[Federal Register Volume 68, Number 188 (Monday, September 29, 2003)]
[Rules and Regulations]
[Pages 56116-56131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24265]



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Part V





Department of Housing and Urban Development





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24 CFR Part 50, et al.



Environmental Review Procedures for Entities Assuming HUD's 
Environmental Responsibilities; Final Rule

  Federal Register / Vol. 68 , No. 188 / Monday, September 29, 2003 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 50, 58, 574, 582, 583, and 970

[Docket No. FR-4523-F-02]
RIN 2501-AC83


Environmental Review Procedures for Entities Assuming HUD's 
Environmental Responsibilities

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Final rule.

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SUMMARY: This final rule updates the list of programs and statutory 
authorities in HUD's environmental regulation for which other entities 
may assume HUD's environmental responsibilities. This rule makes other 
changes to update these regulations that address the assumption of 
HUD's environmental responsibilities. This final rule also makes 
conforming changes to the affected environmental provisions contained 
in various program regulations. This final rule follows publication of 
a June 26, 2002, proposed rule and takes into consideration the public 
comments received on the proposed rule.

DATES: Effective Date: October 29, 2003.

FOR FURTHER INFORMATION CONTACT: Richard H. Broun, Director, Office of 
Community Viability, Office of Community Planning and Development, Room 
7244, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410-7000. For inquiry by phone or e-mail, contact 
Walter Prybyla, Environmental Review Division, Office of Community 
Planning and Development, at (202) 708-1201, extension 4466 (this is 
not a toll-free number), or mail to: [email protected]. Hearing-
impaired or speech-impaired individuals may access the voice telephone 
number listed above by calling the toll-free Federal Information Relay 
Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. The June 26, 2002, Proposed Rule

    On June 26, 2002 (67 FR 43208), HUD published a proposed rule that 
would make a number of changes to HUD regulations at 24 CFR part 58. 
For the convenience of the reader, the Department summarizes here some 
of the details of the proposed rule published in the preamble to the 
proposed rule. Readers are referred to the Supplementary Information 
section of the preamble of the published proposed rule at 67 FR 43208-
43210 for a fuller explanation of the rationale or justification for 
the various revisions in the rule.
    The regulations at 24 CFR part 58 implement statutory authorities 
that permit certain entities other than HUD to assume HUD's 
environmental responsibilities for various HUD programs. The proposed 
rule advised that the Department would (1) update the list of programs 
and statutory authorities covered by part 58, and (2) make conforming 
changes to environmental provisions in certain program regulations to 
include a cross-reference to part 58. In addition, the proposed rule 
would make conforming changes in HUD's regulations at 24 CFR part 50, 
which govern when HUD is responsible to perform environmental 
responsibilities in accordance with the National Environmental Policy 
Act (NEPA) (42 U.S.C. 4321 et seq.), the Council on Environmental 
Quality Regulations (40 CFR parts 1500-1508), and other environmental 
requirements (as specified in 24 CFR 50.4).
    The proposed rule described the additional programs that would be 
added to the list of programs in Sec.  58.1. Among these programs are 
(1) Grants provided to private nonprofit organizations and housing 
agencies under the Supportive Housing Program and the Shelter Plus Care 
Program authorized by Title IV of the McKinney-Vento Homeless 
Assistance Act; (2) Assistance provided under the Native American 
Housing Assistance and Self-Determination Act of 1996 (NAHASDA); (3) 
Indian Housing Loan Guarantees under section 184 of the Housing and 
Community Development Act of 1992; (4) HOPE VI grants for FY 1999 and 
earlier and HOPE VI grants under section 24 of the United States 
Housing Act of 1937; and (5) Housing Opportunities for Persons With 
AIDS (HOPWA) grants under the AIDS Housing Opportunity Act.
    The proposed rule also advised that the Rental Rehabilitation 
Program and the Housing Development Grant Program authorized by section 
17 of the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) 
are no longer in use and would be removed from paragraph (b)(2) of the 
list in 24 CFR 58.1.
    The proposed rule further indicated that the Department would add a 
new Sec.  58.1(c) and Sec.  58.1(d) to Title 24. New Sec.  58.1(c) 
clarifies that activities assisted with repayments to a revolving loan 
fund initially assisted with HUD funds are subject to environmental 
requirements only if HUD program rules treat the activity assisted with 
repayments as being subject to federal requirements. New Sec.  58.1(d) 
clarifies that the Assistant Secretary for Community Planning and 
Development, to the extent permitted by applicable laws and the 
regulations of the Council on Environmental Quality (CEQ), may, for 
good cause and with appropriate conditions, approve waivers and 
exceptions or establish criteria for exceptions from the requirements 
of this part.
    The June 26, 2002, rule proposed changes in Sec.  58.2 to the 
definitions of ``recipient'' and ``responsible entity'' (RE). A new 
Sec.  58.4(c) was proposed to clarify that under NAHASDA and the 
Section 184 program, Indian tribes have a choice whether or not to 
assume environmental responsibilities under 24 CFR part 58.
    The rule also proposed updating the list of NEPA-related 
environmental authorities in Sec.  58.5 to add new requirements similar 
to those identified in 24 CFR 50.3(i), which apply when HUD performs 
the environmental review for a project. The proposed rule indicated 
that environmental reviews for multifamily housing with five or more 
units (including leasing) and non-residential property must include 
evaluation of previous site uses and other evidence of contamination on 
or near the site.
    Further, the proposed rule noted revisions to Sec.  58.11 to 
exclude the term ``Indian Housing'' recipient and to add the term 
``HOPWA'' recipient. Additionally, the rule announced that Sec.  
58.22(a) would be revised to make it clear that all participants in the 
development process are subject to the provisions of part 58.
    The proposed rule added a new paragraph to Sec.  58.22 to permit an 
organization, consortium, or affiliate under the Self-Help 
Homeownership Opportunity Program (SHOP) to advance nongrant funds to 
acquire land prior to completion of the environmental review process.
    The rule also detailed revisions to be made to Sec.  58.33(b) and 
Sec.  58.35, along with conforming changes to 24 CFR part 50. In 
addition, the proposed rule included revisions to Sec. Sec.  58.34(b), 
58.45, 58.72, and 58.75. An additional proposal in the rule would add 
language to 24 CFR parts 574, 582, 583, and 970 to make conforming 
amendments to reflect the applicability of part 58 procedures.
    The proposed amendments to Sec. Sec.  58.34(b) and 58.35(d) 
regarding the timing of environmental documentation have been omitted 
from the final rule.
    The proposed amendments to Sec. Sec.  50.20(a)(2)(i) and 
58.35(a)(3)(i) regarding conditions for eligibility for a

[[Page 56117]]

categorical exclusion for rehabilitation of buildings for residential 
use (with one to four units) are modified in the final rule. The 
threshold that ``the dwellings do not result from a conversion of use 
from a non-residential use'' is revised in the final rule to read ``the 
land use is not changed.'' The threshold that ``the footprint of the 
building is not increased in a floodplain or in a wetland'' is added to 
the final rule.
    The final rule updates the reference to the FHA Multifamily Housing 
Finance Agency Pilot Program by removing the word ``Pilot'' because the 
program is now a permanent program. The term ``Pilot'' appears in the 
current regulation and the proposed rule at Sec.  58.2(a)(5)(vii) and 
(6).
    The Department has decided not to adopt the revisions to 24 CFR 
970.4 as published in the proposed rule, in favor of making a simple 
cross-reference to part 58. The Office of Public Housing Investments, 
an office under the Office of the Assistant Secretary for Public and 
Indian Housing, plans to cover the removed guidance in an internal 
notice dealing with demolition or disposition of public housing 
projects pending issuance of a broader amendment to part 970 itself.

II. This Final Rule

    This final rule follows publication of the June 26, 2002, proposed 
rule and takes into consideration the 64 public comments received on 
the proposed rule. The public comment period on the rule closed on 
August 26, 2002. Comments were received from a federal agency, local 
housing and community development authorities, housing professionals, 
an Indian housing authority, city and county governments, housing 
associations, home inspection services, and several private 
individuals. In accordance with the consultation provision of the CEQ 
regulations at 40 CFR 1507.3, HUD submitted for CEQ review and comment 
the proposed amendment to part 58. The final rule implements HUD's 
responsibility to identify and regulate HUD-assisted activities subject 
to NEPA. Section 102 of NEPA requires that all agencies of the federal 
government identify and develop methods and procedures, in consultation 
with the CEQ, which will ensure that presently unquantified 
environmental amenities and values may be given appropriate 
consideration in decisionmaking along with economic and technical 
considerations.
    In response to the public comments, the following revisions, 
summarized here and discussed more fully in Part III, are made to the 
proposed rule.
    Section 58.1(b)(10) is revised by adding the new program for Native 
Hawaiian Housing Block Grants authorized under title VIII of the Native 
American Housing Assistance and Self-Determination Act of 1996 
(NAHASDA), in accordance with section 806 (25 U.S.C. 4226).
    Section 58.2(a)(5)(ix) is revised by adding as a recipient, the 
Department of Hawaiian Home Lands with respect to NAHASDA assistance 
under Sec.  58.1(b)(10).
    Section 58.2(a)(7)(ii) is revised by adding as a responsible 
entity, the Department of Hawaiian Home Lands with respect to 
environmental responsibilities under NAHASDA, when the Department of 
Hawaiian Home Lands is the recipient.
    Section 58.35(a)(3)(i) is revised to clarify the conditions for a 
categorical exclusion for rehabilitation proposed in the case of 
buildings for residential use (with one to four units). The conditions 
are that the density is not increased beyond four units, the land use 
is not changed, and the footprint of the building is not increased in a 
floodplain or in a wetland. The effects of this provision are that: (1) 
It corrects in the current rule at Sec.  58.35(a)(3) the apparent 
omission of the topic of ``buildings for residential use (with one to 
four units)'' by including an explicit reference to this topic in the 
listing for building rehabilitation activities, because the current 
listing cites categorical exclusions only for multifamily and non-
residential buildings. Although under current regulations neither part 
58 nor part 50 refers to the topic of rehabilitation proposed in the 
case of buildings for residential use (with one to four units), the 
topic was considered under part 58 as an ``individual action,'' whereas 
under part 50 it was covered under the generic topic ``rehabilitation 
of structures.'' The final rule removes this ambiguity; (2) it removes 
the proposed rule reference at Sec.  58.35(a)(3)(i) to ``dwellings do 
not result from a conversion of use from a non-residential use'' and 
substitutes ``the land use is not changed'; (3) it eliminates the need 
to perform environmental assessments by removing thresholds listed in 
the current regulations under both parts 50 and 58; (4) it adds a 
cross-reference within the individual actions criteria at Sec. Sec.  
58.35(a)(4) and 50.20(a)(3) to exclude rehabilitation of buildings for 
residential use (with one to four units) from the thresholds for 
individual actions; and (5) this categorical exclusion continues, as in 
the current and proposed regulations, to be subject to the Sec. Sec.  
58.5 and 58.6 provisions. In addition, this rule amends Sec.  
50.20(a)(2) with identical language that applies when HUD itself 
performs the environmental review under part 50.

