Rule Number and Title

OAR 340-054, Clean Water State Revolving Fund (CWSRF) – Stimulus Funding

Adopt OAR 340-054-0098 through 0108,

Amend OAR 340-054-0024, 0025 and 0035

Objective of rulemaking

Changes Proposed

This rulemaking will ensure the revisions made to Division 54 by the temporary rulemaking (expected to be adopted April 17, 2009) are permanent. These revisions align DEQ’s CWSRF program with pertinent requirements of the 2009 American Recovery and Reinvestment Act.

This permanent rulemaking to the CWSRF program will reflect the temporary rules to:

•  Allow financial assistance through principal forgiveness and reduced interest rates, and

•  Ensure existing CWSRF rule requirements do not conflict with the directives of the Act.

Need for this Rulemaking

What is the need for the proposed rules or amendments? Address each of the following that applies:

The primary need for this permanent rulemaking is to ensure the revisions to the CWSRF rules by the temporary rulemaking become permanent changes. The need for those revisions is given below.

▪  Will the changes make it easier for the regulated community to do business? Have we consulted w/affected groups to confirm this?

The Act will provide Oregon’s CWSRF program with an additional federal grant of $44 million. This grant will increase the amount of funds available in Oregon for communities and public entities seeking low-cost funding for water quality improvement projects.

DEQ continues to work closely with stakeholders including the Oregon Association of Clean Water Agencies (ACWA), League of Oregon Cities, Oregon Water Resources Congress, Association of Oregon Counties, Special Districts Association of Oregon, and the Oregon Association of Conservation Districts to ensure their members are kept informed of the requirements, procedures and timeline to successfully apply for these additional funds.

▪  Will the changes make it easier for DEQ to do business? What resource savings will be achieved?

The revisions of this rulemaking will allow DEQ to utilize the additional federal grant money, thus making it easier for DEQ to serve the growing water quality improvement needs of the state. Administering the additional grant will not require additional staff or substantially increase long-term workloads within the CWSRF program.

▪  Will the changes further one or more of our strategic directions?

This permanent rulemaking will support DEQ’s efforts to improve Oregon’s water quality and involve Oregonians in solving problems. The additional $44 million available for loans will allow additional communities to pursue local water quality projects having a positive impact on Oregon’s rivers, streams and lakes.

▪  Do the rules achieve or maintain consistency with federal requirements or delegation of federal programs? If so, explain why that is necessary or important.

This permanent rulemaking will ensure that Oregon’s CWSRF program can permanently utilize the federal grant provided by the Act beyond the 180 days (October) established by the temporary rulemaking.

▪  Can the need be met through policy, guidance, or another alternative to rulemaking? If not, briefly explain.

The need cannot be met through policy, guidance, or another alternative to rulemaking. Permanent amendments to OAR 340-054 are required for DEQ to continue to utilize grant money authorized by the American Recovery and Reinvestment Act of 2009.

Relevant History

In anticipation of the enactment of the American Recovery and Reinvestment Act, DEQ initiated temporary rulemaking on February 10, 2009 to align CWSRF rules with the requirements of the Act. The Act was signed into law on February 17, 2009.

Oregon’s CWSRF is slated to receive $44 million in additional funding from the Act.

Since the announcement that economic stimulus funds would be provided through the CWSRF program, more than 140 applications have been submitted to DEQ. This is a tenfold increase in the number of applications compared to a similar timeframe. Applications are reviewed, scored and placed on the program's Intended Use Plan which will be out for public comment in May. Upon completion of the public comment period, DEQ's application for the $44 million grant will be processed by U.S. EPA Region 10. DEQ expects to receive the additional funds and begin executing loans in mid-June.

Deadlines

This permanent rulemaking must be adopted prior to the end of October when the preceding temporary rules expire.

Technical or Environmental Issues

No new technical issues are expected as a result of this rulemaking. Although the grant authorized by the Act is a unique opportunity for additional funds under the CWSRF program, the loan procedures will be similar.

Cross Media Issues

None known.

Policy or Political Issues

This permanent rulemaking will not address any additional policies or political issues not already identified in the temporary rulemaking. Issues include determining the type and level of incentive incorporated in loans, and the various timeframes for submitting applications and executing loans funded by the Act.

Impacts to MSD and/or OCE

Neither the temporary nor permanent rulemakings will produce any additional impacts to DEQ's Management Services Division or the Office of Compliance and Enforcement.

Implementation Issues

This permanent rulemaking is necessary to ensure DEQ is able to continue to execute loans with the funding under the Act beyond the six month timeframe allowed by the temporary rulemaking.

Executing loan agreements and having projects under contract or construction within the relatively short timeframe established by Congress is expected to be a challenge. The Act authorizes U.S. EPA to reallocate all funds for projects not under contract or construction by February 16, 2010. DEQ continues to be in constant communication with applicants to assist them in moving through the loan application process as quickly as possible.

An implementation plan was developed that outlined planning steps needed to be taken by DEQ and applicants. Although there has been a tremendous increase in activity by DEQ and stakeholders to prepare for this funding, existing DEQ resources are adequate to accommodate the interest in the CWSRF program.

5 year Review

If adopted the new rules within OAR 340-054-0098 through 0108 will require a 5 year review as required by ORS 183.405. At the time of review, a good measurement of how well DEQ accomplished the objective of both the temporary and permanent rulemakings will be the efficient and successful use of all funds provided through the Act.

Stakeholders

The Oregon Association of Clean Water Agencies (ACWA) continues to be interested in the use and implementation of money received through the Act. DEQ continues to work and communicate with applicants, the League of Oregon Cities, Oregon Water Resources Congress, Association of Oregon Counties, Special Districts Association of Oregon, and the Oregon Association of Conservation Districts as new information becomes available.

Effects on Small Business, Individuals

The additional grant money from the Act increases the amount of low-cost loans available to all Oregon communities and public agencies. These proposed rule revisions provide additional financial incentives to all public agencies and substantial incentives to small communities applying for federal funding for water quality improvement projects.

Individuals and businesses are not eligible for funding through the CWSRF program.

Rulemaking Process

Rulemaking Team

Advisory Process

An advisory committee will not be convened to develop this permanent rulemaking. This rulemaking isn’t expected to address any new policy issues resulting from the Act or the temporary rulemaking.

Public Involvement

The public will be notified of opportunities to comment on this rulemaking through DEQ’s standard public comment process. DEQ will continue outreach efforts with applicants and interested stakeholders. The public hearing(s) and comment period will occur in July 2009.

Note: With the adoption of the temporary rulemaking anticipated at the April 17 EQC meeting, confirmation of those changes to the CWSRF program will be sent to all eligible public agencies. This effort will be in addition to any public involvement associated with this permanent rulemaking.

EQC Involvement

The temporary rulemaking was discussed briefly during the Director's Dialog at the February 26, 2009 EQC meeting. The commission was also given the opportunity to comment on the draft staff report in late March. The commission will have the opportunity to hear comments by the public at the April 17, 2009 EQC meeting prior to taking up the proposed CWSRF temporary rulemaking.

Through the Director’s Dialog, the EQC will be updated on activities associated with implementing the Act.

Rulemaking Target Dates

Outline target milestones for rulemaking, including those listed below.

Milestone

Target Dates

Advisory Process (e.g., committees; workgroups)

None Anticipated

Publication in SOS Bulletin

July 1, 2009

EQC rule adoption

October 22-23, 2009