[Federal Register Volume 83, Number 119 (Wednesday, June 20, 2018)]
[Proposed Rules]
[Pages 28563-28566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13227]


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DEPARTMENT OF THE TREASURY

31 CFR Part 34

RIN 1505-AC55


Regulations for the Gulf Coast Restoration Trust Fund

AGENCY: Office of the Fiscal Assistant Secretary, Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of the Treasury (Treasury) proposes to amend 
its rules to revise the method by which the statutory three percent 
limitation on administrative costs (referred to throughout this notice 
of proposed rulemaking (NPRM) as the ``three percent administrative 
cost cap'') is applied under the Direct Component, Comprehensive Plan 
Component, and Spill Impact Component under the Resources and Ecosystem 
Sustainability, Tourist Opportunities, and Revived Economies of the 
Gulf Coast States Act of 2012 (RESTORE Act or Act). This proposed 
amendment will help ensure that the Gulf Coast states and localities 
have the necessary funding to efficiently and effectively oversee and 
manage projects and programs for ecological and economic restoration of 
the Gulf Coast Region while ensuring compliance with the statutory 
three percent administrative cost cap. It does not change the 
definition of ``administrative costs'' or the indirect cost 
reimbursement calculation on an individual federal grant using the 
negotiated indirect cost rate agreement (NICRA) or de minimis rate.

DATES: Written comments on this NPRM must be received on or before: 
July 20, 2018.

ADDRESSES: Treasury invites comments on the topic addressed in this 
NPRM. Comments may be submitted by any of the following methods:
    Electronic Submission of Comments: Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. Electronic submission of comments allows 
the commenter maximum time to prepare and submit a comment, ensures 
timely receipt, and enables Treasury to make them available to the 
public. Comments submitted electronically through the http://www.regulations.gov website can be viewed by other commenters and 
interested members of the public.
    Mail: Send to Department of the Treasury, Attention: Laurie 
McGilvray, Office of Gulf Coast Restoration, Office of the Fiscal 
Assistant Secretary, Room 2112; 1500 Pennsylvania Avenue NW, 
Washington, DC 20220.
    In general, Treasury will post all comments to http://www.regulations.gov without change, including any business or personal 
information provided, such as names, addresses, email addresses, or 
telephone numbers. All comments received, including attachments and 
other supporting materials, will be part of the public record and 
subject to public disclosure. You should submit only information that 
you wish to make publicly available.

FOR FURTHER INFORMATION CONTACT: The Office of Gulf Coast Restoration 
at [email protected], or Laurie McGilvray at 202-622-7340.

SUPPLEMENTARY INFORMATION:

I. Background

    The RESTORE Act (33 U.S.C. 1321(t) and note) makes funds available 
for the ecological and economic restoration of the Gulf Coast Region, 
and certain programs with respect to the Gulf of Mexico, through a 
trust fund in the Treasury of the United States known as the Gulf Coast 
Restoration Trust Fund (trust fund). The trust fund holds 80 percent of 
the administrative and civil penalties paid under the Federal Water 
Pollution Control Act after July 6, 2012 in connection with the 
Deepwater Horizon Oil Spill.
    Treasury administers two of the five components established by the 
Act, the Direct Component and Centers of Excellence Research Grants 
Program. The Act also established an independent Federal entity, the 
Gulf Coast Ecosystem Restoration Council (Council), to administer two 
components of the Act, the Comprehensive Plan Component and the Spill 
Impact Component. The National Oceanic and Atmospheric Administration 
(NOAA) administers one component, the NOAA RESTORE Act Science Program. 
This NPRM only affects grants under the Direct Component, Comprehensive 
Plan Component, and Spill Impact Component of the Act, which are 
collectively referred to throughout the NPRM as the three 
``components.''
    On December 14, 2015, Treasury promulgated a final rule on the 
RESTORE Act, 80 FR 77239, which became effective on February 12, 2016.

