[Federal Register Volume 69, Number 151 (Friday, August 6, 2004)]
[Notices]
[Pages 47971-47976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18086]


=======================================================================
-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION


National Environmental Policy Act Procedures

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Notice of proposed change in procedures.

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

SUMMARY: SBA seeks comment on its proposed revisions to its procedures 
implementing the National Environmental Policy Act specifically 
relating to loans made under these business loan assistance programs. 
SBA also seeks comments on a proposed assessment of the effects of the 
Agency's 7(a) business loan program and 504 certified development 
company program upon the environment. These changes are necessary to 
reflect changes in SBA's loan programs.

DATES: Comments on both the revised procedures and the PEA must be 
received on or before October 5, 2004.

ADDRESSES: Comments should be addressed to Eric S. Benderson, Associate 
General Counsel, Office of General Counsel, Small Business 
Administration, 409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Eric S. Benderson, Associate General 
Counsel (202) 205-6636; [email protected].

SUPPLEMENTARY INFORMATION: SBA has prepared a Programmatic 
Environmental Assessment (``PEA'') to evaluate the effects of the 
Agency's 7(a) business loan and 504 certified development company 
programs (``small business loan assistance programs'') on various 
environmental resources. The PEA finds that the cumulative effects of 
these business loan assistance programs do not have a significant 
adverse impact on these resources. To obtain a copy of this PEA, you 
may send a request to [email protected] or visit SBA's Web site at 
http://www.sba.gov/library/reportsroom.html. Interested parties may 
submit comments on this PEA to the above address.
    Under the National Environmental Policy Act (``NEPA''), 42 U.S.C. 
4321 et. seq., and the implementing regulations promulgated by the 
Council on Environmental Quality (``CEQ''), 40 CFR part 1500, agencies 
must adopt procedures for determining the environmental effects of 
major Federal actions. SBA's procedures implementing NEPA are set forth 
in SBA Standard Operating Procedure (``SOP'') 90-57. These procedures 
were originally published in 45 FR 7358, February 1, 1980, and are 
available for review at http://www.sba.gov/library/soproom.html.
    SBA's two primary business loan assistance programs are the 7(a) 
Guaranteed Loan Program (``7(a) Program''), implemented pursuant to the 
Small Business Act, 15 U.S.C. 636(a), and the 504 Certified Development 
Company Program (``504 Program''), implemented pursuant to Title V of 
the Small Business Investment Act of 1958, as amended, 15 U.S.C. 695. 
Under the 7(a) Program, SBA guarantees up to 85 percent of loan amount 
(depending upon loan size) to encourage commercial lenders to make 
loans to eligible and creditworthy small businesses that cannot obtain 
financing on reasonable terms through normal

[[Page 47972]]

private lending channels. SBA does not use any of its own funds unless 
there is a default by the borrower in paying the loan. If a default 
occurs, SBA pays its guaranty obligation to the lender. Lenders then 
undertake the liquidation of collateral given by the borrower to secure 
the loan, and appropriate debt collection actions against the borrower, 
to recover any loss on the loan.
    Under the 504 Program, which is a jobs-creation program, SBA 
assists small businesses seeking long-term, fixed-rate financing to 
acquire or improve capital assets. SBA implements the program through 
268 Certified Development Companies (``CDCs''), which are private, 
mostly non-profit corporations licensed to promote local and community 
economic development. Typically, a 504 project is funded by three 
sources: (1) A loan, secured with a senior lien, from a private-sector 
lender for 50 percent of the project cost; (2) an equity contribution 
from the borrower of at least 10 percent of the project cost; and (3) a 
loan covering up to 40 percent of the total cost, which is funded from 
proceeds from the sale to investors of a debenture issued by a CDC, 
payment of which is guaranteed by the SBA. (Although SBA does not 
actually guarantee the payment of a 504 loan, but rather the debenture 
which funds the loan, these loans are referred to below as guaranteed 
loans for the sake of convenience.) SBA does not use any of its own 
funds unless there is a default by the borrower in paying the 
debenture-funded loan, in which case the Agency pays the outstanding 
balance owed on the debenture to the investors. After a default, 
liquidation of collateral given by the borrower to secure the loan, and 
appropriate debt collection actions against the borrower, are 
undertaken to recover any loss on the loan.
    Under SOP 90-57, SBA's issuance of guaranties, given in connection 
with loans made under the 7(a) Program and in connection with 
debentures for local and community development loans under the 504 
Program, are categorically excluded from NEPA except that an 
environmental assessment may be required in those cases where loan 
proceeds used for construction and/or purchase of land exceed $300,000. 
SOP 90-57, ]] 7h, 7k. SBA's NEPA procedures, which have not been 
revised since their adoption in 1980 despite significant changes in 
SBA's small business loan assistance programs, are outdated. For the 
reasons discussed below, SBA proposes to revise its NEPA procedures.

