrator may grant an exception to 
Sec. 35.146(a) if, after notice and opportunity for a public hearing, 
the Regional Administrator determines that a reduction in expenditure 
is attributable to a non-selective reduction of the programs of all 
executive branch agencies of the applicable unit of government.
    (e) The Regional Administrator will not award section 105 funds 
unless the applicant provides assurance that the grant will not 
supplant non-federal funds that would otherwise be available for 
maintaining the section 105 program.


Sec. 35.147  Minimum cost share for a Performance Partnership Grant.

    (a) To calculate the cost share for a Performance Partnership Grant 
(see Secs. 35.130 through 35.138) in the initial and subsequent years 
that it includes section 105 funds, the minimum cost share contribution 
for the section 105 program will be the match requirement set forth in 
Sec. 35.145, or the maintenance of effort established under Sec. 35.146 
in the first year that the section 105 grant is included in a 
Performance Partnership Grant, whichever is greater.
    (b) If an air pollution control agency includes its section 105 air 
program funding in a Performance Partnership Grant and subsequently 
withdraws that program from the grant:
    (1) The required maintenance of effort amount for the section 105 
program for the first year after the program is withdrawn will be equal 
to the maintenance of effort amount required in the year the agency 
included the section 105 program in the Performance Partnership Grant.
    (2) The maximum federal share for the section 105 program in the 
first and subsequent years after the grant is withdrawn may not be more 
than three-fifths of the approved cost of the program.
    (c) The Regional Administrator may approve an exception from 
paragraph (b) of this section upon determining that exceptional 
circumstances justify a reduction in the maintenance of effort, 
including when an air pollution control agency reduces section 105 
funding as part of a non-selective reduction of the programs of all 
executive branch agencies of the applicable unit of government.


Sec. 35.148  Award limitations.

    (a) The Regional Administrator will not award section 105 funds to 
an interstate or intermunicipal agency:
    (1) That does not provide assurance that it can develop a 
comprehensive plan for the air quality control region which includes 
representation of appropriate State, interstate, local, Tribal, and 
international interests; and
    (2) Without consulting with the appropriate official designated by 
the Governor or Governors of the State or States affected or the 
appropriate official of any affected Indian Tribe or Tribes.
    (b) The Regional Administrator will not disapprove an application 
for or terminate or annul a section 105 grant without prior notice and 
opportunity for a public hearing in the affected State or States.

Water Pollution Control (Section 106)


Sec. 35.160  Purpose.

    (a) Purpose of section. Sections 35.160 through 35.168 govern Water 
Pollution Control Grants to State and interstate agencies (as defined 
in section 502 of the Clean Water Act) authorized under section 106 of 
the Clean Water Act.

[[Page 1740]]

    (b) Purpose of program. Water Pollution Control Grants are awarded 
to assist in administering programs for the prevention, reduction, and 
elimination of water pollution, including programs for the development 
and implementation of ground-water protection strategies. Some of these 
activities may also be eligible for funding under sections 104(b)(3) 
(Water Quality Cooperative Agreements and Wetlands Development Grants), 
205(j)(2) (Water Quality Management Planning), and section 205(g) 
(State Administration Grants) of the Clean Water Act. (See 
Secs. 35.160, 35.360, 35.380, 35.400, and 35.410.)
    (c) Associated program requirements. Program requirements for water 
quality planning and management activities are provided in 40 CFR part 
130.


Sec. 35.161  Definition.

    Recurrent expenditures are those expenditures associated with the 
activities of a continuing Water Pollution Control program. All 
expenditures, except those for equipment purchases of $5,000 or more, 
are considered recurrent unless justified by the applicant as 
nonrecurrent and approved as such in the grant award or an amendment 
thereto.


Sec. 35.162  Basis for allotment.

    (a) Allotments. Each fiscal year funds appropriated for Water 
Pollution Control grants to State and interstate agencies will be 
allotted to States and interstate agencies on the basis of the extent 
of the pollution problems in the respective States. A portion of the 
funds appropriated for States under the Water Pollution Control grant 
program will be set aside for allotment to eligible interstate 
agencies. The interstate allotment will be 2.6 percent of the funds 
available under this paragraph.
    (b) State allotment formula. The Water Pollution Control State 
grant allotment formula establishes an allotment ratio for each State 
based on six components selected to reflect the extent of the water 
pollution problem in the respective States. The formula provides a 
funding floor for each State with provisions for periodic adjustments 
for inflation and a maximum funding level (150 percent of its previous 
fiscal year allotment).
    (1) Components and component weights. (i) Components. The six 
components used in the Water Pollution Control State grant allotment 
formula are: Surface Water Area; Ground Water Use; Water Quality 
Impairment; Point Sources; Nonpoint Sources; and Population of 
Urbanized Area. The components for the formula are presented in Table 1 
of this section, with their associated elements, sub-elements, and 
supporting data sources.

