[Federal Register Volume 78, Number 221 (Friday, November 15, 2013)]
[Rules and Regulations]
[Pages 68719-68734]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27427]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 50, 55, and 58

[Docket No. FR-5423-F-02]
RIN 2501-AD51


Floodplain Management and Protection of Wetlands

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This final rule revises HUD's regulations governing the 
protection of wetlands and floodplains. With respect to wetlands, the 
rule codifies existing procedures for Executive Order 11990 (E.O. 
11990), Protection of Wetlands. HUD's policy has been to require the 
use of the 8-Step Process for floodplains for wetlands actions 
performed by HUD or actions performed with HUD financial assistance. 
This rule codifies this wetlands policy and improves consistency and 
increases transparency by placing the E.O. 11990 requirements in 
regulation. In certain instances, the new wetlands procedures will 
allow recipients of HUD assistance to use individual permits issued 
under section 404 of the Clean Water Act (Section 404 permits) in lieu 
of 5 steps of the E.O. 11990's 8-Step Process, streamlining the 
wetlands decisionmaking processes. With respect to floodplains, with 
some exceptions, the rule prohibits HUD funding (e.g., Community 
Development Block Grants, HOME Investment Partnerships Program, Choice 
Neighborhoods, and others) or Federal Housing Administration (FHA) 
mortgage insurance for construction in Coastal High Hazard Areas. In 
order to ensure maximum protection for communities and wise investment 
of Federal resources in the face of current and future risk, this final 
rule also requires the use of preliminary flood maps and advisory base 
flood elevations where the Federal Emergency

[[Page 68720]]

Management Agency (FEMA) has determined that existing Flood Insurance 
Rate Maps (FIRMs) may not be the ``best available information'' for 
floodplain management purposes. This change in map usage requirements 
brings HUD's regulations into alignment with the requirement in 
Executive Order 11988 that agencies are to use the ``best available 
information'' and will provide greater consistency with floodplain 
management activities across HUD and FEMA programs. The rule also 
streamlines floodplain and wetland environmental procedures to avoid 
unnecessary processing delays. The procedures set forth in this rule 
would apply to HUD and to state, tribal, and local governments when 
they are responsible for environmental reviews under HUD programs.

DATES: Effective December 16, 2013.

FOR FURTHER INFORMATION CONTACT: Danielle Schopp, Director, Office of 
Environment and Energy, Office of Community Planning and Development, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
7250, Washington, DC 20410-8000. For inquiry by phone or email, contact 
Jerimiah Sanders, Environmental Review Division, Office of Environment 
and Energy, Office of Community Planning and Development, at 202-402-
4571 (this is not a toll-free number) or at Jerimiah.J.Sanders@hud.gov. 
Persons with hearing or speech impairments may access this number 
through TTY by calling the Federal Relay Service at 800-877-8339 (this 
is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

