1. (a) General. The applicant's preparation of the environmental information and the executive administrator's review and issuance of a determination forms an integral part of the planning process required of any potential applicant to the fund. There are three levels of environmental information required, varying according to the nature and scope of the project and the environment in which it is proposed. Correspondingly, the appropriate level of review will be conducted by the board and formal determinations documenting the review are issued. The categorical exclusion (CE) is directed toward those applicants proposing only minor rehabilitation or functional replacement of existing equipment. Although the environmental information required is small, the proposed project must fit a narrow range of criteria defined in paragraph (1)(A) of this subsection. The CE must be revoked and an environmental information document (EID) must be prepared if the project is subsequently modified so as to exceed the limits of the criteria. The majority of applicants will prepare an EID, developed in accordance with guidance available from the board. In addition to a greater amount of information to be supplied by the applicant, a public hearing must be held on the proposed project and the determination, a finding of no significant impact (FNSI), is also subject to public comment for a period not less than 30 days following its issuance. All applicants whose proposed projects do not meet the criteria for either a CE or environmental impact statement (EIS) must prepare an EID. Although there are other criteria involved, as described in paragraph (1)(C) of this subsection and subsection (d)(3) of this section, an EIS is usually required of those projects that are so major in scope or involve such environmentally sensitive areas (i.e., floodplains, endangered species habitat, etc.) that the proposed project may have significant adverse social or environmental impacts. An EIS requires close coordination and involvement of the board and other agencies in its preparation and results in a record of decision (ROD). The board's staff shall endeavor to provide guidance as to the appropriate level of environmental information to applicants during the pre-planning process. All applicants are urged, however, to review the criteria and contact the board's staff, particularly if there is doubt as to the level of environmental information that is appropriate to the proposed project. Based on the environmental information, the executive administrator will conduct an independent and interdisciplinary environmental review consistent with the National Environmental Policy Act (NEPA) of all projects funded through the DWSRF. This review will further insure that the proposed project will comply with the applicable local, state, and federal laws and board rules relating to the protection and enhancement of the environment. Based upon the staff's review, the executive administrator will make formal determinations regarding the potential social and environmental impacts of the proposed project. As necessary, the determinations will include mitigative provisions recommended to be applied as a condition of receiving financial assistance. Funds will not be released for building until a final environmental determination has been made. Proposed projects using the pre-design funding option will follow the environmental review procedures described under paragraph (2)(C) of this subsection.

   1. (1) Basic environmental determinations. There are three basic environmental determinations that will apply to projects proposed to be implemented with assistance from the fund. These are: a determination to categorically exclude a proposed project from a formal environmental review, a FNSI based upon a formal environmental review supported by an EID, and a determination to provide or not provide financial assistance based upon a ROD following the preparation of an EIS. The appropriate determination will be based on the following criteria.

      1. (A) The CE determination applies to categories of projects that have been shown over time not to entail significant impacts on the quality of the human environment.

         1. (i) Proposed projects which meet the following criteria may be categorically excluded from formal environmental review requirements.

            1. (I) The proposed project is directed solely toward minor rehabilitation of existing facilities, functional replacement of equipment, or toward the construction of related facilities adjoining the existing facilities that do not affect the degree of treatment or the capacity of the works. Examples include replacement of existing distribution lines within the same rights-of-way or easements, rehabilitation of existing equipment and structures, and the construction of structures on existing sites.
            2. (II) The proposed project is in a community of less than 10,000 population and is for minor expansions or upgrading of existing systems.

         2. (ii) CEs will not be granted for proposed projects that entail:

            1. (I) the construction of new distribution lines;
            2. (II) providing capacity for a population 30% or greater than the existing population;
            3. (III) known or expected impacts to cultural resources, threatened or endangered species, or other environmentally sensitive areas; or
            4. (IV) the construction of facilities which will not be, or apparently will not be, cost-effective or are likely to cause significant public controversy.
      2. (B) The FNSI will be based upon an environmental review by the staff supported by an EID prepared by the applicant in conformance with guidance developed by the executive administrator. Based upon its review, the staff will prepare an environmental assessment (EA) resulting in the issuance of either a FNSI or a public notice that the preparation of an EIS will be required. All applicants whose projects do not meet the criteria for either a CE or EIS will be required to prepare an EID. The executive administrator's issuance of a FNSI will be based upon an EA documenting that the potential environmental impacts will not be significant or that they may be mitigated without extraordinary measures.

