[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Rules and Regulations]
[Pages 35245-35253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14255]



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  Federal Register / Vol. 77, No. 114 / Wednesday, June 13, 2012 / 
Rules and Regulations  

[[Page 35245]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1700

RIN 0572-AC23


Substantially Underserved Trust Areas (SUTA)

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Utilities Service (RUS) is issuing regulations 
related to loans and grants to finance the construction, acquisition, 
or improvement of infrastructure projects in Substantially Underserved 
Trust Areas (SUTA). The intent is to implement Section 306F of the 
Rural Electrification Act by providing the process by which eligible 
applicants may apply for funding by the agency.

DATES: Effective: July 13, 2012.

FOR FURTHER INFORMATION CONTACT: Michele Brooks, Director, Program 
Development and Regulatory Analysis, Rural Utilities Service, Rural 
Development, U.S. Department of Agriculture, 1400 Independence Avenue 
SW., STOP 1522, Room 5162-S, Washington, DC 20250-1522. Telephone 
number: (202) 690-1078, Facsimile: (202) 720-8435.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Rural Development has determined that this rule meets 
the applicable standards provided in section 3 of that Executive Order. 
In addition, all State and local laws and regulations that are in 
conflict with this rule will be preempted. No retroactive effect will 
be given to the rule and, in accordance with section 212(e) of the 
Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 
6912(e)), administrative appeal procedures must be exhausted before an 
action against the Department or its agencies may be initiated.

Regulatory Flexibility Act Certification

    RUS has determined that this rule will not have a significant 
economic impact on a substantial number of small entities, as defined 
in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). RUS provides 
loans to borrowers at interest rates and on terms that are more 
favorable than those generally available from the private sector. RUS 
borrowers, as a result of obtaining federal financing, receive economic 
benefits that exceed any direct economic costs associated with 
complying with RUS regulations and requirements.

Information Collection and Recordkeeping Requirements

    The information collection and recordkeeping requirements contained 
in this rule are pending approval by OMB and will be assigned OMB 
control number 0572-0147 in accordance with the Paperwork Reduction Act 
of 1995 (44 U.S.C. chapter 35).

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

Catalog of Federal Domestic Assistance

    The programs described by this rule are listed in the Catalog of 
Federal Domestic Assistance Programs under number 10.759, Special 
Evaluation Assistance for Rural Communities and Households Program 
(SEARCH); 10.760, Water and Waste Disposal Systems for Rural 
Communities; 10.761, Technical Assistance and Training Grants; 10.762, 
Solid Waste Management Grants; 10.763, Emergency Community Water 
Assistance Grants; 10.770, Water and Waste Disposal Loans and Grants 
(Section 306C); 10.850; Rural Electrification Loans and Loan 
Guarantees; 10.851, Rural Telephone Loans and Loan Guarantees, 10.855, 
Distance Learning and Telemedicine Loans and Grants; 10.857, State Bulk 
Fuel Revolving Fund Grants, 10.859, Assistance to High Energy Cost 
Rural Communities; 10.861, Public Television Station Digital Transition 
Grant Program; 10.862, Household Water Well System Grant Program 
10.863, Community Connect Grant Program; 10.864, Grant Program to 
Establish a Fund for Financing Water and Wastewater Projects; 10.886, 
Rural Broadband Access Loans and Loan Guarantees.
    The Catalog is available on the Internet at http://www.cfda.gov.

Executive Order 12372

    Most programs covered by this rulemaking are excluded from the 
scope of Executive Order 12372, Intergovernmental Consultation, which 
may require consultation with State and local officials. See the final 
rule related notice entitled ``Department Programs and Activities 
Excluded from Executive Order 12372,'' (50 FR 47034). However, the 
Water and Waste Disposal Loan Program, CFDA number 10.770, is subject 
to the provisions of Executive Order 12372 which requires 
intergovernmental consultation with State and local officials.

Unfunded Mandates

    This rule contains no Federal mandates (under the regulatory 
provision of Title II of the Unfunded Mandate Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
Unfunded Mandate Reform Act of 1995.

National Environmental Policy Act Certification

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

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the

[[Page 35246]]

national government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states is not required.

Executive Order 13175

    The policies contained in this rule do not impose substantial 
unreimbursed direct compliance costs on Indian tribal, Alaska native, 
or native Hawaiian governments and sovereign institutions or have 
tribal implications that preempt tribal law. Prior to development of 
this rulemaking, the agency held Tribal Consultations at seven (7) USDA 
regional consultations, conducted sixteen (16) SUTA specific 
consultations and hosted three (3) Internet and toll free 
teleconference based webinars in order to determine the impact of this 
rule on Tribal governments, communities, and individuals. Reports from 
these sessions for consultation will be made part of the USDA annual 
reporting on Tribal Consultation and Collaboration, the annual SUTA 
Report to Congress and were used extensively throughout the drafting of 
this proposed rule.