A. The December 12, 2011, Proposed Rule

    Federal departments and agencies (agencies) are charged by E.O. 
11990, entitled Protection of Wetlands, dated May 24, 1977 (42 FR 
26961) and Executive Order 11988 (E.O. 11988), entitled ``Floodplain 
Management,'' dated May 24, 1977 (42 FR 26951), with incorporating 
floodplain management goals and wetland protection considerations in 
their respective planning, regulatory, and decisionmaking processes. A 
floodplain refers to the lowland and relatively flat areas adjoining 
inland and coastal waters including flood-prone areas of offshore 
islands that, at a minimum, are subject to a one percent or greater 
chance of flooding in any given year (often referred to as the ``100-
year'' flood). Wetlands refers to those areas that are inundated by 
surface or ground water with a frequency sufficient to support, and 
under normal circumstances does or would support, a prevalence of 
vegetative or aquatic life that requires saturated or seasonally 
saturated soil conditions for growth and reproduction. Wetlands 
generally include swamps, marshes, bogs, and similar areas, such as 
sloughs, potholes, wet meadows, river overflows, mud flats, and natural 
ponds.
    On December 12, 2011, HUD proposed revising its regulations 
governing floodplain management (76 FR 77162, as corrected by 76 FR 
79145) to codify the procedures applicable to wetlands authorized by 
E.O. 11990. The procedures authorized by E.O. 11990, which focus on 
protection of wetlands, require the completion of an 8-step process 
referred to as the ``8-Step Process'' of evaluation, public notice, 
environmental review, and evaluation of alternatives. This review and 
evaluation process is similar to the process required for protection of 
floodplains under E.O. 11988, Floodplain Management, which is already 
codified in HUD regulations, (See 24 CFR 55.20).
    The 8-Step Process is administered by HUD, state governments, units 
of general local government, or tribal governments. Step 1 requires a 
determination regarding whether or not the proposed project to be 
developed with HUD financial assistance will be in a wetland. If the 
project is in a wetland, Step 2 requires that public notice be issued 
to inform interested parties that a proposal to consider an action in a 
wetland has been made. Following this notice, Step 3 requires the 
identification and evaluation of practicable alternatives to avoid 
locating the project in a wetland. Step 4 requires the identification 
and evaluation of the potential direct and indirect impacts associated 
with the occupancy or modification of wetlands. Step 4 also requires 
the identification of the potential direct support of wetlands 
development, such as housing or public- service structures that require 
additional investment such as food service or parking, and indirect 
support of wetlands development that can be caused by infrastructure, 
such as water and waste water systems for the development that could 
induce further development due to proximity to the wetland. Step 5 
requires an analysis of practicable modifications and changes to the 
proposal to minimize adverse impacts to the wetlands and to the project 
as a result of its proposed location in wetlands. Under Step 6, the 
practicable alternatives developed under Step 3 are evaluated. If there 
is no practicable alternative to the proposed wetland development, Step 
7 requires a second notice to be issued to the public stating that the 
decision has been made and providing details associated with the 
decision. After this second notice, Step 8 implements the action, 
including any mitigating measures established during the decisionmaking 
process. The December 12, 2011, rule also proposed requiring 
appropriate compensatory mitigation for adverse impacts to more than 
one acre of wetlands.
    The December 12, 2011, rule also proposed streamlining the wetlands 
decisionmaking process by allowing HUD and HUD's recipients of 
assistance to use permits issued under section 404 of the Clean Water 
Act (33 U.S.C. 1344) (Section 404) in lieu of performing the first 5 
steps of the 8-Step Process. Section 404 of the Clean Water Act 
establishes a program to regulate the discharge of dredged or fill 
material into waters of the United States, including wetlands. 
Activities in waters of the United States regulated under this program 
include fill for development, water resource projects (such as dams and 
levees), infrastructure development (such as highways and airports) and 
mining projects. Section 404 requires a permit before dredged or fill 
material may be discharged into waters of the United States, unless the 
activity is exempt from Section 404 regulation (e.g., certain farming 
and forestry activities). In order to obtain a permit, an applicant 
must show that it has: (1) Taken steps to avoid wetland impacts, (2) 
minimized potential impacts on wetlands, and (3) provided compensation 
for any remaining unavoidable impacts.
    The use of Section 404 permits was proposed to reduce costs and the 
processing time for complying with parts of the 8-Step Process. The 
proposed rule provided that if the applicant had obtained an individual 
Section 404 permit and submitted the permit with its application for a 
HUD program, then HUD or a responsible entity assuming HUD's authority 
need complete only the last 3 steps of the 8-Step Process. The rule 
also proposed to streamline project approvals by expanding the use of 
the current ``5-Step Process'' for repairs, rehabilitations, and 
improvements to facilitate rehabilitation of certain residential and 
nonresidential properties.
    Several other changes were proposed by the December 12, 2011, rule 
including a proposal to require the use of FEMA's preliminary flood 
maps and advisory base flood elevations in post-disaster situations 
where the FEMA has determined that the official FIRMs may not be the 
most up-to-date information. In addition, the proposed rule suggested 
exempting certain activities, such as

[[Page 68721]]

leasing some already insured structures, allowing entities to adopt 
previous reviews performed by a responsible entity or HUD, and 
modifying a categorical exclusion from review under the National 
Environmental Policy Act of 1969 (NEPA). Further, the rule proposed 
prohibiting HUD funding or FHA mortgage insurance for the construction 
of new structures in Coastal High Hazard Areas. The rule also proposed 
to encourage nonstructural floodplain management, when possible, to 
encourage resiliency. When HUD or a recipient analyzes alternatives, 
the nonstructural alternative should be chosen if all other factors are 
considered to be equal. For a full discussion of the proposed rule, 
please see the December 12, 2011 Federal Register (76 FR 77162).

B. Solicitation of Specific Comment on Requiring That Critical Actions 
Be Undertaken at the 500-Year Base Flood Elevation

    HUD's proposed rule also solicited specific comment regarding a 
potential change to Sec.  55.20(e), Step 5 of the ``Decisionmaking 
process'' to require that all new construction of ``critical actions'' 
in the 100- or 500-year floodplain be elevated to the 500-year base 
flood elevation. While HUD received comments on this issue, which will 
be discussed later in this preamble, HUD has decided not to make any 
changes to address this issue at this time. HUD will continue to 
research the impact of allowing critical actions below the 500-year 
base flood elevation.

