CJ                                                        OOOR78107
                              WASHINGTON. DC  20460        OFFICE OF WATER AND
  •<«»"                                                       WASTE MANAGEMENT

    FROM:     Thomas C.  Jorling,  Assistant Administrator            QCT 2 7 1978

                              S^tate/EPA Agreement
                         Concept  Paper on  Regulations

         FY 1980 will mark the start of a  new era  in planning,  implementing,
    and managing environmental programs at the Regional and  State levels.
    Beginning in FY 1980, State/EPA Agreements will  present  integrated
    approaches to solving water supply, solid waste, and  water  pollution
    control problems.  The integration of  these program areas will be a
    major step toward the objective of overall  environmental planning and
    management versus an approach which tries to solve interrelated
    environmental problems in a piecemeal  fashion,  program by program.

         The idea of an integrated approach to solving env-ironmental problems
    is not new.   A number of Regions and States have had  an  integrated
    orientation to problem-solving for years.  EPA requires  all  Regions  and
    States to develop State/EPA Agreements for FY  1979 covering Clean Water
    Act programs.  By FY 1980, State/EPA Agreements  will  drive  the integration
    and coordination of environmental  programs under the  Safe Drinking Water Act,
    Resource Conservation and Recovery Act, and Clean Water  Act for all  States.
    Agreement requirements are contained in 40 CFR 35.1016 of the Construction
    Management Assistance Grant regulations, 35.1507 of the  proposed Water
    Quality Management regulation and 35.738-6 of  the Interim Grant regulations
    for the Resource Conservation and Recovery Act.

         We now need to develop a central  regulation for  OWWM programs which
    will clarify Agreement requirements and ensure consistency  between programs.
    The attached Concept Paper contains preliminary  regulatory  language, public
    participation announcements,  and explanatory material.  I am very interested
    in receiving your comments and suggestions on  the proposal.  When reviewing
    the Concept Paper,  please keep in mind that the  regulatory  language  is flexible
    enough to accomodate the differences in EPA programs  covered and State/local
    needs.  Comments should be submitted by December 8, 1978.

         In addition, there will  be further opportunities to participate in
    the development of regulations.   A public meeting will be held December 4,
    1978, in Washington to discuss the proposal  and  receive  comments. Additional
    meetings in other areas of the country are being scheduled.  The time
    and location of meetings will  be announced in  the Federal Register.
    Please refer to the Concept Paper for  further  information.

         I appreciate your time and attention to this effort, and request
    you send your comments to Peter L.  Wise (WH-554), Water  Planning Division,
    U.S. Environmental  Protection Agency,  401 M Street, S.W., Washington, D.C.
    20460.  Comments received will be considered in  the development of the
                        •nvT                /

                                        \  /         ^   SI  /

                 TITLE  40  --  PROTECTION OF ENVIRONMENT
                       CHAPTER  I — ENVIRONMENTAL

                           PROTECTION AGENCY


                 PART 35 —  STATE AND LOCAL ASSISTANCE


                          INTERIM REGULATIONS

SUMMARY:   These regulations  would establish basic policies and procedures
for developing and  implementing State/EPA Agreements under the Clean Water
Act, the  Resource Conservation  and Recovery Act, and the Safe Drinking
Water Act.   They are scheduled  for publication as interim final regulations
by February 1979, because  OWWM  policy and other regulations recently
issued under the above-mentioned Acts require State/EPA Agreements in
Fiscal Year 1980. The regulations will clarify requirements and ensure
consistency between programs.   Public meetings to receive comments on
this Concept Paper  are  discussed below.