[[Page 28564]]

The final rule contains two relevant limitations on the amount of grant 
funds that may be used for administrative costs.
    First, the final rule subjects the grants to government-wide cost 
principles. Treasury's final rule defines ``administrative costs'' as 
``indirect costs for administration'' and provides that such ``[c]osts 
must comply with administrative requirements and cost principles in 
applicable federal laws and policies on grants.'' 31 CFR 34.2, 
34.200(a)(1). Treasury's final rule excludes ``indirect costs that are 
identified specifically with, or readily assignable to, facilities'' 
from its definition of ``administrative costs.''
    Indirect cost principles are contained in the Office of Management 
and Budget's ``Uniform Administrative Requirements, Cost Principles, 
and Audit Requirements for Federal Awards'' in 2 CFR part 200, which 
Treasury has adopted. 2 CFR 1000.10. Indirect costs are defined in 2 
CFR 200.56 and are allowable subject to Subpart E of 2 CFR part 200 and 
Appendix VII.
    Under Subpart E, a grant recipient's negotiated indirect cost rate 
agreement (NICRA) with its cognizant agency determines the allowable 
indirect cost rate for the recipient's grants, taking into account the 
unique circumstances and cost structure of the recipient. The NICRA, or 
a de minimis rate if elected, must be used across all of the 
recipient's federal grants.\1\ 2 CFR 200.414(c)(1). In accordance with 
the 2 CFR part 200 Uniform Guidance, Appendix VII--State and Local 
Government and Indian Tribe Indirect Cost Proposals, these allowable 
indirect costs are computed on each individual Federal award.
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    \1\ Subpart E provides that when a recipient has never had a 
NICRA and receives $35 million or less in direct federal funding, a 
de minimis rate of 10 percent of modified total direct costs (MTDC) 
may be used to calculate its allowable indirect costs in lieu of 
establishing a NICRA. 2 CFR 200.414(f), 2 CFR part 200, Appendix 
VII(D)(1)(b).
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    The second limitation for RESTORE awards on the amount of grant 
funds that can be used for administrative costs under the three 
components is a three percent administrative cost cap. The Act provides 
that ``[o]f the amounts received by a Gulf Coast State . . ., not more 
than 3 percent may be used for administrative costs . . . .'' 33 U.S.C. 
1321(t)(1)(B)(iii)(I). The Act does not specify the method by which 
this three percent administrative cost cap is to be applied. Treasury's 
final rule, however, provides that the three percent administrative 
cost cap is to be applied on a grant-by-grant basis: ``The three 
percent limit is applied to the total amount of funds received by a 
recipient under each grant.'' 31 CFR 34.204(a). In other words, under 
the current regulation, the administrative costs associated with each 
particular grant may not exceed three percent of the total amount of 
that grant.
    Thus, under the current regulation, allowable administrative costs 
for a particular grant, (i.e., the indirect costs for administration) 
are limited to three percent of total funds received under that 
particular grant even in cases where a recipient's NICRA (or its de 
minimis rate) allows more.
    For example, if a recipient with a NICRA with a direct labor base 
were to contract out the labor on a project, the indirect costs under 
its NICRA may be much lower than three percent of the total amount of 
the grant. In contrast, if the bulk of the labor is performed in-house, 
the indirect costs will typically be much greater than three percent of 
the total amount of the grant.
    To address this issue, Treasury proposes to provide a recipient the 
option to apply the three percent administrative cost cap, within each 
component, on either a grant-by-grant basis or on an aggregate basis. 
More specifically, this proposed revision provides that the three 
percent administrative cost cap may be applied by component to a Gulf 
Coast State, coastal political subdivision, or coastal zone parish's 
trust fund allocation, i.e., an aggregate of (1) all grants received by 
it under one component, and (2) the amount in the trust fund for the 
same component that is allocated to, but not yet received by it. As 
used in this NPRM, the phrase ``allocated to, but not yet received 
under that component by a Gulf Coast State, coastal political 
subdivision, or coastal zone parish'' refers only to funds presently in 
the trust fund and not to future deposits into the trust fund,\2\ and 
includes the following amounts with respect to each component: (1) With 
respect to the Direct Component, amounts made available in equal shares 
for the Gulf Coast States in accordance with 31 CFR 34.302; (2) with 
respect to the Comprehensive Plan Component, the estimated aggregate 
cost of all projects included in all approved Funded Priorities Lists; 
and (3) with respect to the Spill Impact Component, amounts allocated 
to the Gulf Coast States in accordance with 31 CFR 34.502 and 40 CFR 
1800.500.
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    \2\ BP Exploration & Production Inc. began making annual civil 
penalty payments in April 2017, and is expected to continue to make 
annual payments through mid-2031 pursuant to a consent decree 
entered on April 4, 2016 under the Federal Water Pollution Control 
Act (Clean Water Act), of which 80 percent of the total will be 
deposited into the trust fund and invested. The annual payments into 
the trust fund through 2031 are expected to total $4.4 billion. In 
2032, BP will make a final payment in the form of penalty interest.
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    The Treasury regulations allocate precise sums to specific entities 
based on criteria in the Act, which allows the flexibility to 
administer the administrative cost cap on an aggregate basis. 
Permitting recipients to allocate administrative costs by component 
from their ``pool'' in the trust fund toward the indirect costs in 
their grants will enable them to recover the maximum amount of indirect 
costs allowed under the Act and to more efficiently and effectively 
oversee and manage projects and programs. Under this methodology, if a 
recipient's allowable indirect costs for administration for one grant 
are less than three percent of the total amount of that grant, the 
difference would be available to cover allowable indirect costs for 
administration exceeding three percent on other grants.
    The two methods for applying the three percent administrative cost 
cap are illustrated by the examples below.