C. This Final Rule

    This final rule follows publication of the December 12, 2011, 
proposed rule. HUD received four public comments, which are detailed in 
the section of this preamble labeled ``Discussion of Public Comments 
received on the December 12, 2011 Proposed Rule,'' and is making 
several changes in response to public comment. In addition, HUD is 
making selected changes in the final rule to provide greater 
consistency between the regulatory text, the intent expressed in the 
proposed rule preamble language, paragraph 2(b) of E.O. 11990, and 
other codified HUD regulations. HUD is also revising Sec.  55.20(a) to 
make it more consistent with the preamble of the proposed rule and the 
requirements of E.O. 11990. Section 55.28 is also revised to make it 
more consistent with the preamble of the proposed rule and section 404 
of the Clean Water Act.
    A summary of key changes in the final rule from the proposed rule 
follow.
    Changes made in response to public comments.
     Clarification of Sec.  55.1(c)(3), which describes the 
exceptions to the prohibition on HUD financial assistance for 
noncritical actions in high hazard areas, to allow ``infrastructure'' 
improvements and reconstruction following destruction caused by a 
disaster in Coastal High Hazard Areas. This change is intended to 
reduce confusion. It also narrows the proposed prohibition and makes 
HUD's policies for grantees more consistent with FEMA policies. Section 
55.11(c) is also revised to make the table in this section consistent 
with Sec.  55.1(c)(3).
     Revision of the definition of Coastal High Hazard Areas in 
Sec.  55.2(b)(1) to allow FEMA flood insurance studies to be used in 
addition to flood insurance maps in making the determinations of the 
boundaries of the Coastal High Hazard Areas, 100- and 500-year 
floodplains, and floodways. HUD is also clarifying that when available, 
the latest interim FEMA information, such as advisory base flood 
elevations or preliminary maps or studies, shall be used as the source 
of these designations.
     Modification of the definition of wetlands in Sec.  
55.2(b)(11) to cover manmade wetlands in order to ensure that wetlands 
built for mitigation would be preserved as natural wetlands would be 
preserved.
     Revision of the scope of assistance eligible for the 5-
Step Process in Sec.  55.12(a)(3) by providing that certain types of 
projects not be categorized as substantial improvements as defined by 
Sec.  55.2(b)(10). Projects that are ``substantial improvements'' 
remain subject to the 8-Step Process, while projects that fall below 
that rehabilitation threshold are eligible for the 5-Step Process for 
the residential and nonresidential rehabilitations at Sec.  55.12(a)(3) 
and (4). This will allow less costly housing units and those housing 
units damaged by events to receive expedited processing, while more 
costly and more severely damaged units will continue to be subject to 
the full 8-Step Process.
    Changes made to more closely align the regulatory text with the 
statutory language and the Executive Order.
     Revision of Sec.  55.12(c) to remove the exclusion from 
part 55 for HUD's implementation of the full disclosure and other 
registration requirements of the Interstate Land Sales Disclosure Act 
(15 U.S.C. 1701-1720) (ILSDA). Section 1061(b)(7) of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, 12 U.S.C. 5581(b)(7), 
transferred all of HUD's consumer protection functions under ILSDA to 
the Bureau of Consumer Financial Protection.
     Clarification of Sec.  55.20(a), which describes Step 1 in 
the decisionmaking process. The change removes redundant language and 
clarifies that actions that result in new construction in a wetland are 
covered actions. The revised regulatory text is more consistent with 
E.O. 11990 and current policy to protect wetlands impacted by off-site 
actions. For example, it would now cover such situations as damming a 
stream, which could result in diking or impounding of wetlands offsite. 
This change will allow wetlands to be considered consistent with the 
hydrology of the land as opposed to the property boundaries that often 
do not reflect hydrological conditions. An estimated 275 8-Step 
Processes for wetlands and floodplains will be performed on HUD-
assisted projects each year.
     Clarification of Sec.  55.28(a)(2) to permit recipients of 
HUD assistance to use permits issued by state and tribal governments 
under section 404(h) of the Clean Water Act in lieu of 5 steps of the 
Executive Order's 8-Step Process. State agencies and tribes were 
specifically mentioned in the proposed rule preamble, and the terms are 
now included in the regulatory text to provide effective notice to 
affected parties that these entities are covered. Michigan and New 
Jersey currently exercise the authority under section 404(h) of the 
Clean Water Act to issue Section 404 permits.

II. Discussion of Public Comments Received on the December 12, 2011, 
Proposed Rule

    By the close of the public comment period on February 10, 2012, HUD 
received four public comments on the proposed rule. Comments were 
submitted by two individuals; a national, nonprofit organization 
representing state floodplain managers; and the Floodplain Management 
Branch of FEMA. The comments generally expressed support for the 
proposed rule, but several raised questions about the rule or offered 
suggestions for additional amendments. After careful consideration of 
the issues raised by the commenters, HUD has decided to adopt the 
regulatory amendments as proposed, with some minor changes as already 
discussed.
    The following section of this preamble summarizes the significant 
issues raised by the commenters on the December 12, 2011, proposed rule 
and HUD's responses to these comments. To ease review of the comments, 
the comments and responses are presented in the sequence of the 
sections presented for proposed amendment in the proposed rule.

[[Page 68722]]