Final regulations will  accommodate experience gained during development
of the Fiscal  Year  1980 Agreements.  Comments on the interim regulations
received  by October, 1979, would be considered in development of final
regulations.  One or more  public meetings for purposes of receiving
comments  will  be held prior to  expiration of the comment period for
developing final regulations.   Notice of these meetings will be published
in the Federal Register and otherwise appropriately publicized.
DATES:  Public Meeting:
December 4,  1978 from 9  a.m.  to  12 noon; afternoon
optional; (Additional  meetings in other areas
of the country will  be announced in the Federal
Register.  Contact Patti  Morris  (see  below) for
for further details.)
        Comments must be received  on  or  before December 8, 1978.
ADDRESSES:  Public Meeting inj Washington,  D.C.:
                        Environmental  Protection
                        401  M Street,  SW,  Room 3906
                        Washington,  D.C.
         Send requests to speak to:
             Patti  Morris,  Environmental  Protection
             Agency,  WH-554,  401  M  Street, SW,
             Washington,  D.C.   20460  (For additional
             information  regarding  requests  to  speak
             and the  agenda for the .meeting  see
             Public Meeting below)

            Send written comments to:  Peter L. Wise, Environmental Protection
                                       Agency, WH-554, 401 M Street, SW,
                                       Washington, D.C.  20460

            Telephone Service:  EPA will provide, during the hours and on
               the days specified below, a toll-free telephone number to
               assist the public in making comments or requesting
               clarification regarding the Concept Paper.  The toll-free
               number is 800-424-9304.  The toll-free line will be open
               only from 1 p.m. to 4:30 p.m. Eastern Daylight Time from
               November 13 thru 16, 1978 and December 5 thru 8, 1978.
               This line will be open for the sole purpose of hearing
               comments and providing information on the State/EPA
               Agreement Concept Paper.

            Comments submitted may be inspected at the Public Information
               Reference Unit, EPA Headquarters, Room 2922, Waterside Mall,
               401 M Street, S.W., Washington, D.C.

            FOR FURTHER INFORMATION CONTACT: Linda Eichmiller, Environmental
                                             Protection Agency, WH-554,
                                             401 M St., SW, Washington, D.C.
                                             20460  (202) 755-6965
                       Washington Public Meeting

     A meeting to receive comments on the Concept Paper will be held at the
Environmental Protection Agency, 401 M Street, S.W., Room 3906, Washington, D.C.,
from 9 a.m. to 12 p.m. on December 4, 1978.  If there is sufficient public
interest, an afternoon session will be held.

     Individuals wishing to comment are requested to submit their names,
addresses, and telephone numbers to Patti Morris, Environmental Protection
Agency WH-554, 401 M Street SW, Washington, D.C. 20460 (202-755-2117).
Requests should indicate the length of time each individual wishes to
comment and any preference as to time.  Statements will be limited to a
maximum of 10 minutes.  Individuals who request to comment will be notified
in advance of the time scheduled for their statement.  Time will be re-
served for unscheduled comments.  Each individual who plans to comment is
requested to submit one typewritten copy of his or her statement at the
meeting.  The record will be closed at the end of the meeting; however,
as indicated above, written and telephone comments on the Concept Paper
will be accepted by EPA if they are received no later than December 8, 1978.
The agenda for the hearing is as follows:  Introductory Presentation: Question
and Answer Session; Scheduled Presentations; Unscheduled Testimony.  Any
afternoon session scheduled will follow this agenda.

     As EPA's legislative authority to deal  with environmental  problems
has expanded, it has become apparent that solutions to such problems
frequently are interrelated.  This has led to recognition of a  need for
better coordination and integration of EPA assistance programs  under
the Clean Water Act, the Safe Drinking Water Act, and the Resource
Conservation and Recovery Act.  The State/EPA Agreement represents a
flexible management tool which can be used to meet this need.

     The idea of an integrated approach is not new.  Some States and
Regions have been using an integrated approach to environmental
problem-solving for years, and EPA began implementation of the  State/EPA
Agreement concept in Fiscal Year 1979.  What is new is that EPA now is
emphasizing nationally the need for coordination and integration of
covered programs in all States, through published procedures designed to
lead to development of an efficient management tool in the form of a
State/EPA Agreement.

     The Agreement will be a decision document reflecting important
decisions of the States and EPA on environmental problems, priorities,
timing of solutions, responsibilities, and allocation of resources.  It
will focus top management attention in EPA regional offices and the
States on these decisions, and on evaluation of how the decisions are
carried out.  The Agreement will also be an information document useful
to local governments, areawide agencies, and other affected and interested
organizations and individuals.