BILLING CODE 6560-50-P

[[Page 1741]]

[GRAPHIC] [TIFF OMITTED] TR09JA01.019

    (ii) Component weights. To account for the fact that not all of the 
selected formula components contribute equally to the extent of the 
pollution problem within the States, each formula component is weighted 
individually. Final component weights will be phased-in by Fiscal Year 
(FY) 2004,

[[Page 1742]]

according to the schedule presented in Table 2 of this section:

            Table 2.--Component Weights in the Water Pollution Control State Grant Allotment Formula
----------------------------------------------------------------------------------------------------------------
                                                                      FY 2000      FY2001-FY2003      FY2004+
                            Component                                (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Surface Water Area..............................................              13              13              12
Ground Water Use................................................              11              12              12
Water Quality Impairment........................................              13              25              35
Point Sources...................................................              25              17              13
Nonpoint Sources................................................              18              15              13
Population of Urbanized Area....................................              20              18              15
                                                                 -----------------------------------------------
    Total.......................................................             100             100             100
----------------------------------------------------------------------------------------------------------------

    (2) Funding floor. A funding floor is established for each State. 
Each State's funding floor will be at least equal to its FY 2000 
allotment in all future years unless the funds appropriated for States 
under the Water Pollution Control grant program decrease from the FY 
2000 amount.
    (3) Funding decrease. If the appropriation for Water Pollution 
Control State grants decreases in future years, the funding floor will 
be disregarded and all State allotments will be reduced by an equal 
percentage.
    (4) Inflation adjustment. Funding floors for each State will be 
adjusted for inflation when the funds appropriated for Water Pollution 
Control State grants increase from the preceding fiscal year. These 
adjustments will be made on the basis of the cumulative change in the 
Consumer Price Index (CPI), published by the U.S. Department of Labor, 
since the most recent year in which Water Pollution Control State grant 
funding last increased. Inflation adjustments to State funding floors 
will be capped at the lesser of the percentage change in appropriated 
funds or the cumulative percentage change in the inflation rate.
    (5) Cap on annual funding increases. The maximum allotment to any 
State will be 150 percent of that State's allotment for the previous 
fiscal year.
    (6) Cap on component ratio. A component ratio is equal to each 
State's share of the national total of a single component. The cap on 
each of the six State formula components ratios is 10 percent. If a 
State's calculated component ratio for a particular component exceeds 
the 10 percent cap, the State will instead be assigned 10 percent for 
that component. The component ratios for all other States will be 
adjusted accordingly.
    (7) Update cycle. The data used in the State formula will be 
periodically updated. The first update will impact allotments for FY 
2001, and will consist of updating the data used to support the Water 
Quality Impairment component of the formula. These data will be updated 
using the currently available Clean Water Act section 305(b) reports. 
After this initial update, the data used to support all six components 
of the Water Pollution Control State grant allotment formula will be 
updated in FY 2003 (for use in the determination of FY 2004 
allotments). Thereafter, all data will be updated every five years 
(e.g., in FY 2008 for FY 2009 allotments and in FY 2013 for FY 2014 
allotments.) There will be an annual adjustment to the funding floor 
for all States, based on the appropriation for Water Pollution Control 
State grants and changes in the CPI.
    (c) Interstate allotment formula. EPA will set-aside 2.6 percent of 
the funds appropriated for the Water Pollution Control State grant 
program for interstate agencies. The interstate agency Water Pollution 
Control grant allotment formula consists of two parts: a base allotment 
and a variable allotment.
    (1) Base allotment. Each eligible interstate agency shall be 
provided a base allotment of $125,000 to help fund coordination 
activities among its member States. However, no more than 50 percent of 
the total available interstate set-aside may be allotted as part of the 
base allotment. If, given the 50 percent limitation placed on the base 
allotment, the amount of interstate set-aside funds is insufficient to 
provide each interstate agency with $125,000, then each interstate 
agency will receive a base allotment equal to 50 percent of the total 
interstate set-aside divided by the total number of eligible interstate 
agencies.
    (2) Variable allotment. The variable allotment provides for funds 
to be distributed to interstate agencies on the basis of the extent of 
the pollution problems in the respective States. Funds not allotted 
under the base allotment will be allotted to eligible interstate 
agencies based on each interstate agency's share of their member 
States' Water Pollution Control grant formula allotment ratios. Updates 
of the data for the six components of the Water Pollution Control State 
grant allocation formula will automatically result in corresponding 
updates to the variable allotment portion of the interstate allotments. 
The allotment ratios for those States involved in compacts with more 
than one interstate agency will be allocated among such interstate 
agencies based on the percentage of each State's territory that is 
situated within the drainage basin or watershed area covered by each 
compact.


Sec. 35.165  Maintenance of effort.

    To receive a Water Pollution Control grant, a State or interstate 
agency must expend annually for recurrent section 106 program 
expenditures an amount of non-federal funds at least equal to 
expenditures during the fiscal year ending June 30, 1971.


Sec. 35.168  Award limitations.