    Comment: Prohibit HUD funding or FHA multifamily mortgage insurance 
for construction of new structures in Coastal High Hazard Areas. One 
commenter supported the prohibition on construction in Coastal High 
Hazard Areas (V Zones, one of the FEMA-defined Special Flood Hazard 
Areas in the 100-year Floodplain) that was contained in the proposed 
rule. The commenter stated that HUD may, under existing regulations, 
fund construction activities in the Coastal High Hazard Area as long as 
the structures meet FEMA regulations establishing acceptable 
construction standards. The commenter referenced HUD's current policy 
in relationship to current FEMA regulations in 44 CFR 60.3(e), 
``Floodplain management criteria for flood-prone areas'' and stated 
that these minimal construction standards would still result in 
significant residual risk and an increased flood risk, particularly 
given the current sea level rise projections. Accordingly, the 
commenter supported HUD's proposal to completely eliminate HUD funding 
for construction in these areas.
    Another commenter addressing this issue stated that the regulatory 
text of proposed Sec.  55.1(c)(3), which lists some regulatory 
exceptions to the general prohibition on HUD assistance, was not clear 
as to the meaning of ``an improvement of an existing structure'' and 
``reconstruction.'' The commenter also stated that it was unclear as to 
whether some definitions would be retained. In addition, the commenter 
suggested minimization for V Zones and floodways, which are defined in 
Sec.  55.2(b)(4).
    HUD Response. HUD appreciates these comments. In response, HUD has 
decided to clarify Sec.  55.1(c)(3), which would prohibit the use of 
HUD financial assistance with respect to most noncritical actions in 
Coastal High Hazard Areas, by removing reference to improvements to 
existing ``structures'' and ``structures'' destroyed by disasters. HUD 
is making this clarification since HUD's proposed rule prohibited new 
construction of structures, a term that is defined by FEMA regulations 
at 44 CFR 9.4 to mean walled or roofed buildings, including mobile 
homes and gas or liquid storage tanks. HUD believes that referencing 
the term ``structures'' could be misinterpreted as limiting 
improvements of projects that are not structures under the FEMA 
regulations, such as roads and utility lines. Such an interpretation 
does not accurately describe current HUD regulations and policies or 
accurately portray the intent of the proposed rule changes. Namely, HUD 
has been interpreting currently codified Sec.  55.1(c)(3) to allow 
infrastructure reconstruction in V Zones. HUD has changed the language 
to ``existing construction (including improvements)'' to better 
describe the eligible activities and in order to make the provision 
more consistent with Sec.  55.1(c)(3)(ii), which uses the term 
``existing construction.'' Under the same rationale, HUD has changed 
the Sec.  55.1(c)(3) language from ``reconstruction of a structure 
destroyed by a disaster'' to ``reconstruction following destruction 
caused by a disaster.'' HUD made the change to follow the intent of the 
proposed rule, which was not to limit reconstruction to structures 
alone. Additionally, these changes are consistent with the intent of 
the preamble to the December 12, 2011, proposed rule, which expresses 
HUD's goal of aligning HUD's development standards with those of FEMA 
grant programs.
    Section 55.11(c) is also revised to make a corresponding change to 
a table in this section describing the type of proposed actions allowed 
in various locations.
    Comment: The ``Coastal High Hazard Area'' definition is confusing 
and seems to address multiple topics. A commenter stated that too many 
references were made within the ``Coastal High Hazard Area'' definition 
at Sec.  55.2(b)(1). The commenter also stated that the ``Coastal High 
Hazard Area'' definition is not consistent with that of the National 
Flood Insurance Program (NFIP). In addition, the commenter expressed 
concern as to whether other terms from the codified regulations not 
mentioned in the proposed rule would be retained.
    HUD Response. HUD has decided to retain the current definition of 
``Coastal High Hazard Area'' in order to maintain consistency with 
HUD's preexisting codified environmental regulations. This definition 
is also consistent with FEMA's ``Coastal High Hazard Area'' definition 
at 44 CFR 9.4, which is used for FEMA grant programs. Terms are 
retained as indicated in the proposed rule.
    Comment: Require the use of preliminary flood maps, Flood Insurance 
Studies, and Advisory Base Flood Elevations where they may be deemed 
best available data. A commenter stated that HUD's requirement to use 
updated and preliminary data where existing official published data, 
such as FIRMs, is not the ``best available information'' is a useful 
course of action. The commenter also stated that past experience has 
shown that flood events frequently highlight the inadequacy of older 
flood maps and studies. A commenter also recommended the use of Flood 
Insurance Studies (FIS).
    HUD Response. HUD agrees with this comment and will, in the 
interest of public safety, require the use of the latest interim FEMA 
information. HUD has also added a reference to FIS at Sec.  55.2(b)(1). 
In addition, HUD clarifies that, when available, the latest interim 
FEMA information, such as an Advisory Base Flood Elevation or 
preliminary map or study, is the best available information for the 
designation of flood hazard areas or equivalents. If FEMA information 
is unavailable or insufficiently detailed, other Federal, state, or 
local data may be used as ``best available information'' in accordance 
with E.O.11988.
    Comment: Mitigation banking should not be used in an urban area and 
this term should be restricted to areas of open space and significant 
environmental areas. Mitigation banking means the restoration, 
creation, enhancement, and, in exceptional circumstances, preservation 
of wetlands and/or other aquatic resources expressly for the purpose of 
providing compensatory mitigation in advance of authorized impacts to 
similar resources. A commenter stated that mitigation banking could be 
a ``check the box'' analysis.
    HUD Response. HUD declines to adopt the commenter's recommendation, 
although HUD agrees that mitigation banking, or compensatory mitigation 
as defined in the rule, is not appropriate for all sites. Due to the 
various different state and local mitigation programs around the United 
States, HUD supports the flexibility to allow state and local 
governments to determine what is best for projects. For this reason, 
the definition of compensatory mitigation at Sec.  55.2(b)(2) will 
remain broad as presented in the proposed rule.
    Comment: The proposed definition of wetlands does not include 
manmade wetlands. The commenter stated that the Environmental 
Protection Agency (EPA) and United States Army Corps of Engineers 
(USACE) programs often create wetlands, and these wetlands are not 
covered by the definition.
    HUD Response. HUD has clarified the definition based on the 
commenter's recommendation. The definition in the proposed rule is the 
definition that is stated in E.O. 11990. HUD has added a sentence to 
the regulatory text of Sec.  55.2(b)(11) to ensure that the definition 
covers manmade wetlands under compensatory programs. The definition of 
wetlands at Sec.  55.2(b)(11)