     It should be emphasized that EPA views the State/EPA Agreement as  a
genuinely bilateral agreement in the full sense of the term.  To be
successful, the Agreement must reflect a sense of partnership between
the State and EPA concerning a mutual undertaking to achieve environ-
mental goals, through means which both agree are best.

     If the State/EPA Agreement is to fulfill expectations, EPA may have
to adjust the way it does business with the States.  EPA is interested
in exploring any innovations which may enhance administration of the
provisions below.  For example, EPA plans to examine the feasibility of
using a mechanism like the "one-stop" permit issuance procedure recently
undertaken by Regional Offices, perhaps by establishing a single person
or small group in the EPA Regional Office to act as a focal point for
each State's contact.  EPA also needs to examine ways to better coordinate
development of annual Headquarters guidance related to the covered programs.

     The experience of EPA and the States in developing the 1980 Agreements
will be used as the primary basis for modification of the provisions below
when final regulations are issued.  EPA will closely observe implementation
of these regulations (and supplementary guidance) over the next six months,
and will be particularly interested in the comments of State and Regional
Office representatives concerning ways in which the process can be improved.


      While the State/EPA Agreement has among Its purposes the simplific-
 ation of management, this does not mean that there will  be any re-
 laxation of the requirements of underlying program regulations.   The States
 must continue to meet the requirements published for each of the
 categorical programs.  The State/EPA Agreement will enable EPA and the
 States to meet these requirements in a better coordinated and more
 efficient manner.

      While the regulation below is specifically applicable to only certain
 programs, the Regional  Administrator is in no way precluded from including
 other EPA programs in the State/EPA Agreement.

      The provisions below contain several  approaches which the Regional
 Administrators and the States may use in simplifying financial  auditing
 procedures.  When less fiscal auditing is undertaken, more "program"
 auditing should be undertaken to assure that program objectives are met.
 Regional Administrators may request the assistance of the EPA Office of
 Audit in performing "program" audit functions as well as the more narrow
 fiscal auditing.
      EPA cannot emphasize too strongly that the requirements below are
 meant to result in less paperwork and effort,  not more.   The Agreement
 should incorporate other documents by reference whenever possible to avoid
 duplication and volume.  Public participation  and evaluation efforts should
 be combined with existing requirements of the  covered programs.   The
 regulations specify that the objectives statement and the summary portion
 of the Agreement are to be brief.  The Agreement must be used by  States
 and EPA to consolidate, integrate and simplify, not to add further
 paperwork or red-tape.


      Part 35 is amended by adding the following new Subpart:

                    Subpart A - State/EPA Agreements
35.100 Purpose
     This subpart establishes basic policies and procedures for
developing and implementing State/EPA Agreements to integrate and
coordinate environmental  problem-solving and program management.

35.101 Scope and applicability.

     This subpart is applicable  to all State/EPA Agreements covering
activities in Fiscal Year ]980 and subsequent years which are associated
with EPA technical and financial  assistance to States under Sections 106,
205(g), 208, and 314 of the Clean Water Act;  Sections 3011, 4008 and
4009 of the Resource Conservation and Recovery Act;  Sections 1442(b) (3)
(C), 1443(a) and 1443(b)  of the  Safe Drinking Water Act; and any other
provisions of the latter  laws under which assistance is provided through
EPA regional offices to States.   These programs are referred to in this
subpart as "covered programs".  This subpart supplements the general
grant regulations in Part 30 of  this chapter.  There are other regulations
in this chapter establishing additional or modified requirements for the
State/EPA Agreement in relation  to particular covered programs (for
example, §35.1016 concerning construction management assistance grants
and §35.1507 for water quality management).
35.102 General policy.