      3. (C) The ROD may only be based upon an EIS prepared in conformance with the format and guidelines described in subsection (b)(3) of this section. An EIS will be required when the executive administrator determines any of the following:

         1. (i) the proposed project will significantly affect the pattern and type of land use or growth and distribution of the population;
         2. (ii) the effects of a proposed project's construction or operation will conflict with local or state laws or policies;

         3. (iii) the proposed project may have significant adverse impacts upon:

            1. (I) wetlands;
            2. (II) floodplains;
            3. (III) threatened and endangered species or their habitats;
            4. (IV) cultural resources including parklands, preserves, other public lands, or areas of recognized scenic, recreational, agricultural, archeological, or historic value;
         4. (iv) the proposed project will displace population or significantly alter the characteristics of existing residential areas;
         5. (v) the proposed project may directly or indirectly (e.g., through induced development) have significant adverse effect upon local ambient air quality, local noise levels, surface and ground water quantity or quality, fish, shellfish, wildlife or their natural habitats;
         6. (vi) the proposed project may generate significant public controversy; or
         7. (vii) the water supply is proposed to be obtained from a surface or groundwater source where the characterization of quality and/or quantity is being challenged or for which the proposed withdrawal might adversely affect the quality or quantity.

   2. (2) Other determinations that are required of the board.

      1. (A) Recognizing that a project may be altered at some time after an environmental determination on the proposed project has been issued, the executive administrator will provide that, prior to approval of the alterations, the contract documents, loan application, or related documents will be examined for consistency with the environmental determination. If minor inconsistencies are found and the amended project will not entail adverse environmental impacts different from those previously identified, the project may be allowed to proceed without additional formal environmental review. When substantive inconsistencies are found or new adverse environmental impacts may result, the executive administrator will revoke a CE and require the preparation of an EID or an EIS, consistent with the criteria of paragraph (1) of this subsection, or require the preparation of amendments to an EID or supplements to an EIS, as appropriate. Based upon the staff's review of the amended project, the executive administrator will:

         1. (i) reaffirm the original environmental determination through the issuance of a public notice or statement of finding;
         2. (ii) issue a FNSI when a CE has been revoked, or issue a public notice that the preparation of an EIS will be required;
         3. (iii) issue an amendment to a FNSI, or revoke a FNSI and issue a public notice that the preparation of an EIS will be required; or
         4. (iv) issue a supplement to a ROD, or revoke the ROD and issue a public notice that financial assistance will not be provided.
      2. (B) When five or more years have elapsed between the last environmental determination and the submittal of an application to the fund, the executive administrator will re-evaluate the proposed project, environmental conditions and public views, and prior to presentation of the application to the board, proceed in accordance with subparagraph (A) of this paragraph.
      3. (C) For projects using the pre-design funding option, board staff will use preliminary environmental data provided by the applicant, as specified in §371.38 of this title (relating to Pre-Design Funding Option), and make a written report to the executive administrator on known or potential significant social or environmental concerns before an application for pre-design funding is taken to the board. Prior to release of funds for design, these projects must have approval by the board after the appropriate level of environmental review has been conducted during planning, as provided under this section.

   3. (3) Other determinations that are available to the board.

      1. (A) The executive administrator may adopt previous environmental determinations issued by the EPA and other federal agencies whose determinations may be considered to be current and applicable under the environmental review requirements of this section. In so doing, the executive administrator will insure that all mitigative measures specified in the previous determinations are applied as conditions of the loan commitment and that such adoption will be consistent with the requirements of these rules. The executive administrator will adopt the previous determination by means of a statement of findings, when the proposed project and its previous determination are to be adopted without substantial modifications, or in a FNSI which will explain modifications to the proposed project, potential environmental impacts identified during an environmental review, and any mitigative measures proposed in addition to those included in the federal environmental determination to be adopted.
      2. (B) In order to better inform the public, the executive administrator may issue a statement of findings to interested agencies and public groups describing the outcome of a mitigative condition required by an environmental determination.