III. Discussion of Public Comments Received on the June 26, 2002, 
Proposed Rule

    Comment: HUD should mandate radon testing and remediation, if 
necessary, of every home, because the Department's failure to enforce 
the environmental responsibilities required by the rule is contributing 
to thousands of preventable lung cancer deaths. Specifically, 
commenters noted that 24 CFR 50.3(i)(1) states HUD's policy that all 
property proposed for use in HUD programs be free of hazardous 
materials and toxic substances, among other things, where a hazard 
could affect the health and safety of occupants. They stated that radon 
is a carcinogen, which can be inexpensively remediated, yet most home 
purchasers, in spite of the EPA recommendation, do not order a radon 
test.
    Many commenters cited 24 CFR 50.3(i)(1) in arguing that HUD should 
enforce the regulation and mandate a radon test of residential property 
for it to qualify for a Department of Veterans Affairs (VA), Department 
of Housing and Urban Development (HUD), Federal National Mortgage 
Association (Fannie Mae), or Federal Home Loan Mortgage Corporation 
(Freddie Mac) mortgage. Commenters noted that the Government Sponsored 
Enterprises (GSEs) (regulated by HUD) are the largest source of housing 
finance in the country. They remarked that industry experts agree that 
once HUD imposes mandatory testing of radon hazards, the majority of 
primary market mortgage originators will follow suit.
    HUD Response: After a careful review of the comments, the 
Department has decided not to revise the proposed rule. Mandatory 
testing of homes for radon hazards under HUD's mortgage insurance 
programs for single-family home loans is outside the scope of this 
rulemaking. This rule deals primarily with HUD's grant programs for 
which HUD's environmental review responsibility is assumed by state, 
local, and tribal governments for compliance with NEPA and the related 
laws and authorities.
    The Department would add that conforming Sec.  58.5(i) in this 
final rule to the existing language in Sec.  50.3(i)(1) signals its 
policy of establishing a uniform standard for dealing with toxic 
hazards in cases where an environmental review is required to

[[Page 56118]]

comply with NEPA and/or the related laws and authorities cited at Sec.  
58.5. As stated above, a requirement for mandatory testing for radon 
hazards for single-family homes is not within the scope of this rule. 
Nonetheless, the new language in Sec.  58.5 reflects HUD's policy that, 
regardless of whether the environmental reviews are performed by HUD or 
by the responsible entity, the same standards would be used. Further, 
the conforming provision requires that the environmental review of 
multifamily housing with five or more dwelling units (including 
leasing) and non-residential property, must include the evaluation of 
previous uses of the site and other evidence of contamination on or 
near the site, to ensure that the occupants of proposed sites are not 
adversely affected by any of the hazards listed in Sec.  58.5(i)(1). 
The provision requires that particular attention should be given to any 
proposed site on or in the general proximity of such areas as dumps, 
landfills, industrial sites, or other locations that contain or may 
have contained hazardous wastes. The new conforming provision would 
apply to addressing radon hazards within the context of the 
environmental review whenever it is known or suspected that such 
hazards exist.
    The Department also notes that there is no HUD review or approval 
before the completion of construction or rehabilitation and the loan 
closing for single-family homes whose mortgages are endorsed by the 
FHA. Consequently, the program is excluded from environmental review 
regulations under part 50 (see Sec.  50.19(b)(17)). However, 
environmental underwriting criteria for FHA mortgage insurance programs 
are listed elsewhere at 24 CFR 203.12(b), relating to ``Builder's 
Certification of Plans, Specifications and Site'' (Builder's 
Certification) for mortgage insurance on proposed or new construction 
of single-family homes. The Builder's Certification form covers ``Other 
foreseeable hazards or adverse conditions.'' (See 24 CFR 
203.12(b)(2)(vi)).
    Comment: HUD should remove from the rule the language in part 58 
that makes units of general local government, counties, and states 
responsible for environmental review of HOPE VI projects. The commenter 
recommended that HUD directly perform environmental review of HOPE VI 
projects and other projects undertaken by public housing agencies 
(PHAs) under the programs listed in Sec.  58.1(b). The commenter stated 
that imposing environmental review responsibilities upon non-recipient 
entities for such projects diverts limited administrative staff time 
not only to conduct the environmental review, but also to negotiate 
agreements with recipients regarding the environmental review work. The 
commenter noted that these agreements may need to be approved by one or 
more legislative bodies. The commenter also noted that the statutory 
authority under which HOPE VI is proposed to be added to part 58 does 
not require HUD to delegate environmental responsibilities to the non-
recipient entities listed in Sec.  58.2(a)(7).
    HUD Response: The Department has carefully considered this comment, 
but declines to change the rule. Accordingly, the final rule is 
unchanged from the proposed rule on this issue. At this time, many more 
responsible entities perform environmental reviews for their own 
complex capital projects and have sufficient experience to be able to 
do so for other HUD-assisted recipients within their area. Where the 
responsible entity staff lacks time or skills, then services of 
consultants are recommended. Consultant support is also recommended in 
order to support certain kinds of technical environmental analysis.
    Generally, negotiating agreements is an established operating 
practice and need not be viewed as a burden, but as an opportunity to 
partner. HUD expects responsible entities to reach out to partners and 
to readily negotiate agreements with public housing agencies and 
private non-profit organizations seeking environmental services of the 
responsible entity for their HUD-assisted project or activity. HUD 
understands that such agreements must comply with state and local laws 
and in some cases may need approval of the legislative body, as pointed 
out by respondents.
    This rule is an environmental rule and therefore does not cover 
findings of consistency with the Consolidated Plan; however, such 
findings are required for the HOPE VI Program listed at 24 CFR 
91.2(b)(12), Revitalization of Severely Distressed Public Housing. HUD 
has the discretion to perform environmental reviews, but such 
performance would be inconsistent with HUD's general direction to 
devolve this federal function for its grant programs to state, local, 
and tribal governments. HUD believes that effective environmental 
review and administration is best performed by the responsible entity. 
While HUD encourages units of general local government, counties, and 
states to perform environmental reviews for HOPE VI projects, such 
governments are not required to do so when they are not the recipient 
of the HOPE VI assistance. HUD does not believe it advisable to 
prohibit any unit of a local government, county, or state from 
performing environmental reviews for PHAs under part 58 when many are 
willing to do so.
    Comment: A commenter objected to the proposed change in Sec. Sec.  
58.1 and 58.2 that would make a governmental jurisdiction that is not 
providing the federal funding responsible for the environmental review 
for the assisted project. The commenter expressed concern that this 
rule change could force a certifying officer into court to defend a 
project in which the officer has no influence. The commenter asserted 
that effective environmental review and administration lies solely with 
the funding agency.
    HUD Response: The final rule makes no change to the proposed rule 
in response to this comment. Generally, environmental litigation 
results from failure of the project managers to perform the requisite 
environmental review or to address environmental impacts 
satisfactorily. HUD believes that certifying officers, who are 
generally the top elected officials of the jurisdiction, are in a 
better position than the funding agency alone to guide and defend 
projects within their jurisdiction. The certifying officers live in 
their jurisdictions and are involved with governing their 
jurisdictions--including sitting on or appointing directors to boards 
of public housing agencies and private non-profit organizations. 
Responsible entities and their certifying officers, in performing 
environmental reviews under part 58, have no less authority than HUD 
under part 50. Either party is under the same legal duty to ensure full 
compliance with statutory and regulatory requirements for environmental 
quality irrespective of the type of HUD-assisted recipient, developer, 
or project.
    HUD disagrees with the comment that effective environmental review 
and administration lies solely with the funding agency. HUD, as the 
funding agency, has a partnership role to play, but HUD partners with 
the local government that has jurisdiction and competency. At the 
project level, the responsible entity is the local government that 
``governs'' by providing land use planning and consolidated planning; 
by permitting, through zoning, building, and building occupancy 
approvals for projects that are assisted by HUD; and by supplying 
infrastructure support for these projects. Thus, HUD believes the 
certifying officers and responsible entities are already involved with 
HUD-assisted projects.

[[Page 56119]]

    The assumption of federal environmental responsibilities by tribal, 
local, and state governments is virtually unique among federal 
agencies. This assumption reflects the transfer of full authority to 
local, state, or tribal governments for environmental quality and 
protection for HUD-assisted projects, including the monitoring and 
implementation of any mitigation that the responsible entity requires. 
HUD believes that effective environmental review and administration is 
best performed by the responsible entity and not by the federal funding 
agency.
    Comment: HUD's Office of Native American Programs requested the 
addition to Sec.  58.1(b)(10) of the Native Hawaiian Housing Block 
Grants program authorized by section 513 of American Homeownership and 
Economic Opportunity Act of 2000 (Pub. L. 106-569, approved December 
27, 2000) and section 203 of the Omnibus Indian Advancement Act (Pub. 
L. 106-568, approved December 27, 2000), each of which amended NAHASDA 
by adding a new title VIII. Section 806 of NAHASDA, as amended, 
authorizes HUD to permit the Director of the Department of Hawaiian 
Home Lands to assume environmental review responsibilities.
    HUD Response: The final rule adds the Native Hawaiian Housing Block 
Grants program to Sec.  58.1(b)(10).
    Comment: Several commenters felt that an American Society for 
Testing and Materials (ASTM) Phase I assessment is a possible means for 
complying with Sec.  58.5(i). As an alternative, some commenters 
suggested a simple ``reasonableness'' test and recommended that the 
regulation provide that grantees must determine to a reasonable level 
of certainty, as determined by the grantee, that sites are free of 
hazardous materials and other deleterious substances. One commenter 
wrote that the proposed amendment would create significant new cost and 
other burdens for Community Development Block Grant (CDBG) and HOME 
grantees. Another commenter wrote that requiring properties to be free 
of hazards without providing a safe harbor leaves a governmental 
jurisdiction potentially liable for damages caused by unknown or 
undiscovered hazards.
    HUD Response: The final rule makes no change to the proposed rule 
in response to this comment. The policy in proposed Sec.  58.5(i) 
requires due diligence in accordance with the language in that section, 
but is not intended to suggest any liability for damages caused by 
unknown or undiscovered hazards where an appropriate review has been 
performed. In addition, the policy that sites be free from hazardous 
materials, etc., does not require a complete absence of such materials, 
but only that the property be free of hazards where the hazard could 
affect the health and safety of occupants or conflict with the intended 
utilization of the property. The policy also does not prescribe any 
specific form of remediation, which may vary depending upon the nature 
of the hazard.
    With respect to the issue of costs, in most cases, the cost of the 
environmental study is eligible for HUD funding as administrative or 
project costs. The potential remediation costs to owners of existing 
property who are primarily interested in doing rehabilitation work or 
facade-type improvements are all costs that are eligible for HUD 
funding as project costs or for funding under other federal programs. 
There should be no financial burden to affected property owners 
benefiting from federal financial assistance to identify and remediate 
environmental hazards on their property. Significant benefits accrue to 
the value and desirability of the property. Generally, the benefits of 
remediation outweigh the costs. Remediation provides a safer 
environment, which the final rule advances in support of meeting a 
national goal of a suitable living environment expressed in housing and 
NEPA legislation.
    The criteria in Sec.  58.5(i) rely on a general performance 
standard. Section 58.5(i) does not require a Phase I environmental 
assessment for toxics (American Society for Testing and Materials, ASTM 
E 1527). Certainly, a Phase I report or equivalent analysis is a 
possible means for complying with Sec.  58.5(i). Some HUD programs 
already require a Phase I report, a standard of private real estate 
transactions. Visual inspection of the property may not disclose enough 
information to ascertain toxic contamination. Permission of the 
property owner is a routine procedure for examining or testing on-site 
of a site that is not under the control of the prospective purchaser or 
environmental reviewer. Such permission includes testing, if the site 
is suspected or known to contain toxic contaminants. Checking existing 
federal, state, or local databases is routine procedure for the 
environmental review, but such databases are not all inclusive and up-
to-date. Due diligence is required in making such determinations.
    When HUD itself is responsible for performing the environmental 
review, the policy under Sec.  50.3(i) is not to approve the provision 
of financial assistance to residential properties located on 
contaminated sites that are not found to meet the criterion in current 
Sec.  50.3(i)(1). Sites known or suspected to be contaminated by toxic 
chemicals or radioactive materials include, but are not limited to, 
sites which: (1) Are listed on an Environmental Protection Agency (EPA) 
Superfund National Priorities list or the Comprehensive Environmental 
Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601 et 
seq.) (CERCLA) list or equivalent state list; (2) are located within 
3,000 feet of a toxic or solid waste landfill site; or (3) have an 
underground storage tank that is not for residential fuel. For any of 
these conditions, the recipient provides HUD with an American Society 
for Testing and Materials (ASTM) Phase I environmental assessment for 
toxics report or equivalent analysis.
    Comment: Some commenters objected to the provision in Sec. Sec.  
58.5(i)(2) and (3) requiring environmental review of multifamily 
housing and non-residential properties to include evaluation of 
previous site uses and other evidence of contamination on or near the 
site or in the general proximity. Commenters said that it is not 
possible to identify hidden conditions such as drug labs or other 
hazards out of plain sight. Five commenters recommended that the 
requirement should be limited to a reasonable determination of 
potential hazards that might include checking existing federal, state, 
and local databases that contain information on contaminated 
properties.
    HUD Response: The final rule makes no change to the proposed rule 
in response to the commenters' objections. In general, multifamily 
housing refers to five or more units within one building. Properties 
are to be ``free'' of hazards that affect the health and safety of 
occupants or conflict with the intended utilization of the property. 
The rule sets a performance standard that includes evaluation of 
previous uses of the site and evidence of contamination on or near the 
site, to assure that occupants of proposed sites are not adversely 
affected by the hazards. Unacceptable sites are to be disapproved, 
unless the site can be made acceptable by the remediation of the toxic 
contaminants. Due diligence is the norm. The rule does not create a 
basis for liability of responsible entities for contamination or the 
effects of contamination that are not discovered as the result of the 
exercise of due diligence. Certainly, checking federal, state, and 
local data banks on toxic hazards is necessary, but the absence of the 
property in such data banks is not always conclusive on the hazards 
issue.

