[Federal Register Volume 73, Number 111 (Monday, June 9, 2008)]
[Proposed Rules]
[Pages 32515-32520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-12811]


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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

49 CFR Part 260

[Docket No. FRA-2008-0061]
RIN 2130-AB91


Railroad Rehabilitation and Improvement Financing Program

AGENCY: Federal Railroad Administration (FRA), Department of 
Transportation (DOT).

ACTION: Notice of Proposed Rulemaking (NPRM); request for comments.

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SUMMARY: The Transportation Equity Act for the 21st Century of 1998 
(TEA-21) established the Rail Rehabilitation and Improvement Financing 
(RRIF) Program. The program authorizes the Secretary of Transportation 
to issue direct loans and loan guarantees to state and local 
governments, railroads, interstate compacts, and other specified 
organizations to finance the development of railroad infrastructure. 
The Safe, Accountable, Flexible and Efficient Transportation Equity Act 
of 2005: a Legacy for Users (SAFETEA-LU) amended and expanded the 
program. SAFETEA-LU increased the principal amount of the RRIF program 
up to $35.0 billion, and of that amount, $7.0 billion is reserved for 
freight railroads other than Class I carriers. This NPRM proposes 
amending eligibility and application form and content criteria to 
ensure the long-term sustainability of the program, promote competition 
in the railroad industry, and reduce the risk of default for applicants 
and the Government.

DATES: Comments must be received on or before August 8, 2008.

ADDRESSES: Comments should reference Docket No. FRA-2008-0061 and may 
be submitted the following ways:
     E-Gov Web site: http://www.regulations.gov. This Web site 
allows the public to enter comments on any Federal Register notice 
issued by any agency. Follow the instructions for submitting comments.
     Fax: 1-202-493-2251.
     Mail: DOT Docket Management System: U.S. Department of 
Transportation, Docket Operations, M-30, West Building, Ground Floor, 
Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590-0001.
     Hand Delivery: DOT Docket Management System; West 
Building, Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., 
Washington, DC 20590-0001 between 9 a.m. and 5 p.m., Monday through 
Friday, except Federal holidays.
    Instructions: You should identify the docket ID, FRA-2008-0061, at 
the beginning of your comments. If you submit your comments by mail, 
submit two copies. To receive confirmation that FRA received your 
comments, include a self-addressed stamped postcard. Internet users may 
submit comments at http://www.regulations.gov. Note: Comments are 
posted without changes or edits to http://www.regulations.gov, 
including any personal information provided. Please see the Privacy Act 
discussion in the Supplementary Information section of this NPRM.

[[Page 32516]]


FOR FURTHER INFORMATION CONTACT: John Kern, Attorney-Advisor, Office of 
the Chief Counsel, Federal Railroad Administration, 1200 New Jersey 
Avenue, SE., Washington, DC 20590 ([email protected] or 202-493-6044).

SUPPLEMENTARY INFORMATION: 

Electronic Access and Filing

    You may submit or retrieve comments online through http://www.regulations.gov, which is available 24 hours each day, 365 days 
each year. Electronic submission and retrieval help and guidelines are 
available under the help section of the Web site.
    An electronic copy of this document may also be downloaded from 
Office of the Federal Register's home page at http://www.archives.gov/federal_register and the Government Printing Office's Web page at 
http://www.gpoaccess.gov.