Background

    Small businesses make up a major sector of the American economy and 
play an essential role in maintaining the Nation's system of private 
enterprise. The Small Business Act, which created the SBA, provides as 
follows:

    The essence of the American economic system of private 
enterprise is free competition. Only through full and free 
competition can free markets, free entry into business, and 
opportunities for the expression and growth of personal initiative 
and individual judgment be assured. The preservation and expansion 
of such competition is basic not only to the economic well-being but 
to the security of this Nation. Such security and well-being cannot 
be realized unless the actual and potential capacity of small 
business is encouraged and developed. It is the declared policy of 
the Congress that the Government should aid, counsel, assist, and 
protect, insofar as is possible, the interests of small-business 
concerns in order to preserve free competitive enterprise, * * * and 
to maintain and strengthen the overall economy of the Nation.

    15 U.S.C. 631, et seq.
    According to a report published by the SBA Office of Advocacy, 
Small Business by the Numbers (May 2003), America's 22.9 million small 
businesses employ more than 50 percent of the private work force, 
generate more than 50 percent of the nation's non-farm private gross 
domestic product, and generate 60 to 80 percent of net new jobs 
annually. Small businesses create opportunities for women, minorities, 
veterans and the handicapped to enter the economic mainstream, and play 
an important role in technological innovation, helping the U.S. to 
achieve a high standard of living, and providing a diversity of 
products and services.
    One of the many ways that Congress has empowered SBA to fulfill the 
Agency's statutory mission to ``aid, counsel and assist small 
businesses,'' 15 U.S.C. 631, is through the SBA small business loan 
assistance programs--the 7(a) and 504 Programs. These programs allow 
SBA to assist small businesses, including many minority and women-owned 
businesses, as well as those owned by veterans and those with 
disabilities, by encouraging lenders to provide loans to small 
businesses that would not otherwise qualify for financial assistance 
from private sources.
    Several features of SBA's loan assistance programs bear emphasis:
    (1) In over 60 percent of loans stemming from the Agency's 7(a) and 
504 small business loan assistance programs, the lender approves the 
loan and funds it without SBA's prior review and approval. In fact, 
based upon current trends to streamline these programs, most of SBA's 
business loan guaranties likely will be made in this way in the near 
future.
    (2) It is of paramount importance that loan approval be 
accomplished as quickly as possible given the needs of the small 
businesses applying for the loans and the timeframes for loan approval 
sought by our participating lenders.
    (3) In the vast majority of cases the loan applicant comes to the 
lender with an existing business that is in need of specific funding, 
or with a definite business plan, both as to the business location and 
the use of proceeds. SBA plays no role in determining either. In this 
regard, SBA is asked for its guaranty at the end of the process, after 
the small business owner has determined the purpose and amount of the 
financing.
    (4) It is the lender that applies for the guaranty, not the small 
business, and SBA generally has little or no contact with the small 
business during the loan approval process.
    (5) An SBA-guaranteed loan, though quite significant to a small 
business borrower, when viewed as a Federal expenditure, is relatively 
small. Approximately three-quarters of all guaranteed loans provided by 
SBA in Fiscal Year 2002 pertained to loans of less than $300,000. In 
fact, the average size of an SBA-guaranteed loan in FY 2002 was 
$237,907.
    (6) In addition, approximately 75 percent of all 7(a) loans, and 70 
percent of all 504 loans, are made to borrowers involved in wholesale 
or retail businesses, or the service industry.
    (7) Further, less than 13 percent of 7(a) or 504 borrowers are 
located in rural areas, and the vast majority of SBA loans do not 
finance new construction.
    Accordingly, the nature of SBA's small business loan assistance 
programs, in which SBA's role is secondary to that of the lenders, 
expedited loan approval is required, guaranteed loans of relatively low 
dollar value are involved, and existing site locations or ones that 
have already been planned, makes a loan-by-loan assessment under NEPA 
impractical and unnecessary. As discussed above, SBA has undertaken a 
PEA to determine the extent of any environmental impact of its 
programs. A primary focus of this assessment was to determine any 
possible impact SBA small business loan assistance programs may have on 
urban sprawl, since that question has been raised by certain 
environmental groups. As discussed in the PEA, SBA has determined that 
the Agency's small business loan assistance programs do not promote 
urban sprawl. Such a