Background

    USDA Rural Development (Rural Development) is a mission area within 
the U.S. Department of Agriculture comprising the Rural Housing 
Service, Rural Business/Cooperative Service and Rural Utilities 
Service. Rural Development's mission is to increase economic 
opportunity and improve the quality of life for all rural Americans. 
Rural Development meets its mission by providing loans, loan 
guarantees, grants and technical assistance through more than forty 
programs aimed at creating and improving housing, businesses and 
infrastructure throughout rural America.
    Rural Utilities Service (RUS) loan, loan guarantee and grant 
programs act as a catalyst for economic and community development. By 
financing improvements to rural electric, water and waste, and telecom 
and broadband infrastructure, RUS also plays a big role in improving 
other measures of quality of life in rural America, including public 
health and safety, environmental protection, conservation, and cultural 
and historic preservation.
    The 2008 Farm Bill (Pub. L. 110-246, codified at 7 U.S.C. 936f) 
authorized the Substantially Underserved Trust Area (SUTA) initiative. 
The SUTA initiative gives the Secretary of Agriculture certain 
discretionary authorities relating to financial assistance terms and 
conditions that can enhance infrastructure financing options in areas 
that are underserved by electric, water and waste, and 
telecommunications and broadband utilities. Given the challenges, 
dynamics, and opportunities in implementing the SUTA initiative, RUS 
has aimed to foster a process that includes the voices of tribal 
leaders, tribal community members, Alaska Native Regional and Village 
Corporations, Guam, American Samoa and the Commonwealth of the Northern 
Mariana Islands, and other stakeholders.
    Preliminary research by RUS identified various reports that 
provided several insights. In 2007, the United States Census Bureau 
Facts for Features article (dated 10/29/07) reported that the poverty 
rate of people who reported being sole race American Indian and Alaska 
Native (AI/AN) was 27 percent. Additionally, in 2006, the United States 
Government Accountability Office reported that based on the 2000 
decennial census, the telephone subscribership rate for Native American 
households on tribal lands was substantially below the national level 
of about 98 percent. Specifically, about 69 percent of Native American 
households on tribal lands in the lower 48 states and about 87 percent 
in Alaska Native villages had telephone service. Additionally, in 2000, 
the United States Census Bureau reported that on Native American lands, 
11.7 percent of residents lack complete plumbing facilities, compared 
to 1.2 percent of the general U.S. population.
    There are special considerations and challenges in implementing an 
initiative to communities residing on trust lands. Many American 
Indians, Alaska Natives, Native Hawaiians, and Pacific Islanders have a 
deep spiritual, cultural, and historical relationship with the land. In 
certain circumstances, the objectives of economic and infrastructure 
development can be at odds with spiritual, cultural, historical, and 
environmental values. Additionally, there are special legal 
considerations inherent in financing projects in areas where the land 
itself cannot be used as security.
    The SUTA initiative identifies the need to improve utility service 
and seeks to improve the availability of RUS programs to reach 
communities within trust areas when communities are determined by the 
Secretary of Agriculture (such authority has been delegated to the 
Administrator of RUS) to be substantially underserved. The RUS programs 
that are affected by this provision include: Rural Electrification 
Loans and Guaranteed Loans, and High Cost Energy Grants; Water and 
Waste Disposal Loans, Guaranteed Loans and Grants; Telecommunications 
Infrastructure Loans and Guaranteed Loans; Distance Learning and 
Telemedicine Loans and Grants; and Broadband Loans and Guaranteed 
Loans.
    In addition to its discretionary authority to implement the SUTA 
provisions, RUS is under a continuing obligation to make annual reports 
to Congress on (a) the progress of the SUTA initiative, and (b) 
recommendations for any regulatory or legislative changes that would be 
appropriate to improve services to communities located in substantially 
underserved trust areas. RUS has submitted three reports to Congress, 
dated June 18, 2009, June 21, 2010, and August 23, 2011.
    The USDA Office of Native American Programs (since renamed the 
Office of Tribal Relations, hereinafter OTR) and RUS began exploring 
SUTA initiative implementation in 2008 after passage of the Farm Bill. 
RUS in conjunction with OTR interpreted implementation to include 
formal USDA Tribal Consultations and working with stakeholders that are 
federally recognized tribes. Pursuant to this determination and in 
accordance with President Obama's November 5, 2009, Memorandum on 
Tribal Consultation, RUS conducted sixteen (16) direct tribal 
consultations, seven (7) regional consultations, one listening session 
and three (3) Internet and toll free teleconference based webinars on 
implementation of the SUTA provision with Indian tribes from across the 
country. Additionally, the agency heard from six Federal agencies at 
three separate consultations on how best to implement the SUTA 
provision.
    Federal agencies that were consulted include: The Department of the 
Interior, as the primary Federal agency with many direct 
responsibilities to Native American and Pacific Islander stakeholders; 
the Department of Veterans Affairs, for its clarification of the 
definition of ``trust land''; the Environmental Protection Agency, 
because it has information regarding underserved trust areas with 
environmental challenges; the Department of Energy, because it has an 
interest in promoting energy development and conservation in trust 
areas; the Department of Commerce and the Federal Communications 
Commission, because each agency has an interest in telecommunications 
service in trust areas; the Department of Health and Human Services, 
because it has a long standing interest in providing health care 
services and promoting the

[[Page 35247]]

adoption of health IT in native communities; and the Office of 
Management and Budget.
    As a result of categorizing and analyzing the comments received 
through tribal consultations and filed comments, RUS was able to 
identify certain issues that impact both the underserved communities 
that seek better access to RUS programs, and the federal agencies that 
have similar yet sometimes competing interests in trust areas. This 
regulation is informed by the insight gained through consultations and 
comments, and is designed to complement existing loan, grant, and 
combination loan and grant programs with the SUTA provisions that 
authorize the Administrator to apply certain discretionary authorities 
(2 percent interest and extended repayment terms; waivers of 
nonduplication restrictions, matching fund requirements, or credit 
support requirements; and highest funding priority) for the benefit of 
eligible communities, and the entities that serve them, in underserved 
Trust areas.