Background

    Section 7203 of TEA-21, Public Law 105-178 (June 9, 1998), 
established the Railroad Rehabilitation and Improvement Financing 
(RRIF) Program. This program revised and replaced the pre-existing 
railroad financing program established under Title V of the Railroad 
Revitalization and Regulatory Reform Act of 1976. In 2000, the FRA 
promulgated a rule implementing the RRIF program (65 FR 41838, July 6, 
2000) found in 49 CFR Part 260 (``RRIF Rule''). In 2005, SAFETEA-LU 
further amended and expanded the RRIF program, establishing additional 
priorities, increasing the loan principal, and eliminating any 
requirement for collateral under the program.
    The RRIF program authorizes the Secretary to provide direct loans 
and loan guarantees to state and local governments, interstate compacts 
consented to by Congress, government-sponsored authorities and 
corporations, railroads, joint ventures that include one railroad, and 
limited option rail freight shippers that own or operate a plant or 
other facility that is served by no more than a single railroad. 
SAFETEA-LU did not amend the types of eligible projects, so they remain 
the same as under TEA-21: (1) Acquisition, improvement, or 
rehabilitation of intermodal or rail equipment or facilities (including 
tracks, components of tracks, bridges, yards, buildings, and shops); 
(2) refinancing outstanding debt incurred for these purposes; or (3) 
development or establishment of new intermodal or railroad facilities. 
Direct loans and loan guarantees issued under this section cannot be 
used for railroad operating expenses.
    SAFETEA-LU increased the authorized, aggregate unpaid principal 
amount of obligations under direct loans and loan guarantees from $3.5 
billion under TEA-21 to $35.0 billion. Of this amount, SAFETEA-LU 
increased the amount available solely for projects primarily benefiting 
freight railroads other than Class I carriers to $7.0 billion. 
Furthermore, SAFETEA-LU prescribed that the Secretary shall not 
establish any limit on the proportion of the unused amount authorized 
that may be used for one loan or loan guarantee.
    The Secretary has delegated her authority under the RRIF program to 
the FRA Administrator. TEA-21 required FRA to give priority 
consideration to projects that: (1) Enhance public safety; (2) enhance 
the environment; (3) promote economic development; (4) enable United 
States companies to be more competitive in international markets; (5) 
are endorsed by plans prepared under 23 U.S.C. 135 by the state or 
states in which they are located; or (6) preserve or enhance rail or 
intermodal service to small communities or rural areas. SAFETEA-LU 
amended these priority considerations to include projects that: (7) 
Enhance service and capacity in the national rail system or (8) would 
materially alleviate rail capacity problems which degrade the provision 
of service to shippers and would fulfill a need in the national 
transportation system.
    Pursuant to the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et 
seq.) and OMB Circular No. A-129, Policies for Federal Credit Programs 
and Non-Tax Receivables, the Federal government must manage the RRIF 
program to ensure that the goals of the program are met while 
minimizing the risk of borrower default. The Federal government is 
responsible for making estimates of the costs of direct loan and loan 
guarantees. The goal of the RRIF program is to address a perceived gap 
between the railroad industry's financial needs and the lack of private 
financial sources willing to provide the necessary long-term, low-
capital loans. Additionally, a goal of the program shall be to assist 
small railroads that lack access to capital and financing for making 
capital improvements in support of the priority considerations listed 
in section 260.7. The program shall also strive to encourage the 
private sector to invest in railroads and to provide financing for the 
types of projects underwritten by the RRIF program. The proposed 
amendments will further these goals and priorities.
    The NPRM proposes to amend the RRIF rule to incorporate a number of 
program features which FRA believes will improve the administration and 
effectiveness of the RRIF program. FRA's beliefs are based on its 
experience gained while administering the RRIF program and its 
knowledge of the railroad industry, as well as congressional findings 
and General Accountability Office recommendations, which will be 
discussed later in the preamble. The NPRM proposes substantive 
amendments to the existing rule that will ensure the long-term 
sustainability of the program, promote competition in the railroad 
industry, and reduce the risk of default for applicants and the 
Government.

Section-by-Section Discussion of the Proposed Changes

Section 260.21 Eligibility

    The NPRM proposes to establish an equity contribution requirement 
for applicants who are larger than small entities. The FRA believes 
that by requiring borrowers to invest a certain percentage of non-RRIF 
funds to finance a project, this will ensure that borrowers are 
themselves financially invested in the project. Equity contribution 
requirements are a common practice among financial lenders. The FRA's 
intent is to reduce the risk of borrower default, and subsequent 
Government loss, by having an applicant contribute to the assets 
financed by the loan.
    The NPRM proposes that an applicant be required to have and 
maintain a minimum equity contribution of the total costs of the 
project being financed by the federal assistance. Furthermore, the FRA 
proposes to establish a required equity contribution ratio that is a 
function of the creditworthiness of the applicant, the degree of 
leverage in the project represented by the amount of federal assistance 
requested, the size of the loan as compared with the overall financial 
resources of the applicant, and whether the applicant is requesting a 
direct loan or loan guarantee. Finally, the FRA proposes that direct 
loan and loan guarantee applications for less than $20 million will be 
exempt from the equity contribution requirement.
    Applicants with a low credit rating, which the FRA proposes to 
define as below ``investment grade,'' represent a riskier investment 
for the federal government. Applicants requesting a large amount of 
financial assistance as compared with the overall financial resources 
of the applicant will also represent a greater risk to the federal 
government, since more of the federal government's resources will be 
dependent on the outcome of the project.
    Additionally, the Department believes applicants whose debt 
(including the