    (a) The Regional Administrator may award section 106 funds to a 
State only if:
    (1) The State monitors and compiles, analyzes, and reports water 
quality data as described in section 106(e)(1) of the Clean Water Act;
    (2) The State has authority comparable to that in section 504 of 
the Clean Water Act and adequate contingency plans to implement such 
authority;
    (3) There is no federally-assumed enforcement as defined in section 
309(a)(2) of the Clean Water Act in effect with respect to the State 
agency;
    (4) The State's work plan shows that the activities to be funded 
are coordinated, as appropriate, with activities proposed for funding 
under sections 205(g) and (j) of the Clean Water Act; and
    (5) The State filed with the Administrator within 120 days after

[[Page 1743]]

October 18, 1972, a summary report of the current status of the State 
pollution control program, including the criteria used by the State in 
determining priority of treatment works.
    (b) The Regional Administrator may award section 106 funds to an 
interstate agency only if:
    (1) The interstate agency filed with the Administrator within 120 
days after October 18, 1972, a summary report of the current status of 
the State pollution control program, including the criteria used by the 
State in determining priority of treatment works.
    (2) There is no federally-assumed enforcement as defined in section 
309(a)(2) of the Clean Water Act in effect with respect to the 
interstate agency.

Public Water System Supervision (Section 1443(a))


Sec. 35.170  Purpose.

    (a) Purpose of section. Sections 35.170 through 35.178 govern 
Public Water System Supervision Grants to States (as defined in section 
1401 (13)(A) of the Safe Drinking Water Act) authorized under section 
1443(a) of the Act.
    (b) Purpose of program. Public Water System Supervision Grants are 
awarded to carry out public water system supervision programs including 
implementation and enforcement of the requirements of the Act that 
apply to public water systems.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 141, 142, and 143.


Sec. 35.172  Allotment.

    (a) Basis for allotment. The Administrator allots funds for grants 
to support States' Public Water System Supervision programs based on 
each State's population, geographic area, numbers of community and non-
community water systems, and other relevant factors.
    (b) Allotment limitation. No State, except American Samoa, Guam, 
the Virgin Islands, and the Commonwealth of the Northern Mariana 
Islands, shall be allotted less than $334,500 (which is one percent of 
the FY 1989 appropriation).


Sec. 35.175  Maximum federal share.

    The Regional Administrator may provide a maximum of 75 percent of 
the State's approved work plan costs.


Sec. 35.178  Award limitations.

    (a) Initial grants. The Regional Administrator will not make an 
initial award unless the applicant has an approved Public Water System 
Supervision program or agrees to establish an approvable program within 
one year of the initial award.
    (b) Subsequent grants. The Regional Administrator will not award a 
grant to a State after the initial award unless the applicant has 
assumed and maintained primary enforcement responsibility for the 
State's Public Water System Supervision program.

Underground Water Source Protection (Section 1443(b))


Sec. 35.190  Purpose.

    (a) Purpose of section. Sections 35.190 through 35.198 govern 
Underground Water Source Protection Grants to States (as defined in 
section 1401(13)(A) of the Safe Drinking Water Act) authorized under 
section 1443(b) of the Act.
    (b) Purpose of program. The Underground Water Source Protection 
Grants are awarded to carry out underground water source protection 
programs.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR 124, 144, 145, 146, and 147.


Sec. 35.192  Basis for allotment.

    The Administrator allots funds for grants to support State's 
underground water source protection programs based on such factors as 
population, geographic area, extent of underground injection practices, 
and other relevant factors.


Sec. 35.195  Maximum federal share.

    The Regional Administrator may provide a maximum of 75 percent of a 
State's approved work plant costs.


Sec. 35.198  Award limitation.

    The Regional Administrator will only award section 1443(b) funds to 
States that have primary enforcement responsibility for the underground 
water source protection program.

Hazardous Waste Management (Section 3011(a))


Sec. 35.210  Purpose.

    (a) Purpose of section. Sections 35.210 through 35.218 govern 
Hazardous Waste Management Grants to States (as defined in section 1004 
of the Solid Waste Disposal Act) under section 3011(a) of the Act.
    (b) Purpose of program. Hazardous Waste Management Grants are 
awarded to assist States in the development and implementation of 
authorized State hazardous waste management programs.
    (c) Associated program regulations. Associated program regulations 
are at 40 CFR part 124, subparts B, E, and F; 40 CFR parts 260 through 
266; 40 CFR parts 268 through 273; and 40 CFR part 279.


Sec. 35.212  Basis for allotment.

    The Administrator allots funds for Hazardous Waste Management 
Grants in accordance with section 3011(b) of the Solid Waste Disposal 
Act based on factors including:
    (a) The extent to which hazardous waste is generated, transported, 
treated, stored, and disposed of in the State;
    (b) The extent to which human beings and the environment in the 
State are exposed to such waste, and;
    (c) Other factors the Administrator deems appropriate.


Sec. 35.215  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plant costs.


Sec. 35.218  Award limitation.

    The Regional Administrator will not award Hazardous Waste 
Management Grants to a State with interim or final hazardous waste 
authorization unless the applicant is the lead agency designated in the 
authorization agreement.

Pesticide Cooperative Enforcement (Section 23(a)(1))


Sec. 35.230  Purpose.