[[Page 47973]]

conclusion is not surprising in light of the fact that small business 
follows economic development because of the need for customers or 
clients. But even if this were not the case, the Agency's small 
business loan assistance programs prohibit the use of loan proceeds for 
speculative real estate ventures or for real estate development. See 13 
CFR 120.130.
    In the absence of any other known controversy regarding the impact 
of the business loan programs other than an alleged contribution to 
urban sprawl, the PEA also undertakes a generalized review of the 
impacts of the small business loan assistance programs upon other 
components of the environment. As discussed therein, SBA has determined 
that the cumulative effects of these programs upon the environment are 
very limited.

Legal Analysis

    Having reviewed SBA's existing NEPA procedures as they relate to 
the Agency's small business loan assistance programs, and having 
carefully considered the provisions of NEPA, applicable regulations, 
the relevant case law developed during the twenty-three years since 
SBA's rules were first promulgated, and the current nature of SBA's 
various small business loan assistance programs, SBA has concluded that 
its current NEPA procedures should be modified. The Agency has 
determined that NEPA reviews pertaining to individual business loan 
guaranties need not be undertaken because an SBA guaranty of a business 
loan does not constitute a major Federal action significantly affecting 
the quality of the environment and, thus, does not come within the 
purview of NEPA. However, because of questions raised as to the 
programmatic impact of those loan guaranties, particularly as they may 
relate to urban sprawl, the Agency has reviewed its small business loan 
assistance programs to determine what cumulative impact, if any, they 
may have on the environment. As set forth in SBA's PEA, the Agency's 
small business loan assistance programs do not have a significant 
effect upon urban sprawl or the environment.
    Under NEPA, 42 U.S.C. 4332(2)(C), all agencies of the Federal 
Government are directed to include in every recommendation or report on 
``major Federal actions significantly affecting the quality of the 
human environment,'' a detailed statement setting forth the 
environmental impact of the proposed action, any unavoidable adverse 
environmental effects of the proposed action, alternatives to the 
proposed action, and certain other data. From the outset, however, the 
proper interpretation of the critical words just quoted, and, thus, the 
actual scope of NEPA's applicability, has been subject to each federal 
agency's interpretation in the context of particular proposed programs 
and actions, informed by numerous judicial decisions.
    NEPA's procedural requirements bind only the Federal government. 
NEPA does not apply to the actions of state, local, or private entities 
unless the Federal government has, in some manner, become sufficiently 
involved in a particular undertaking of the state, local, or private 
entity so as to ``federalize'' that project for purposes of NEPA. The 
CEQ regulations implementing the procedural provisions of NEPA and 
numerous judicial decisions provide guidance for determining what level 
of Federal involvement is necessary before the requirements of NEPA 
must be met--i.e., before the Federal involvement will be deemed 
sufficient to qualify the subject project as a ``major Federal 
action.'' The CEQ regulations define ``major Federal action'' as 