[[Page 32517]]

federal assistance applied for) to equity ratio exceeds 1.0 also pose 
an increased risk to the federal government since borrowers whose debt 
exceeds equity generally have an increased risk of default. Finally, 
direct loans create more risk to the federal government than loan 
guarantees do, since loan guarantees have the added protection of 
having an independent financial lender assessing project risk. In cases 
where applicants and projects create an increased risk to the federal 
government, applicants will be required to have invested a greater 
proportion of the total project costs to offset the increased risk to 
the government.
Direct Loan Applicants
    The NPRM proposes that all direct loan applicants with either a 
credit rating of less than investment grade or whose debt (including 
the federal financial assistance applied for) to equity ratio exceeds 
1.0 will be required to have and always maintain an equity contribution 
of at least 20 percent of total project costs for direct loan 
applications for less than $250 million and an equity contribution of 
at least 30 percent of total project costs for direct loan applications 
exceeding $250 million.
    The NPRM proposes that all direct loan applicants with a credit 
rating of no less than investment grade and whose debt, including the 
federal financial assistance applied for, to equity ratio does not 
exceed 1.0 will be required to have and to always maintain an equity 
contribution of at least 10 percent of total project costs for direct 
loan applications for less than $250 million and an equity contribution 
of at least 15 percent of total project costs for direct loan 
applications exceeding $250 million.
Loan Guarantee Applicants
    The NPRM proposes that all loan guarantee applicants with either a 
credit rating of less than investment grade or whose debt, including 
the federal financial assistance applied for, to equity ratio exceeds 
1.0 will be required to have and always maintain an equity contribution 
of at least 20 percent of total project costs for loan guarantee 
applications for less than $250 million and an equity contribution of 
at least 25 percent of total project costs for loan guarantee 
applications exceeding $250 million. The equity contribution required 
for applications of direct loans and loan guarantees of less than $250 
million is the same because FRA believes that the greater risk 
presented by direct loans is only necessarily addressed in this program 
in the context of very large direct loan amounts. Additionally, the 
type of financial assistance requested is one of many factors that the 
FRA used to determine the appropriate level of equity contribution for 
each financial assistance amount category.
    The NPRM proposes that all loan guarantee applicants with a credit 
rating of no less than investment grade and whose debt, including the 
federal financial assistance applied for, to equity ratio does not 
exceed 1.0 will be required to have and to always maintain an equity 
contribution of at least 10 percent of total project costs for loan 
guarantee applications for less than $250 million and an equity 
contribution of at least 12.5 percent of total project costs for loan 
guarantee applications exceeding $250 million.
    The FRA requests comments on the equity contribution requirement 
and the amounts proposed.
    Finally, the NPRM proposes a limitation on the cumulative 
outstanding balance to a single borrower. The SAFETEA-LU amendments to 
RRIF state that the Secretary shall not establish ``any limit on the 
proportion of the unused amount authorized under this subsection that 
may be used for 1 loan or loan guarantee.'' However, FRA believes that 
placing a limit on the cumulative amount of direct loans and loan 
guarantees to any one borrower is within the FRA's authority since the 
proposed limit is an absolute limit and not based on a proportion of 
unused funds. 45 U.S.C. 822(d). As Congress could have chosen instead 
to explicitly prohibit all limitations, regardless of whether or not 
the limitation is based on the proportion of unused funds, FRA 
interprets the language as written to indicate that Congress did not 
intend to prohibit all limitations but only limitations based on the 
proportion of the unused amount authorized.
    In an October 2006 report, the GAO recommended that the Department 
``consider strategies to sustain the role of competitive market forces 
by creating a level playing field for all freight modes.'' \1\ The GAO 
report found that over the past 30 years, the railroad industry has 
become more concentrated. The number of Class I railroad systems 
decreased from 30 railroads in 1976 to 7 railroads in operation today. 
Of those, four railroads account for over 89% of the industry's 
revenues.
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    \1\ GAO, Freight Railroads: Industry Health Has Improved, but 
Concerns about Competition and Capacity Should Be Addressed, GAO-07-
94, October 2006.
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    FRA believes a sufficiently large direct loan or loan guarantee to 
one borrower could potentially further increase concentration in the 
railroad industry. A sufficiently large direct loan or loan guarantee 
to one railroad may have the potential to allow it to obtain a 
preferential standing in the marketplace over its competitors. The FRA 
believes that the RRIF program can be an effective means of updating 
and improving railroad infrastructure to meet modern needs. Congress 
also established that it is a priority of the program to focus on 
providing capital to smaller railroads by requiring that twenty percent 
of the program's total funding be set aside for these smaller 
railroads. Therefore, the FRA believes that limiting the cumulative 
amount that any one applicant may borrow is proper federal direct loan 
and loan guarantee policy and would be in keeping with Congressional 
intent to ensure that a few large projects do not dominate the entire 
funding for the program.
    In order to ensure that the direct loans and loan guarantees are 
spread evenly throughout the railroad industry, the NPRM proposes 
limiting the amount of any cumulative outstanding balance to a single 
borrower. The NPRM proposes $500 million as an appropriate limit for 
any cumulative loan guarantee and direct loan for any single borrower 
and seeks comment on the suitability of this figure. In particular, 
commenters who believe this figure is insufficient for their project 
needs should comment on whether any greater amount would be more 
suitable.