    (a) Purpose of section. Sections 35.230 through 35.235 govern 
Pesticide Enforcement Cooperative Agreements to States (as defined in 
section 2 of Federal Insecticide, Fungicide, and Rodenticide Act) under 
section 23(a)(1) of the Act.
    (b) Purpose of program. Pesticides Enforcement Cooperative 
Agreements are awarded to assist States to implement pesticide 
enforcement programs.
    (c) Program regulations. Associated program regulations are at 40 
CFR parts 150 through 189 and 19 CFR part 12.


Sec. 35.232  Basis for allotment.

    (a) Factors for FIFRA enforcement program funding. The factors 
considered in allotment of funds for enforcement of FIFRA are:
    (1) The State's population,
    (2) The number of pesticide-producing establishments,
    (3) The numbers of certified private and commercial pesticide 
applicators,
    (4) The number of farms and their acreage, and
    (5) As appropriate, the State's potential farm worker protection 
concerns.
    (b) Final allotments. Final allotments are negotiated between each 
State and the appropriate Regional Administrator.

[[Page 1744]]

Sec. 35.235  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

Pesticide Applicator Certification and Training (Section 23(a)(2))


Sec. 35.240  Purpose.

    (a) Purpose of section. Sections 35.240 through 35.245 govern 
Pesticide Applicator Certification and Training Grants to States (as 
defined in section 2 of Federal Insecticide, Fungicide, and Rodenticide 
Act) under section 23(a)(2) of the Act.
    (b) Purpose of program. Pesticide Applicator Certification and 
Training Grants are awarded to train and certify restricted use 
pesticide applicators.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 162, 170, and 171.


Sec. 35.242  Basis for allotment.

    The Regional Administrator considers two factors in allotting 
pesticides applicator certification and training funds:
    (a) The number of farms in each State; and
    (b) The numbers of private and commercial applicators requiring 
certification and recertification in each State.


Sec. 35.245  Maximum federal share.

    The Regional Administrator may provide up to 50 percent of the 
approved work plan costs.

Pesticide Program Implementation (Section 23(a)(1))


Sec. 35.250  Purpose.

    (a) Purpose of section. Sections 35.250 through 35.259 govern 
Pesticide Program Implementation Cooperative Agreements to States (as 
defined in section 2 of Federal Insecticide, Fungicide, and Rodenticide 
Act) under section 23(a)(1) of the Act.
    (b) Purpose of program. Pesticide Program Implementation 
Cooperative Agreements are awarded to assist States to develop and 
implement pesticide programs, including programs that protect workers, 
groundwater, and endangered species from pesticide risks and for other 
pesticide management programs designated by the Administrator.
    (c) Program regulations. Associated program regulations are at 40 
CFR parts 150 through 189 and 19 CFR part 12.


Sec. 35.251  Basis for allotment.

    (a) Factors for pesticide program implementation funding. The 
factors considered in allotment of funds for pesticide program 
implementation are based upon potential ground water, endangered 
species, and worker protection concerns in each State relative to other 
States and on other factors the Administrator deems appropriate for 
these or other pesticide program implementation activities.
    (b) Final allotments. Final allotments are negotiated between each 
State and the appropriate Regional Administrator.


Sec. 35.252  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.

Nonpoint Source-Management (Section 319(h))


Sec. 35.260  Purpose.

    (a) Purpose of section. Sections 35.260 through 35.268 govern 
Nonpoint Source Management Grants to States (as defined in section 502 
of the Clean Water Act) authorized under section 319 of the Act.
    (b) Purpose of program. Nonpoint Source Management Grants may be 
awarded for the implementation of EPA-approved nonpoint source 
management programs, including ground-water quality protection 
activities, that will advance the implementation of a comprehensive 
approved nonpoint source management program.


Sec. 35.265  Maximum federal share.

    The Regional Administrator may provide up to 60 percent of the 
approved work plan costs in any fiscal year. The non-federal share of 
costs must be provided from non-federal sources.


Sec. 35.266  Maintenance of effort.

    To receive section 319 funds in any fiscal year, a State must agree 
to maintain its aggregate expenditures from all other sources for 
programs for controlling nonpoint pollution and improving the quality 
of the State's waters at or above the average level of such 
expenditures in Fiscal Years 1985 and 1986.


Sec. 35.268  Award limitations.