Discussion of Proposed Rule and Comments Received

    In its Proposed Rule, published in the Federal Register October 14, 
2011, (76 FR 63846), the agency requested comments regarding 
implementing the Substantially Underserved Trust Areas provision of the 
2008 Farm Bill. The agency received nine comments from the following 
organization/individuals:
     Society of American Indian Government Employees
     Lalamilo Community Association
     NANA Regional Corporation
     Winnebago Tribe of Nebraska
     WAIMEA Hawaiian Homesteaders Assoc., Inc.
     State of Hawaii, Department of Hawaiian Home Lands
     Council for Native Hawaiian Advancement
     National Tribal Telecommunications Association
     Cheyenne River Sioux Tribe
    These comments have been summarized and are addressed below:

Society of American Indian Government Employees

    The Society expressed support and appreciation for the hard work 
performed by the RUS staff. The Society recommended that the agency (1) 
affirmatively proclaim that all land (including all ``fee land'') 
within tribal reservation boundaries to be qualified as trust lands for 
the SUTA provision, (2) designate the data requirements under Sec.  
1700.107 as burdensome and require that the burden of proof be on the 
current service providers to demonstrate that they are actually 
providing service at reasonable prices, (3) refrain from requiring 
tribal communities to document significant health risks when a 
significant proportion of the community is unserved, and (4) ensure 
that RUS applicant reviewers have some tribal training on special legal 
status of tribes as sovereign nations before reviewing these types of 
applications. The Society also suggested that the SUTA Farm Bill 
provisions ensure that tribes are automatically eligible to receive 
waivers from the agency's non-duplication policies when a tribe applies 
to serve their own areas.

RUS Response

    With regard to trust land status, the RUS does not have the 
authority to adjust the statutory definition of trust lands. RUS 
understands the unique ``checker board'' character of trust and non-
trust lands in tribal communities The agency, consistent with its 
current practice, may consider SUTA related applications that include 
non-Trust territories when the service to or through those areas are 
``necessary and incidental'' to improving service to a covered Trust 
area. In other cases, the agency could allocate SUTA benefits to SUTA 
eligible territories.
    With regard to data requirements under Sec.  1700.107, the proposed 
rule provides that the ``explanation and documentation of the high need 
for the benefits of the eligible program * * * may'' include data from 
the list of proxies. As such the list is not exclusive and applicants 
are welcome to provide additional information which could demonstrate 
to the Administrator that the high need for the benefits of the 
eligible program exists. The agency understands the burden; however, 
the applicant is in the best position to at least make an initial case 
that current services are inadequate. The agency can then attempt to 
document the service delivery by incumbent providers and the agency 
will make an independent determination based on the information that is 
available.
    With regard to areas unserved by water utilities, the agency 
certainly supports the general proposition that the absence of clean 
sources of drinking water poses serious health risks, but the specific 
details of the types of health risks a community faces due to water 
quality and availability in that specific location both helps the 
agency meet the finding of ``substantially underserved'' and target 
limited funding to areas where it is needed the most.
    As for training on the special legal status of tribes as sovereign 
nations for application reviewers, the agency has and will continue to 
train staff on the SUTA provision and a wide range of issues affecting 
tribal participation in RUS program including the sovereign nation 
status of tribes. RUS has provided service to numerous tribes as 
sovereign nations, and understands the legal status and collateral 
challenges to develop solutions that provide for program participation 
and the balance to protect taxpayer investments.
    Regarding amendments to the Farm Bill, under SUTA the RUS may make 
legislative recommendations and will take our experience with the new 
authorities into account.

Waimea Hawaiian Homesteaders Association, Council for Native Hawaiian 
Advancement, Lalamilo Community Association and the Department of 
Hawaiian Homelands

    The agency received comments from several entities in support of 
RUS' historic consultation efforts to implement the SUTA provisions to 
communities residing on trust lands managed by the Department of 
Hawaiian Home lands. The agency has a long history of providing access 
to capital for infrastructure projects to communities throughout the 
Hawaiian home lands. The current statute only applies the SUTA 
provisions to RUS programs. The Rural Development mission area will 
likely learn from the implementation of SUTA by the RUS and may outline 
important best practices in its annual report to Congress.
    In comments submitted by the state of Hawaii's Department of 
Hawaiian Homelands (DHHL), recommendations were made requesting the 
agency to (1) interpret Sec.  1700.104 to apply feasibility 
requirements on the specific project rather than the applicant and (2) 
interpret Sec.  1700.107 to permit USDA to provide grant assistance of 
up to 75 percent for communities on Trust lands in Alaska and Hawaii 
that have a median family income of 80 percent.

RUS Response

    Regarding the feasibility recommendation, the agency points to its 
response to the NTTA (below) which raised similar recommendations. The 
RUS is bound under Section 306F(c)(4) of the Rural Electrification Act 
(RE Act) which states that the Secretary ``shall only make loans or 
loan guarantees that are found to be financially feasible'' under the 
SUTA amendments to the RE Act and it does not expand other discretions. 
The SUTA discretionary authorities defined by these provisions of the 
RE Act are summarized earlier.

[[Page 35248]]

The RUS will continue its long standing practice of working 
collaboratively with native communities to find solutions that balance 
federal loan security requirements with the unique circumstances facing 
native communities. Therefore, DHHL's recommendations regarding loan 
security and financial feasibility will be addressed in the application 
review process.
    With regard to DHHL's recommendation to authorize grant assistance 
of up to 75 percent for communities on Trust lands in Alaska and Hawaii 
with a median family income of 80 percent, the agency points to its 
response to NTTA regarding the level of grant funds dedicated for a 
particular provision in the statute. The amount of loan and grant funds 
that can be dedicated for any single purpose are generally defined by 
the authorizing statutes the agency administers and the annual 
appropriations laws which allocate budget authority (BA) to various 
programs. The SUTA provisions of the RE Act do not grant the agency any 
new authorities to convert BA among and between grant, direct loan or 
loan guarantee categories. Where it has such authority, the agency 
takes into account the needs of eligible communities.
    We also note DHHL's support for Sec.  1700.108 which covers 
application requirements that invite SUTA applicants to provide a 
variety of data sets that are already provided to other federal 
agencies who work closely with native communities. With the inclusion 
of subsection (H), RUS recognizes the need for native communities to 
articulate their unique circumstances to federal agencies for purposes 
of program eligibility.