actions ``with effects that may be major which are potentially subject 
to Federal control and responsibility.''
    Case law has articulated the meaning of this standard in a number 
of different factual contexts. It is clear that there are Federal 
activities and actions that will not be deemed sufficiently significant 
as to amount to ``major Federal action'' under the provisions of NEPA. 
Ka Makani `O Kohala Ohana Inc. v. Water Supply, 295 F.3d 955, 960 (9th 
Cir. 2002); Atlanta Coalition on the Transportation Crisis, Inc. v. 
Atlanta Regional Commission, 599 F.2d 1333, 1347 (5th Cir. 1979). 
According to the Ka Makani Court, in order to determine whether a 
particular Federal action is sufficiently major so as to trigger NEPA's 
requirements, one must ``look `to the nature of the federal funds used 
and the extent of federal involvement.' '' 295 F.3d at 960 (quoting 
Sierra Club v. Penfold, 857 F.2d 1307, 1314 (9th Cir. 1988). Another 
court stated that ``Whether a particular federal action is `major' 
depends on the amount of federal funds expended, the number of people 
affected, the length of time consumed, and the extent of government 
planning involved.'' Como-Falcon Coalition, Inc. v. United States 
Department of Labor, 465 F. Supp. 850, 857 (D. Minn. 1978), aff'd, 609 
F.2d 342 (8th Cir. 1979), cert. denied, 446 U.S. 936 (1980). And one 
case, Township of Ridley v. Blanchette, 421 F. Supp. 435 (E.D. Pa. 
1976) observed:

Those cases which have found the existence of major federal action 
have ordinarily involved highway extensions, large structures which 
alter the neighborhood, major dams or river projects, and other 
projects which can generally be characterized as involving sizable 
federal funding (over one-half million dollars, and usually well 
over one million), large increments of time for the planning and 
construction stages, the displacement of many people or animals, or 
the reshaping of large areas of topography.

Id. at 446.

    With respect to the funding of a project by a Federal agency, the 
courts have recognized that significant Federal funding can transform a 
non-federal project into a ``major Federal action.'' Ka Makani, 295 
F.3d at 960; Sierra Club v. U.S. Fish and Wildlife Service, 235 F. 
Supp. 2d 1109, 1121 (D. Ore. 2002) (``Given the overwhelming percentage 
of federal dollars involved, and the fact that the amount itself, 
regardless of the percentage it represents, is more than $3 million, 
the federal funding contribution alone is probably sufficient to 
`federalize' the project.''). But regardless of the amount of Federal 
money involved in a specific Federal project, the key test for 
determining the presence of a ``major Federal action'' is whether there 
is a significant degree of Federal involvement with, and control over, 
the subject project. See, e.g., The Environmental Rights Coalition, 
Inc. v. Austin, 780 F. Supp. 584, 600-01 (S.D. Ind. 1991).
    As noted by the Fifth Circuit,

Determining whether a program is sufficiently ``federal'' to render 
it subject to NEPA will often entail analysis of the amount and 
significance of federal aid. * * * And in some circumstances, 
perhaps, the federal character of a state or local project can be 
established merely by the presence of substantial federal 
assistance. * * * But we think the presence of federal financial 
assistance is generally just one factor in the analysis of whether 
there is sufficient federal control over, responsibility for, or 
involvement with an action to require preparation of an EIS.