    The following limitations apply to funds appropriated and awarded 
under section 319(h) of the Act in any fiscal year.
    (a) Award amount. The Regional Administrator will award no more 
than 15 percent of the amount appropriated to carry out section 319(h) 
of the Act to any one State. This amount includes any grants to any 
local public agency or organization with authority to control pollution 
from nonpoint sources in any area of the State.
    (b) Financial assistance to persons. States may use funds for 
financial assistance to persons only to the extent that such assistance 
is related to the cost of demonstration projects.
    (c) Administrative costs. Administrative costs in the form of 
salaries, overhead, or indirect costs for services provided and charged 
against activities and programs carried out with these funds shall not 
exceed 10 percent of the funds the State receives in any fiscal year. 
The cost of implementing enforcement and regulatory activities, 
education, training, technical assistance, demonstration projects, and 
technology transfer programs are not subject to this limitation.
    (d) Requirements. The Regional Administrator will not award section 
319(h) funds to a State unless:
    (1) Approved assessment report. EPA has approved the State's 
assessment report on nonpoint sources, prepared in accordance with 
section 319(a) of the Act;
    (2) Approved State management program. EPA has approved the State's 
management program for nonpoint sources, prepared in accordance with 
section 319(b) of the Act;
    (3) Progress on reducing pollutant loadings. The Regional 
Administrator determines that the State made satisfactory progress in 
the preceding fiscal year in meeting its schedule for achieving 
implementation of best management practices to reduce pollutant 
loadings from categories of nonpoint sources, or particular nonpoint 
sources, designated in the State's management program. The State must 
have developed this schedule in accordance with section 319(b)(2)(c) of 
the Act;
    (4) Activity and output descriptions. The work plan briefly 
describes each significant category of nonpoint source activity and the 
work plan commitments to be produced for each category; and
    (5) Significant watershed projects. For watershed projects whose 
costs exceed $50,000, the work plan also contains:
    (i) A brief synopsis of the watershed implementation plan outlining 
the problem(s) to be addressed;
    (ii) The project's goals and objectives; and
    (iii) The performance measures or environmental indicators that 
will be used to evaluate the results of the project.

Lead-Based Paint Program (Section 404(g))


Sec. 35.270  Purpose.

    (a) Purpose of section. Sections 35.270 through 35.278 govern Lead-
Based Paint Program Grants to States (as defined in section 3 of the 
Toxic Substances

[[Page 1745]]

Control Act), under section 404(g) of the Act.
    (b) Purpose of program. Lead-Based Paint Program Grants are awarded 
to develop and carry out authorized programs to ensure that individuals 
employed in lead-based paint activities are properly trained; that 
training programs are accredited; and that contractors employed in such 
activities are certified.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR part 745.


Sec. 35.272  Funding coordination.

    Recipients must use the lead-based paint program funding in a way 
that complements any related assistance they receive from other federal 
sources for lead-based paint activities.

State Indoor Radon Grants (Section 306)


Sec. 35.290  Purpose.

    (a) Purpose of section. Sections 35.290 through 35.298 govern 
Indoor Radon Grants to States (as defined in section 3 of the Toxic 
Substances Control Act, which include territories and the District of 
Columbia) under section 306 of the Toxic Substances Control Act.
    (b) Purpose of program. (1) State Indoor Radon Grants are awarded 
to assist States with the development and implementation of programs 
that assess and mitigate radon and that aim at reducing radon health 
risks. State Indoor Radon Grant funds may be used for the following 
eligible activities:
    (i) Survey of radon levels, including special surveys of geographic 
areas or classes of buildings (such as public buildings, school 
buildings, high-risk residential construction types);
    (ii) Development of public information and education materials 
concerning radon assessment, mitigation, and control programs;
    (iii) Implementation of programs to control radon on existing and 
new structures;
    (iv) Purchase by the State of radon measurement equipment and 
devices;
    (v) Purchase and maintenance of analytical equipment connected to 
radon measurement and analysis, including costs of calibration of such 
equipment;
    (vi) Payment of costs of EPA-approved training programs related to 
radon for permanent State or local employees;
    (vii) Payment of general overhead and program administration costs 
in accordance with Sec. 35.298(d);
    (viii) Development of a data storage and management system for 
information concerning radon occurrence, levels, and programs;
    (ix) Payment of costs of demonstration of radon mitigation methods 
and technologies as approved by EPA, including State participation in 
the EPA Home Evaluation Program; and
    (x) A toll-free radon hotline to provide information and technical 
assistance.
    (2) States may use grant funds to assist local governments in 
implementation of activities eligible for assistance under paragraphs 
(b)(1)(ii), (iii), and (vi) of this section.
    (3) In implementing paragraphs (b)(1)(iv) and (ix) of this section, 
a State should make every effort, consistent with the goals and 
successful operation of the State radon program, to give preference to 
low-income persons.
    (4) Funds appropriated for section 306 may not be used to cover the 
costs of federal proficiency rating programs under section 305(a)(2) of 
the Act. Funds appropriated for section 306 and grants awarded under 
section 306 may be used to cover the costs of State proficiency rating 
programs.


Sec. 35.292  Basis for allotment.

    (a) The Regional Administrator will allot State Indoor Radon Grant 
funds based on the criteria in EPA Guidance in accordance with sections 
306(d) and (e) of the Toxic Substances Control Act.
    (b) No State may receive a State Indoor Radon Grant in excess of 10 
percent of the total appropriated amount made available each fiscal 
year.


Sec. 35.295  Maximum federal share.

    The Regional Administrator may provide State agencies up to 50 
percent of the approved costs for the development and implementation of 
radon program activities.


Sec. 35.298  Award limitations.