NANA Regional Corporation

    The NANA Regional Corporation (an ANCSA Regional Corporation in 
Alaska) filed comments expressing concern over the current eligibility 
requirements contained in the Proposed Rule on SUTA. NANA argues that 
the current requirements may preclude villages in its region and across 
Alaska for SUTA consideration since many Alaska Native villages are not 
located on large tracts of trust land.

RUS Response

    The definition of trust areas in the Proposed Rule is taken 
directly from the current statute (7 U.S.C. 306F (B)(2)) added to the 
RE Act as part of the Food, Conservation and Energy Act of 2008 (the 
Farm Bill). This definition includes land that ``is owned by a Regional 
Corporation or a Village Corporation, as such terms are defined in 
Section 3(g) and 3(j) of the Alaska Native Claims Settlement Act * * 
*.'' The RUS does not have the authority to adjust the statutory 
definition of trust lands. RUS understands the many unique 
infrastructure challenges that rural communities (both Native and non-
Native) face throughout Alaska. The agency, consistent with current 
practice, however, may consider SUTA related applications that include 
non-Trust territories when the service to or through those areas are 
``necessary and incidental'' to improving service to a covered Trust 
area. In other cases, the agency could allocate SUTA benefits to SUTA 
eligible territories. RUS is also legislatively mandated to report to 
Congress annually on its implementation of the SUTA legislation. As 
part of that report, RUS may suggest ``recommendations for any 
regulatory or legislative changes that would be appropriate to improve 
services to substantially underserved trust areas.'' In this regard, 
the NANA suggestions on coverage of non-Trust territories are very 
helpful.

Winnebago Tribe of Nebraska

    The Winnebago Tribe of Nebraska expressed support for the SUTA 
regulations championing waivers of matching requirements and giving the 
highest priority to SUTA projects to facilitate expedient construction, 
acquisition or improvements of infrastructure throughout tribal 
communities. The Tribe noted the ongoing need for access to robust 
broadband service to be deployed in order for economic capacity 
building to occur throughout the Winnebago community. Specifically, the 
Tribe highlighted the inadequate level of mobile wireless and broadband 
coverage in their region. The tribe's listed priorities in health, 
education, safety and economic capacity building and recommend that 
tribal governments merit the right to control the planning, adoption, 
utilization and sustainability of any and all services that advance 
their goals.

RUS Response

    SUTA will give the RUS new tools to make financial resources more 
accessible to entities seeking to bring modern utility services to 
tribal areas. We share the concerns expressed by the Tribe that 
unserved native communities can no longer be ignored and that the 
availability of adequate broadband access remains an important national 
priority. USDA has made the deployment of advanced services on Tribal 
lands a central pillar to our rural economic development mission which 
will be accelerated by this regulation.

National Tribal Telecommunications Association

    The National Tribal Telecommunications Association commended USDA 
for its diligence implementing the SUTA provisions and offered specific 
comment on the following topics:

Disparity Analysis

    The National Tribal Telecommunications Association (NTTA) suggested 
that the USDA adopt a metric of ``disparity'' to assess infrastructure 
``underservice'' and recommended a comparison of access to 
infrastructure in a Trust Area and an area of community immediately 
contiguous to the Trust Area.

RUS Response

    In Sec.  1700.108(i) of the proposed rule, the agency seeks data 
from the applicant documenting a lack of service or inadequate service 
in the affected community (Sec.  1700.108(i)). The relative level of 
service between Trust and non-Trust territories as well as the relative 
cost between those areas are relevant factors and could be provided by 
applicants in a SUTA request. A disparity analysis may be very helpful 
in demonstrating a lack of service. If disparity information is 
provided in a RUS application, the agency will take such information 
into consideration when reviewing SUTA requests. RUS believes that 
codifying a disparity test may have the unintended consequence of 
signaling that SUTA authorities would be less available where a Trust 
Area exists and its surrounding non-Trust areas all suffer from a lack 
of service.

Overlapping or Incumbent Service Provider Areas

    The NTTA recommends that the proposed definition of ``underserved'' 
in section 1700.101 be amended to add the phrase, ``notwithstanding 
that a service provider is an RUS borrower.''

RUS Response

    A change in the definition of ``underserved'' is not necessary to 
address the concern of the commenter and is addressed elsewhere. 
Whether an area is determined to be ``underserved'' does not depend on 
the relationship of the incumbent service provider to the RUS. However, 
among the discretionary powers given to the agency under section 
306F(c)(2) of the RE Act and under section 1700.106 of the proposed 
rule, is the power to waive ``non-

[[Page 35249]]

duplication restrictions.'' That core discretionary authority is not 
limited to areas served by RUS borrowers or non-borrowers.

Financial Feasibility Considerations

    NTTA makes several comments and recommended changes regarding 
financial feasibility, loan security and risk assessments as well as 
weighing financial feasibility against a community's lack of essential 
infrastructure. Specifically, NTTA recommends changing proposed section 
1700.104 from ``the financial feasibility of an application will be 
determined pursuant to normal underwriting practices for a particular 
eligible program'' to ``pursuant to normal underwriting practices, and 
such reasonable alternative practices as may support financial 
feasibility determination for a particular eligible program.'' NTTA 
also proposes to add additional discretionary authorities related to 
collateral, security and risk assessment and Times Interest Earned 
Ratio (TIER) calculations.