Example 1--Grant-by-Grant Method

    A recipient receives a Direct Component planning assistance grant 
totaling $216,494. The grant consists of $210,000 for direct costs and, 
under the three percent cap, $6,494 for indirect costs.

Example 2--Aggregate Method

    As in the first example, a recipient with a NICRA receives a Direct 
Component planning assistance grant which includes $210,000 for direct 
costs. Under the aggregate method, its grant may also include $56,000 
for indirect costs under its NICRA, for a grant totaling $266,000. The 
recipient has a total administrative cost pool of $2,600,000, based on 
three percent of its gross trust fund allocation for the Direct 
Component. The recipient has received indirect costs for administration 
totaling $112,000 for two prior grants, leaving a net amount of 
$2,488,000 available in its administrative cost pool. Therefore, the 
recipient may use $56,000 for indirect costs in this grant award 
because the funds are available in the pool.
    At least annually, Treasury will post publicly the amounts 
available in the administrative cost ``pool'' by component, 
simultaneously with its updates to the trust fund allocations. At no 
time, however, may the total amount of administrative costs of a Gulf 
Coast State, coastal political subdivision, or coastal zone parish 
exceed three percent of the aggregate of (1) all grants received by it 
under one of the three components, and (2) the amount in the trust fund 
for

[[Page 28565]]

the same component that is allocated to, but not yet received by such 
Gulf Coast State, coastal political subdivision, or coastal zone 
parish. Also, at no time would a recipient be able to recover more in 
indirect costs under an individual award than it would receive under 
its NICRA or its de minimis rate.
    Treasury invites public comments on all aspects of this proposed 
amendment for 30 days, and anticipates publishing a final rule on this 
revision soon after the 30 day public comment period. In particular, 
Treasury solicits comments from eligible entities on the following: (1) 
Is the aggregate method an attractive option and if so, describe the 
benefits; (2) How would you manage and track administrative indirect 
costs under each method; (3) Is there an additional burden associated 
with managing the administrative indirect cost cap using the aggregate 
method?

II. This Notice of Proposed Rulemaking

    For the reasons described above, Treasury proposes amending the 
method by which the statutory three percent administrative cost cap is 
applied under 31 CFR 34.204(a). Conceptually, the proposed revision 
allows each recipient to establish a ``pool'' of funds for 
administrative costs under each component if it so chooses. Within each 
component, a recipient may budget these funds among its grants, 
consistent with the definition of administrative costs at 31 CFR 34.2 
and Subpart E. Treasury believes that this NPRM will help ensure that 
recipients have the necessary funding to efficiently and effectively 
oversee and manage projects and programs while ensuring compliance with 
the statutory three percent administrative cost cap and a recipient's 
NICRA or de minimis rate under Subpart E.
    To clarify that recipients are no longer required to apply the 
three percent administrative cost cap on a grant-by-grant basis, 
Treasury proposes deleting ``in a grant'' from the first sentence of 
Sec.  34.204(a). Treasury proposes replacing the second sentence in 
existing Sec.  34.204(a), which currently requires the three percent 
administrative cost cap to be applied on a grant-by-grant basis, with 
language permitting the three percent administrative cost cap to be 
applied on either a grant-by-grant basis or on an aggregated basis 
within each component. For the latter method, this NPRM states that 
amounts used for administrative costs may not at any time exceed three 
percent of the aggregate of: (1) The amounts received under a component 
by a recipient, beginning with the first grant through the most recent 
grant, and (2) the amounts in the trust fund that are allocated to, but 
not yet received under such component, by a Gulf Coast State, coastal 
political subdivision, or coastal zone parish under Sec.  34.103, 
consistent with the definition of administrative costs in Sec.  34.2. 
This proposed revision helps ensure that the recipient will not exceed 
the statutory three percent administrative cost cap before the 
termination of the trust fund. Please note the NPRM does not amend the 
definition of administrative costs in Sec.  34.2.
    Treasury also proposes adding ``recipient and'' before 
``subrecipient'' in the last sentence of Sec.  34.204(a) to clarify 
that Federal grant law and policies apply to recipient costs as well as 
to subrecipient costs.
    Treasury will conduct a retrospective analysis of this proposed 
revision no later than seven years after the date it becomes effective. 
This review will consider whether the revision ensures that the Gulf 
Coast states, coastal political subdivisions, and coastal zone parishes 
have the necessary funding to efficiently and effectively oversee and 
manage projects and programs for ecological and economic restoration of 
the Gulf Coast Region while ensuring compliance with the statutory 
three percent administrative cost cap, and whether it helps them to 
administer RESTORE grant projects effectively and efficiently.