Atlanta Coalition, 599 F.2d at 1347. And the need for Federal control 
over a project before it will be deemed a ``major Federal action'' is 
reflected in numerous cases pertaining to NEPA. Ka Makani, 295 F.3d 
955, 960 and 961(``The USGS and HUD * * * lacked the degree of 
decision-making power, authority, or control over the [project] needed 
to render it a major federal action.'' Id. at 960; ``Because the final 
decision-making power remained at all times with [the state agency], we 
conclude that the USGS involvement was not sufficient to constitute 
`major federal action.' '' Id. at 961); Mayaguezanos Por La Salud Y El

[[Page 47974]]

Ambiente v. U.S., 198 F.3d 297, 302 (1st Cir. 1999) (``Like the Fourth 
Circuit, we look to whether federal approval is the prerequisite to the 
action taken by the private actors and whether the federal agency 
possesses some form of authority over the outcome.''); United States v. 
Southern Florida Water Management District, 28 F.3d 1563, 1572 (11th 
Cir. 1994), cert. denied sub nom. Western Palm Beach County Farm 
Bureau, Inc. v. U.S., 514 U.S. 1107 (1995) (``The touchstone of major 
federal activity constitutes a federal agency's authority to influence 
nonfederal activity. `[T]he federal agency must possess actual power to 
control the nonfederal activity.' Sierra Club [v. Hodel, 848 F.2d 1068, 
1089 (10th Cir. 1988)].''); Sugarloaf Citizens Association v. FERC, 959 
F.2d 508, 512 (4th Cir. 1992) (``As stated by the Tenth Circuit, `the 
federal agency must possess actual power to control the non-federal 
activity.' Sierra Club v. Hodel, 848 F.2d 1068, 1089 (10th Cir. 
1988).''); Save Barton Creek Association v. Federal Highway 
Administration, 950 F.2d 1129, 1134-35 (5th Cir.), cert. denied, 505 
U.S. 1220 (1992). Indeed, in one recent case, Riverfront Garden 
District Association, Inc. v. City of New Orleans, 2000 WL 1789952 
(E.D. La. Dec. 6, 2000), although the Federal Highway Administration 
paid $15,500,000 of the $88,000,000 cost of the subject project, the 
Court nonetheless concluded,

    While the amount of federal money is not insignificant, the 
Fifth Circuit's focus on the ability to influence or control the 
outcome in material respects in determining whether a major federal 
action exists convinces this Court that the [project] is not a 
``major federal action.'' * * * The federal government could not 
exercise discretion and control over the design, location or choice 
of alternatives for the nonfederally funded portions.

p. 6.
    As noted above, SBA does not provide loan proceeds directly to 
borrowers. It provides guaranties to lenders, in order to encourage 
them to provide loans to small businesses. Proceeds from these loans 
are used by the borrowing businesses for working capital, to purchase 
inventory, machinery, or equipment, or to purchase real estate for use 
in the business or fund the cost of business expansion. And, regardless 
of how the loan proceeds are used by borrowers benefiting from SBA's 
small business loan assistance programs, the amount of the federal 
guaranteed-loan remains relatively low, as already noted, averaging 
only approximately $237,907 in amount. Accordingly, SBA has concluded 
that the size of the guaranties which it extends (or which are placed 
on loans by lenders authorized to do so without prior SBA consent) are 
not of sufficient magnitude to constitute major Federal actions under 
NEPA.
    Even more significant, however, is the clear and irrefutable fact 
that SBA does not have control over the business activities of the 
private borrower, has no responsibility for the borrower's business 
activities, and has no authority over the outcome of the borrower's 
efforts. Thus, SBA borrowers approach lenders with business plans which 
they have formulated without SBA direction; they have chosen, or 
choose, the location of their businesses without directives from SBA; 
SBA does not direct or even supervise the efforts of borrowers to 
operate, modify, or expand their businesses; SBA has no role whatsoever 
in the day-to-day activities of the borrowers; and SBA does not control 
a borrower's ability to succeed in its business activities. Thus, SBA 
has concluded that the absence of a significant degree of Agency 
involvement with, or control over, borrowers' projects compels a 
determination that SBA's role with regard to those projects does not 
constitute a ``major Federal action'' for purposes of NEPA.
    Given the relatively small magnitude of the dollar amount of SBA-
guaranteed loan funds received by individual borrowers, and in light of 
the fact that SBA does not have a significant degree of involvement 
with, or control over, the projects of the borrowers, it is quite 
appropriate that SBA's actions with regard to any particular loan 
should not be deemed major Federal actions for purposes of NEPA, and 
that SBA should not be subject to the requirements of NEPA in 
connection with individual loans made in connection with its small 
business loan assistance programs. As has been observed by the District 
Court for the Southern District of New York, ``* * * it would make no 
sense to require federal agencies to assess the environmental impact of 
private actions over which they have no control, solely on the basis of 
the incidental effects of federal action on the private action.'' 
Landmark West! v. United States Postal Service, 840 F. Supp. 994, 1009 
(S.D.N.Y. 1993), aff'd, 41 F.3d 1500 (2d Cir. 1994) (Table). Further, 
as noted by the Fourth Circuit in Sugarloaf Citizens Association,