[[Page 56120]]

    Comment: Some governmental jurisdictions may determine that under 
the Sec.  58.5(i) standards, the potential legal or financial exposure 
is too high and would limit the range of activities they fund with CDBG 
and HOME funds. The commenter was of the opinion that property owners 
are unlikely to enter into purchase agreements that include 
contingencies allowing on-site testing of their property by a 
prospective purchaser or environmental reviewer to determine the 
presence or absence of toxic contamination.
    HUD Response: Among HUD's missions is promotion of the national 
goal that every American family be able to afford a decent home in a 
suitable environment, and HUD's CDBG and HOME programs support that 
national goal. Accordingly, we disagree with the commenter's opinion 
that the potential legal or financial exposure is too high and would 
limit the range of activities that local governments fund with CDBG and 
HOME funds, should HUD implement Sec.  58.5(i). That section simply 
conforms part 58 with identical policy at Sec.  50.3(i), which, since 
1996, HUD itself applies when HUD staff perform environmental reviews 
under part 50.
    HUD does not share the commenter's opinion that property owners are 
unlikely to enter into purchase agreements that include contingencies 
allowing on-site testing of their property by a prospective purchaser 
or environmental reviewer to determine the presence or absence of toxic 
contamination for a HUD-assisted project. The federal subsidy is a 
significant incentive to ensure the cooperation of most property owners 
in this matter.
    Comment: A commenter questioned the rationale for not requiring 
site evaluation for residential buildings with fewer than five units. 
The commenter wrote that a contaminated site would present 
environmental issues regardless of the number of people who will be 
served by the site.
    HUD Response: The final rule makes no change to the proposed rule, 
but in response to the comment, HUD provides this clarification. The 
final rule renumbers the section in question. Section 58.5(i)(2)(i) of 
the final rule applies to all properties (i.e., ``covered'' properties) 
that are being proposed for use in HUD programs covered under Sec.  
58.1(b) (i.e., ``covered'' programs). Section 58.5(i)(2)(ii) applies 
specifically to multifamily residential properties and to non-
residential properties proposed for use in ``covered'' programs; and it 
requires an evaluation of previous uses of the site or other evidence 
of contamination on or near the site. HUD clarifies that the language 
of Sec. Sec.  58.5(i)(2)(iii) and (iv) is not limited in its 
application to multifamily residential properties and to non-
residential properties, but applies to all ``covered'' properties, 
including buildings for residential use (with one to four units). The 
language of Sec.  58.5(i)(2)(iii) requires that particular attention 
should be given to any proposed site on or in the general proximity of 
such areas as dumps, landfills, industrial sites, or other locations 
that contain, or may have contained, hazardous wastes. The language of 
Sec.  58.5(i)(2)(iv) requires the responsible entity to use current 
techniques by qualified professionals to undertake investigations 
determined necessary. In addition, HUD clarifies that all ``covered'' 
properties may include those properties subject to a categorical 
exclusion under Sec.  58.35(b) in cases of extraordinary circumstances 
in accordance with Sec.  58.35(c).
    Comment: Not enough emphasis is made in the proposed rule on the 
high level of priority that should be placed on expediting 
environmental reviews, since the environmental review process can be a 
lengthy one that slows the funding and expending of HUD grant funds. 
The commenter suggested that the rule provide positive incentives to 
expedite the environmental review process as HUD adds new programs and 
entities to part 58.
    HUD Response: The most significant incentive is intrinsic in the 
current part 58 regulations, because delays can be prevented by the 
recipient responsible entity since the calendar and pace of performing 
the environmental procedures is under the control of the responsible 
entity itself. With respect to non-recipient responsible entities, the 
final rule makes no change to the proposed rule to provide additional 
incentives to expedite the environmental review process as HUD adds new 
programs and entities to part 58. HUD believes that the current 
regulations provide the following incentives: (1) Sec.  58.23 provides 
that the environmental review costs are eligible costs to the extent 
allowable under the HUD assistance program regulations. The assurance 
of payment for work performed is an incentive in expediting 
environmental reviews. Also, Sec. Sec.  58.34(a)(1) and (3), 
respectively, exempt from environmental review procedures both 
``environmental and other studies'' as well as ``administrative and 
management activities.'' This exemption extends to the costs of 
environmental consultants and/or payments to local governments for this 
service; (2) The regulations provide an opportunity for closer 
partnering arrangements among all local partners providing housing and 
economic opportunities to achieve the responsible entity's Consolidated 
Plan targets. HUD's local partners include local governments, public 
housing agencies, private non-profit and for-profit organizations. Such 
local arrangements should provide for time-efficient management of 
environmental reviews; (3) The regulations provide policy guidance to 
private non-profit organizations and public housing agencies requiring 
them to supply the responsible entity with all available, relevant 
information necessary for the responsible entity to perform for each 
property any environmental review required under part 58; (4) This 
rulemaking would expedite environmental reviews by simplifying the 
provision that provides a categorical exclusion for rehabilitation 
assistance in the case of a building for residential use (with one or 
four units) and a categorical exclusion for the approval of 
supplemental assistance to a project previously approved under this 
part; and (5) Often overlooked is the provision in the CEQ regulations 
that requires responsible entities to integrate the NEPA process with 
other planning ``at the earliest possible time'' to ensure that 
planning and decisions reflect environmental values, to avoid delays 
later in the process, and to head off potential conflicts (40 CFR 
1501.2).
    Section 58.30(b) states that the environmental review process 
should begin as soon as a recipient determines the projected use of HUD 
assistance. The prohibition on commencing choice-limiting activities 
under Sec.  58.22 and CEQ regulations at 40 CFR 1506.1 until after the 
environmental review process is completed may be an additional 
incentive to expedite the review.
    Comment: The term ``any participant in the development process'' is 
not defined in the rule. The commenter observed that proposed Sec.  
58.22 would prohibit any participant in the development process from 
committing non-HUD funds or undertaking an activity on a project that 
would have an adverse environmental impact or limit the choice of 
reasonable alternatives prior to release of funds. The commenter 
recommended limiting the application of the prohibition to 
subrecipients and adding the cited term to the definition of 
subrecipient in Sec.  58.2(a)(5).
    HUD Response: The Department did not incorporate this 
recommendation in the final rule. HUD does not believe that the phrase 
``any participant in the development process'' needs further

[[Page 56121]]

clarification. The phrase covers the recipient's clients and partners 
that are project participants, such as public or private, non-profit or 
for-profit entities and their contractors. To narrow the application of 
this phrase to subrecipients is contrary to the intent of this 
provision to provide a broad and all-inclusive application of the 
phrase. The final rule would continue the generic usage contained in 
the proposed rule.
    Comment: The rule should allow responsible entities approving 
supplemental assistance to a previously approved project to treat such 
projects as categorically excluded and not subject to Sec.  58.5 
authorities when the part 58 review and approval was conducted by a 
different responsible entity from the one that conducted the 
environmental review on the original project.
    HUD Response: Section 58.35(b)(7) in both the proposed and final 
rule requires that the approval for the supplemental assistance be made 
by the original responsible entity. The original responsible entity has 
the environmental review record for the project and is more 
knowledgeable about the original project. For that reason, HUD believes 
that the original responsible entity can best judge whether 
supplemental assistance is eligible to be treated as a categorical 
exclusion not subject to the related laws, particularly since this 
judgment requires a determination by the original responsible entity 
under Sec.  58.47 as to whether re-evaluation of the original 
environmental findings is required. Additionally, the Department views 
all the participants in the process as partners.
    Comment: The existing requirement in Sec.  58.22 restricting 
development before HUD approvals are received as ``choice-limiting'' 
actions is unworkable and most likely is misinterpreted. The commenter 
recommended modifying the restriction on ``committing'' HUD funds to a 
project until HUD has approved a Request for Release of Funds (RROF). 
The commenter said that many projects may have already been approved by 
other environmental processes and that construction may be underway 
before HUD funding is ``committed'' to the project. The commenter 
suggested substituting the word ``expended'' for the word ``committed'' 
to denote that while allocation of HUD funds is permissible, the actual 
expenditure of HUD funds is not permissible until the RROF has been 
approved.
    HUD Response: The final rule makes no change to the proposed rule 
in response to this comment. The term ``commit'' is broader and 
includes the meaning of the term ``expend.'' The intent in using the 
term ``commit'' is to prevent any ``choice-limiting'' action from 
occurring prior to HUD or state approval of the environmental 
certification of compliance and the request for the release of funds 
for the HUD-assisted project. This provision does not affect the 
recipient's general allocation of funds, but only restricts commitment 
of such funds to choice-limiting actions, for example, site-specific 
activities such as real property acquisition, leasing, demolition, 
rehabilitation, and related site improvements.
    The commitment to a HUD-assisted project of HUD and non-HUD funds 
by the recipient and its partners prior to completion of the 
environmental review and submission and approval of the recipient's 
environmental certification of compliance and request for the release 
of funds inherently diminishes and biases objective consideration of 
alternative locations for the proposed project (including a no action 
alternative). The Department believes that the consideration of 
alternatives is fundamental to the environmental review process for 
HUD-assisted projects complying with the procedures of part 58.
    CEQ regulations at 40 CFR 1502.2(f) require that agencies not 
commit resources prejudicing selection of alternatives before making a 
final decision. The regulations at 40 CFR 1506.1 address limitations on 
actions during the NEPA process. Applicable statutes and regulations 
set decision points for environmental review and compliance for the 
various authorities at Sec. Sec.  58.5 and 58.6. This standard is not 
in any way diminished by the participation of non-federal funding of 
the project.
    As more programs are added to Sec.  58.1(b) where the recipient is 
different from the responsible entity, and based on HUD's recent 
program experience, it is necessary for HUD to be clear in the 
rulemaking regarding this important environmental compliance issue. 
This demonstrates the need for responsible entities and recipients 
other than responsible entities to help each other perform timely 
compliance with part 58 with all partners selected to implement HUD-
assisted projects. Substituting the words ``not expend'' for the words 
``not commit'' as suggested by the respondent would not address HUD's 
concern. The restriction on undertaking or committing funds for choice-
limiting actions does not apply to undertakings or commitments of non-
federal funds for a development by a party before the party applies to 
the part 58 recipient for federal funds for the project. Thus, a third 
party may begin a project in good faith as a private project and by so 
doing is not precluded from later deciding to apply for federal 
assistance. However, when the party applies for federal assistance, it 
will generally need to cease further choice-limiting actions on the 
project until the environmental review process is completed in 
accordance with procedures under part 58.
    Comment: The ``choice-limiting'' requirements in 24 CFR 58.22 are 
overly restrictive. Two commenters wrote that there may be numerous 
``choice-limiting'' requirements imposed upon a development even before 
HUD funding is available. The commenters want a distinction made in 
Sec.  58.22 to recognize that ``choice-limiting'' requirements may not 
always be negative. For example, the imposition of requirements under 
the Endangered Species Act before the approval of the RROF should not 
be considered as limiting environmental choices. Further, Sec. Sec.  
58.22(a) and (c) would restrict development with non-HUD funds if an 
application for HUD funding was under consideration and the grantee was 
aware that some ``choice-limiting'' was going to or had already taken 
place. The commenters argued that the recipient has no way of knowing 
until the approval process is complete whether a particular application 
will or will not be funded. Additionally, the recipient has no legal 
authority to stop or limit development by an applicant before HUD funds 
have been committed to the activity. Also, many of the ``choice-
limiting'' conditions would most likely be imposed upon the development 
anyway. The commenters recommended that HUD reconsider its policy of 
defining land acquisition as a ``choice-limiting'' activity, asserting 
that neither NEPA nor the CEQ regulation at 40 CFR 1506.1 defines 
``choice-limiting'' activity.
    HUD Response: The Department declines to adopt the commenters' 
recommendation here. Use of the term ``choice-limiting'' in this 
regulation does not apply to mitigation measures, as implied in the 
comment. The term applies to limitations on actions during the 
environmental review process as prescribed by the CEQ regulations for 
implementing the procedural provisions of NEPA (40 CFR 1506.1(a)).
    HUD has reviewed court decisions on whether land acquisition or 
similar actions are choice-limiting activities under NEPA. Six federal 
circuit courts including the DC Circuit Court have