III. Procedural Requirements

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires agencies to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedures Act or any other statute, unless the agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities.
    Six of the 20 Louisiana parishes and six of the 23 Florida counties 
eligible to receive grants under the RESTORE Act have fewer than 50,000 
residents. (2010 U.S. Census) and thus qualify as small governmental 
jurisdictions under the Regulatory Flexibility Act. (5 U.S.C. 601(5)). 
Treasury anticipates that this proposed revision will have no 
significant economic impact on these small entities because all 
recipients have the option to continue applying the three percent 
administrative cost cap on a grant-by-grant basis. Accordingly, 
Treasury certifies that the amendment to this regulation will not have 
a significant impact upon a substantial number of small entities, and 
no regulatory flexibility analysis is required.

B. Regulatory Planning and Review (Executive Orders 12866 and 13563)

    The amendment to the regulation is a significant regulatory action 
as defined in Executive Order 12866, as supplemented by Executive Order 
13563.

C. Catalog of Federal Domestic Assistance

    The affected program for Treasury is listed in the Catalog of 
Federal Domestic Assistance Program under 21.015, Resources and 
Ecosystems Sustainability, Tourist Opportunities, and Revived Economies 
of the Gulf Coast States. The affected programs for the Council are 
listed under 87.051, and 87.052, for its Comprehensive Plan and Spill 
Impact Components, respectively.

List of Subjects in 31 CFR Part 34

    Coastal zone, Fisheries, Grant programs, Grants administration, 
Intergovernmental relations, Marine resources, Natural resources, Oil 
pollution, Research, Science and technology, Trusts, Wildlife.

    For the reasons set forth herein, the Department of the Treasury 
proposes to amend 31 CFR part 34 to read as follows:

PART 34--RESOURCES AND ECOSYSTEMS SUSTAINABILITY, TOURIST 
OPPORTUNITIES, AND REVIVED ECONOMIES OF THE GULF COAST STATES

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

    Authority:  31 U.S.C. 301; 31 U.S.C. 321; 33 U.S.C. 1251 et seq.

0
2. Amend Sec.  34.204 by revising paragraph (a) to read as follows:


Sec.  34.204   Limitations on administrative costs and administrative 
expenses.

    (a)(1) Of the amounts received by a Gulf Coast State, coastal 
political subdivision, or coastal zone parish from Treasury under the 
Direct Component, or from the Council under the Comprehensive Plan 
Component or Spill Impact Component, not more than three percent may be 
used for administrative costs. The three percent limit on 
administrative costs may be applied to the total amount of funds 
received by a recipient under each of the three Components either on a 
grant-by-grant basis or on an aggregate basis. For the latter method, 
amounts used for administrative costs under each of the

[[Page 28566]]

three Components may not at any time exceed three percent of the 
aggregate of:
    (i) The amounts received under a Component by a recipient, 
beginning with the first grant through the most recent grant; and
    (ii) The amounts in the Trust Fund that are allocated to, but not 
yet received under such Component by a Gulf Coast State, coastal 
political subdivision, or coastal zone parish under Sec.  34.103, 
consistent with the definition of administrative costs in Sec.  34.2. 
The three percent limit does not apply to the administrative costs of 
subrecipients. All recipient and subrecipient costs are subject to the 
cost principles in Federal laws and policies on grants.
    (2) Treasury will conduct a retrospective analysis of this 
provision no later than seven years after the date it becomes 
effective. This review will consider whether the revision ensures that 
the Gulf Coast states, coastal political subdivisions, and coastal zone 
parishes have the necessary funding to efficiently and effectively 
oversee and manage projects and programs for ecological and economic 
restoration of the Gulf Coast Region while ensuring compliance with the 
statutory three percent administrative cost cap, and whether it helps 
them to administer RESTORE grant projects effectively and efficiently.
* * * * *

David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2018-13227 Filed 6-19-18; 8:45 am]
 BILLING CODE 4810-25-P