Only proposals for a ``major'' federal action * * * require review 
by an agency under NEPA. ``Requiring an EIS for anything less would 
needlessly hinder the Government's ability to carry on its myriad 
programs and responsibilities in which it assists, informs, 
monitors, and reacts to activities of individuals, organizations, 
and states, but in which Government plays an insubstantial role.'' 
NAACP v. Medical Center, Inc., 584 F.2d 619, 634 (3d Cir. 1978).

959 F.2d at 512. Finally, the observation of the Court in Township of 
Ridley is of particular significance:

In sum, ``major'' is a term of reasonable connotation, and serves to 
differentiate between projects which do not involve sufficiently 
serious effects to justify the costs of completing an impact 
statement, and those projects with potential effects which appear to 
offset the costs in time and resources of preparing a statement. 421 
F. Supp. at 446.

    For loans made under the Preferred Lender (``PL'') or Premier 
Certified Lender (PCL) Programs, there is an additional reason that 
such loans would not come within the purview of NEPA. Under the PL 
Program, pursuant to the Small Business Act, SBA delegates 
responsibility to experienced and qualified lenders (generally larger 
lending institutions) to issue an SBA guaranty on a loan without prior 
approval by SBA. Under Section 7(a)(2)(C) of the Small Business Act, 15 
U.S.C. 636(a)(2)(C), Congress has defined the PL Program as a ``program 
established by the Administrator * * * under which a written agreement 
between the lender and the Administration delegates to the lender * * * 
complete authority to make and close guaranteed loans with a guaranty 
from the Administration without obtaining the prior specific approval 
of the Administration * * *'' (emphasis added). PL Program lenders, 
thus, have delegated authority to make SBA-guaranteed loans without any 
approval from SBA.
    Under the PCL Program, pursuant to the Small Business Investment 
Act of 1958, as amended, SBA delegates the responsibility to 
experienced and qualified CDCs to issue an SBA guaranty on a loan 
without prior approval by SBA. 15 U.S.C. 697e. As to the PCL Program, 
Congress has mandated that guaranteed loans made by PCLs shall not 
include SBA ``review of the decisions by the lender involving 
creditworthiness, loan closing, or compliance with legal requirements 
imposed by law or regulation.'' 15 U.S.C. 697e.
    Thus, the guaranteed loans made under SBA's PL and PCL Programs are 
extended without prior SBA review or consent. Those guaranteed loans 
involve decisions by private sector borrowers to apply for guaranteed 
loans from private commercial lenders, and unilateral determinations by 
those lenders to loan their own money, subject to an SBA guaranty 
pertaining to a 7(a) loan or 504 debenture.
    The legislative history of NEPA reflects congressional intent that 
the

