SRF Authority Rulemaking Presentation to the EQC
2/21/08
Chairwoman Hampton, Commissioners
For the record, my name is Larry McAllister.
Within DEQ’s WQ program, I coordinate the Clean Water State Revolving Fund loan program. (State Revolving Fund)
Over the next couple minutes I intend to introduce you to the amendments being proposed to the program’s admin rules, provide you with a quick background on the program, explain why the amendments are necessary at this time and finally explain a key issue you should be aware of.
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The proposed amendments to the State Revolving Fund are themselves simple and straightforward.
The program’s administrative rules contain a handful of references to a specific version of a document used within the program. That document is referenced in 5 different locations within our admin rules.
Today’s proposed amendments will simply update those 5 references. That is the extent of this rulemaking.
What is more important is that the Commission understands why these simple changes are necessary at this time.
I would like to take just a moment to back up to provide an overview of the State Revolving Fund, and then explain why these changes are needed.
State Revolving Fund
■ Federal program established 20 years ago, Administered nationally by the EPA, under the CWA, implemented by all 50 states.
■ The loan program (Env. Bank, if you will) provides low-interest loans to public entities to finance projects that protect or improve water quality. Historically: cities have used the fund to improve their wastewater treatment systems.
■ Initially, EPA provided states with grants as seed money to grow each loan fund. Due to the ongoing demand for funding, EPA continues today to provide each state with an annual capitalization grant to increase the amount of each fund. Oregon’s annual grant is typically about $10 million.
■ In Oregon we provide about $40 million in loans each year (1/4 coming from Cap grants, the balance of the funds being provided by re-payments and interest from existing loans). DEQ has provided a total of $670 million in loans to more than a hundred communities.
So why are these amendments needed…..
EPA administers the program and they annually review DEQ’s efforts both programmatically and financially.
During EPA’s 2006 review, EPA determined that the procedures DEQ was using to review the environmental impacts of community projects applying to the fund, did not meet federal requirements.
The immediate result of this finding was that EPA would not be able to provide future capitalization grants until DEQ revised its environmental review procedures and EPA approved those new procedures.
Since EPA’s review, DEQ has completely revised what is called our “State Environmental Review Process (SERP). And the new SERP was formally approved by EPA last month, January.
So getting back to the amendments…
These new environmental review procedures are contained within the program’s “Procedures Manual”. It is this document that is referenced 5 times within our current rules. The proposed amendmets will simply update those references so they refer to the new, 2008 version of the Procedures Manual rather than referencing the old version.
So that is the “what” and the “why” of this rulemaking.
I would like to highlight a couple aspects of this rulemaking and a key issue.
- New applicants to the State Revolving Fund will be required to perform a more comprehensive environmental analysis of their projects This will entail more effort and additional expense for applicants.
- Although EPA has approved Oregon’s new state environmental review process (SERP), today’s amendments to our rules are necessary to ensure DEQ has the authority to implement the new procedures.
Key issue:
When EPA determined that our existing environmental review process was insufficient, a major aspect of that finding was DEQ’s inconsistent compliance with what are referred to as “cross-cutting federal authorities” These are additional environmental considerations required of a project when federal funds are used. These include the requirements of such acts as the National Historic Preservation Act, the Endangered Species Act, the Coastal Zone Management Act, etc. These ‘cross cutter” requirements have to be addressed in projects in an amount equal to our capitalization grants.
DEQ is reviewing our files to determine which past loans complied with these cross cutter requirements. DEQ has agreed with EPA to require these additional cross-cutting authorities for all future loans until we have addressed these requirements that were not addressed consistently in previous years. We project this effort will entail about 4 years worth of future loans.
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With the Commission’s adoption of these amendments, DEQ is ready to implement our new environmental review procedures, submit an application to EPA for Oregon’s 2007 capitalization grant and continue serving Oregon’s communities through the State Revolving Fund.
Neil and I are available at this time to answer your questions.