Section 260.23 Form and Content of Application Generally

    First, if the amount of financial assistance requested exceeds a 
defined threshold, the NPRM proposes adding a requirement for 
applicants to obtain a credit rating or assessment that takes into 
account the proposed project. This will result in better informed 
decisions by the government and ensure that the credit risk to the 
Government is minimized for the largest direct loan and loan guarantee 
requests. The NPRM proposes a threshold of $250 million as an 
appropriate amount and invites comments on the suitability of this 
figure.
    Second, the NPRM proposes adding a requirement that applicants 
submit electronic copies of their audited financial statements. This 
requirement will reduce application review costs and credit risk for 
the Government and ensure more efficient processing of loan 
applications. As this requirement may be overly burdensome on small 
railroad operations, the NPRM proposes excluding applicants with annual

[[Page 32518]]

revenues of less than $20 million from this requirement, as well as 
applications for direct loans or loan guarantees for less than $20 
million.
    Pursuant to its authority under the Small Business Act to define 
``small entities,'' FRA published a final statement of agency policy 
that formally establishes ``small entities'' as railroads that meet the 
line-haulage revenue requirements of a Class III railroad.  See 68 FR 
24891 (May 9, 2003), as codified at part 209, appendix C of this 
chapter. The $20 million limit (adjusted annually for inflation) is 
based on the Surface Transportation Board's threshold of a Class III 
railroad carrier, which is adjusted by applying the railroad revenue 
deflator adjustment (49 CFR parts 1201). The NPRM proposes to use this 
definition for this rulemaking.
    Third, the NPRM proposes adding a requirement for applicants to 
identify and quantify the public benefit to be attained by the 
financial assistance. A GAO report from 2003 discussing the financing 
limitations of freight transportation recommended the DOT promote the 
use of benefit analyses, including external benefits.\2\ The report 
found that by evaluating the benefits of competing alternatives, 
applicants would have to apply systematic analytical methods as part of 
their investment decision-making process, leading to a better 
understanding of the tradeoffs among competing alternative solutions. 
Additionally, by determining clear and tangible benefits, applicants 
would be better able to garner support for projects from private firms. 
The proposed rule will reduce the credit risk to the Government by 
encouraging participation from private financial sources, reduce 
application review costs, and improve government decision-making 
through better information. Furthermore, the NPRM proposes giving 
priority consideration to applications that have the highest benefit to 
loan value in order to make economically efficient use of limited 
government resources and to further reduce the risk to the Government 
of default.
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    \2\ GAO, Freight Transportation: Strategies Needed to Address 
Planning and Financing Limitations, GAO-04-165, December 2003.
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Rulemaking Analyses and Notices

