    [Federal Register Volume 91, Number 58 (Thursday, March 26, 2026)]
    [Notices]
    [Pages 14694-14696]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 2026-05864]

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    ENVIRONMENTAL PROTECTION AGENCY

    [EPA-HQ-OW-2026-1090; FRL-13236-01-OW]

    EPA's Clean Water Act (CWA) Financial Capability Assessment (FCA)
    Guidance; Request for Comment

    AGENCY: Environmental Protection Agency (EPA).

    ACTION: Notice; request for comment.

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    SUMMARY: The U.S. Environmental Protection Agency (EPA) invites written
    feedback on its Clean Water Act (CWA) Financial Capability Assessment
    (FCA) Guidance. The FCA Guidance provides information on how to assess
    a community's financial capability as part of negotiating
    implementation schedules under both permits and enforcement agreements.
    In addition, the FCA Guidance identifies specific methodologies,
    supplementing the Interim Economic Guidance for Water Quality Standards
    (1995; https://www.epa.gov/system/files/documents/2024-01/interim-economic-guidance-water-quality-standards-workbook-1995.pdf), that can
    be used to consider economic impacts to public entities when
    determining water quality standards (WQS) variances and antidegradation
    reviews. In appropriate cases, these methodologies also inform
    decisions about revisions to designated uses.
        As part of the agency's commitment to implementing CWA objectives
    in an effective manner, EPA continues to enhance understanding of the
    issues surrounding FCAs for communities and seeks ways to improve the
    guidance. The agency will use this input to determine whether updates
    to the guidance are necessary to provide clear recommendations that
    accurately identify a community's financial capability. EPA is
    requesting comment on its CWA FCA guidance.

    DATES: Comments must be received on or before May 26, 2026.

    ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
    OW-2026-1090, by the following method:
         Federal eRulemaking portal: https://www.regulations.gov/.
    Follow the online instructions for submitting comments.
        Instructions: All submissions received must include the Docket ID
    No. for this guidance. Comments received may be posted without change
    to https://www.regulations.gov/, including any personal information
    provided. For detailed instructions on sending comments and additional
    information on the guidance process, see the ``Request for Public
    Comments'' heading of the SUPPLEMENTARY INFORMATION section of this
    document.
        Tips for Preparing Comments: When submitting comments, remember to:
         Identify the guidance by docket number and other
    identifying information (subject heading, Federal Register date, and
    page number).
         Follow directions--the agency asks commenters to respond
    to specific questions and provide information according to the National
    Academy of Public Administration (NAPA) recommended criteria.
         Explain why you agree or disagree; suggest alternatives
    and substitute language for your requested changes.
         Describe any assumptions and provide any technical
    information and/or data that you used.

    [[Page 14695]]

         Provide specific examples to illustrate your comments and
    suggest alternatives.
         Explain your views as clearly as possible.
         Adhere to the comment period deadline.

    FOR FURTHER INFORMATION CONTACT: Tara Johnson, Office of Wastewater
    Management, Water Infrastructure Division (MC4204M), Environmental
    Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460;
    telephone number: (202) 809-7368; email address: johnson.tara@epa.gov.

    SUPPLEMENTARY INFORMATION:
    I. Purpose of Revisions to the Current FCA Guidance
    II. Four Key Areas for FCA Revision
    III. Request for Public Comments