    (a) The Regional Administrator shall not include State Indoor Radon 
funds in a Performance Partnership Grant awarded to another State 
Agency without consulting with the State Agency which has the primary 
responsibility for radon programs as designated by the Governor of the 
affected State.
    (b) No grant may be made in any fiscal year to a State which in the 
preceding fiscal year did not satisfactorily implement the activities 
funded by the grant in the preceding fiscal year.
    (c) The costs of radon measurement equipment or devices (see 
Sec. 35.290(b)(1)(iv)) and demonstration of radon mitigation, methods, 
and technologies (see Sec. 35.290(b)(1)(ix)) shall not, in the 
aggregate, exceed 50 percent of a State's radon grant award in a fiscal 
year.
    (d) The costs of general overhead and program administration (see 
Sec. 35.290(b)(1)(vii)) of a State Indoor Radon grant shall not exceed 
25 percent of the amount of a State's Indoor Radon Grant in a fiscal 
year.
    (e) A State may use funds for financial assistance to persons only 
to the extent such assistance is related to demonstration projects or 
the purchase and analysis of radon measurement devices.
    (f) Recipients must provide the Regional Administrator all radon-
related information generated in its grant supported activities, 
including the results of radon surveys, mitigation demonstration 
projects, and risk communication studies.
    (g) Recipients must maintain and make available to the public, a 
list of firms and individuals in the State that have received a passing 
rating under the EPA proficiency rating program under section 305(a)(2) 
of the Act.

Toxic Substances Compliance Monitoring (Section 28)


Sec. 35.310  Purpose.

    (a) Purpose of section. Sections 35.310 through 35.315 govern Toxic 
Substances Compliance Monitoring Grants to States (as defined in 
section 3(13) of the Toxic Substances Control Act) under section 28(a) 
of the Act.
    (b) Purpose of program. Toxic Substances Compliance Monitoring 
Grants are awarded to establish and operate compliance monitoring 
programs to prevent or eliminate unreasonable risks to health or the 
environment associated with chemical substances or mixtures within the 
States with respect to which the Administrator is unable or not likely 
to take action for their prevention or elimination.
    (c) Associated program regulations. Associated program regulations 
are at 40 CFR parts 700 through 799.


Sec. 35.312  Competitive process.

    EPA will award Toxic Substances Control Act Compliance Monitoring 
grant funds to States through a competitive process in accordance with 
national program guidance.


Sec. 35.315  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.


Sec. 35.318  Award limitation.

    If the toxic substances compliance monitoring grant funds are 
included in a Performance Partnership Grant, the toxic substances 
compliance monitoring work plan commitments must be included in the 
Performance Partnership Grant work plan.

[[Page 1746]]

State Underground Storage Tanks (Section 2007(f)(2))


Sec. 35.330  Purpose.

    (a) Purpose of section. Sections 35.330 through 35.335 govern 
Underground Storage Tank Grants to States (as defined in section 1004 
of the Solid Waste Disposal Act) under section 2007(f)(2) of the Act.
    (b) Purpose of program. State Underground Storage Tank Grants are 
awarded to States to develop and implement a State underground storage 
tank release detection, prevention, and corrective action program under 
Subtitle I of the Resource Conservation and Recovery Act.
    (c) Associated program regulations. Associated program regulations 
are found in 40 CFR parts 280 through 282.


Sec. 35.332  Basis for allotment.

    The Administrator allots State Underground Storage Tank Grant funds 
to each EPA regional office. Regional Administrators award funds to 
States based on their programmatic needs and applicable EPA guidance.


Sec. 35.335  Maximum federal share.

    The Regional Administrator may provide up to 75 percent of the 
approved work plan costs.

Pollution Prevention State Grants (Section 6605)


Sec. 35.340  Purpose.

    (a) Purpose of section. Sections 35.340 through 35.349 govern 
Pollution Prevention State Grants under section 6605 of the Pollution 
Prevention Act.
    (b) Purpose of program. Pollution Prevention State Grants are 
awarded to promote the use of source reduction techniques by 
businesses.


Sec. 35.342  Competitive process.

    EPA Regions award Pollution Prevention State Grants to State 
programs through a competitive process in accordance with EPA guidance. 
When evaluating State applications, EPA must consider, among other 
criteria, whether the proposed State program would:
    (a) Make specific technical assistance available to businesses 
seeking information about source reduction opportunities, including 
funding for experts to provide onsite technical advice to businesses 
seeking assistance in the development of source reduction plans;
    (b) Target assistance to businesses for whom lack of information is 
an impediment to source reduction; and
    (c) Provide training in source reduction techniques. Such training 
may be provided through local engineering schools or other appropriate 
means.


Sec. 35.343  Definitions.

    In addition to the definitions in Sec. 35.102, the following 
definitions apply to the Pollution Prevention State Grants program and 
to Secs. 35.340 through 35.349:
    (a) Pollution prevention/source reduction is any practice that:
    (1) Reduces the amount of any hazardous substance, pollutant, or 
contaminant entering any waste stream or otherwise released into the 
environment (including fugitive emissions) prior to recycling, 
treatment, or disposal;
    (2) Reduces the hazards to public health and the environment 
associated with the release of such substances, pollutants, or 
contaminants; or
    (3) Reduces or eliminates the creation of pollutants through:
    (i) Increased efficiency in the use of raw materials, energy, 
water, or other resources; or
    (ii) Protection of natural resources by conservation.
    (b) Pollution prevention/source reduction does not include any 
practice which alters the physical, chemical, or biological 
characteristics or the volume of a hazardous substance, pollutant, or 
contaminant through a process or activity which itself is not integral 
to and necessary for the production of a product or the providing of a 
service.