[[Page 56122]]

considered this issue. All six have ruled that land acquisition is a 
choice-limiting activity under NEPA. Two of these cases were appealed 
to the Supreme Court, which denied certiorari both times. Accordingly, 
the provisions of Sec.  58.22 prohibiting the commitment of HUD or non-
HUD funds for acquisition of property to be used in a HUD-assisted 
project before an environmental review is completed reflect existing 
case law on this point, which is law in all of the federal circuit 
courts that have ruled on this point and law that the U.S. Supreme 
Court has twice declined to overturn.
    Comment: Four commenters wrote that any restriction on the ability 
to invest HUD funds in developments that are already underway could 
have a harmful effect on a grantee's ability to comply with CDBG 
program requirements for timely expenditure of grant funds.
    HUD Response: The final rule is unchanged from the proposed rule 
with respect to this issue. In most cases, the cause of the delay in 
the recipient's expenditure of grant monies may be attributed to 
factors other than that of compliance with environmental review 
processing under part 58. Part 58 allows state, local, and tribal 
governments and other recipients to set and manage the schedule of 
their environmental review processing. CEQ regulations at 40 CFR 1501.2 
require agencies to integrate the NEPA process with other planning at 
the earliest possible time. This requirement is intended to ensure that 
planning and decisions reflect environmental values, to avoid delays 
later in the process, and to head off potential conflicts.
    Moreover, as noted in response to a previous comment, the 
restriction on undertaking or committing funds for choice-limiting 
actions does not apply to undertakings or commitments of non-federal 
funds for a development by a party before the party applies to the part 
58 recipient for federal funds for the project. Where a third party has 
begun a project in good faith as a private project, the part 58 
recipient is not precluded from considering a later application for 
federal assistance for the project, but must advise the third party 
applicant to cease further choice-limiting actions on the project until 
the environmental review is completed.
    Comment: The final rule should clarify the term ``nominal'' as used 
in current Sec.  58.22 for real estate options. The commenter asked 
whether it is a percent of the purchase price.
    HUD Response: The final rule makes no change to the proposed rule 
in response to the commenter's request for clarification. Real estate 
options are subject to the conditions regarding environmental 
acceptability and nominal price at Sec.  58.22(d). The provision allows 
some flexibility regarding the term ``nominal'' and any reasonable 
interpretation is acceptable. In most instances, the deposit is not 
refundable if the property buyer fails to exercise the real estate 
option by purchasing the property within the defined time period.
    Comment: The final rule should eliminate the proposed changes to 
Sec.  58.22, because the changes would place unenforceable burdens on 
recipients to police the actions of subrecipients during the 
application phase. The commenter objected to the proposed changes for 
two reasons. The first concern is that recipients would be expected to 
analyze whether potential subrecipients are ``about to take an action 
within the jurisdiction of the recipient that is prohibited by Sec.  
58.22(a).'' The second concern of the commenter is the requirement that 
if the recipient becomes aware that a subrecipient is about to take a 
prohibited action, ``the recipient will take appropriate action to 
ensure that the objectives and procedures of NEPA are achieved.'' It is 
unclear, in the view of the commenter, what would constitute 
``appropriate action'' and what the recipient's actual responsibilities 
would be under this requirement. Some nationwide recipients are not in 
a position to determine NEPA's objectives at the local level nor to 
enforce them with their subrecipients. A recipient of HUD funds can 
ensure that its own and its subrecipients' actions conform to the HUD 
environmental review process once a legal relationship exists and HUD 
funds have been allocated and disbursed. But, wrote the commenter, 
recipients lack both the jurisdiction and enforcement power that would 
be required by proposed Sec.  58.22(c) during the application phase.
    HUD Response: The final rule makes no change to the proposed rule 
with respect to the commenter's first concern. The disqualification for 
the use of HUD assistance for violation of the limitation on activities 
pending clearance itself serves to influence the behavior of potential 
subrecipients. In fact, the rule provides the requisite power to 
enforce appropriate action. The final rule at Sec.  55.22(c) states 
that ``if a recipient is considering an application from a prospective 
subrecipient or beneficiary and is aware that the prospective 
subrecipient or beneficiary is about to take an action within the 
jurisdiction of the recipient that is prohibited by Sec.  58.22(a), 
then the recipient will take appropriate action to ensure that the 
objectives and procedures of NEPA are achieved.'' To enforce compliance 
with this procedure, the final rule requires that recipients, whether 
responsible entities or recipients other than responsible entities, be 
effectively responsible for establishing internal controls. The 
controls would prohibit the recipients' public and private development 
partners from the commitment and expenditure of HUD and non-HUD funds 
to implement a HUD-assisted project prior to compliance with part 58. 
These controls should apply to applicants, potential awardees, or 
development partners selected by the recipient.
    The Department also carefully considered the commenter's second 
point, but declines to change the proposed rule in response to the 
comment. As stated earlier, HUD believes that the recipient has both 
the jurisdiction and the power to act under this provision. In the 
first place, the recipient, when seeking prospective applicants or 
potential developers, has the authority to market its relationship with 
conditions. The recipient may mandate that no implementation of the 
project to be assisted with HUD funds is to occur until there is 
compliance with part 58. During and after the application phase, 
recipients must refuse HUD assistance to an applicant or developer who 
has violated the provision for limitations on activities pending 
environmental clearance. HUD looks to recipients to enforce this 
provision as they approve or disapprove either applications for HUD 
financial assistance or partners in the development of HUD-assisted 
projects. The provision in Sec.  58.22(c) simply serves to emphasize a 
provision in the CEQ regulations (40 CFR 1506.1(b)) that already 
applies to responsible entities under part 58, and also to apply these 
responsibilities to recipients regardless of whether they are the 
responsible entity.
    Comment: Four commenters suggested that HUD should not amend the 
public comment periods in Sec.  58.45 to reflect that the periods are 
minimum periods. The commenters objected to the proposed amendment on 
the basis that a person who fails to respond within the 15-day period 
could conceivably persuade a court that the comment period for a 
specific project was not long enough. Thus, if no maximum period is 
stated, a court could determine that the comment period could be any 
length of time. The result would be to delay needed development and 
negatively impact CDBG timeliness

[[Page 56123]]

requirements. Another commenter suggested eliminating the word 
``minimum'' to avoid confusion that may be caused by the different 
interpretations of the word.
    HUD Response: The Department was not persuaded to make changes to 
the proposed rule on this matter. The provision requires the minimum 
number of days for public comment periods. The rule does not require 
any longer comment period, but provides the responsible entity with the 
authority and flexibility to extend the number of days for public 
comment beyond the minimum number of days. The Department does not 
share the commenters' view on the possible actions a court may take.
    Comment: Proposed Sec.  58.75 language should be revised to 
parallel the prohibition in Sec.  58.22 so that the basis for an 
objection is clearly limited to projects that have an adverse 
environmental impact or limit the choice of reasonable alternatives. 
The commenters wrote that the proposed rule would allow objections on 
the basis of a recipient or other participant having incurred costs or 
committed funds even if there was no actual adverse environmental 
impact or no actual limitation on the choice of reasonable 
alternatives.
    HUD Response: The final rule makes no change to the proposed rule 
on this matter. The objection in Sec.  58.75(e) as stated in the 
proposed rule is similar to the current regulations, because the 
limitation on activities pending clearance applies to both HUD and non-
HUD funds for HUD-assisted projects. In contrast, the reference in the 
last sentence of Sec.  58.22(a) on limitations on actions that have an 
adverse environmental impact or limit the choice of reasonable 
alternatives is too restrictive to be repeated as a more general basis 
for objection in Sec.  58.75, because the language applies only to 
limitation on the use of non-HUD funds. The basis for objection in 
proposed Sec.  58.75(e) does not refer to all incurring of costs or 
commitment of funds, but specifically refers only to those commitments 
of funds, incurring of costs and undertakings ``not authorized by this 
part.''
    Comment: The commenter welcomes the proposed change that clarifies 
the categorical exclusions for (1) rehabilitation of one to four family 
units, and (2) individual actions on one to four family units.'' The 
commenter wrote that the intent to identify the rehabilitation of 1-4 
unit residential buildings within this exclusion is a welcome 
clarification, which codifies a practice HUD has endorsed for years. 
The commenter wrote that it is not clear from the reading of the 
proposed language whether this means all rehabilitation of buildings 
for residential use (with one to four units) is categorically excluded, 
or whether rehabilitation of these units needs to be less than 75 
percent of replacement value, as the current threshold is for 
multifamily dwellings (or meet some other threshold value). The 
commenter wants the Supplementary Information reference to ``minor 
rehabilitation'' clarified in the final rule.
    HUD Response: The final rule is not changed in response to the 
comment. With respect to environmental review procedures for all 
rehabilitation of buildings for residential use (with one to four 
units), the final rule allows a categorical exclusion subject to Sec.  
58.5 except that an environmental assessment is required only in the 
following circumstances: (1) the density is increased beyond four 
units; (2) the land use is changed; (3) the footprint of the building 
is increased in a floodplain or in a wetland; or (4) there are 
extraordinary circumstances (Sec.  58.35(c)). Under the final rule, the 
limitation on rehabilitation costs to 75 percent of replacement value 
applies only to multifamily residential buildings and non-residential 
structures, and does not apply to rehabilitation of buildings for 
residential use (with one to four units).
    The final rule replaces the following criterion contained in the 
proposed rule: ``* * * the dwellings do not result from a conversion of 
use from a non-residential use'' (proposed rule at Sec. Sec.  
50.20(a)(2)(i) and 58.35(a)(3)(i)) with a criterion that ``the land use 
is not changed.'' HUD wishes to clarify the application of the 
provisions regarding ``change in land use'' found in the final rule at 
Sec.  50.20(a)(2)(ii)(B) and (iii)(B) and its counterpart in part 58 in 
the current regulations, redesignated in the final rule as Sec. Sec.  
58.35(a)(3)(ii)(B) and (iii)(B). As a condition of eligibility for this 
categorical exclusion, the proposed project or activity must meet the 
condition that there will be no change in land use. When one reads the 
``categorical exclusion'' sections of parts 50 and 58, the existing 
land use of the property and not its future land use is always the 
threshold to be used for determining eligibility for categorical 
exclusion. Any conversion or ``change in land use'' made to an existing 
property is ineligible for a categorical exclusion for rehabilitation 
and a full environmental assessment is required. The environmental 
assessment itself focuses its evaluation primarily on the future land 
use of the property and the prospective and potential impacts resulting 
from the proposed land use.
    Comment: The final rule should clarify the terminology in 
Sec. Sec.  58.35(a)(3)(i) and (4). One commenter wrote that using the 
two phrases, ``single-family residential building'' together with ``one 
to four units'' conflicts because standard planning terminology 
suggests that a single-family residential building is one family per 
building. This term should be changed to read ``Single buildings for 
family residential use (with one to four units)''.
    HUD Response: The final rule revises the phrase published in the 
proposed rule to read ``a building for residential use (with one to 
four units)'' in Sec.  58.35(a)(3)(i) and its counterpart Sec.  
50.20(a)(2)(i). The rule removes from usage the phrase ``one-to four-
family dwelling'' appearing in the current regulations at Sec. Sec.  
50.20(a)(3) and 58.35(a)(4). Generally, HUD considers five or more 
units within a residential building as multifamily housing, a term 
established for the internal administration of its mortgage insurance 
programs. Fewer than five units within a residential building are 
generally considered single-family housing. This explains the origins 
of the terms in HUD environmental and program regulations. The final 
rule replaces the term ``one-to four-family dwelling'' that is used in 
the current regulation.
    Comment: The final rule should clarify the proposed language at 
Sec. Sec.  58.35(a)(4)(i) and (ii) with respect to exclusion of an 
``individual action'' on a one-to four-unit dwelling when there are no 
more than four dwelling units on any one site, whether in one or 
multiple buildings. According to the commenter, this particular 
categorical exclusion is unwieldy to apply in the field. A clear 
definition is needed regarding what an ``individual action'' is on a 
one-to four-family dwelling. The commenter asked the question, ``Is it 
only new construction or new construction and substantial 
rehabilitation (depending on the intent of Sec.  58.35(a)(3)(i))?'' The 
commenter also wrote that the proposed language does not account for 
circumstances in a program of ``scattered sites'' where sites may be 
widely dispersed, but where there may be a limited number of homes that 
happen to be within 2,000 feet of each other. If the project is 
classified as categorically excluded, does the project sponsor have to 
guarantee that every site will be more than 2,000 feet apart? The 
commenter suggested adding the following language to Sec.  
58.35(a)(4)(ii) ``or there are not more than four units within 2,000 
feet of each other.''