2. (b) Required environmental information. A minimum of three copies of all information required in this subsection shall be submitted to the executive administrator.

   1. (1) Applicants seeking a CE for their proposed projects will provide the executive administrator with sufficient documentation to demonstrate compliance with the criteria of subsection (a)(1)(A) of this section. At a minimum, this will consist of:

      1. (A) a brief, complete description of the proposed project and its costs;
      2. (B) a statement indicating that the project is cost-effective and that the applicant is financially capable of constructing, operating and maintaining the facilities; and

      3. (C) a plan map or maps of the proposed project showing:

         1. (i) the location of all construction areas;
         2. (ii) the planning area boundaries; and
         3. (iii) any known environmentally sensitive areas.

   2. (2) An EID must be submitted by those applicants whose proposed projects do not meet the criteria for a CE and for which the executive administrator has made a preliminary determination that an EIS will not be required. The executive administrator will provide guidance on both the format and contents of the EID to potential applicants prior to initiation of planning.

      1. (A) At a minimum, the contents of an EID will include:

         1. (i) the purpose and need for the project;
         2. (ii) the environmental setting of the proposed project and the future of the environment without the project;
         3. (iii) the alternatives to the project as proposed and their potential environmental impacts;
         4. (iv) a description of the proposed project;
         5. (v) the potential environmental impacts of the project as proposed including those which cannot be avoided;
         6. (vi) the relationship between the short term uses of man's environment and the maintenance and enhancement of long term productivity;
         7. (vii) any irreversible and irretrievable commitments of resources to the proposed project;
         8. (viii) a description of public participation activities conducted, issues raised, and changes to the project which may be made as a result of the public participation process; and
         9. (ix) documentation of required public participation activities and coordination with appropriate governmental agencies.
      2. (B) Prior to the applicant's adoption of the DWSRF engineering feasibility report, the applicant will hold a public hearing on the proposed project and the EID, and provide the executive administrator with a verbatim transcript of the hearing. The executive administrator will provide guidance to the applicant regarding the contents of the hearing notice and of the hearing. The hearing will be advertised at least 30 days in advance in a local newspaper of general circulation within the area to be impacted by the proposed project. Notice of the public hearing and availability of the documents also will be sent at least 30 days in advance of the public hearing to all local, state, and federal agencies and public and private parties that may have an interest in the proposed project. Included with the transcript will be a list of all attendees, any written testimony, and the applicant's Responsiveness Summary to the issues raised.
      3. (C) The applicant will provide copies of the EID to all federal, state, and local agencies and others with an interest in the proposed project. The executive administrator will provide guidance to the applicant regarding coordination requirements.

   3. (3) The format of an EIS will encourage sound analysis and clear presentation of alternatives, including the no action alternative and the preferred alternative, and their environmental, economic, and social impacts. The following format must be followed by the applicant unless the executive administrator determines there are compelling reasons to do otherwise:

      1. (A) a cover sheet identifying the applicant, the proposed project(s), the program through which financial assistance is requested, and the date of publication;

      2. (B) an executive summary consisting of a 10 to 15 page precis of the critical issues of the EIS in sufficient detail that the reader may become familiar with the proposed project and its cumulative effects. The summary will include:

         1. (i) a description of the existing problem;
         2. (ii) a description of each alternative;
         3. (iii) a listing of each alternative's potential environmental impacts, mitigative measures and any areas of controversy; and
         4. (iv) any major conclusions;

      3. (C) the body of the EIS, which will contain the following information:

         1. (i) a complete and clear description of the purpose and need for the proposed project and objectives;
         2. (ii) a balanced description of each alternative considered by the applicant. The descriptions will include the size and location of the facilities and pipelines, land requirements, operation and maintenance requirements, and construction schedules. The alternative of no action will be discussed and the applicant's preferred alternative(s) will be identified. Alternatives that were eliminated from detailed examination will be presented with the reasons for their elimination;

         3. (iii) a description of the alternatives available to the board including:

            1. (I) providing financial assistance to the proposed project;
            2. (II) requiring that the proposed project be modified prior to providing financial assistance to reduce adverse environmental impacts, or providing assistance with conditions requiring the implementation of mitigative measures; and
            3. (III) providing no financial assistance;
         4. (iv) a description of the alternatives available to other local, state, and federal agencies which may have the ability to issue or deny a permit, provide financial assistance, or otherwise effect or have an interest in any of the alternatives;
         5. (v) a description of the affected environment and environmental consequences of each alternative. The affected environment on which the evaluation of each alternative will be based includes, as a partial listing, hydrology, geology, air quality, noise, biology, socioeconomics, land use, and cultural resources of the planning area. The executive administrator will provide guidance, as necessary, to the applicant regarding the evaluation of the affected environment. The discussion will present the total impacts of each alternative in a manner that will facilitate comparison. The effects of the no action alternative must be included to serve as a baseline for comparison of the adverse and beneficial impacts of the other alternatives. A description of the existing environment will be included in the no action section to provide background information. The detail in which the affected environment is described will be commensurate with the complexity of the situation and the significance of the anticipated impacts.
   4. (4) The draft EIS will be provided to all local, state and federal agencies and public groups with an interest in the proposed project and be made available to the public for review. The final EIS will include all objections and suggestions made before and during the draft EIS review process, along with the issues of public concern expressed by individuals or interested groups. The final EIS must include discussions of any such comments pertinent to the project or the EIS. All commentors will be identified. If a comment has led to a change in either the project or the EIS, the reason should be given. The board's staff will always endeavor to resolve any conflicts that may have arisen, particularly among permitting agencies, prior to the issuance of the final EIS. In all cases, the comment period will be no less than 45 days.
   5. (5) Material incorporated into an EIS by reference will be organized to the extent possible into a supplemental information document and be made available for public review upon request. No material may be incorporated by reference unless it is reasonably available for inspection by interested persons within the comment periods specified in paragraph (4) of this subsection.
   6. (6) Preparation of the EIS will be done, at the discretion of the executive administrator: directly by its own staff; by consultants to the board; or by a consultant, contracted by the applicant subject to approval by the executive administrator. In the latter two cases, the consultants will be required to execute a disclosure statement prepared by the executive administrator signifying they have no financial or other conflicting interest in the outcome of the project. When an EIS is prepared by contractors, either in the service of the applicant or the board, the executive administrator will independently evaluate the EIS prior to issuance of the ROD and take responsibility for its scope and contents. The board staff who undertake this evaluation will be identified under the list of preparers along with those of the contractor and any other parties responsible for the content of the EIS.

   7. (7) The following public participation requirements are the minimum allowable to the applicant and the board.

      1. (A) Upon making the determination that an EIS will be required of a proposed project, the executive administrator will publish in the Texas Register and distribute a notice of intent to prepare an EIS.

      2. (B) As soon as possible after the notice of intent has been issued, the executive administrator will convene a meeting of the affected federal, state, and local agencies, the applicant, and other interested parties to determine the scope of the EIS. A notice of this scoping meeting may be incorporated into the notice of intent or prepared and issued separately. In no case will the notification period be less than 45 days. As part of the scoping meeting the board will, at a minimum:

         1. (i) determine the significance of issues and the scope of those significant issues to be analyzed in depth in the EIS;
         2. (ii) identify the preliminary range of alternatives to be considered;
         3. (iii) identify potential cooperating agencies and determine the information or analyses that may be needed from cooperating agencies or other parties;
         4. (iv) discuss the method for EIS preparation and the public participation strategy;
         5. (v) identify consultation requirements of other laws and regulations;
         6. (vi) determine the relationship between the preparation of the EIS and the completion of the DWSRF engineering feasibility report and any necessary arrangements for coordination of the preparation of both documents.
      3. (C) Following the scoping process, the executive administrator will begin the identification and evaluation of all potentially viable alternatives to adequately address the range of issues developed in the scoping. A summary of this, including a list of the significant issues identified, will be provided to the applicant and other interested parties.
      4. (D) The draft EIS will be the subject of a formal public hearing and any other public participation activities determined to be appropriate during the scoping process. Both the draft EIS and final EIS will be distributed and made available for public review in a fashion consistent with the requirements of paragraph (2)(B) of this subsection except that the advertisement period for the public hearing and comment periods for the draft EIS and final EIS will be no less than 45 days. The executive administrator will publish, in the Texas Register and a newspaper(s) of general circulation in the project area, a notice of availability of the EIS giving locations at which it will be available for public review at least 45 days prior to making any environmental determination.