[[Page 47975]]

statute not apply if ``the existing law applicable to such agency's 
operations expressly prohibits or makes full compliance with one of the 
directives impossible.'' H. Conf. Rep. No. 765, 91st Cong., 1st Sess. 
(1969), reprinted in 1969 U.S.C.C.A.N. 2767, 2770 (as quoted by Douglas 
County, Or. v. Babbitt, 48 F.3d 1495, 1502 (9th Cir. 1995), cert. 
denied, 516 U.S. 1042 (1996)). In interpreting this legislative 
history, the Supreme Court concluded that ``where a clear and 
unavoidable conflict in statutory authority exists, NEPA must give 
way.'' Flint Ridge Dev. Co. v. Scenic Rivers Ass'n, 426 U.S. 776, 791 
(1976). Such a conflict exists with respect to the PL and PCL programs. 
It would not be possible for SBA to perform an environmental assessment 
or environmental impact statement under NEPA for PL and PCL Program 
guaranteed loans when Congress has directed that these guaranteed loans 
are to be made without any prior approval by SBA. SBA has, thus, 
determined that the statutory authority for these programs constitutes 
a clear and unavoidable conflict which compels the conclusion that they 
are not subject to NEPA.
    Because of questions as to the possible cumulative impact of SBA's 
business loan programs upon the environment, SBA has undertaken a PEA 
to determine what impact, if any, the small business loan assistance 
programs themselves have on the environment.

Discussion of Alternatives

    This Section describes the alternatives considered in revising 
SBA's NEPA procedures, and provides a basis for the choice of the 
preferred alternative. The ``No Action Alternative'' is described 
first. The ``Preferred Alternative'' is then described. Finally, there 
is a comparison of the environmental and socioeconomic consequences of 
the No Action Alternative compared to the Preferred Alternative.

No Action Alternative

    Under the ``No Action Alternative'', SBA would retain its existing 
NEPA procedures. Under SBA's SOP 90-57, all SBA-guaranteed loans made 
under the 7(a) Program, and local and community development loans and 
guaranties (which would include guaranteed loans made under the 504 
Program), are categorically excluded from NEPA, except that an 
environmental assessment may be required in those cases where 
guaranteed loan proceeds in excess of $300,000 are used for 
construction under the 7(a) and 504 Programs, and where proceeds in 
excess of $300,000 are used for the purchase of land under the 7(a) 
Program. SOP 90-57, ]] 7h, 7k. As discussed above, SOP 90-57 also 
provides that an environmental assessment may be required if ``the loan 
is in response to a government regulation which pertains to the 
environmental impact of the business operation,'' but SBA has not 
provided such financing for many years. Thus, under the ``No Action 
Alternative,'' SBA would, when appropriate, perform environmental 
assessments on individual guaranties of loans or debentures meeting one 
of these $300,000 thresholds.

Preferred Alternative

    Under the Preferred Alternative, SBA would not perform a NEPA 
review on individual guaranteed loans made under the 7(a) and 504 
Programs for the reasons discussed earlier, but would undertake 
programmatic reviews as deemed appropriate to determine the cumulative 
impacts of these programs. In addition, as part of its programmatic 
responsibilities, SBA would make information resources available to 
participants in these programs regarding matters of environmental 
concern. SBA would host this ``Environmental Classroom'' on its website 
and would provide information on such environmental topics as ``Smart 
Growth,'' decreasing pollution in the workplace, environmental 
regulatory compliance and permitting assistance, Superfund, Brownfields 
and environmental audits.