[[Page 68723]]

now includes ``constructed wetlands'' in the final regulatory text.
    Comment: The Department of Fish and Wildlife should be involved in 
wetlands protection. One commenter stated that consultation with, or 
permit approvals from, the ``Department of Fish and Wildlife'' should 
be involved with wetlands protection.
    HUD Response. HUD has decided not to revise the proposed rule 
language. HUD encourages its employees and recipients of financial 
assistance from HUD to consult with the United States Fish and Wildlife 
Service (USFWS). If the HUD employee or responsible entity wants to 
challenge the USFWS National Wetlands Inventory (NWI) maps, they must 
consult with the USFWS, under Sec.  55.2(b)(11)(ii-iv). In addition, 
all federal requirements (including Section 404 permits) and state and 
local laws apply to HUD assistance.
    Comment: HUD should include all available sources in wetlands 
evaluations. One commenter stated that all sources should be used in 
the wetlands evaluation and not just federal sources.
    HUD Response. HUD declines to adopt the commenter's recommendation. 
The final rule encourages the use of other sources in the wetlands 
evaluation after using the NWI maps as primary screening. HUD does not 
require, but recommends, other sources as well as the NWI maps. At 
Sec.  55.2(b)(11)(iii), the regulatory text states: ``As secondary 
screening used in conjunction with NWI maps, HUD or the responsible 
entity is encouraged to use the Department of Agriculture, Natural 
Resources Conservation Service (NRCS) National Soil Survey (NSS) and 
any state and local information concerning the location, boundaries, 
scale, and classification of wetlands within the action area.''
    Comment: Opposition to HUD's broadening the use of the 5-Step 
Process for repairs, rehabilitations, and improvements. One commenter 
opposed HUD's proposal to broaden use of the 5-Step Process which 
eliminates the consideration of alternatives at Step 3, and the two 
notices at Step 2 and Step 7. The commenter stated that applications of 
the 5-Step Process as provided in the proposed rule would increase the 
possible risk to federal investments in these floodplain areas. The 
commenter also stated opposition to placing some critical actions under 
the 5-Step Process; for example, making hospitals and nursing homes, 
which are critical facilities that must be operable and accessible 
during flood events, eligible for the 5-Step Process. A commenter also 
questioned what was meant by the terminology not ``significantly 
increasing the footprint or paved areas.''
    HUD Response. HUD declines to accept all of these recommendations, 
but has made some changes. HUD has found that the 5-Step Process has 
worked well for repairs, rehabilitations, and improvements under HUD 
mortgage insurance programs, and that using the full 8-Step Process for 
these activities has not resulted in significant differences in 
comments or project outcomes.
    HUD has revised the proposed expansion of types of assistance 
subject to the 5-Step Process by requiring in paragraph (a)(3) and 
(a)(4) of Sec.  55.12 that a project be below a threshold of a 
``substantial improvement'' to be eligible for the 5-Step Process for 
residential and nonresidential rehabilitations.
    ``Substantial improvement'' is generally defined as any repair, 
reconstruction, modernization, or improvement of a structure, the cost 
of which equals or exceeds 50 percent of the market value of the 
structure either: (1) before the improvement is started; or (2) if the 
structure has been damaged and is being restored, before the damage 
occurred. Setting the substantial improvement criteria as a threshold 
will allow less costly repairs and less damaged housing units to be 
subject to expedited processing, while more costly repairs and more 
severely damaged units will continue to be subject to the full 8-Step 
Process.
    In general, HUD has not received public comments during its 
administration of the 8-Step notice and comment process for the vast 
majority of HUD or HUD-assisted projects that have not risen to the 
level of substantial improvements. However, the public remains welcome 
to inspect the full environmental review record developed on floodplain 
impacts, or any other aspect of environmental reviews.
    HUD considers an increase in the footprint up to 10 percent not to 
be significant. This is consistent with the policy regarding 
reconstruction in V Zones under Sec.  55.1(c)(3).
    Comment: Exemption of certain activities from the 8-Step Process 
for floodplain management compliance. One commenter opposed the 
proposed exemptions for leasing structures (except those that are in 
floodways or Coastal High Hazard Areas, and critical actions in either 
the 100-year or 500-year floodplains), special projects to increase 
access for those with special needs, and activities involving ships or 
waterborne vessels. However, the commenter supported the exemption for 
activities that preserve or enhance natural and beneficial functions of 
floodplains.
    HUD Response. HUD declines to adopt the commenter's recommendation 
to delete the exemptions proposed in the proposed rule, but appreciates 
the commenter's statement supporting the proposed exemption of 
activities that preserve or restore beneficial functions.
    HUD has found that the 8-Step Process has not been beneficial for 
projects that only allow access for those with special needs or 
involving ships and waterborne vessels due to the activities' lack of 
impacts or alternatives. HUD supports greater participation in the 
National Flood Insurance Program. The exception for leasing requires 
the purchase of flood insurance for the structure. HUD also believes 
that the economic costs of the premiums and the financial protection of 
the property through insurance are adequate mitigation where the 
building is not owned by HUD or the recipient of financial assistance.
    Comment: Environmental justice is an unresolved issue. One 
commenter questioned how environmental justice was addressed by HUD.
    HUD Response. HUD is charged with addressing environmental justice 
under Executive Order 12898, Federal Actions to Address Environmental 
Justice in Minority Populations and Low-Income Populations (dated 
February 11, 1994 (59 FR 7629)). Executive Order 12898 requires Federal 
agencies to ensure that consideration is given to disproportionately 
high and adverse health and environmental effects on minority and low-
income populations. This analysis is done on a site-by-site basis by 
determining the concentration of minority and low-income populations 
and then analyzing environmental and health risks in the area. 
Environmental justice is an integral part of HUD's mission. HUD works 
with multiple stakeholders and other Federal agencies in its efforts to 
assure environmental justice concerns are addressed and are part of the 
environmental review for HUD-assisted projects. HUD recently published 
a final strategy on environmental justice. (See Department of Housing 
and Urban Development Summary of Public Comments, Response to Public 
Comments, and Final 2012-2015 Environmental Justice Strategy, dated 
April 16, 2012 (77 FR 22599). For a copy of that notice see the 
following Web site: http://portal.hud.gov/hudportal/HUD?src=/program_offices/sustainable_housing_communities. HUD requires consideration 
of environmental justice as part of the floodplain management