     The primary purpose of the State/EPA Agreement is to facilitate
environmental problem-solving by coordinating and to the maximum extent
feasible, integrating the planning, management, and implementation of all
covered programs.  The provisions in this subpart are intended (and shall
be administered by both States and EPA) to lead to development and
implementation of State/EPA Agreements which provide:

     (a)  maximum feasible coordination and integration in program
          planning, priority-setting, reporting, and accountability
     (b)  the least possible red tape, delay and paperwork;
     (c)  elimination of duplication among programs;
     (d)  efficient use of each program's resources;
     (e)  easily understood and accessible information concerning
          respective obligations, priorities and resource use;
     (f)  resolution of conflicts and use of opportunities presented by
          the impact of one program's activities on others;
     (g)  effective management of and coordination with EPA, State
          substate programs.

35.103 Definitions.
     (a)  Covered programs.  See definition set forth in §35.101.

     (b)  State.  Any of the fifty States, the District of Columbia, the
          Commonwealth of Puerto Rico, the Virgin Islands, Guam, American
          Samoa, the Commonwealth of the Northern Mariana Islands,
and the Trust Territory of the Pacific Islands.

     (c)  State/EPA Agreement.  A document signed by the Regional Ad-
          ministrator and the Governor of the affected State (or, if the
          Regional Administrator and the Governor agree, by one or more
          heads of State executive agencies) which meets the policies and
          requirements of this subpart and any modified or additional
          requirements of regulations elsewhere in this chapter.

     (d)  Substate entity.  Any public regional, local, county, municipal,
          or intermumcipal general or special purpose governmental  entity
          (including an interstate agency).

     (e)  Work program; work plan.

          A portion of the State/EPA Agreement (which may be incorporated
          by reference to reduce the volume of the Agreement)  which
          specifies in detail the work to be performed by the State
          under the covered programs; EPA's obligations; the costs approved
          by EPA for assistance for each element of work; the associated
          federal and non-federal funding (and sources); technical and
          other non-fiscal assistance to be provided by EPA to the State;
          and other information required by the Regional Administrator in
          accordance with applicable program regulations elsewhere in this
          chapter and other EPA guidance.

35.105 Prerequisite requirement.

     (a) Beginning in Fiscal  Year 1980, all covered programs snail be part of
the State/EPA Agreement.   The State/EPA Agreement must be completed  and
signed before award of grants under any covered program.  For the program
of construction management assistance grants authorized by Section 205(g)
of the Clean Water Act, the State/EPA Agreement must be completed and signed
before execution of the delegation agreement (see §35.1030).

     (b)  The Regional Administrator may permit grant award in advance of
completion of the State/EPA Agreement if he or she determines  that delay
would not be in the best interests of sound environmental management and
that the activities for which funding would be awarded have been adequately
coordinated with other elements of the State's covered programs.
                                                           i  N /"~~\ i  *\ I  i r " "\

      35.107  Content  and  development  of  the  State/EPA Agreement.

           (a)   General.   The State/EPA  Agreement  shall  coordinate  and, to the
      maximum extent  feasible,  integrate planning, management  and implementation
      of all  covered  programs.   In  addition,  the State  and  EPA shall coordinate
      in developing the Agreement with other Federal, State, regional  and local
      planning programs affecting or  affected by activities under the  State/EPA

           (b)   Content.   The State/EPA  Agreement  consists  of  the following:

                (1)  A brief statement of the environmental problems and objectives
      to be met through activities  under the State/EPA  Agreement, based on the
      State's problem assessments,  strategies or other  identification  of needed
      activities  under the covered  programs,  and on  EPA guidance.   To  the extent
      feasible, the State should prepare an  integrated  five year strategy to
      be updated  annually.

                (2)  A detailed work  program meeting the requirements  of the
      regulations which govern  each of the covered programs.   Generally, the State/
      EPA Agreement shall  contain only one work program which  integrates the
      various outputs which would otherwise  be funded under each of the covered
      programs.  Where the Regional Administrator  determines that this is not
      feasible, more  than one work  program may be  prepared, provided that the
      State/EPA Agreement contains  evidence  satisfactory to the Regional Administrator
      that the multiple work programs have been coordinated consistent with the
      policies and requirements of  this  subchapter.  The State/EPA  Agreement may
      incorporate the work program(s) by reference,  rather  than actually including
      the documents,  provided that  the work  program(s)  are  readily  available to EPA
      and for public  inspection.