[[Page 56124]]

    HUD Response: In response to this comment, the final rule amends 
the proposed rule language of the Sec.  58.35(a)(4) and 50.20(a)(3) 
provision for ``individual actions'' by adding a cross-reference to the 
end of Sec. Sec.  58.35(a)(4) and 50.20(a)(3) to exclude rehabilitation 
of a building for residential use (with one to four units) from the 
thresholds for individual actions. As discussed earlier, Sec. Sec.  
58.35(a)(4) and 50.20(a)(3) of the final rule will no longer apply to 
the rehabilitation of buildings for residential use (with one to four 
units), because the topic is covered under a new, separate provision at 
Sec. Sec.  50.20(a)(2)(i) and 58.35(a)(3)(i) located with related 
rehabilitation thresholds for categorical exclusions pertaining to 
multifamily residential buildings and non-residential structures. 
Sections 58.35(a)(4) and 50.20(a)(3) of the final rule will continue to 
apply to all other types of individual actions (including, but not 
limited to, new construction, development, demolition, and acquisition, 
disposition, or refinancing regardless of future use) with respect to 
dwelling or housing units that meet the conditions in Sec. Sec.  
50.20(a)(3)(i) and (ii) and Sec. Sec.  58.35(a)(4)(i) and (ii).
    Although the 2000-foot standard was questioned, no other standards 
were suggested in any of the comments. The rationale for this threshold 
for an environmental assessment is based on the principle of 
aggregation and the need to examine the cumulative environmental 
effects (40 CFR 1508.7) of scattered site housing construction taking 
place in close proximity. This is consistent with the current provision 
in Sec.  58.32, which calls for project aggregation of activities that 
are related either on a geographical or functional basis, or are 
logical parts of a composite of contemplated actions.
    Comment: The Environmental Protection Agency (EPA) requested that 
HUD encourage responsible entities to limit distribution of the 
Findings of No Significant Impact (FONSI) notices to EPA regional 
offices, and not to send copies to EPA Headquarters in Washington, DC. 
The EPA also made two recommendations: (1) That HUD's formats for 
FONSIs add provisions to improve the description of the project and a 
good map; and (2) that HUD clarify that the EPA may review HUD 
environmental assessments, but that EPA does not reach a determination 
on the grant application; however, EPA may provide its views on the 
environmental document to the responsible entity or HUD.
    HUD Response: Section 58.43(a) of the current rule remains 
unchanged. However, in response to the EPA comment, HUD will 
incorporate in guidance addressed to HUD staff and program participants 
the following information: (1) When sending FONSI notices and Notices 
of Intent to Request the Release of Funds (NOI/RROF) to EPA, 
responsible entities are not to send copies to EPA Headquarters in 
Washington, DC, but only to regional offices of the EPA having 
jurisdiction over the responsible entity; (2) notices sent to EPA 
regional offices should include a full description and location of the 
project; and (3) responsible entities are discouraged from requesting 
that the EPA serve as a lead or cooperating agency in preparing 
environmental assessments and impact statements for HUD-assisted 
projects. The role of the EPA is not to prepare, but rather to evaluate 
and comment on these documents.
    Comment: The EPA suggested that HUD further define the categorical 
exclusion in Sec.  58.35(a)(3)(i) by adding the following language at 
the end of Sec.  58.35(a)(3)(i): ``and which exterior building 
dimensions are not increased in a floodplain or in a wetland.''
    HUD Response: HUD agrees, but has substituted the wording ``and the 
footprint of the building is not increased in a floodplain or in a 
wetland'' in lieu of EPA suggested wording. The wording ``and the 
footprint of the building is not increased in a floodplain or in a 
wetland'' is added to the final regulation at Sec.  58.35(a)(3)(i) for 
the environmental review of proposed rehabilitation of buildings for 
residential use (with one to four units). The added language serves as 
a threshold for requiring an environmental assessment so as to evaluate 
and alleviate the environmental effects in cases where rehabilitation 
assistance is proposed for expanding the footprint of buildings for 
residential use (with one to four units) where such expansion is 
located within or would enter the floodplain or wetland. The added 
language is directly relevant in the case of minor repairs or 
improvements to one-to four-family properties that are currently 
excluded from HUD floodplain management decision-making procedures 
under 24 CFR 55.12(b)(2). The exclusion allowed at Sec.  55.12(b)(2) 
does not apply to financial assistance for proposed rehabilitation of 
multifamily residential buildings and non-residential buildings. The 
exclusion is limited to ``[f]inancial assistance for minor repairs or 
improvements on one-to four-family properties that do not meet the 
thresholds for `substantial improvement' under Sec.  55.2(b)(8).''
    Comment: Partially exempt projects in Sec.  50.20 should be exempt 
from all federal environmental laws and should be moved to Sec.  50.19. 
The commenter asserted that since these uses of federal funds involve 
no significant changes to structures that already exist, a presumption 
should apply that their repair or purchase cannot affect any federal 
environmental interest protected by federal law. The commenter said 
that compliance with the numerous laws listed in Sec.  50.4 imposes a 
significant and costly administrative burden on Indian tribes that 
assume NEPA responsibilities. The commenter recommends moving to Sec.  
50.19 the categorical exclusions in Sec. Sec.  50.20(a)(2) and (a)(4) 
when there is no change in the use of the structure, and revising Sec.  
50.19 to require compliance with the Historic Preservation Act only if 
the structure is over 50 years old.
    HUD Response: The final rule makes no change to the proposed rule 
in response to this comment. First, HUD notes that part 58--not part 
50--is applicable to Indian tribes that assume NEPA responsibilities. 
Under Sec. Sec.  58.34 and 58.35(b), HUD has excluded from review those 
actions that by their nature do not trigger compliance requirements 
under NEPA and related authorities listed in Sec.  58.5. However, 
environmental laws listed in Sec.  50.4 and Sec.  58.5 can apply to the 
actions listed in Sec. Sec.  50.20(a)(2) and (4) and the comparable 
actions in Sec. Sec.  58.35(a)(3) and (5). HUD lacks the authority to 
provide exemptions and exclusions from applicable statutory 
requirements and therefore cannot do what the commenter suggests under 
either part 50 or part 58. Compliance is mandatory whenever HUD funds 
are proposed for projects and activities subject to any of the related 
federal environmental laws and authorities cited in Sec. Sec.  58.5, 
58.6 and 50.4 ``as applicable.'' To the extent that HUD has authority, 
the rule provides relief in the case of categorical exclusions from the 
environmental assessment required under NEPA as allowed by the CEQ 
regulations. However, there are certain national objectives that each 
of the related federal environmental laws and authorities is designed 
to achieve at the project level through the support of federal 
financial assistance. The national objectives cover historic 
preservation, protection from toxic chemicals or radioactive materials, 
protection from flood hazards, protection of wetlands and coastal 
barrier resources, protection of endangered species, protection of sole

[[Page 56125]]

source aquifers, environmental justice, environmental standards, and 
others.
    The current provision at Sec.  58.34(a)(12) allows an exemption for 
any categorical exclusion listed in Sec.  58.35(a), provided that there 
are no circumstances that require compliance with any other federal 
laws and authorities cited in Sec.  58.5. A recipient does not have to 
submit an environmental certification and request for the release of 
funds, and no further approval from HUD or the state is needed by the 
recipient for the drawdown of funds to carry out exempt activities and 
projects. However, the responsible entity must document in writing its 
determination that each activity or project is exempt and meets the 
conditions specified for such exemption under Sec.  58.34. The 
conversion to exempt status does not remove the need to comply with the 
other requirements at Sec.  58.6 ``as applicable.''
    Comment: The final rule should clarify the phrase ``except in 
extraordinary circumstances'' as used in proposed Sec.  58.22(b).
    HUD Response: The final rule makes no change to the proposed rule 
on this matter. The phrase ``except in extraordinary circumstances'' is 
taken from CEQ regulations (40 CFR 1508.4) and is already defined at 
Sec.  58.2(a)(3) of the current regulations. The term means a situation 
in which an environmental assessment (EA) or environmental impact 
statement (EIS) is not normally required, but due to unusual 
conditions, an EA or EIS is appropriate. Indicators of unusual 
conditions are: (1) Actions that are unique or without precedent; (2) 
actions that are substantially similar to those that normally require 
an EIS; (3) actions that are likely to alter existing HUD policy or HUD 
mandates; or (4) actions that, due to unusual physical conditions on 
the site or in the vicinity, have the potential for a significant 
impact on the environment or in which the environment could have a 
significant impact on users of the facility.
    Comment: Regarding Sec.  582.230(b), the restrictions on a 
recipient and others limiting proposed acquisition for a project under 
Shelter Plus Care until HUD approves the recipient's environmental 
certification of compliance and request for the release of funds would 
totally restrict a housing authority's ability to move forward with a 
project. The commenter asserted that this will defeat HUD's stated 
desires to achieve a speedy start-up in Shelter Plus Care projects, 
will discourage the housing authority's partners from participating in 
such endeavors, and is an unwarranted incursion into their rights to 
perform standard business activities.
    HUD Response: The final rule makes no change to the proposed rule 
in response to this comment. It appears that the commenter incorrectly 
construed the provision. The added language makes conforming amendments 
to the Shelter Plus Care program regulations, which do not currently 
adequately reflect the applicability of part 58 procedures (see Sec.  
58.1(b)(3)). Also, the Shelter Plus Care program is designed to link 
rental assistance to supportive services for hard-to-serve homeless 
persons with disabilities. The current regulation excludes tenant-based 
rental assistance from any environmental review. Other eligible 
activities may be subject to reviews. Moreover, the restriction on the 
recipient, project ``partners'' and their contractors' undertaking or 
committing funds for acquisition and development actions does not apply 
to undertakings or commitments of non-federal funds for a development 
by a party before the party applies to the Shelter Plus Care recipient 
for federal funds for the project. Where a third party has begun a 
project in good faith as a private project, the recipient is not 
precluded from considering a later application for federal assistance 
for the project, but must advise the third party applicant to cease 
further choice-limiting actions on the project until the environmental 
review is completed.