    EPA's Financial Capability Assessment Guidance

    I. Purpose of Revisions to the Current FCA Guidance

        This effort will revise, as needed, previous versions of the CWA
    FCA Guidance, including the draft guidance released in 2022 (https://www.regulations.gov/document/EPA-HQ-OW-2020-0426-0071) and the most
    recent guidance originally published in March 2023 and revised in March
    2024 (https://www.epa.gov/system/files/documents/2023-01/cwa-financial-capability-assessment-guidance.pdf). The FCA Guidance is not legally
    binding and is intended only to provide clarity to the public regarding
    existing requirements under the law or agency policies.
        Since releasing the 2023 guidance, EPA has received significant
    feedback on the document. Much of the feedback is focused on the
    practical implications of several elements. The agency is revisiting
    the guidance to address these concerns through possible revisions, as
    part of its ongoing commitment to working with communities to ensure
    practical implementation and public health protection. Several
    questions/concerns/areas for further discussion have emerged as EPA has
    engaged with states, authorized tribes, communities, and other
    stakeholders to implement CWA permitting, enforcement, and WQS
    programs, specifically:
        1. The ability of metrics that assess the severity and prevalence
    of poverty within a utility's service area to accurately reflect any
    economic impacts on rural and small communities and low-income
    households;
        2. How to consider the effect cost of living has on the economic
    impacts to a community and its financial capacity;
        3. Appropriate schedule lengths for compliance with CWA
    requirements; and
        4. Specific to the WQS program, additional guidance that would help
    determine whether and how to account for costs when identifying a
    community's current financial burden.
        EPA requests public comment on how to better assess these four
    topics, including any specific approaches and/or metrics that the
    agency should consider. If commenters suggest new or revised metrics of
    financial capability for consideration, EPA requests that the commenter
    identify the frequency at which the proposed data sources are published
    and how EPA and interested parties can obtain such data. In making
    revisions to its FCA Guidance, the agency intends to follow the
    criteria recommended by the NAPA for metrics:
         Readily available from publicly available data sources.
         Clearly defined and understood.
         Simple, direct, and consistent.
         Valid and reliable measures, according to conventional
    research standards, and applicable for comparative analyses among
    permittees.

    II. Four Key Areas for FCA Revision

    1. Prevalence and Severity of Poverty

        In 2021, EPA proposed to supplement the Residential Indicator (RI)
    and the Financial Capability Indicator (FCI) metrics with two new
    metrics: the Lowest Quintile Residential Indicator (LQRI) and the
    Poverty Indicator (PI). The LQRI was intended to evaluate the financial
    impact of CWA costs on lowest quintile households in a community by
    calculating the ratio of adjusted costs per lowest quintile household
    to the service area's lowest quintile income.
        While commenters from local governments, the wastewater sector, and
    environmental organizations were supportive of the new poverty
    measures, some of these commentors also expressed concerns about the
    methodology proposed to scale the costs for lowest quintile households
    and the proposed LQRI thresholds. A number of community-specific
    factors--such as age of infrastructure, housing type, and efficiency of
    water appliances--may impact water usage and costs to lowest quintile
    households.
        In response to public feedback, the 2023 guidance added a single
    new metric called the Lowest Quintile Poverty Indicator (LQPI) to be
    considered with the RI and FCI. EPA has received requests to explicitly
    address concerns regarding metrics used to encompass the prevalence and
    severity of poverty in the FCA Guidance. The LQPI evaluates the
    economic impact on low-income households by assessing the prevalence
    and severity of poverty in a community or service area using U.S.
    Census Bureau American Community Survey (ACS) data. These ACS data meet
    the criteria for data recommended by NAPA (see above).
        Whereas the LQRI and the PI were each individual indicators for
    analysis, the LQPI methodology consists of six indicators.
         LQPI #1: Upper limit of the lowest income quintile (50%
    weight).
         LQPI #2: Percentage of population with income below 200%
    of the Federal Poverty Level (10% weight).
         LQPI #3: Percentage of households receiving food stamps/
    SNAP benefits (10% weight).
         LQPI #4: Percentage of vacant housing units (10% weight).
         LQPI #5: Trend in household growth (10% weight).
         LQPI #6: Percentage of unemployed population 16 and over
    in civilian labor force (10% weight).
        EPA will use any additional comments on this issue to further
    assess the need for potential modifications to the LQRI and/or the LQPI
    analysis and/or additional analyses to characterize the severity and
    prevalence of poverty in a community or service area to accurately
    reflect economic impacts on small, rural communities and low-income
    households.

    2. Cost of Living

        EPA has received requests to explicitly address concerns regarding
    cost of living in the FCA Guidance. EPA plans to use any additional
    comments on this topic to further assess the need for a new framework
    or whether there are gaps in the current analytical framework that need
    to be addressed to accurately reflect economic impacts on a community
    and its financial capacity.
        A potential proxy for assessing cost of living and local
    affordability can be a service area's median household income (MHI);
    however, some commenters on previous proposed FCA Guidance have noted
    that MHI--or even lowest quintile income (LQI)--alone are not
    sufficient measures of poverty.