[[Page 68724]]

process at Sec.  55.20(c)(2)(ii). Additional background information on 
environmental justice and links can be found at the following Web site: 
http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/environment/review/justice.
    Comment: HUD should include birds, fish, and wildlife in the 
floodplain evaluation. A commenter suggested that HUD include language 
specifying that effects on birds, fish, and wildlife be included in the 
final rule.
    HUD Response. HUD believes that the proposed rule already included 
this language. The rule includes an evaluation of ``Living resources 
such as flora and fauna'' at Sec.  55.20(d)(1)(ii). Fauna is typically 
interpreted to include all birds, fish, and wildlife of an area.
    Comment: Infiltration and stormwater capture and reuse should have 
standards as they can be subject to contamination or disease. The 
commenter stated that oil and gas contamination as well as aviary 
disease should be addressed and suggested that HUD impose standards.
    HUD Response. HUD declines to adopt the commenter's recommendation. 
HUD relies on other Federal, state, and local agencies to regulate 
water quality issues. Typically, stormwater capture and reuse involves 
a cistern to store the water pending reuse. This storage isolates the 
water from groundwater. In addition, this water is normally not used 
for human consumption. Instead, the water is most often used for 
toilets or landscaping. For these reasons, stormwater standards are 
beyond the scope of this rule and are unnecessary.
    Infiltration, as used in this rule, relates only to flooding and is 
not meant to address industrial or other contamination issues. Any 
contamination issues should be addressed during the environmental 
review regulated under the processes established by Sec.  50.3(i) or 
Sec.  58.5(i)(2). If contamination issues cannot be sufficiently 
remediated, the project and HUD financial assistance should be 
cancelled, and these techniques should not be used under Sec.  
55.20(c)(1).
    Comment: The evacuation plans and routes established by HUD are not 
feasible or enforceable. The commenter stated that the plans and routes 
were not feasible or enforceable, and that the responsible party for 
the evacuation plans and routes for critical actions was not clearly 
identified.
    HUD Response. HUD declines to adopt any changes to the regulations 
as these issues are already addressed. Depending on the program, either 
HUD employees or state or local authorities are responsible for 
approving these routes and plans. All routes and plans are included in 
the environmental record and subject to public review and monitoring by 
HUD staff. Further, the current language has been in the regulation for 
at least 18 years and has produced a number of evacuation plans for 
subject properties. HUD will continue to monitor its own employees and 
state and local authorities and to provide guidance regarding 
evacuation plans and routes. HUD also encourages its employees' 
involvement with local emergency response staff to attain higher levels 
of preparedness and safety.
    Comment: Allow HUD or a responsible entity to adopt previous review 
processes that were performed by another responsible entity or HUD. One 
commenter supported the provision in the proposed rule that allows 
reviews performed by HUD or a responsible entity under E.O. 11988 and 
E.O. 11990 to be adopted by HUD or a different responsible entity for 
the same project.
    HUD Response. HUD agrees with the commenter and believes this 
provision will eliminate duplication and speed processing for projects 
receiving assistance from multiple programs.
    Comment: Use permits issued under section 404 of the Clean Water 
Act for E.O. 11990, Protection of Wetlands, purposes. A commenter 
supported explicitly allowing HUD and HUD's recipients of assistance to 
use permits issued by state and tribal governments under section 404 of 
the Clean Water Act (33 U.S.C. 1344) (Section 404) in lieu of 
performing the first 5 steps of the 8-Step Process.
    HUD Response. HUD agrees with this comment and this provision 
remains in the final rule. HUD has changed the text of the rule to 
explicitly allow Section 404 permits issued by state and tribal 
governments under programs approved by EPA. HUD also discussed this 
policy in the preamble of the proposed rule, and accordingly, inclusion 
of specific language on state and tribal governments in the final rule 
language is consistent with the preamble of the proposed rule.
    Comment: HUD should allow USACE nationwide permits issued under the 
authority provided by Section 404 to be used in lieu of 5 steps. One 
commenter requested that nationwide permits under Section 404 be 
allowed to be used in place of 5 of the steps of the 8-Step Process.\1\ 
The commenter also requested that these permits be allowed to 
substitute for 5 steps in the 8-Step Process for floodplains.
---------------------------------------------------------------------------