IV. List of HUD Programs Covered by 24 CFR Part 58

    For ready reference and convenience of the reader, the below list 
indicates the HUD programs that are covered by 24 CFR part 58 by 
program name, program regulation, program office, and OMB number found 
in the Catalog of Federal Domestic Assistance. This list is not 
exhaustive as other programs may be added in the future. The final rule 
at Sec.  58.1(b) includes the references to the statutory authorization 
of assumption of HUD environmental responsibilities by state, local, 
and tribal governments.

----------------------------------------------------------------------------------------------------------------
              OMB number                    Name of program         Regulation citation        Program office
----------------------------------------------------------------------------------------------------------------
14.188...............................  Housing Finance Agencies   24 CFR part 266........  Housing \1\
                                        Risk Sharing Project.
14.218...............................  Community Development      24 CFR part 570........  CPD \2\
                                        Block Grants/Entitlement
                                        Grants.
14.219...............................  Community Development      24 CFR part 570........  CPD
                                        Block Grants/Small
                                        Cities Program.
14.225...............................  Community Development      24 CFR part 570........  CPD
                                        Block Grants/Special
                                        Purpose Grants/Insular
                                        Areas.
14.228...............................  Community Development      24 CFR part 570........  CPD
                                        Block Grants/State
                                        Program.
14.231...............................  Emergency Shelter Grants   24 CFR part 576........  CPD
                                        Program.
14.235...............................  Supportive Housing         24 CFR part 583........  CPD
                                        Program.
14.238...............................  Shelter Plus Care........  24 CFR part 582........  CPD
14.239...............................  HOME Investment            24 CFR part 92.........  CPD
                                        Partnerships Program.
14.241...............................  Housing Opportunities for  24 CFR part 574........  CPD
                                        Persons with AIDS.
14.246...............................  Economic Development       CFR: N.A. [NOFA \3\      CPD
                                        Initiative Grants.         references 24 CFR part
                                                                   570].
14.246...............................  Brownfield Economic        CFR: N.A. [NOFA          CPD
                                        Development Initiative     references 24 CFR part
                                        Grants.                    570].
14.246...............................  Economic Development       .......................  COD
                                        Initiative--Special
                                        Projects
                                        (Congressionally
                                        earmarked).
14.247...............................  Self-Help Homeownership    NOFA...................  CPD
                                        Opportunity Program.

[[Page 56126]]

 
14.248...............................  Community Development      24 CFR part 570........  CPD
                                        Block Grants/Section 108
                                        Loan Guarantees.
14.249...............................  Section 8 Moderate         24 CFR part 582........  CPD
                                        Rehabilitation Single
                                        Room Occupancy.
14.850...............................  Public Housing Operating   24 CFR part 990........  PIH
                                        Fund Program.
14.862...............................  Indian Community           24 CFR part 1003.......  PIH \4\
                                        Development Block Grant
                                        Program.
14.865...............................  Loan Guarantees for        24 CFR part 1005.......  PIH
                                        Indian Housing.
14.866...............................  Demolition and             NOFA, 24 CFR part 970..  PIH
                                        Revitalization of
                                        Severely Distressed
                                        Public Housing.
14.867...............................  Indian Housing Block       24 CFR part 1000.......  PIH
                                        Grants.
14.869...............................  Title VI Federal           24 CFR part 1000.......  PIH
                                        Guarantee for Financing
                                        Tribal Housing
                                        Activities.
14.871...............................  Section 8 Project-Based    24 CFR part 983........  PIH
                                        Voucher Program.
14.872...............................  Public Housing Capital     24 CFR part 905........  PIH
                                        Fund.
14.873...............................  Native Hawaiian Housing    24 CFR part 1006.......  PIH
                                        Block Grants.
14.900...............................  Lead-Based Paint Hazard    NOFA...................  OHHLHC \5\
                                        Control in Privately-
                                        Owned Housing.
----------------------------------------------------------------------------------------------------------------
\1\ Office of Housing--Federal Housing Commissioner.
\2\ Office of Community Planning and Development.
\3\ Notice of Funding Availability.
\4\ Office of Public and Indian Housing.
\5\ Office of Healthy Homes and Lead Hazard Control.

Findings and Certifications

Environmental Impact
    A Finding of No Significant Impact with respect to the environment 
for this rule was made at the proposed rule stage in accordance with 
HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of 
NEPA. The Finding of No Significant Impact is available for public 
inspection between 7:30 a.m. and 5:30 p.m. weekdays in the Office of 
Regulations, Office of the General Counsel, Department of Housing and 
Urban Development, Room 10276, 451 Seventh Street, SW., Washington, DC 
20410-5000.
Executive Order 12866, Regulatory Planning and Review
    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, ``Regulatory Planning and Review.'' OMB 
determined that this rule is a ``significant regulatory action'' as 
defined in section 3(f) of the Order (although not an economically 
significant regulatory action under the Order). Any changes made to 
this rule as a result of that review are identified in the docket file, 
which is available for public inspection in the Office of Regulations, 
Office of the General Counsel, Department of Housing and Urban 
Development, Room 10276, 451 Seventh Street, SW., Washington, DC 20410-
5000.
Unfunded Mandates Reform Act
    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
establishes requirements for federal agencies to assess the effects of 
their regulatory actions on state, local, and tribal governments and 
the private sector. This final rule does not impose a federal mandate 
on any state, local, or tribal government, or on the private sector, 
within the meaning of the Unfunded Mandates Reform Act of 1995.
Regulatory Flexibility Act
    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule would not have a significant 
economic impact on a substantial number of small entities. There are no 
anti-competitive discriminatory aspects of the rule with regard to 
small entities, and there are not any unusual procedures that would 
need to be complied with by small entities.
Executive Order 13132, Federalism
    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
Federalism implications and does not impose substantial direct 
compliance costs on state and local governments nor preempt state law 
within the meaning of the Executive Order.

List of Subjects

24 CFR Part 50

    Environmental impact statements.

24 CFR Part 58

    Community Development Block Grants, Environmental Impact 
Statements, Grant programs--housing and community development, 
Reporting and recordkeeping requirements.

24 CFR Part 574

    Community facilities, Grant programs--health programs, Grant 
programs--housing and community development, Grant programs--social 
programs, HIV/AIDS, Low and moderate income housing, Reporting and 
recordkeeping requirements.

24 CFR Part 582

    Grant programs--housing and community development, Homeless, Rent 
subsidies, Reporting and recordkeeping requirements.

24 CFR Part 583

    Community facilities, Grant programs--housing and community 
development, Reporting and recordkeeping requirements.

24 CFR Part 970

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers are 14.165-
18.900.

[[Page 56127]]

Also see section IV of the Supplementary Information.

0
Accordingly, for the reasons described in the preamble, the Department 
amends 24 CFR parts 50, 58, 574, 582, 583, and 970 as follows:

PART 50--PROTECTION AND ENHANCEMENT OF ENVIRONMENTAL QUALITY

0
1. The authority citation for part 50 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 4332; and Executive Order 
11991, 3 CFR, 1977 Comp., p. 123.

0
2. Amend Sec.  50.19 by revising paragraph (b)(15) to read as follows:


Sec.  50.19  Categorical exclusions not subject to the Federal laws and 
authorities cited in Sec.  50.4.

* * * * *
    (b) * * *
    (15) Activities to assist homebuyers to purchase existing dwelling 
units or dwelling units under construction, including closing costs and 
downpayment assistance, interest buydowns, and similar activities that 
result in the transfer of title.
* * * * *

0
3. Amend Sec.  50.20 by revising paragraphs (a)(2), (a)(3), and (a)(4), 
to read as follows:


Sec.  50.20  Categorical exclusions subject to the Federal laws and 
authorities cited in Sec.  50.4.

    (a) * * *
    (2) Rehabilitation of buildings and improvements when the following 
conditions are met:
    (i) In the case of a building for residential use (with one to four 
units), the density is not increased beyond four units, the land use is 
not changed, and the footprint of the building is not increased in a 
floodplain or in a wetland;
    (ii) In the case of multifamily residential buildings:
    (A) Unit density is not changed more than 20 percent;
    (B) The project does not involve changes in land use from 
residential to non-residential; and
    (C) The estimated cost of rehabilitation is less than 75 percent of 
the total estimated cost of replacement after rehabilitation.
    (iii) In the case of non-residential structures, including 
commercial, industrial, and public buildings:
    (A) The facilities and improvements are in place and will not be 
changed in size nor capacity by more than 20 percent; and
    (B) The activity does not involve a change in land use, such as 
from non-residential to residential, commercial to industrial, or from 
one industrial use to another.
    (3)(i) An individual action on up to four dwelling units where 
there is a maximum of four units on any one site. The units can be four 
one-unit buildings or one four-unit building or any combination in 
between; or
    (ii) An individual action on a project of five or more housing 
units developed on scattered sites when the sites are more than 2,000 
feet apart and there are not more than four housing units on any one 
site.
    (iii) Paragraphs (a)(3)(i) and (ii) of this section do not apply to 
rehabilitation of a building for residential use (with one to four 
units) (see paragraph (a)(2)(i) of this section).
    (4) Acquisition (including leasing) or disposition of, or equity 
loans on an existing structure, or acquisition (including leasing) of 
vacant land provided that the structure or land acquired, financed, or 
disposed of will be retained for the same use.
* * * * *

PART 58--ENVIRONMENTAL REVIEW PROCEDURES FOR ENTITIES ASSUMING HUD 
ENVIRONMENTAL RESPONSIBILITIES

0
4. The authority citation for part 58 is revised to read as follows:

    Authority: 12 U.S.C. 1707 note, 1715z-13a(k); 25 U.S.C. 4115 and 
4226; 42 U.S.C. 1437x, 3535(d), 3547, 4332, 4852, 5304(g), 11402, 
12838, and 12905(h); title II of Pub. L. 105-276; E.O. 11514 as 
amended by E.O 11991, 3 CFR 1977 Comp., p. 123.


0
5. Amend Sec.  58.1 by removing paragraph (b)(2) and designating it as 
``reserved,'' redesignating and revising existing paragraph (b)(3) as 
paragraph (b)(3)(i), adding paragraph (b)(3)(ii), revising paragraphs 
(b)(6)(i), (ii), and (iii), deleting ``and'' at the end of paragraph 
(b)(8), replacing the period at the end of paragraph (b)(9) with a 
semicolon, and adding new paragraphs (b)(10), (11), (12), and new 
paragraphs (c) and (d), to read as follows:


Sec.  58.1  Purpose and applicability.