Sec. 35.345  Eligible applicants.

    Applicants eligible for funding under the Pollution Prevention 
program include any agency or instrumentality, including State 
universities, of the 50 States, the District of Columbia, the U.S. 
Virgin Islands, the Commonwealth of Puerto Rico, and any territory or 
possession of the United States.


Sec. 35.348  Award limitation.

    If a State includes a Pollution Prevention State Grant in a 
Performance Partnership Grant, the work plan commitments must be 
included in the Performance Partnership Grant work plan (see 
Sec. 35.138).


Sec. 35.349  Maximum federal share.

    The federal share for Pollution Prevention State Grants will not 
exceed 50 percent of the allowable pollution prevention State grant 
project cost.

Water Quality Cooperative Agreements (Section 104(b)(3))


Sec. 35.360  Purpose.

    (a) Purpose of section. Sections 35.360 through 35.364 govern Water 
Quality Cooperative Agreements to State water pollution control 
agencies and interstate agencies (as defined in section 502 of the 
Clean Water Act) and local government agencies under section 104(b)(3) 
of the Act. These sections do not govern Water Quality Cooperative 
Agreements to other entities eligible under sections 104(b)(3) which 
are generally subject to the uniform administrative requirements of 40 
CFR part 30.
    (b) Purpose of program. EPA awards Water Quality Cooperative 
Agreements for investigations, experiments, training, demonstrations, 
surveys, and studies relating to the causes, effects, extent, 
prevention, reduction, and elimination of water pollution. EPA issues 
guidance each year advising EPA regions and headquarters regarding 
appropriate priorities for funding for this program. This guidance may 
include such focus areas as National Pollutant Discharge Elimination 
System watershed permitting, urban wet weather programs, or innovative 
pretreatment program or biosolids projects.


Sec. 35.362  Competitive process.

    EPA will award Water Quality Cooperative Agreement funds through a 
competitive process in accordance with national program guidance.


Sec. 35.364  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of 
approved work plan costs.

State Wetlands Development Grants (Section 104(b)(3))


Sec. 35.380  Purpose.

    (a) Purpose of section. Sections 35.380 through 35.385 govern State 
Wetlands Development Grants for State and interstate agencies (as 
defined in section 502 of the Clean Water Act) and local government 
agencies under section 104(b)(3) of the Act. These sections do not 
govern wetlands development grants to other entities eligible under 
section 104(b)(3) which are generally subject to the uniform 
administrative requirements of 40 CFR part 30.
    (b) Purpose of program. EPA awards State Wetlands Development 
Grants to assist in the development of new, or refinement of existing, 
wetlands protection and management programs.


Sec. 35.382  Competitive process.

    State Wetlands Development Grants are awarded on a competitive 
basis. EPA annually establishes a deadline for receipt of proposed 
grant project applications. EPA reviews applications and decides which 
grant projects to fund in a given year based on criteria

[[Page 1747]]

established by EPA. After the competitive process is complete, the 
recipient can, at its discretion, accept the award as a State Wetlands 
Development Grant or add the funds to a Performance Partnership Grant. 
If the recipient chooses to add the funds to a Performance Partnership 
Grant, the wetlands development program work plan commitments must be 
included in the Performance Partnership Grant work plan.


Sec. 35.385  Maximum federal share.

    EPA may provide up to 75 percent of the approved work plan costs 
for the development or refinement of a wetlands protection and 
management program.

State Administration (Section 205(g))


Sec. 35.400  Purpose.

    (a) Purpose of section. Sections 35.400 through 35.408 govern State 
Administration Grants to States (as defined in section 502 of the Clean 
Water Act) authorized under section 205(g) of the Act.
    (b) Purpose of program. EPA awards these grants for the following 
two purposes:
    (1) Construction management grants. A State may use section 205(g) 
funds for administering elements of the construction grant program 
under sections 201, 203, 204, and 212 of the Clean Water Act and for 
managing waste treatment construction grants for small communities. A 
State may also use construction management assistance funds for 
administering elements of a State's construction grant program which 
are implemented without federal grants, if the Regional Administrator 
determines that those elements are consistent with 40 CFR part 35, 
subpart I.
    (2) Permit and planning grants. A State may use section 205(g) 
funds for administering permit programs under sections 402 and 404, 
including Municipal Wastewater Pollution Prevention activities under an 
approved section 402 program and State operator training programs, and 
for administering statewide waste treatment management planning 
programs, including the development of State biosolids management 
programs, under section 208(b)(4). Some of these activities may also be 
eligible for funding under sections 106 (Water Pollution Control), 
205(j)(2) (Water Quality Management Planning), and 104(b)(3) (Water 
Quality Cooperative Agreements and Wetlands Development Grants) of the 
Clean Water Act. (See Secs. 35.160, 35.410, 35.360, and 35.380.)
    (c) Associated program requirements. Program requirements for State 
construction management activities under delegation are provided in 40 
CFR part 35, subparts I and J. Program requirements for water quality 
management activities are provided in 40 CFR part 130.