RUS Response

    The Section 306F(c)(4) of the Rural Electrification Act states that 
the Secretary ``shall only make loans or loan guarantees that are found 
to be financially feasible'' under the SUTA amendments to the Rural 
Electrification Act and it does not expand other discretions. The SUTA 
discretionary authorities defined by these provisions of the Rural 
Electrification Act are summarized here.
     AUTHORITY OF SECRETARY.--In carrying out subsection (b), 
the Secretary--
    [cir] May make available from loan or loan guarantee programs 
administered by the Rural Utilities Service to qualified utilities or 
applicants financing with an interest rate as low as 2 percent, and 
with extended repayment terms;
    [cir] May waive nonduplication restrictions, matching fund 
requirements, or credit support requirements from any loan or grant 
program administered by the Rural Utilities Service to facilitate the 
construction, acquisition, or improvement of infrastructure;
    [cir] May give the highest funding priority to designated projects 
in substantially underserved trust areas; and
    [cir] Shall only make loans or loan guarantees that are found to be 
financially feasible and that provide eligible program benefits to 
substantially underserved trust areas.
    The proposed regulation faithfully codifies those authorities and 
the constraint of financial feasibility is also aligned with the RUS 
programs to assure debt repayment and protect taxpayer funds. The 
agency does not have the administrative ability to exceed that 
authority. However, the commenter's concerns about finding creative 
solutions to feasibility issues are well taken. The RUS has a long 
history of working closely with tribal communities to address loan 
security issues. Since the earliest days of the Rural Electrification 
Administration and now the RUS, the agency has found ways to reconcile 
taxpayer's expectation of loan security with the sovereign rights of 
tribal governments. In this regard, the agency has adapted its mortgage 
documents and its loan contracts to accommodate unique tribal needs and 
circumstances.
    The agency intends to continue to work with tribal organizations to 
find creative ways to address tribal needs while preserving loan 
security. Therefore, the final rule will adapt the language proposed by 
NTTA for Sec.  1700.104 to read, ``pursuant to normal underwriting 
practices, and such reasonable alternatives within the discretion of 
RUS that contribute to a financial feasibility determination for a 
particular eligible program or project.''

Eligible Communities

    NTTA proposes that consistent with its advocacy before the Federal 
Communications Commission (FCC), Tribes be given an option to choose 
the service provider serving a Trust community or providing services 
for its own community and that the Trust Area governments be permitted 
to engage service providers on quality of service standards.

RUS Response

    All RUS applicants are required to demonstrate in their application 
that they have secured all regulatory approvals necessary to construct 
infrastructure and deliver services. The RUS does not have the power to 
define the jurisdiction of tribal governments and is mindful of their 
sovereignty. The agency engages with tribes on a government to 
government basis. An applicant must demonstrate that they have secured 
all necessary regulatory approvals on the federal, tribal, state and 
local levels. Furthermore, applicants must demonstrate that their 
projects are financially feasible. The agency notes that an applicant 
seeking to finance infrastructure on trust territory would likely have 
a difficult time demonstrating financial feasibility if it could not 
demonstrate tribal support, at a governmental or community level.

Grant Authority

    The NTTA recommends that RUS convert loan funds to grant options 
for the benefit of ``underserved'' or ``unserved'' trust communities.

RUS Response

    The availability of loan and grant funds are generally defined by 
the authorizing statutes the agency administers and the annual 
appropriations laws which allocate budget authority (BA) to various 
programs. The SUTA provisions of the RE Act do not grant the agency any 
new authorities to convert BA among and between loan, grant or loan 
guarantee categories. Where it has such authority, the agency takes 
into account the needs of eligible communities.

Flexible Proxies for Infrastructure Underservice

    The NTTA commends the RUS for providing a list of proxies for 
determining ``underservice'' and recommends that an additional 
provision be added to allow for additional data to be submitted.

RUS Response

    The proposed rule provides that the ``explanation and documentation 
of the high need for the benefits of the eligible program * * * may'' 
include data from the list of proxies. As such the list is not 
exclusive and applicants are welcome to provide additional information 
which could demonstrate to the Administrator that the high need for the 
benefits of the eligible program exists.

Technical Assistance

    The NTTA recommends that RUS implement a technical assistance 
program. On a related matter, the NTTA also recommends that the RUS 
recommend to entities seeking to serve Trust Areas that they apply 
under SUTA.

RUS Response

    ``While the RUS has limited formal technical assistance funding for 
some of its programs,'' the RUS is committed to expanding outreach to 
tribal communities and applicants on all of its programs. The RUS 
appreciates the suggestion and shares the commenter's concern about 
technical assistance. That is why in the Broadband Initiatives Program 
of the American Recovery and Reinvestment Act of 2009, the RUS 
dedicated $3,384,202 of budget authority to fund 19 technical 
assistance

[[Page 35250]]

grants. The majority of those awards were to Native American 
communities and organizations.
    USDA State Rural Development Offices, RUS General Field 
Representatives, Rural Water Circuit Riders and RUS headquarters staff 
all offer assistance to applicants and are integral parts of the rural 
development program delivery. SUTA is an important initiative and RUS 
and RD staff members have been trained on the provision and will be 
trained on the final rule.

Cheyenne River Sioux Tribe

    In comments filed pursuant to the proposed SUTA regulation, the 
Cheyenne River Sioux Tribe requests that the RUS interpret the 
statutory language for SUTA to allow a waiver of the statutory 
limitation on provision of grant in 7 U.S.C. 1926(a)(2) for Water and 
Waste Disposal grants.
    7 U.S.C. 1926(a)(2)(A)(ii) states that ``the amount of any grant 
made under the authority of this subparagraph shall not exceed 75 per 
centum of the development cost of the project to serve the area which 
the association determines can be feasibly served by the facility and 
to adequately serve the reasonably foreseeable growth needs of the 
area.''
    The commenter writes that the authority provided to the Secretary 
pursuant to Section 6105(C)(2) of the 2008 Farm Bill, allows the 
Secretary to waive the 75 percent grant limitation when considering 
financial assistance pursuant to 7 CFR 1780.
    Neither authorizing statute for the Water and Waste Disposal loan 
and grant program, nor the program regulations, specifically state that 
a match is required. By way of contrast, in 7 U.S.C. 
1926(a)(2)(C)(ii)(II), Congress specifically refers to matching funds 
related to Special Evaluation Assistance for Rural Communities and 
Households (SEARCH). In addition, in Section 306C of the Consolidated 
Farm and Rural Development Act (ConAct), Congress specifically 
authorized the Secretary to provide up to 100 percent grants for water 
and waste infrastructure to Native American Tribes to address health 
and sanitary issues.
    However, the commenter further suggests that ``a restriction of the 
total amount of project cost that would be funded with grant funds 
creates a matching requirement whether the word ``matching'' is used.