* * * * *
    (b) * * *
    (2) [Reserved]
    (3)(i) Grants to states and units of general local government under 
the Emergency Shelter Grant Program, Supportive Housing Program (and 
its predecessors, the Supportive Housing Demonstration Program (both 
Transitional Housing and Permanent Housing for Homeless Persons with 
Disabilities) and Supplemental Assistance for Facilities to Assist the 
Homeless), Shelter Plus Care Program, Safe Havens for Homeless 
Individuals Demonstration Program, and Rural Homeless Housing 
Assistance, authorized by Title IV of the McKinney-Vento Homeless 
Assistance Act, in accordance with section 443 (42 U.S.C. 11402);
    (ii) Grants beginning with Fiscal Year 2001 to private non-profit 
organizations and housing agencies under the Supportive Housing Program 
and Shelter Plus Care Program authorized by Title IV of the McKinney-
Vento Homeless Assistance Act, in accordance with section 443 (42 
U.S.C. 11402);
    * * *
    (6)(i) Public Housing Programs under Title I of the United States 
Housing Act of 1937, including HOPE VI grants authorized under section 
24 of the Act for Fiscal Year 2000 and later, in accordance with 
section 26 (42 U.S.C. 1437x);
    (ii) Grants for the revitalization of severely distressed public 
housing (HOPE VI) for Fiscal Year 1999 and prior years, in accordance 
with Title II of the Departments of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, 1999 
(Pub. L. 105-276, approved October 21, 1998); and
    (iii) Assistance administered by a public housing agency under 
section 8 of the United States Housing Act of 1937, except for 
assistance provided under part 886 of this title, in accordance with 
section 26 (42 U.S.C. 1437x);
    * * *
    (10) Assistance provided under the Native American Housing 
Assistance and Self-Determination Act of 1996 (NAHASDA), in accordance 
with:
    (i) Section 105 for Indian Housing Block Grants and Federal 
Guarantees or Financing for Tribal Housing Authorities (25 U.S.C. 4115 
and 4226); and
    (ii) Section 806 for Native Hawaiian Housing Block Grants (25 
U.S.C. 4226);
    (11) Indian Housing Loan Guarantees authorized by section 184 of 
the Housing and Community Development Act of 1992, in accordance with 
section 184(k) (12 U.S.C. 1715z-13a(k)); and
    (12) Grants for Housing Opportunities for Persons with AIDS (HOPWA) 
under the AIDS Housing Opportunity Act, as follows: competitive grants 
beginning with Fiscal Year 2001 and all formula grants, in accordance 
with section 856(h) (42 U.S.C. 12905(h)); all grants for Fiscal Year 
1999 and prior years, in accordance with section 207(c) of the 
Departments of Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations

[[Page 56128]]

Act, 1999 (Pub. L. 105-276, approved October 21, 1998).
    (c) When HUD assistance is used to help fund a revolving loan fund 
that is administered by a recipient or another party, the activities 
initially receiving assistance from the fund are subject to the 
requirements in this part. Future activities receiving assistance from 
the revolving loan fund, after the fund has received loan repayments, 
are subject to the environmental review requirements if the rules of 
the HUD program that initially provided assistance to the fund continue 
to treat the activities as subject to the Federal requirements. If the 
HUD program treats the activities as not being subject to any Federal 
requirements, then the activities cease to become Federally-funded 
activities and the provisions of this part do not apply.
    (d) To the extent permitted by applicable laws and the applicable 
regulations of the Council on Environmental Quality, the Assistant 
Secretary for Community Planning and Development may, for good cause 
and with appropriate conditions, approve waivers and exceptions or 
establish criteria for exceptions from the requirements of this part.

0
6. Amend Sec.  58.2 by revising paragraphs (a)(5)(v) and (a)(5)(vii), 
adding new paragraphs (a)(5)(ix) and (x), revising paragraphs (a)(6), 
(a)(7) introductory text, (a)(7)(i) and (a)(7)(ii) introductory text, 
and removing paragraphs (a)(7)(ii)(D) and (E), to read as follows:


Sec.  58.2  Terms, abbreviations and definitions.

    (a) * * *
    (5) * * *
    (v) With respect to Public Housing Programs under Sec.  
58.1(b)(6)(i), fiscal year 1999 and prior HOPE VI grants under Sec.  
58.1(b)(6)(ii) or Section 8 assistance under Sec.  58.1(b)(6)(iii), a 
public housing agency;
    * * *
    (vii) With respect to the FHA Multifamily Housing Finance Agency 
Program under 58.1(b)(8), a qualified housing finance agency;
    * * *
    (ix)(A) With respect to NAHASDA assistance under Sec.  58.1(b)(10), 
the Indian tribe or the Department of Hawaiian Home Lands; and
    (B) With respect to the Section 184 Indian Housing Loan Guarantee 
program under Sec.  58.1(b)(11), the Indian tribe.
    (x) With respect to the Shelter Plus Care and Supportive Housing 
Programs under Sec.  58.1(b)(3)(ii), nonprofit organizations and other 
entities.
    (6) Release of funds. In the case of the FHA Multifamily Housing 
Finance Agency Program under Sec.  58.1(b)(8), Release of Funds, as 
used in this part, refers to HUD issuance of a firm approval letter, 
and Request for Release of Funds refers to a recipient's request for a 
firm approval letter. In the case of the Section 184 Indian Housing 
Loan Guarantee program under Sec.  58.1(b)(11), Release of Funds refers 
to HUD's issuance of a commitment to guarantee a loan, or if there is 
no commitment, HUD's issuance of a certificate of guarantee.
    (7) Responsible Entity. Responsible Entity means:
    (i) With respect to environmental responsibilities under programs 
listed in Sec.  58.1(b)(1), (2), (3)(i), (4), and (5), a recipient 
under the program.
    (ii) With respect to environmental responsibilities under the 
programs listed in Sec.  58.1(b)(3)(ii) and (6) through (12), a state, 
unit of general local government, Indian tribe or Alaska Native 
Village, or the Department of Hawaiian Home Lands, when it is the 
recipient under the program. Under the Native American Housing 
Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.) 
listed in Sec.  58.1(b)(10)(i), the Indian tribe is the responsible 
entity whether or not a Tribally Designated Housing Entity is 
authorized to receive grant amounts on behalf of the tribe. The Indian 
tribe is also the responsible entity under the Section 184 Indian 
Housing Loan Guarantee program listed in Sec.  58.1(b)(11). Regional 
Corporations in Alaska are considered Indian tribes in this part. Non-
recipient responsible entities are designated as follows:
* * * * *

0
7. Amend Sec.  58.4 by revising paragraph (b)(2), removing paragraph 
(b)(3), and adding a new paragraph (c) to read as follows:


Sec.  58.4  Assumption authority.

* * * * *
    (b) * * *
    (2) States must exercise HUD's responsibilities in accordance with 
Sec.  58.18, with respect to approval of a unit of local government's 
environmental certification and RROF for a HUD assisted project funded 
through the state. Approval by the state of a unit of local 
government's certification and RROF satisfies the Secretary's 
responsibilities under NEPA and the related laws cited in Sec.  58.5.
    (c) Particular responsibilities of Indian tribes. An Indian tribe 
may, but is not required to, assume responsibilities for environmental 
review, decision-making and action for programs authorized by the 
Native American Housing Assistance and Self-Determination Act of 1996 
(25 U.S.C. 4101 et seq.) (other than title VIII) or section 184 of the 
Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a). 
The tribe must make a separate decision regarding assumption of 
responsibilities for each of these Acts and communicate that decision 
in writing to HUD. If the tribe assumes these responsibilities, the 
requirements of this part shall apply. If a tribe formally declines 
assumption of these responsibilities, they are retained by HUD and the 
provisions of part 50 of this title apply.

0
8. Amend Sec.  58.5 by revising paragraphs (a)(1) and (i) to read as 
follows:


Sec.  58.5  Related Federal laws and authorities.

* * * * *
    (a) Historic properties. (1) The National Historic Preservation Act 
of 1966 (16 U.S.C. 470 et seq.), particularly sections 106 and 110 (16 
U.S.C. 470 and 470h-2).
* * * * *
    (i) HUD environmental standards. (1) Applicable criteria and 
standards specified in part 51 of this title, other than the runway 
clear zone notification requirement in Sec.  51.303(a)(3).
    (2)(i) Also, it is HUD policy that all properties that are being 
proposed for use in HUD programs be free of hazardous materials, 
contamination, toxic chemicals and gases, and radioactive substances, 
where a hazard could affect the health and safety of occupants or 
conflict with the intended utilization of the property.
    (ii) The environmental review of multifamily housing with five or 
more dwelling units (including leasing), or non-residential property, 
must include the evaluation of previous uses of the site or other 
evidence of contamination on or near the site, to ensure that the 
occupants of proposed sites are not adversely affected by any of the 
hazards listed in paragraph (i)(2)(i) of this section.
    (iii) Particular attention should be given to any proposed site on 
or in the general proximity of such areas as dumps, landfills, 
industrial sites, or other locations that contain, or may have 
contained, hazardous wastes.
    (iv) The responsible entity shall use current techniques by 
qualified professionals to undertake investigations determined 
necessary.
* * * * *

0
9. Revise Sec.  58.10 to read as follows:

[[Page 56129]]

Sec.  58.10  Basic environmental responsibility.

    In accordance with the provisions of law cited in Sec.  58.1(b), 
except as otherwise provided in Sec.  58.4(c), the responsible entity 
must assume the environmental responsibilities for projects under 
programs cited in Sec.  58.1(b). In doing so, the responsible entity 
must comply with the provisions of NEPA and the CEQ regulations 
contained in 40 CFR parts 1500 through 1508, including the requirements 
set forth in this part.

0
10. Amend Sec.  58.11 by revising paragraph (b) to read as follows:


Sec.  58.11  Legal capacity and performance.

* * * * *
    (b) If a public housing, special project, HOPWA, Supportive 
Housing, Shelter Plus Care, or Self-Help Homeownership Opportunity 
recipient that is not a responsible entity objects to the non-recipient 
responsible entity conducting the environmental review on the basis of 
performance, timing, or compatibility of objectives, HUD will review 
the facts to determine who will perform the environmental review.
* * * * *


Sec.  58.17  [Removed]

0
11. Remove and reserve Sec.  58.17.

0
12. Revise Sec.  58.18 to read as follows:


Sec.  58.18  Responsibilities of States assuming HUD environmental 
responsibilities.

    States that elect to administer a HUD program shall ensure that the 
program complies with the provisions of this part. The state must:
    (a) Designate the state agency or agencies that will be responsible 
for carrying out the requirements and administrative responsibilities 
set forth in subpart H of this part and which will:
    (1) Develop a monitoring and enforcement program for post-review 
actions on environmental reviews and monitor compliance with any 
environmental conditions included in the award.
    (2) Receive public notices, RROFs, and certifications from 
recipients pursuant to Sec. Sec.  58.70 and 58.71; accept objections 
from the public and from other agencies (Sec.  58.73); and perform 
other related responsibilities regarding releases of funds.
    (b) Fulfill the state role in subpart H relative to the time period 
set for the receipt and disposition of comments, objections and appeals 
(if any) on particular projects.

0
13. Revise Sec.  58.22 to read as follows:


Sec.  58.22  Limitations on activities pending clearance.

    (a) Neither a recipient nor any participant in the development 
process, including public or private nonprofit or for-profit entities, 
or any of their contractors, may commit HUD assistance under a program 
listed in Sec.  58.1(b) on an activity or project until HUD or the 
state has approved the recipient's RROF and the related certification 
from the responsible entity. In addition, until the RROF and the 
related certification have been approved, neither a recipient nor any 
participant in the development process may commit non-HUD funds on or 
undertake an activity or project under a program listed in Sec.  
58.1(b) if the activity or project would have an adverse environmental 
impact or limit the choice of reasonable alternatives.
    (b) If a project or activity is exempt under Sec.  58.34, or is 
categorically excluded (except in extraordinary circumstances) under 
Sec.  58.35(b), no RROF is required and the recipient may undertake the 
activity immediately after the responsible entity has documented its 
determination as required in Sec.  58.34(b) and Sec.  58.35(d), but the 
recipient must comply with applicable requirements under Sec.  58.6.
    (c) If a recipient is considering an application from a prospective 
subrecipient or beneficiary and is aware that the prospective 
subrecipient or beneficiary is about to take an action within the 
jurisdiction of the recipient that is prohibited by paragraph (a) of 
this section, then the recipient will take appropriate action to ensure 
that the objectives and procedures of NEPA are achieved.
    (d) An option agreement on a proposed site or property is allowable 
prior to the completion of the environmental review if the option 
agreement is subject to a determination by the recipient on the 
desirability of the property for the project as a result of the 
completion of the environmental review in accordance with this part and 
the cost of the option is a nominal portion of the purchase price. 
There is no constraint on the purchase of an option by third parties 
that have not been selected for HUD funding, have no responsibility for 
the environmental review and have no say in the approval or disapproval 
of the project.
    (e) Self-Help Homeownership Opportunity Program (SHOP). In 
accordance with section 11(d)(2)(A) of the Housing Opportunity Program 
Extension Act of 1996 (42 U.S.C. 12805 note), an organization, 
consortium, or affiliate receiving assistance under the SHOP program 
may advance nongrant funds to acquire land prior to completion of an 
environmental review and approval of a Request for Release of Funds 
(RROF) and certification, notwithstanding paragraph (a) of this 
section. Any advances to acquire land prior to approval of the RROF and 
certification are made at the risk of the organization, consortium, or 
affiliate and reimbursement for such advances may depend on the result 
of the environmental review. This authorization is limited to the SHOP 
program only and all other forms of HUD assistance are subject to the 
limitations in paragraph (a) of this section.
    (f) Relocation. Funds may be committed for relocation assistance 
before the approval of the RROF and related certification for the 
project provided that the relocation assistance is required by 24 CFR 
part 42.