    \1\ USACE issues nationwide permits (NWPs) to authorize certain 
activities that require Department of the Army permits under Section 
404 of the Clean Water Act and/or Section 10 of the Rivers and 
Harbors Act of 1899. The NWPs authorize activities that have minimal 
individual and cumulative adverse effects on the aquatic 
environment. The NWPs authorize a variety of activities, such as 
aids to navigation, utility lines, bank stabilization activities, 
road crossings, stream and wetland restoration activities, 
residential developments, mining activities, commercial shellfish 
aquaculture activities, and agricultural activities.
---------------------------------------------------------------------------

    HUD Response. HUD cannot adopt the commenter's recommendation as it 
is inconsistent with the requirements of E.O. 11988 to provide two 
notices to the public, it focuses on wetlands as opposed to 
floodplains, and it would not result in adequate permitting. Further, 
while HUD agrees that many wetlands are in 100-year floodplains, HUD is 
also aware of many wetlands that are not in floodplains. HUD does not 
believe that wetlands outside of the 100-year floodplain are rare on a 
nationwide basis and believes that the Department must provide for 
these situations in the rule.
    HUD, therefore, cannot allow the abbreviated 3-Step Process to 
substitute for the 8-Step Process in floodplains, because E.O. 11988 
requires two notices at sec. 2(a)(2) and (4) instead of just one notice 
as required by E.O. 11990. As a result, the single notice under the 3-
Step Process would be insufficient for E.O. 11988 purposes. In 
addition, the USACE Section 404 permitting process does not provide 
notice or analysis regarding floodplain impacts, so the permitting 
process would not adequately address the 5 steps, for which HUD is 
allowing the permit, to substitute for the purposes of floodplains and 
E.O. 11988.
    HUD has also chosen not to allow nationwide permits at this time 
because the permits are not as site-specific in nature as individual 
permits. While HUD supports the use of nationwide permits, it has 
chosen not to allow these permits to substitute for 5 steps of the 
process. HUD believes that the more intense review under individual 
permits is a better starting point to begin this process. If HUD and 
grantees encounter the anticipated high degree of success with the 
streamlined process provided by this rule using individual permits, HUD 
will consider expanding this streamlined process to nationwide permits. 
Additionally, any mitigation under the nationwide permit could be used 
as part of HUD's 8-Step Process for E.O. 11990 compliance.
    Comment: HUD should allow applicants to forego 5 steps of the 8-
Step Process for wetlands before a Section 404 permit is secured. One 
commenter stated that it is an unreasonable hardship on the applicant 
to require the acquisition of a wetlands permit prior to

[[Page 68725]]

entering the abbreviated 3-Step wetlands process.
    HUD Response. The 3-Step Process is only applicable when a permit 
has been granted. If the permit has not yet been granted, the public 
would not have access to supporting documentation that was necessary 
for the permit. This information is necessary for HUD to adequately 
perform the 8-Step Process and for HUD to provide adequate notice to 
the public as required by E.O. 11990 at sec. 2(b) and NEPA. For these 
reasons, HUD will require the full 8-Step Process unless a Section 404 
permit has been issued prior to the environmental review.
    Comment: HUD should not modify the Categorical Exclusion (CatEx) 
from environmental review under NEPA for minor rehabilitation of one- 
to four-unit residential properties by removing the qualification that 
the footprint of the structure may not be increased in a floodplain or 
wetland. Two commenters objected to the proposed removal of the 
footprint qualification for the categorical exclusion for minor 
rehabilitation of one- to four-unit residential properties. One 
commenter recognized that this may seem like a trivial matter, but the 
expansion can increase risk to the property or adjacent properties and 
may increase the base flood elevation level.
    HUD Response. HUD declines to adopt the commenters' 
recommendations, and will retain the proposed language to remove the 
footprint qualification in the final rule. HUD assistance for minor 
rehabilitations in a floodplain or wetland will remain subject to E.O. 
11988 and E.O. 11990 8-Step-process review, unless 24 CFR 55.12(b)(2) 
or another exception applies. However, a full environmental assessment 
will no longer be required unless extraordinary circumstances indicate 
the potential of significant environmental impact. HUD has found that a 
full environmental assessment has not been productive in the past. 
Further, this change will subject rehabilitations of one- to four-unit 
properties to the same review level as new construction of one- to 
four-unit buildings, which are currently categorically excluded at 24 
CFR 58.35(a)(4), instead of requiring a greater level of review.