RUS Response

    The Agency will consider requests for waiver of some, or all, of 
the loan portion of a loan-grant combination under SUTA authority on a 
case-by-case basis. The decision to consider a waiver does not waive 
the over-arching requirement for a finding of need or feasibility 
pursuant to program regulations. The final determination of grant 
assistance will be made based on the following factors:
    1. Eligibility requirements, including credit elsewhere 
certifications pursuant to 1780.7(d);
    2. Underwriting and demonstration of need for grant, including the 
use of the prevailing program interest rate and the discretionary as 
low as 2% interest rates on loans pursuant to SUTA;
    3. Availability of funds, including those funds available pursuant 
to the Section 306C grant set-aside for Native American Tribes or other 
applicable congressional set-asides; and
    4. Percentage of the project that is located on SUTA eligible trust 
lands.

Eligibility Requirements

    Eligibility requirements pursuant to 7 CFR 1780, such as credit 
elsewhere certifications (Sec.  1780.7(d)) and restrictions on the use 
of grant to reduce equivalent dwelling unit costs to a level less than 
similar systems cost (Sec.  1780.10 (b)(1)), will apply to applicants 
seeking a waiver of the loan component under SUTA.

 Finding of Need and Feasibility Through Underwriting

    To ensure that limited grants funds are awarded to those projects 
with the greatest need, financial analysis and underwriting will 
continue to be used to determine the need for grant, including grant 
above the 75 percent level. The analysis will include the applicant's 
ability to incur debt at the prevailing program interest rate and the 
discretionary as low as 2 percent interest rates on loans pursuant to 
SUTA.

Availability of Funds

    The commenter correctly noted that the Agency has limited grant 
funding available in the regular loan and grant program and a backlog 
of requests that exceeds $3 billion. In addition, reductions in program 
funds will impact the ability of the Agency to provide needed grant 
funding. To support SUTA efforts to increase tribal participation in 
the program, the Agency will maximize the use of the Section 306C grant 
program, and other appropriate grant program set-asides to meet the 
grant needs of projects seeking waivers of the 75 percent grant 
limitation under SUTA. To ensure that grant funds are available to fund 
as many projects as possible, the agency may limit the total amount of 
grant funding to be used to address requests for additional grants 
pursuant to SUTA, as well as total Agency grant investment in the 
project.

Percentage of Project on SUTA-Defined Trust Lands

    Grant determinations will factor in the percentage of the proposed 
project that is located on substantially underserved trust lands as 
defined under SUTA.

List of Subjects in 7 CFR Part 1700

    Authority delegations (Government agencies), Electric power, 
Freedom of information, Loan programs--communications, Loan programs-
energy, Organization and functions (Government agencies), Rural areas, 
Telecommunications, Broadband loan and grant programs, water and waste 
loan and grant program, and the Distance Learning and Telemedicine 
program.

    For reasons set out in the preamble, the agency amends chapter XVII 
of title 7 of the Code of Federal Regulations by amending part 1700 to 
read as follows:

PART 1700--GENERAL INFORMATION

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

    Authority: 5 U.S.C. 301, 552; 7 U.S.C. 901 et seq., 1921 et. 
seq., 6941 et seq.; 7 CFR 2.7, 2.17 and 2.47.


Sec. Sec.  1700.59 through 1700.99  [Reserved]

0
2. Add reserved Sec. Sec.  1700.59 through 1700.99 to Subpart C of part 
1700.

0
3. Add subpart D, consisting of Sec. Sec.  1700.100 to 1700.150, to 
read as follows:
Subpart D--Substantially Underserved Trust Areas
Sec.
1700.100 Purpose.
1700.101 Definitions.
1700.102 Eligible programs.
1700.103 Eligible communities.
1700.104 Financial feasibility.
1700.105 Determining whether land meets the statutory definition of 
``trust land.''
1700.106 Discretionary provisions.
1700.107 Considerations relevant to the exercise of SUTA 
discretionary provisions.
1700.108 Application requirements.
1700.109 RUS review.
1700.110--1700.149 [Reserved]
1700.150 OMB Control Number.

Subpart D--Substantially Underserved Trust Areas


Sec.  1700.100  Purpose.

    This subpart establishes policies and procedures for the Rural 
Utilities Service (RUS) implementation of the

[[Page 35251]]

Substantially Underserved Trust Areas (SUTA) initiative under section 
306F of the Rural Electrification Act of 1936, as amended (7 U.S.C. 
906f). The purpose of this rule is to identify and improve the 
availability of eligible programs in communities in substantially 
underserved trust areas.


Sec.  1700.101  Definitions.