3. (c) Environmental Review.

   1. (1) When the executive administrator has determined that an applicant's proposed project may be excluded from a formal environmental review or has determined that a CE is to be rescinded, the executive administrator will prepare a public notice of the determination and the availability of supporting documentation for public inspection. The notice will be published in a local newspaper of community-wide circulation by the applicant. The executive administrator, concurrent with the publication, will distribute the notice to all interested parties.

   2. (2) An environmental review of the proposed project, supported by the applicant's EID, will be conducted by the executive administrator to determine whether any significant impacts are anticipated and whether any changes may be made in the proposed project to eliminate significant adverse impacts. As part of this review, the executive administrator may require the applicant to submit additional information or undertake additional public participation and coordination to support the environmental determination. Based on the environmental review, the executive administrator will prepare an EA, describing:

      1. (A) the purpose and need for the proposed project;
      2. (B) the proposed project, including its costs;
      3. (C) the alternatives considered and the reasons for their rejection or acceptance;
      4. (D) the existing environment;
      5. (E) any potential adverse impacts and mitigative measures;
      6. (F) any proposed conditions to the provision of financial assistance and any means provided for the monitoring of compliance with the conditions; and
      7. (G) a summary of the public comments and response to those comments made by the applicant.
   3. (3) Based upon this EA, the executive administrator will issue a FNSI or issue a notice of intent to prepare an EIS. The FNSI will include a brief description of the proposed project, its costs, any mitigative measures proposed for the applicant as a condition of its receipt of financial assistance, and a statement to the effect that comments supporting or disagreeing with the FNSI may be submitted for consideration by the board. The EA will be attached to the FNSI when mitigative measures are specified by conditions of the financial assistance. The FNSI will be distributed to all parties, governmental entities, and agencies that may have an interest in the proposed project. No action regarding approval of the DWSRF engineering feasibility report will be taken by the executive administrator for at least 30 days after the issuance of the FNSI. Additionally, except for projects utilizing the pre-design option under §371.38 of this title (relating to Pre-Design Funding Option), no funds for building will be released for at least 30 days after the issuance of the FNSI. For projects utilizing the pre-design option, approval of the release of funds for planning will be made prior to the issuance of the FNSI, but no approval for release of funds for design or building will be made until at least 30 days after the issuance of the FNSI.
   4. (4) Except for projects utilizing pre-design funding under §371.38 of this title (relating to Pre-Design Funding Option), the executive administrator will prepare a concise public ROD following the public hearing on the draft EIS and the comment period on the final EIS and before the decision to approve the DWSRF engineering feasibility report or to provide or deny financial assistance to the proposed project. The ROD will describe those mitigative measures to be taken which will make the selected alternative environmentally acceptable. For projects utilizing the pre-design funding option under §371.38 of this title (relating to Pre-Design Funding Option), the ROD shall be made prior to the board's approval of the release of funds for design.

4. (d) Application of other laws and authorities. In addition to the requirements of state law and rules, the Act, and the NEPA, the board must, as required by the initial guidance for the state water pollution control revolving fund and the drinking water capitalization grant agreement, insure that each project proposed to receive DWSRF financial assistance complies with the following federal laws and authorities respecting the human environment: the Archeological and Historic Preservation Act of 1974, Public Law 93-191; the Historic Sites Act; the Clean Air Act, 42 United States Code 7506(c); the Coastal Barrier Resources Act, 16 United States Code 3501 et seq., the Coastal Zone Management Act of 1972, Public Law 92-583, as amended; the Endangered Species Act, 16 United States Code 1531 et seq.; Executive Order 11953, Protection and Enhancement of the Cultural Environment; Executive Order 11988, Floodplain Management; the Flood Disaster Protection Act of 1973, Public Law 93-234; Executive Order 11990, Protection of Wetlands; the Farmland Protection Policy Act, 7 United States Code 4201 et seq.; the Fish and Wildlife Coordination Act, Public Law 85-624, as amended; the National Historic Preservation Act of 1966, Public Law 89-665, as amended; the Safe Drinking Water Act, §1424(e), Public Law 92-523, as amended; the Wild and Scenic Rivers Act, Public Law 90-542, as amended; and the Wilderness Act, 16 United States Code 1131 et seq. Because particular federal and/or state agencies are charged with the enforcement of or permitting under many of these laws and authorities, the executive administrator will provide guidance to applicants to the fund regarding consultation requirements and will encourage proper coordination of project planning with the appropriate agencies. Because of their complexity and critical importance to the board's administration of the fund, the board has adopted the following sections to effect proper compliance with the requirements of the Flood Disaster Protection Act of 1973, the Coastal Barrier Resources Act, and Executive Order 11988.