Sec. 35.402  Allotment.

    Each State may reserve up to four percent of the State's authorized 
construction grant allotment as determined by Congress or $400,000, 
whichever is greater, for section 205 (g) grants.


Sec. 35.405  Maintenance of effort.

    To receive funds under section 205(g), a State agency must expend 
annually for recurrent section 106 program expenditures an amount of 
non-federal funds at least equal to such expenditures during fiscal 
year 1977, unless the Regional Administrator determines that the 
reduction is attributable to a non-selective reduction of expenditures 
in State executive branch agencies (see Sec. 35.165).


Sec. 35.408  Award limitations.

    The Regional Administrator will not award section 205(g) funds:
    (a) For construction management grants unless there is a signed 
agreement delegating responsibility for administration of those 
activities to the State.
    (b) For permit and planning grants before awarding funds providing 
for the management of a substantial portion of the State's construction 
grants program. The maximum amount of permit and planning grants a 
State may receive is limited to the amount remaining in its reserve 
after the Regional Administrator allows for full funding of the 
management of the construction grant program under full delegation.
    (c) For permit and planning grants unless the work plan submitted 
with the application shows that the activities to be funded are 
coordinated, as appropriate, with activities proposed for funding under 
sections 106 (Water Pollution Control) and 205(j) (Water Quality 
Management Planning) of the Clean Water Act.

Water Quality Management Planning Grants (Section 205(j)(2))


Sec. 35.410  Purpose.

    (a) Purpose of section. Sections 35.410 through 35.418 govern Water 
Quality Management Planning Grants to States (as defined in section 502 
of the Clean Water Act) authorized under section 205(j)(2) of the Act.
    (b) Purpose of program. EPA awards Water Quality Management 
Planning Grants to carry out water quality management planning 
activities. Some of these activities may also be eligible for funding 
under sections 106 (Water Pollution Control), 104(b)(3) (Water Quality 
Cooperative Agreements and Wetlands Development Grants) and section 
205(g) (State Administration Grants) of the Clean Water Act. (See 
Secs. 35.160, 35.360, 35.380, and 35.400.) EPA awards these grants for 
purposes such as:
    (1) Identification of the most cost-effective and locally 
acceptable facility and nonpoint measures to meet and maintain water 
quality standards.
    (2) Development of an implementation plan to obtain State and local 
financial and regulatory commitments to implement measures developed 
under paragraph (b)(1) of this section.
    (3) Determination of the nature, extent, and causes of water 
quality problems in various areas of the State and interstate region.
    (4) Determination of those publicly owned treatment works which 
should be constructed with State Revolving Fund assistance. This 
determination should take into account the relative degree of effluent 
reduction attained, the relative contributions to water quality of 
other point or nonpoint sources, and the consideration of alternatives 
to such construction.
    (5) Implementation of section 303(e) of the Clean Water Act.
    (c) Program requirements for water quality management planning 
activities are provided in 40 CFR part 130.


Sec. 35.412  Allotment.

    States must reserve, each fiscal year, not less than $100,000 nor 
more than one percent of the State's construction grant allotment as 
determined by Congress for Water Quality Management Planning Grants 
under section 205(j)(2). However, Guam, the Virgin Islands, American 
Samoa and the Commonwealth of the Northern Mariana Islands must reserve 
a reasonable amount for this purpose. (See 40 CFR 35.3110(g)(4) 
regarding reserves from State allotments under Title VI of the Clean 
Water Act for section 205(j) grants.)


Sec. 35.415  Maximum federal share.

    The Regional Administrator may provide up to 100 percent of the 
approved work plan costs.


Sec. 35.418  Award limitations.

    The following limitations apply to funds awarded under section 
205(j)(2) of

[[Page 1748]]

the Clean Water Act. The Regional Administrator will not award these 
grants to a State agency:
    (a) Unless the agency develops its work plan jointly with local, 
regional and interstate agencies and gives funding priority to such 
agencies and designated or undesignated public comprehensive planning 
organizations to carry out portions of that work plan.
    (b) Unless the agency reports annually on the nature, extent, and 
causes of water quality problems in various areas of the State and 
interstate region.
    (c) Unless the work plan submitted with the application shows that 
the activities to be funded are coordinated, as appropriate, with 
activities proposed for funding under section 106 (Water Pollution 
Control) of the Clean Water Act.

Part 745--[AMENDED]

    1. The authority citation for part 745 continues to read as 
follows:

    Authority: 15 U.S.C. 2605, 2607, 2681-2692, and 42 U.S.C. 4852d. 
Water Act.


Sec. 745.330  [Removed]

    2. 40 CFR 745.330 is removed.

[FR Doc. 01-218 Filed 1-8-01; 8:45 am]
BILLING CODE 6560-50-P