    Administrator means the Administrator of the Rural Utilities 
Service, or designee or successor.
    Applicant means an entity that is eligible for an eligible program 
under that program's eligibility criteria.
    Borrower means any organization that has an outstanding loan or 
loan guarantee made by RUS for a program purpose.
    Completed application means an application that includes the 
elements specified by the rules for the applicable eligible program in 
form and substance satisfactory to RUS.
    ConAct means the Consolidated Farm and Rural Development Act, as 
amended (7 USC 1921 et seq.).
    Credit support means equity, cash requirements, letters of credit, 
and other financial commitments provided in support of a loan or loan 
guarantee.
    Eligible community means a community as defined by 7 CFR 1700.103.
    Eligible program means a program as defined by 7 CFR 1700.102.
    Financial assistance means a grant, combination loan and grant, 
loan guarantee or loan.
    Financial feasibility means the ability of a project or enterprise 
to meet operating expenses, financial performance metrics, such as debt 
service coverage requirements and return on investment, and the general 
ability to repay debt and sustain continued operations at least through 
the life of the RUS loan or loan guarantee.
    Matching fund requirements means the applicant's financial or other 
required contribution to the project for approved purposes.
    Nonduplication generally means a restriction on financing projects 
for services in a geographic area where reasonably adequate service 
already exists as defined by the applicable program.
    Project means the activity for which financial assistance has been 
provided.
    RE Act means the Rural Electrification Act of 1936, as amended (7 
U.S.C. 901 et seq.).
    RUS means the Rural Utilities Service, an agency of the United 
States Department of Agriculture, successor to the Rural 
Electrification Administration.
    Substantially underserved trust area means a community in trust 
land with respect to which the Administrator determines has a high need 
for the benefits of an eligible program.
    Trust land means ``trust land'' as defined in section 3765 of title 
38, United States Code as determined by the Administrator under 7 CFR 
1700.104.
    Underserved means an area or community lacking an adequate level or 
quality of service in an eligible program, including areas of 
duplication of service provided by an existing provider where such 
provider has not provided or will not provide adequate level or quality 
of service.


Sec.  1700.102  Eligible programs.

    SUTA does not apply to all RUS programs. SUTA only applies to 
eligible programs. An eligible program means a program administered by 
RUS and authorized in paragraph (a) of the RE Act, or paragraphs 
(b)(1), (2), (14), (22), or (24) of section 306(a) (7 U.S.C. 
1926(a)(1), (2), (14), (22), (24)), or sections 306A, 306C, 306D, or 
306E of the Con Act (7 U.S.C. 1926a, 1926c, 1926d, 1926e).


Sec.  1700.103  Eligible communities.

    An eligible community is a community that:
    (a) Is located on Trust land;
    (b) May be served by an RUS administered program; and
    (c) Is determined by the Administrator as having a high need for 
benefits of an eligible program.


Sec.  1700.104  Financial feasibility.

    Pursuant to normal underwriting practices, and such reasonable 
alternatives within the discretion of RUS that contribute to a 
financial feasibility determination for a particular eligible program 
or project, the Administrator will only make grants, loans and loan 
guarantees that RUS finds to be financially feasible and that provide 
eligible program benefits to substantially underserved trust areas. All 
income and assets available to and under the control of the Applicant 
will be considered as part of the Applicant's financial profile.


Sec.  1700.105  Determining whether land meets the statutory definition 
of ``trust land.''

    The Administrator will use one or more of the following resources 
in determining whether a particular community is located in Trust land:
    (a) Official maps of Federal Indian Reservations based on 
information compiled by the U. S. Department of the Interior, Bureau of 
Indian Affairs and made available to the public;
    (b) Title Status Reports issued by the U. S. Department of the 
Interior, Bureau of Indian Affairs showing that title to such land is 
held in trust or is subject to restrictions imposed by the United 
States;
    (c) Trust Asset and Accounting Management System data, maintained 
by the Department of the Interior, Bureau of Indian Affairs;
    (d) Official maps of the Department of Hawaiian Homelands of the 
State of Hawaii identifying land that has been given the status of 
Hawaiian home lands under the provisions of section 204 of the Hawaiian 
Homes Commission Act, 1920;
    (e) Official records of the U.S. Department of the Interior, the 
State of Alaska, or such other documentation of ownership as the 
Administrator may determine to be satisfactory, showing that title is 
owned by a Regional Corporation or a Village Corporation as such terms 
are defined in the Alaska Native Claims Settlement Act (43 U.S.C. 1601 
et seq);
    (f) Evidence that the land is located on Guam, American Samoa or 
the Commonwealth of the Northern Mariana Islands, and is eligible for 
use in the Veteran's Administration direct loan program for veterans 
purchasing or constructing homes on communally-owned land; and
    (g) Any other evidence satisfactory to the Administrator to 
establish that the land is ``trust land'' within the meaning of 38 
U.S.C. 3765(1).


Sec.  1700.106  Discretionary provisions.

    (a) To improve the availability of eligible programs in eligible 
communities determined to have a high need for the benefits of an 
eligible program, the Administrator retains the discretion, on a case-
by-case basis, to use any of the following SUTA authorities 
individually or in combination to:
    (1) Make available to qualified applicants financing with an 
interest rate as low as 2 percent;
    (2) Extend repayment terms;
    (3) Waive (individually or in combination) non-duplication 
restrictions, matching fund requirements, and credit support 
requirements from any loan or grant program administered by RUS; and
    (4) Give the highest funding priority to designated projects in 
substantially underserved trust areas.
    (b) Requests for waivers of nonduplication restrictions, matching 
fund requirements, and credit support requirements, and requests for 
highest funding priority will be reviewed on a case-by-case basis upon 
written request

[[Page 35252]]

of the applicant filed pursuant to 7 CFR 1700.108.
    (c) Notwithstanding the requirements in paragraph (b) of this 
section, the Administrator reserves the right to evaluate any 
application for an eligible program for use of the discretionary 
provisions of this subpart without a formal, written request from the 
applicant.


Sec.  1700.107  Considerations relevant to the exercise of SUTA 
discretionary provisions.