Executive Order 12866 and U.S. DOT Regulatory Policies and Procedures

    This proposed rule has been evaluated in accordance with existing 
policies and procedures, and determined to be significant under both 
Executive Order 12866 and DOT policies and procedures (44 FR 11034; 
Feb. 26, 1979). We have prepared and placed in the docket a regulatory 
evaluation addressing the economic impact of this proposed rule. FRA 
invites comments on this regulatory evaluation.
    This regulation will affect only those entities that voluntarily 
elect to apply for a direct loan or loan guarantee and those who 
receive a direct loan or loan guarantee under the program. It will not 
impose any direct, involuntary, or un-reimbursed costs on those 
entities not applying for the program. The only costs imposed on the 
applicants are the costs associated with completing an application. The 
costs associated with the proposed rule would also not differ 
materially from the current applications costs. The proposed rule 
codifies and regularizes many requirements already in effect. Although 
we have not provided a detailed cost of the application, many of these 
costs would be incurred with or without the rule. FRA specifically 
solicits comment on the total and incremental application costs of this 
proposed rule.
    FRA has also concluded that the railroad rehabilitation and 
improvement loan program could generate both direct and indirect 
benefits. By codifying existing application review practices, the 
proposed rule will result in a more efficient and consistent use of 
government resources. Additionally, the proposed rule will provide for 
greater governmental transparency in codifying how applications will be 
reviewed. Furthermore, applicants will have the benefit of knowing 
their applications contain all the information necessary for review. 
The regulatory evaluation contains a more detailed discussion of the 
costs and benefits of the proposed rule.
    This rule is not anticipated to adversely affect, in a material 
way, any sector of the economy. This rulemaking sets forth criteria for 
project applications in the RRIF program, which will result in only 
minimal additional cost to program applicants. This rule would also not 
create a serious inconsistency with any other agency's action or 
materially alter the budgetary impact of any entitlements, grants, user 
fees, or loan programs.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354, 5 U.S.C. 
601-612) requires a review of rules to assess their impact on small 
entities. FRA does not expect the proposed rule to have a significant 
economic impact on a substantial number of small entities. For this 
proposed rule, the relevant definition of small entities is based on 
the applicant's annual revenue. The Small Business Administration (SBA) 
has provided FRA with the authority to establish a definition for small 
entities. FRA has published a final policy that formally establishes 
small entities as railroads that meet the line haulage revenue 
requirements of a Class III railroad, which is currently annual 
operating revenues of $20 million or less. The $20 million limit is 
based on the Surface Transportation Board's threshold of a Class III 
railroad carrier.
    FRA has not conducted a regulatory flexibility assessment of this 
proposed rule's impact on small entities. Small entities are largely 
exempt from the new application and equity contribution requirements in 
order to avoid a scenario where additional costs imposed could have 
significant economic impact on a substantial number of small entities. 
Additionally, FRA notes that this is a voluntary loan program, and the 
proposed rule will not have any effect on small entities that do not 
apply for direct loans or loan guarantees. FRA invites comment on the 
economic effect of the proposed rule on small entities. However, FRA 
believes the proposed rule will benefit small entities by providing 
them with greater access to capital and capital markets. FRA has, 
therefore, concluded that there are no substantial economic impacts for 
small entities of government, business, or other organizations.
    FRA requests public comments that will clarify what the impacts 
will be for the affected small entities. FRA especially encourages 
political subdivisions that may be considered to be small entities to 
participate in the comment process and submit written comments to the 
docket.

Unfunded Mandates Reform Act of 1995

    Pursuant to Section 201 of the Unfunded Mandates Reform Act of 1995 
(Pub. L. 104-4, 2 U.S.C. 1531), each Federal agency ``shall, unless 
otherwise prohibited by law, assess the effects of Federal regulatory 
actions on State, local, and tribal governments, and the private sector 
(other than to the extent that such regulations incorporate 
requirements specifically set forth in law).'' Section 202 of the Act 
(2 U.S.C. 1532) further requires that ``before promulgating any general 
notice of proposed rulemaking that is likely to result in the 
promulgation of any rule that includes any Federal mandate that may 
result in the expenditure by State, local, and tribal governments, in 
the aggregate, or by the private sector, of $100,000,000 or more 
(adjusted annually for inflation) in any one year,

[[Page 32519]]

and before promulgating any final rule for which a general notice of 
proposed rulemaking was published, the agency shall prepare a written 
statement'' detailing the effect on State, local, and tribal 
governments and the private sector.
    This loan program is not an ``unfunded mandate.'' This NPRM will 
not result in the expenditure by state, local, or tribal governments, 
in the aggregate, of $132,000,000 (adjusted annually for inflation) or 
more in any one year, and thus preparation of such a statement is not 
required.