Environmental/Socio-Economic Consequences

    This section discusses the environmental and socio-economic 
consequences of the No-Action Alternative as compared to the Preferred 
Alternative. The discussion of environmental and socio-economic 
consequences is necessarily generalized given the programmatic nature 
of these alternatives.
    As discussed above, SBA has concluded that individual loans made 
under SBA's small business loan assistance programs are not major 
federal actions that are subject to NEPA. Under the No-Action 
Alternative, environmental assessments may be required if proceeds in 
excess of $300,000 from a guaranteed loan are used for construction 
under the 7(a) and 504 Programs, or the purchase of land under the 7(a) 
Program. However, given the Agency's conclusions that the effects of 
guaranteed business loans over $300,000 do not have a significant 
impact on the environment, set forth in SBA's PEA, requiring individual 
environmental assessments of loans in excess of $300,000 that involve 
construction or the purchase of land would not, therefore, likely 
result in significantly greater protection of the environment.
    As discussed above, Congress has directed that certain lenders have 
considerable independence to approve loan guaranties with virtually no 
involvement from SBA. Lender approval of loans without significant SBA 
involvement accounts for over sixty percent of all 7(a) and 504 loans. 
Moreover, of the limited number of guaranties that are actually 
approved by SBA, it is of paramount importance that determinations 
regarding the issuance of guaranteed loans be accomplished as quickly 
as possible given the needs of the small businesses applying for the 
loans and the timeframes for loan approval sought by our participating 
lenders. Further, although SBA assists a large number of small 
businesses, including firms owned by minorities, women and veterans, 
the average loan size is under $240,000, and more than three quarters 
of all loans are under $300,000.
    The Preferred Alternative will most effectively facilitate the 
prompt issuance of loans, while continuing to ensure that the business 
loan programs do not negatively impact the environment. Under the 
Preferred Alternative, SBA would perform programmatic assessments of 
the effects of the small business loan assistance programs as deemed 
appropriate. Through the performance of programmatic assessments, SBA 
could effectively monitor the overall cumulative effects of the small 
business loan assistance programs. In addition, under the Preferred 
Alternative, SBA would provide through its website an environmental 
classroom, which will post relevant information for program 
participants in order to promote awareness of matters of environmental 
concern.
    On balance, therefore, SBA believes that the consideration of the 
comparative effects of these alternatives favors the adoption of the 
Preferred Alternative.

Proposed Revision of NEPA Procedures for the 7(A) and 504 Programs

    As discussed above, SBA has determined that there is no legal 
requirement to perform a NEPA analysis on individual loan guarantees 
under the 7(a) and 504 Programs. SBA has also conducted a PEA, which 
has found that the 7(a) and 504 Programs, as a whole, do not have a 
significant impact on the environment. Therefore, SBA proposes

[[Page 47976]]

to revise the SOP provisions relating to these programs, Paragraphs 7h 
and 7k of SOP 90-57, as set forth below.
    As a housekeeping matter, SBA is consolidating NEPA procedures for 
the 7(a) and 504 Programs into Paragraph 7k of SOP 90-57. Therefore, 
the title of Paragraph 7h will be revised so that it does not apply to 
7(a) loans or 504 loans.
    In addition, SBA is revising its NEPA procedures for loans made 
under the 7(a) and 504 Programs to clarify that a loan-by-loan analysis 
is not required, and that programmatic assessments will be performed 
when deemed appropriate. Therefore, SBA proposes to revise paragraph 7k 
to read as follows:
    k. Loans made under the 7(a) and 504 Programs

SBA will conduct programmatic analyses of the 7(a) and 504 Programs 
when it deems appropriate, but the analysis of individual loans is 
not required. A programmatic analysis may be appropriate when: (1) 
SBA proposes a major programmatic change to either the 7(a) or the 
504 Programs, and there are substantiated indications that either 
such Program, as changed, would have a significant impact upon the 
environment; or (2) an outside party brings to SBA's attention 
specific factual evidence that the 7(a) or 504 Program is having a 
significant impact upon the environment. SBA will also provide 
information through its Web site regarding matters of environmental 
concern to participants in these programs.

    (Authority: 40 CFR 1507.3)

Ronald E. Bew,
Associate Deputy Administrator.
[FR Doc. 04-18086 Filed 8-5-04; 8:45 am]
BILLING CODE 8025-01-P