    3. Schedule Length for Compliance

        A critical issue in many CWA permits and enforcement actions with
    utilities is the length of the schedule to achieve compliance with the
    CWA. When negotiating extended schedules, EPA intends to balance the
    timely mitigation of human health and environmental impacts as well as
    ability of the community to finance compliance costs

    [[Page 14696]]

    and the impacts on individual households throughout the utility's
    service area. EPA will consider any relevant information presented that
    illustrates the unique or atypical circumstances faced by a community
    when negotiating CWA permit and enforcement compliance schedules, and
    will evaluate appropriate timelines to be encompassed in the FCA based
    on that information.

    4. For WQS, Costs When Identifying Financial Burden

        It is critical for states and tribes to accurately describe and
    quantify water-related costs communities are incurring, or have made a
    commitment to invest in, to demonstrate whether there will be a
    substantial economic impact if the community incurs additional costs to
    meet requirements derived from applicable WQS. EPA recognizes that
    wastewater treatment costs are typically not the only water cost paid
    by households and that aging infrastructure and shifting populations
    require careful planning to maintain service levels. In the FCA
    Guidance, EPA provides standardized instructions for reporting drinking
    water, stormwater, and asset management costs. The agency now requests
    input on whether more specific guidance, or a separate standalone
    guidance document, regarding incorporating these types of information
    directly into the Municipal Preliminary Screener analysis would be
    helpful, if a community elects to do so.

    III. Request for Public Comments

        EPA requests public comment on the most recent FCA Guidance,
    specifically:
        1. EPA seeks comment on the effectiveness of the LQRI and the LQPI
    methodologies at measuring the severity and prevalence of poverty and
    whether an alternative or additional analyses may better capture
    economic impacts to small and rural communities and low-income
    households.
        The 2020 proposed FCA Guidance uses the LQRI and PI methodology:
         Lowest Quintile Residential Indicator--cost per low-income
    household as a percentage of the LQI.
         Poverty Indicator--five poverty indicators used to
    benchmark the prevalence of poverty throughout the service area.
        The 2024 FCA Guidance uses the LQPI methodology:
         Lowest Quintile Poverty Indicators--upper limit of the
    lowest income quintile; percentage of population with income below 200%
    of the Federal Poverty Level; percentage of households receiving food
    stamps/SNAP benefits; percentage of vacant housing units; trend in
    household growth; and percentage of unemployed population 16 and over
    in civilian labor force.
        Both methodologies include consideration of the following factors:
         Residential Indicator--cost per household as a percentage
    of MHI
         Financial Capability Indicator--six socioeconomic, debt,
    and financial indicators used to benchmark a community's financial
    strength.
        EPA is interested in feedback on indicators that provide distinct
    information regarding the severity and prevalence of poverty in a
    community or service area.
        2. EPA seeks public comment on whether the FCA Guidance should
    explicitly incorporate cost of living metrics. If yes, how should the
    analysis incorporate cost of living? What data sources are publicly
    available to consider cost of living?
        3. EPA seeks public comment on the current scheduling benchmarks
    for communities facing unusually high financial impacts associated with
    complying with CWA requirements. Any scheduling considerations need to
    be balanced with the need for the agency to ensure that CWA
    requirements are complied with in a timely manner. If commentors
    propose schedule benchmarks, EPA requests examples to support the basis
    for such benchmarks.
        4. For purposes of WQS analyses, EPA seeks comment on what
    information or separate guidance would be helpful to determine whether
    and how states and authorized tribes could account for costs, such as
    asset management costs, stormwater costs and/or drinking water costs,
    when characterizing costs that communities are incurring or have made a
    commitment to invest in.
        5. EPA requests comments on what, if any, additional perspectives
    or considerations relevant to the implementation of the FCA Guidance
    are not addressed by the focused questions above.

    Andrew D. Sawyers,
    Director, Office of Wastewater Management, Office of Water.
    [FR Doc. 2026-05864 Filed 3-25-26; 8:45 am]
    BILLING CODE 6560-50-P