0
14. Amend Sec.  58.33 by revising paragraph (b) to read as follows:


Sec.  58.33  Emergencies.

* * * * *
    (b) If funds are needed on an emergency basis and adherence to 
separate comment periods would prevent the giving of assistance during 
a Presidentially declared disaster, or during a local emergency that 
has been declared by the chief elected official of the responsible 
entity who has proclaimed that there is an immediate need for public 
action to protect the public safety, the combined Notice of FONSI and 
Notice of Intent to Request Release of Funds (NOI/RROF) may be 
disseminated and/or published simultaneously with the submission of the 
RROF. The combined Notice of FONSI and NOI/RROF shall state that the 
funds are needed on an emergency basis due to a declared disaster and 
that the comment periods have been combined. The Notice shall also 
invite commenters to submit their comments to both HUD and the 
responsible entity issuing the notice to ensure that these comments 
will receive full consideration.

0
15. Amend Sec.  58.35 as follows:
    a. Redesignating paragraphs (a)(3)(i) and (a)(3)(ii) as paragraphs 
(a)(3)(ii) and (a)(3)(iii);
    b. Adding a new paragraph (a)(3)(i);
    c. Revising paragraphs (a)(4) and (a)(5); and
    d. Adding a new paragraph (b)(7).
    The additions and revisions read as follows:


Sec.  58.35  Categorical exclusions.

    (a) * * *
    (3) * * *

[[Page 56130]]

    (i) In the case of a building for residential use (with one to four 
units), the density is not increased beyond four units, the land use is 
not changed, and the footprint of the building is not increased in a 
floodplain or in a wetland;
    (ii) * * *
    (iii) * * *
    (4)(i) An individual action on up to four dwelling units where 
there is a maximum of four units on any one site. The units can be four 
one-unit buildings or one four-unit building or any combination in 
between; or
    (ii) An individual action on a project of five or more housing 
units developed on scattered sites when the sites are more than 2,000 
feet apart and there are not more than four housing units on any one 
site.
    (iii) Paragraphs (a)(4)(i) and (ii) of this section do not apply to 
rehabilitation of a building for residential use (with one to four 
units) (see paragraph (a)(3)(i) of this section).
    (5) Acquisition (including leasing) or disposition of, or equity 
loans on an existing structure, or acquisition (including leasing) of 
vacant land provided that the structure or land acquired, financed, or 
disposed of will be retained for the same use.
* * * * *
    (b) * * *
    (7) Approval of supplemental assistance (including insurance or 
guarantee) to a project previously approved under this part, if the 
approval is made by the same responsible entity that conducted the 
environmental review on the original project and re-evaluation of the 
environmental findings is not required under Sec.  58.47.
* * * * *

0
16. Revise Sec.  58.45 to read as follows:


Sec.  58.45  Public comment periods.

    Required notices must afford the public the following minimum 
comment periods, counted in accordance with Sec.  58.21:

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
(a) Notice of Finding of No Significant Impact (FONSI)..  15 days when published or, if no publication, 18 days
                                                           when mailing and posting
(b) Notice of Intent to Request Release of Funds (NOI-    7 days when published or, if no publication, 10 days
 RROF).                                                    when mailing and posting
(c) Concurrent or combined notices......................  15 days when published or, if no publication, 18 days
                                                           when mailing and posting
----------------------------------------------------------------------------------------------------------------


0
17. Amend Sec.  58.72 by revising paragraph (b) to read as follows:


Sec.  58.72  HUD or State actions on RROFs and certifications.

* * * * *
    (b) HUD (or the state) may disapprove a certification and RROF if 
it has knowledge that the responsible entity or other participants in 
the development process have not complied with the items in Sec.  
58.75, or that the RROF and certification are inaccurate.
* * * * *

0
18. Amend Sec.  58.75 by revising paragraph (e) to read as follows:


Sec.  58.75  Permissible bases for objections.

* * * * *
    (e) The recipient or other participants in the development process 
have committed funds, incurred costs or undertaken activities not 
authorized by this part before release of funds and approval of the 
environmental certification by HUD (or the state).
* * * * *

PART 574--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS

0
19. The authority citation for part 574 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 12901-12912.

0
20. Revise Sec.  574.510 to read as follows:


Sec.  574.510  Environmental procedures and standards.

    (a) Activities under this part are subject to HUD environmental 
regulations in part 58 of this title, except that HUD will perform an 
environmental review in accordance with part 50 of this title for any 
competitive grant for Fiscal Year 2000.
    (b) The recipient, its project partners and their contractors may 
not acquire, rehabilitate, convert, lease, repair, dispose of, 
demolish, or construct property for a project under this part, or 
commit or expend HUD or local funds for such eligible activities under 
this part, until the responsible entity (as defined in Sec.  58.2 of 
this title) has completed the environmental review procedures required 
by part 58 and the environmental certification and RROF have been 
approved (or HUD has performed an environmental review and the 
recipient has received HUD approval of the property). HUD will not 
release grant funds if the recipient or any other party commits grant 
funds (i.e., incurs any costs or expenditures to be paid or reimbursed 
with such funds) before the recipient submits and HUD approves its RROF 
(where such submission is required).
    (c) For activities under a grant to a nonprofit entity that would 
generally be subject to review under part 58, HUD may make a finding in 
accordance with Sec.  58.11(d) and may itself perform the environmental 
review under the provisions of part 50 of this title if the recipient 
nonprofit entity objects in writing to the responsible entity's 
performing the review under part 58. Irrespective of whether the 
responsible entity in accord with part 58 (or HUD in accord with part 
50) performs the environmental review, the recipient shall supply all 
available, relevant information necessary for the responsible entity 
(or HUD, if applicable) to perform for each property any environmental 
review required by this part. The recipient also shall carry out 
mitigating measures required by the responsible entity (or HUD, if 
applicable) or select alternate eligible property.

PART 582--SHELTER PLUS CARE

0
21. The authority citation for part 582 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 11403-11407b.

0
22. Revise Sec.  582.230 to read as follows:


Sec.  582.230  Environmental review.

    (a) Activities under this part are subject to HUD environmental 
regulations in part 58 of this title, except that HUD will perform an 
environmental review in accordance with part 50 of this title prior to 
its approval of any conditionally selected applications from PHAs for 
Fiscal Year 2000 and prior years for other than the SRO component. For 
activities under a grant to a PHA that generally would be subject to 
review under part 58, HUD may make a finding in accordance with Sec.  
58.11(d) and may itself perform the environmental review under the 
provisions of part 50 of this title if the recipient PHA objects in 
writing to the responsible entity's performing the review under part 
58. Irrespective of whether the responsible entity in accord with part 
58 (or HUD in accord with

[[Page 56131]]

part 50) performs the environmental review, the recipient shall supply 
all available, relevant information necessary for the responsible 
entity (or HUD, if applicable) to perform for each property any 
environmental review required by this part. The recipient also shall 
carry out mitigating measures required by the responsible entity (or 
HUD, if applicable) or select alternate eligible property. HUD may 
eliminate from consideration any application that would require an 
Environmental Impact Statement (EIS).
    (b) The recipient, its project partners and their contractors may 
not acquire, rehabilitate, convert, lease, repair, dispose of, 
demolish, or construct property for a project under this part, or 
commit or expend HUD or local funds for such eligible activities under 
this part, until the responsible entity (as defined in Sec.  58.2 of 
this title) has completed the environmental review procedures required 
by part 58 and the environmental certification and RROF have been 
approved or HUD has performed an environmental review under part 50 and 
the recipient has received HUD approval of the property. HUD will not 
release grant funds if the recipient or any other party commits grant 
funds (i.e., incurs any costs or expenditures to be paid or reimbursed 
with such funds) before the recipient submits and HUD approves its RROF 
(where such submission is required).

PART 583--SUPPORTIVE HOUSING

0
23. The authority citation for part 583 continues to read as follows:

    Authority: 42 U.S.C. 3535(d) and 11389.

0
24. Revise Sec.  583.230 to read as follows:


Sec.  583.230  Environmental review.

    (a) Activities under this part are subject to HUD environmental 
regulations in part 58 of this title, except that HUD will perform an 
environmental review in accordance with part 50 of this title prior to 
its approval of any conditionally selected applications for Fiscal Year 
2000 and prior years that were received directly from private nonprofit 
entities and governmental entities with special or limited purpose 
powers. For activities under a grant that generally would be subject to 
review under part 58, HUD may make a finding in accordance with Sec.  
58.11(d) and may itself perform the environmental review under the 
provisions of part 50 of this title if the recipient objects in writing 
to the responsible entity's performing the review under part 58. 
Irrespective of whether the responsible entity in accord with part 58 
(or HUD in accord with part 50) performs the environmental review, the 
recipient shall supply all available, relevant information necessary 
for the responsible entity (or HUD, if applicable) to perform for each 
property any environmental review required by this part. The recipient 
also shall carry out mitigating measures required by the responsible 
entity (or HUD, if applicable) or select alternate eligible property. 
HUD may eliminate from consideration any application that would require 
an Environmental Impact Statement (EIS).
    (b) The recipient, its project partners and their contractors may 
not acquire, rehabilitate, convert, lease, repair, dispose of, demolish 
or construct property for a project under this part, or commit or 
expend HUD or local funds for such eligible activities under this part, 
until the responsible entity (as defined in Sec.  58.2 of this title) 
has completed the environmental review procedures required by part 58 
and the environmental certification and RROF have been approved or HUD 
has performed an environmental review under part 50 and the recipient 
has received HUD approval of the property. HUD will not release grant 
funds if the recipient or any other party commits grant funds (i.e., 
incurs any costs or expenditures to be paid or reimbursed with such 
funds) before the recipient submits and HUD approves its RROF (where 
such submission is required).

PART 970--PUBLIC HOUSING PROGRAM--DEMOLITION OR DISPOSITION OF 
PUBLIC HOUSING PROJECTS

0
25. The authority citation for part 970 continues to read as follows:

    Authority: 42 U.S.C. 1437p and 3535(d).

0
26. Amend Sec.  970.4 by revising paragraph (b), removing paragraph (c) 
and designating it as reserved, to read as follows:


Sec.  970.4  General requirements for HUD approval of applications for 
demolition or disposition.

* * * * *
    (b) Environmental review. Activities under this part are subject to 
HUD environmental regulations in part 58 of this title. However, HUD 
may make a finding in accordance with Sec.  58.11(d) and may itself 
perform the environmental review under the provisions of part 50 of 
this title if a PHA objects in writing to the responsible entity's 
performing the review under part 58.
    (c) [Reserved]
* * * * *

    Dated: September 15, 2003.
Mel Martinez,
Secretary.
[FR Doc. 03-24265 Filed 9-26-03; 8:45 am]
BILLING CODE 4210-29-P