Executive Order 13132 (Federalism)

    The FRA has analyzed this NPRM in accordance with the principles 
and criteria contained in Executive Order 13132, issued on August 4, 
1999, which directs Federal agencies to exercise great care in 
establishing policies that have federalism implications. See 64 FR 
42355. This NPRM will not have a substantial effect on the states, on 
the relationship between the national government and the states, or on 
the distribution of power and responsibilities among various levels of 
government. This NPRM will not have federalism implications that impose 
any direct compliance costs on state and local governments. There will 
be minor costs associated with the submission of applications, but they 
are discretionary and will only be incurred should a state or local 
government wish to apply for funding. Otherwise, this NPRM directs how 
Federal funds will go to the states, and thus, there are no federalism 
implications.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) 
addresses the collection of information by the Federal government from 
individuals, small businesses and state and local governments and seeks 
to minimize the burdens such information collection requirements might 
impose. A collection of information includes providing answers to 
identical questions posed to, or identical reporting or record-keeping 
requirements imposed on ten or more persons, other than agencies, 
instrumentalities, or employees of the United States. In accordance 
with the requirements of the Paperwork Reduction Act, agencies may not 
conduct or sponsor, and the respondent is not required to respond to, 
an information collection unless it displays a currently valid Office 
of Management and Budget (OMB) control number. FRA is requesting 
comment on a proposed information collection. FRA is also giving notice 
that the proposed collection of information has been submitted to OMB 
for review and approval.
    Section 260.23 of the NPRM contains additional information 
requirements that would apply to railroads, states or political 
subdivisions of states that file applications for Federal funding for 
railroad rehabilitation and improvement projects.
    This NPRM proposes to include requirements for applicants for loans 
and loan guarantees to provide certain information with their 
application in order to assess their financial health. Specifically, in 
Sections 260.23(4)(p)-(r), FRA proposes to require: Credit ratings or 
assessments for loan and guarantee applications for more than $250 
million; electronic copies of audited financial statements to be 
submitted with applications from other than small entities for loans or 
guarantees of more than $20 million; and, that applicants must identify 
and quantify the public benefit that would accrue from the completion 
of the proposed project. FRA believes that any burden on applicants 
from formally incorporating these proposed requirements would be 
negligible because there are exceptions made for small loan and 
guarantee amounts as well as for small entities in general. For all 
other scenarios, the documentation requested would be required for any 
sort of financing that an applicant would seek, be it public or 
private, in order to assess the risk of granting financing. Pursuant to 
44 U.S.C. 3506(c)(2)(B), the FRA solicits comments concerning: Whether 
these information collection requirements are necessary for FRA to 
properly perform its functions, including whether the information has 
practical utility; the accuracy of FRA's estimates of the burden of the 
information collection requirements; the quality, utility, and clarity 
of the information to be collected; and whether the burden of 
collecting information on those who are to respond, including through 
the use of automated collection techniques or other forms of 
information technology, may be minimized.

Privacy Act

    Anyone is able to search the electronic form of all comments 
received into any of DOT's dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc). You may review DOT's 
complete Privacy Act Statement published in the Federal Register on 
April 11, 2000 (Volume 65, Number 70, Pages 19477-78).

National Environmental Policy Act

    The FRA has evaluated this regulation in accordance with its 
procedures for ensuring full consideration of the potential 
environmental impacts of FRA actions, as required by the National 
Environmental Policy Act (42 U.S.C. 4321 et seq.) (NEPA) and related 
directives (see FRA Policy Statement on Procedures for Considering 
Environmental Impacts, 64 FR 28545). FRA has concluded that the 
issuance of this NPRM, which proposes to amend regulations governing 
the provisions of loan guarantees and direct loans for railroad 
rehabilitation and improvement projects, does not have a potential 
impact on the environment and does not constitute a major Federal 
action requiring an environmental assessment or environmental impact 
statement.