    (a) In considering requests to make available financing with an 
interest rate as low as 2 percent, and extended repayment terms, the 
Administrator will evaluate the effect of and need for such terms on 
the finding of financial feasibility.
    (b) In considering a request for a non-duplication waiver, the 
Administrator will consider the offerings of all existing service 
providers to determine whether or not granting the non-duplication 
waiver is warranted. A waiver of non-duplication restrictions will not 
be given if the Administrator determines as a matter of financial 
feasibility that, taking into account all existing service providers, 
an applicant or RUS borrower would not be able to repay a loan or 
successfully implement a grant agreement. Requests for waivers of non-
duplication restrictions will be reviewed by taking the following 
factors into consideration:
    (1) The size, extent and demographics of the duplicative area;
    (2) The cost of service from existing service providers;
    (3) The quality of available service; and
    (4) The ability of the existing service provider to serve the 
eligible service area.
    (c) Requests for waivers of matching fund requirements will be 
evaluated by taking the following factors into consideration:
    (1) Whether waivers or reductions in matching or equity 
requirements would make an otherwise financially infeasible project 
financially feasible;
    (2) Whether permitting a matching requirement to be met with 
sources not otherwise permitted in an affected program due to 
regulatory prohibition may be allowed under a separate statutory 
authority; and
    (3) Whether the application could be ranked and scored as if the 
matching requirements were fully met.
    (d) Requests for waivers of credit support requirements will be 
evaluated taking the following factors into consideration:
    (1) The cost and availability of credit support relative to the 
loan security derived from such support;
    (2) The extent to which the requirement is shown to be a barrier to 
the applicant's participation in the program; and
    (3) The alternatives to waiving the requirements.
    (e) The Administrator may adapt the manner of assigning highest 
funding priority to align with the selection methods used for 
particular programs or funding opportunities.
    (1) Eligible programs which use priority point scoring may, in a 
notice of funds availability or similar notice, assign extra points for 
SUTA eligible applicants as a means to exercise a discretionary 
authority under this subpart.
    (2) The Administrator may announce a competitive grant opportunity 
focused exclusively or primarily on trust lands which incorporates one 
or more discretionary authorities under this subpart into the rules or 
scoring for the competition.


Sec.  1700.108  Application requirements.

    (a) To receive consideration under this subpart, the applicant must 
submit to RUS a completed application that includes all of the 
information required for an application in accordance with the 
regulations relating to the program for which financial assistance is 
being sought. In addition, the applicant must notify the RUS contact 
for the applicable program in writing that it seeks consideration under 
this subpart and identify the discretionary authorities of this subpart 
it seeks to have applied to its application. The required written 
request memorandum or letter must include the following items:
    (1) A description of the applicant, documenting eligibility.
    (2) A description of the community to be served, documenting 
eligibility in accordance with 7 CFR 1700.103.
    (3) An explanation and documentation of the high need for the 
benefits of the eligible program, which may include:
    (i) Data documenting a lack of service (i.e. no service or unserved 
areas) or inadequate service in the affected community;
    (ii) Data documenting significant health risks due to the fact that 
a significant proportion of the community's residents do not have 
access to, or are not served by, adequate, affordable service.
    (iii) Data documenting economic need in the community, which may 
include:
    (A) Per capita income of the residents in the community, as 
documented by the U.S. Department of Commerce, Bureau of Economic 
Analysis;
    (B) Local area unemployment and not-employed statistics in the 
community, as documented by the U.S. Department of Labor, Bureau of 
Labor Statistics and/or the U.S. Department of the Interior, Bureau of 
Indian Affairs;
    (C) Supplemental Nutrition Assistance Program participation and 
benefit levels in the community, as documented by the U.S. Department 
of Agriculture, Economic Research Service;
    (D) National School Lunch Program participation and benefit levels 
in the community, as documented by the U.S. Department of Agriculture, 
Food and Nutrition Service;
    (E) Temporary Assistance for Needy Families Program participation 
and benefit levels in the community, as documented by the U.S. 
Department of Health and Human Services, Administration for Children 
and Families;
    (F) Lifeline Assistance and Link-Up America Program participation 
and benefit levels in the community, as documented by the Federal 
Communications Commission and the Universal Service Administrative 
Company;
    (G) Examples of economic opportunities which have been or may be 
lost without improved service.
    (H) Data maintained and supplied by Indian tribes or other tribal 
or jurisdictional entities on ``trust land'' to the Department of 
Interior, the Department of Health and Human Services and the 
Department of Housing and Urban Development that illustrates a high 
need for the benefits of an eligible program.
    (4) The impact of the specific authorities sought under this 
subpart.
    (b) The applicant must provide any additional information RUS may 
consider relevant to the application which is necessary to adequately 
evaluate the application under this subpart.
    (c) RUS may also request modifications or changes, including 
changes in the amount of funds requested, in any proposal described in 
an application submitted under this subpart.
    (d) The applicant must submit a completed application within the 
application window and guidelines for an eligible program.


Sec.  1700.109  RUS review.

    (a) RUS will review the application to determine whether the 
applicant is eligible to receive consideration under this subpart and 
whether the application is timely, complete, and

[[Page 35253]]

responsive to the requirements set forth in 7 CFR 1700.107.
    (b) If the Administrator determines that the application is 
eligible to receive consideration under this subpart and one or more 
SUTA requests are granted, the applicant will be so notified.
    (c) If RUS determines that the application is not eligible to 
receive further consideration under this subpart, RUS will so notify 
the applicant. The applicant may withdraw its application or request 
that RUS treat its application as an ordinary application for review, 
feasibility analysis and service area verification by RUS consistent 
with the regulations and guidelines normally applicable to the relevant 
program.


Sec. Sec.  1700.110-1700.149  [Reserved]


Sec.  1700.150  OMB Control Number.

    The reporting and recordkeeping requirements contained in this part 
have been approved by the Office of Management and Budget and have been 
assigned OMB control number 0572-0147.

    Dated: May 23, 2012.
Jonathan Adelstein,
Administrator, Rural Utilities Service.
[FR Doc. 2012-14255 Filed 6-12-12; 8:45 am]
BILLING CODE P