                (3)  Other information and coordination requirements which the
      Regional  Administrator determines  are  necessary to meet  the policies of this

                (4)  A summary  of the Agreement contents, generally not exceeding
      5 pages.   The summary shall be  a separable document usable by State and EPA
      managers, and the public, as  an overview of  the State/EPA Agreement and
      work to be performed during the coming year.   It  shall briefly describe how
      covered programs have been and  will  be coordinated and integrated, and
      shall summarize major work program outputs,  associated funding (and sources)
      and agency responsibilities for completing the outputs.

           (c)   Development.  The State  and  EPA regional  personnel  should begin
      development of the State/EPA  Agreement  as  early  as  possible  each year.  A
      draft Agreement shall  be completed  and  submitted to the  Regional Administrator
      no later than June 1  of each  year.   The Regional  Administrator  shall  review
      the draft for compliance with the requirements of this chapter  and  provide
      comments to the State within  30  days.   The final  Agreement shall be submitted
      to the Regional Administrator not later than  September 1  of  each year.
      Authority to sign the Agreement  on  behalf  of  EPA shall not be delegated
      below the Deputy Regional  Administrator.

     (d)  Relationship to grant agreements.  To avoid duplication, the
State/EPA Agreement may constititute the narrative portion of a single
application for grant funds under the covered programs.   Where a single
application containing the State/EPA Agreement has been  submitted and
approved, and funds are available for obligation, the Regional Administrator's
signature on the grant agreement shall constitute his or her execution of
the State/EPA Agreement and award of grant funds.  If the Regional
Administrator must provide separate grant awards, he or  she shall incorporate
by reference the executed State/EPA Agreement in each such grant agreement.

     (e)  Fund recipients.  Consistent with the terms of the State/EPA
Agreement, the Regional Administrator may award a grant  to one agency, a
grant which directs funds to more than one agency, or separate grants to the
various agencies which will be performing under the State/EPA Agreement.

     (f)  Emergencies.  The State/EPA Agreement should provide authority to  deal
quickly in environmental  emergencies.  As part of such authority, abbreviated
review and approval procedures may be included.

35.109 Term of State/EPA Agreement.

     The term of the State/EPA Agreement shall be for the Federal fiscal
year.  The Agreement shall require execution each year by the Regional
Administrator and the State; however, unchanged provisions may be incorporated
by reference to avoid the need for voluminous duplication.  The Agreement
may include outputs which will be funded over a shorter  or longer period of
time than the Federal fiscal year.  Where an output will be funded over a
period which extends beyond one year, the subsequent Agreement(s) generally
will carry forward the remaining balance of funding and  the obligations
related to uncompleted work.

35.111  Public and substate participation.

     (a)  Public participation.  Early in the process of development of
the draft Agreement under §35.107(c), the State shall notify the public
about the goals and scope of the Agreement (including the work program) and
shall schedule opportunities for consultation with the public.  Prior to
submission of the draft Agreement to EPA, the State shall distribute to the
public a fact sheet which explains in layman's terms the contents of the
proposed Agreement, and shall
with Part 25 of this chapter.
Agreement a summary of public
comments from the hearing and
                              thereafter hold a public hearing  in  accordance
                               The State shall  submit with the  draft
                              participation;  summary of significant public
                              other sources,  such as advisory committees
required under regulations of the covered programs;  and the State's
responses.  To avoid duplication, all  public  participation activities  should
be combined with such activities required under the  covered programs.
     (b)  Participation of substate entities.   While substate entities shall
have the opportunity to participate in activities under paragraph (a)  of

this section, the affirmative role of these entities in environmental
management makes it mandatory that they have appropriate additional
opportunities for participation in development and implementation of the
State/EPA Agreement.  In some cases, regulations for the covered programs
specify the particular involvement of substate entities which is required
or appropriate.  Generally, interested substate entities must be involved
in development of all aspects of the Agreement which will affect them, and
the Agreement must provide evidence satisfactory to the Regional Administrator
of such involvement.  Failure to involve substate entities may provide
a basis for disapproval  of part or all of the State/EPA Agreement.  Nothing
shall preclude the right of affected substate entities to submit comments
directly to EPA.