Executive Order 13211 (Energy Effects)

    Executive Order 13211 requires Federal agencies to prepare a 
Statement of Energy Effects for any ``significant energy action.'' See 
66 FR 28355 (May 22, 2001). Under the Executive Order a ``significant 
energy action'' is defined as any action by an agency that promulgates 
or is expected to lead to the promulgation of a final rule or 
regulation, including notices of inquiry, advance notices of proposed 
rulemaking, and notices of proposed rulemaking: (1)(i) That is a 
significant regulatory action under Executive Order 12866 or any 
successor order, and (ii) is likely to have a significant adverse 
effect on the supply, distribution, or use of energy; or (2) that is 
designated by the Administrator of the Office of Information and 
Regulatory Affairs as a significant energy action. The FRA has 
evaluated this NPRM in accordance with Executive Order 13211. The FRA 
has determined that this NPRM is not likely to have a significant 
adverse effect on the supply, distribution, or use of energy. 
Consequently, FRA has determined that this NPRM is not a ``significant 
energy action'' within the meaning of the Executive Order.

List of Subjects in 49 CFR Part 260

    Loan programs--Transportation; Railroads.

The Proposed Rule

    For the reasons set forth in the preamble, and under the authority 
of 45 U.S.C. 822, FRA proposes to amend Part 260 of chapter II, 
subtitle B of title 49, Code of Federal Regulations, as set forth 
below:

[[Page 32520]]

PART 260--[AMENDED]

    1. The authority citation for part 260 continues to read as 
follows:

    Authority:  45 U.S.C. 821, 822, 823; 49 CFR 1.49.

    2. Revise section 260.21 to read as follows:


Sec.  260.21  Eligibility.

    (a) The Administrator may make a direct loan to an Applicant, or 
guarantee the payment of the principal balance and any interest of an 
obligation of an Applicant prior to, on, or after the date of execution 
or the date of disbursement of such obligation, if the proceeds of such 
direct loan or obligation shall be, or have been, used by the Applicant 
for the eligible purposes listed in Sec.  260.5(a)(1), (2), and (3).
    (b) Except for railroads that are small entities as provided in 
part 209, appendix C of this chapter and are seeking loans not in 
excess of $20 million, an Applicant applying for financial assistance 
must make an equity contribution to the costs of the project being 
financed, in part, by the federal assistance, based on the 
creditworthiness of the Applicant and the degree of leverage in the 
project represented by the federal assistance.
    (c) An Applicant for a direct loan that is greater than $20 million 
but less than $250 million shall have and always maintain an equity 
contribution of at least 20 percent of total project costs. An 
Applicant for a direct loan that is greater than $250 million shall 
have and always maintain an equity contribution of at least 30 percent 
of total project costs.
    (d) An Applicant for a loan guarantee that is greater than $20 
million but less than $250 million shall have and always maintain an 
equity contribution of at least 20 percent of total project costs. An 
Applicant for a loan guarantee that is greater than $250 million shall 
have and always maintain an equity contribution of at least 25 percent 
of total project costs.
    (e) An Applicant for a direct loan or loan guarantee with a credit 
rating of no less than investment grade and whose debt to equity ratio 
that does not exceed 1.0, shall be required to have and always maintain 
an equity contribution of half of the amounts prescribed in paragraphs 
(c) or (d), respectively.
    (f) The cumulative outstanding balance of loans and loan guarantees 
to a single borrower shall not exceed $500 million.
    3. Section 260.23 is amended by adding new paragraphs (p), (q), and 
(r) to read as follows:


Sec.  260.23  Form and content of application generally.

* * * * *
    (p) A credit rating or assessment if the application for financial 
assistance is in excess of $250 million.
    (q) Electronic copies of their audited financial statements, unless 
the Applicant has revenues of less than $20 million or the application 
for financial assistance is less than $20 million.
    (r) Identification and quantification of the public benefit to be 
obtained by the financial assistance requested, including, but not 
limited to, the priorities listed in 49 U.S.C. 822(c). Priority 
consideration will be given to those applications that have the highest 
benefit to loan value, consistent with the provisions of 49 U.S.C. 822.

    Issued in Washington, DC on June 3, 2008.
Joseph H. Boardman,
Administrator.
 [FR Doc. E8-12811 Filed 6-6-08; 8:45 am]
BILLING CODE 4910-06-P