   1. (1) The board will not provide financial assistance from the DWSRF for any project element that is proposed to be constructed in a floodplain when the applicant's community is sanctioned by the Federal Emergency Management Agency (FEMA) in its administration of the National Flood Insurance Program, pursuant to the requirements of the Flood Disaster Protection Act of 1973, Public Law 93-234.
   2. (2) The board will not provide financial assistance from the fund to any entity proposing construction in or extension or expansion of water service into any area within the Coastal Barrier Resources System other than those permitted by the Coastal Barrier Resources Act, 16 United States Code 3501 et seq.

   3. (3) Pursuant to the requirements of Executive Order 11988, the board will avoid direct and indirect support of development in floodplains wherever there is a practicable alternative. Therefore, both to preserve the significant natural functions and values of floodplains and to protect human health and safety.

      1. (A) The board may provide financial assistance from the fund for the transportation or treatment of drinking water in a floodplain only when the proposed project will provide service to:

         1. (i) areas of existing development in a floodplain;
         2. (ii) facilities such as marinas which, by their nature, must be located in floodplains;
         3. (iii) areas of projected growth if an EID demonstrates that the proposed development will be consistent with FEMA's floodplain management criteria for flood prone areas (40 Code of Federal Regulations 60.3) and will have no significant impacts on natural functions and values of floodplains;
         4. (iv) areas of projected growth if an EIS demonstrates that there is no practicable alternative to such growth, that such growth will be consistent with the floodplain management criteria cited in clause (iii) of this subparagraph and that the benefits of such growth outweigh its costs to the natural functions and values of the effected floodplains or risks to human health and safety.
      2. (B) When regional systems are proposed, the board will require the regional authority and the member entities to demonstrate compliance with these rules.

      3. (C) For the purposes of this subsection, the following definitions will apply:

         1. (i) Areas of existing development--All or part of the project planning area which, at the time of the board's issuance of its environmental determination, is:

            1. (I) occupied by existing structures or facilities;
            2. (II) substantially surrounded by existing structures and facilities and which serves no significant independent natural floodplain function; or
            3. (III) characterized by substantial investment in public infrastructure (e.g., roads and utilities are available to individual users) but which is only partially occupied by structures or facilities.
         2. (ii) Floodplain or 100-year floodplain--Those lowland, relatively flat areas usually adjoining inland or coastal waters that have a 1.0% or greater chance of flooding in any given year. In determining these areas, the applicant will use flood insurance rate maps or flood hazard boundary maps approved by FEMA. Where these maps are unavailable, the applicant should produce its own map(s) delineating the 100-year floodplain and showing 100-year flood elevations. Such maps should be prepared in accordance with FEMA's Guidelines and Specifications for Study Contractors.

         3. (iii) Natural functions and values of the floodplain include:

            1. (I) maintenance of water quality;
            2. (II) transport, storage, and absorption of floodwaters;
            3. (III) groundwater recharge;
            4. (IV) flow of debris;
            5. (V) wildlife habitat;
            6. (VI) cultural and historical resource repository;
            7. (VII) agricultural resources; and
            8. (VIII) aesthetic resources.
      4. (D) The board will, as appropriate and consistent with the requirements of these rules and Executive Order 11988, require assurances or include conditions to the provision of DWSRF financial assistance to insure compliance with these rules.

Source Note:The provisions of this §371.35 adopted to be effective March 18, 1997, 22 TexReg 2502; amended to be effective October 8, 1998, 23 TexReg 10042.