35.112  Indian Tribes.

     Where an Indian tribe receives EPA assistance under two or more
covered programs, the Regional Administrator  and the Indian tribe may
use the procedures in this subpart to integrate, coordinate and manage
the programs.

35.113  Evaluation and feedback.

     Each covered program specifies in regulations or guidance the
particular evaluation criteria applicable to the objectives of the program.
Annual evaluation of implementation of the State/EPA Agreement shall take
into account these specific program evaluation criteria, and the extent
to which implementation of the State/EPA Agreement is meeting the policies
and requirements of this subchapter.  The Regional Administrator shall
conduct a joint, on-site, mid-year evaluation meeting with each State to
review and evaluate the accomplishments of the current year arrd to review
activities projected for the coming year.  The Regional Admirustrator
should hold this meeting in conjunction with other evaluation meetings
required by the regulations of the covered programs.  The State and EPA
shall apply the findings of evaluations to development of the State/EPA
Agreement for the following year.   The Regional Administrator shall prepare
a brief written report of the evaluation, forward a copy to the State,
and notify the public of the report's availability.  The State/EPA
Agreement may be used to establish other agreed-upon evaluation and
feedback mechanisms.  The State and EPA may also conduct such other
evaluations as each deems appropriate.

35.115  Grants and integrated work programs.

     States and Regional Administrators generally will develop integrated
work programs (see §35.107(b)(2),  which may include common work elements
drawing funding from more than one covered program.  In such an event, the
work program shall specify the amount or percentage of funding attributable
to each covered program under which the work element is eligible.  The
State's matching share for each work element need not rigidly track this
split of Federal funds, as long as overall the State's required matching
share level is met from allowable costs attributable to each covered program.

                                 — 10-
35.117 Financial and program auditing.

35.117-1 Financial audit procedures.

     (a)  If the Regional Administrator has determined that the work
program has clearly and adequately established reasonable funding levels
for eligible work elements, he or she may request EPA auditors to audit
expenditures only back to the State/EPA Agreement to determine that funds
have been spent in accordance with the Agreement.  The EPA Office of Audit,
after consultation with the Regional Administrator, may determine to
conserve State and EPA effort by accepting a written assurance from the
State that funds have been spent as specified in the Agreement (in such an
event the Regional Administrator shall assure, through the annual evaluation
or by use of other program reviews (see §35.117-2) that the agreed-upon
outputs have been produced).  With the concurrence of the EPA Office of
Audit, the State and the Regional Administrator may agree to accept State
audit results in lieu of an EPA audit, in accordance with Office of
Management and Budget Circular 74-7.  In the latter event, financial
assistance to support the State audit effort generally will be administered
through the EPA Office of Audit.

     (b)  Notwithstanding any provision of (a), EPA may determine to
conduct a complete review of expenditures of Federal grant funds and State
funds needed to meet applicable matching and maintenance-of-effort require-
ments to assure that funds have been expended in accordance with the
policies and intent of the covered programs.  Each State shall afford EPA
auditors and representatives of the U.S. Comptroller General access to
records which the auditors or representatives need under this paragraph.
Any interagency or subagreement between the State and other entities using
grant funds must also provide for such access.

35.117-2 Program audits.

     At the request of the Regional Administrator, and within the limits
of available resources as determined by the Director of the EPA Office of
Audit, the EPA Office of Audit shall (directly or through contract or
cooperative agreement) conduct program evaluation functions related to EPA
and State performance under the Agreement.

35.119 Funding flexibility.

     Annual EPA appropriations legislation and Congressional committee
directives limit the amount of funds which may be reprogrammed by EPA
among the covered programs (except for construction grants and construction
management assistance grants, which may not be reprogrammed).  Each year,
EPA annual guidance will contain advice concerning the availability of this
funding flexibility and the procedures for State funding transfers based
on EPA reprogramming.  In no event may a State transfer funding between
covered programs without advance written approval of the Regional
Administrator, who will act in accordance with guidance of the Office of
Planning and Management.