III. Comment on Solicitation of Views on Requirement That Critical 
Actions Be Undertaken at the 500-Year Base Flood Elevation

    Comment: HUD should require that critical actions be elevated to 
the 500-year floodplain level. The commenter supported HUD's potential 
change submitted for public comment requiring that all new construction 
of ``critical actions'' in the 100- or 500-year floodplain level be 
elevated to the 500-year base flood elevation. The commenter supported 
making this change because those actions, such as funding a community 
wastewater facility, can be among the most significant investments a 
community will make. Further, such type of facility must be operable 
during and after a flood event. The commenter also supported, as HUD 
requested comment on, consistency with the Water Resources Council 
guidance on critical actions.
    HUD Response. HUD appreciates the commenter's support. HUD has 
decided, however, not to make any changes to address moving ``critical 
actions'' at this time. HUD intends to gather more data to analyze 
factors such as, perhaps, costs and benefits, safety, and project 
viability. HUD will continue to research the impact of allowing 
critical actions below the 500-year base flood elevation, and, if 
adequate data is available, propose changes to HUD regulations at Sec.  
55.20(e).

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (E.O. 12866) (Regulatory Planning and 
Review), a determination must be made whether a regulatory action is 
significant and, therefore, subject to review by the Office of 
Management and Budget (OMB) in accordance with the requirements of the 
order.
    Executive Order 13563 (E.O. 13563) (Improving Regulations and 
Regulatory Review) directs executive agencies to analyze regulations 
that are ``outmoded, ineffective, insufficient, or excessively 
burdensome, and to modify, streamline, expand, or repeal them in 
accordance with what has been learned.'' E.O. 13563 also directs that, 
where relevant, feasible, and consistent with regulatory objectives, 
and to the extent permitted by law, agencies are to identify and 
consider regulatory approaches that reduce burdens and maintain 
flexibility and freedom of choice for the public. This rule was 
determined to be a ``significant regulatory action'' as defined in 
section 3(f) of E.O. 12866 (although not an economically significant 
regulatory action, as provided under section 3(f)(1) of the Executive 
Order).
    As discussed in this preamble, this rule revises HUD's regulations 
for the protection of wetlands and floodplains to incorporate existing 
procedures for E.O. 11990 Protection of Wetlands and, in certain 
instances, to allow recipients of HUD assistance to use permits issued 
under section 404 of the Clean Water Act in lieu of 5 steps of E.O. 
11990's 8-Step Process. With respect to floodplains, with some 
exceptions, the rule prohibits HUD funds or mortgage insurance for the 
construction of new structures in Coastal High Hazard Areas. The rule 
thus streamlines processes and codifies procedures that are currently 
addressed in guidance.

Regulatory Impact Analysis

    The Office of Management and Budget (OMB) reviewed this regulation 
under E.O. 12866 (entitled ``Regulatory Planning and Review''). The 
regulation has been determined to be a ``significant regulatory 
action,'' as defined in section 3(f) of E.O. 12866, but not 
economically significant, as provided in section 3(f)(1) of the 
Executive Order.
    The majority of the regulatory changes made by this rule will have 
minor economic effects. The primary purpose of this rule is to 
streamline the existing procedures pertaining to floodplain management 
and protection of wetlands. However, two changes proposed by HUD are 
anticipated to have some economic effect. These two changes are: (1) 
HUD's streamlining the approval process for rehabilitations, repairs, 
and improvements of HUD-funded properties in floodplains and wetlands; 
and (2) HUD's prohibiting new construction that would either be funded 
by HUD or have mortgages insured by FHA in Coastal High Hazard Areas. 
The streamlined process for rehabilitations will lower costs for 
projects, which could induce more improvement activities. The 
prohibition of new construction in Coastal High Hazard Areas could 
affect the siting of properties, but these projects are rarely proposed 
or approved even in the absence of a prohibition.

Streamlined Procedures for Minor Repairs and Improvements of Properties 
in Floodplains

    HUD or responsible entities reviewing proposals for 
rehabilitations, repairs, and improvements to multifamily properties 
located in floodplains are required to follow the 8-Step Process to 
minimize the impact to floodplains. This rule abbreviates the process 
for these proposals because the process no longer requires public 
notices or the consideration of alternatives for floodplain Executive 
order compliance. The benefits of this change arise from the reduced 
compliance costs associated with the eliminated steps. Total labor 
compliance costs for the entire 8-Step Process have been estimated at 
$320 per

[[Page 68726]]

project. A more detailed step-by-step cost estimate is not available.
    Without precise estimate concerning the costs of the specific steps 
eliminated, HUD ran Monte Carlo simulations to estimate the percentage 
reduction in costs. Any one step is assumed to have a cost of either 0 
and 1 units of effort. Fixed costs are assumed to equal the number of 
steps less variable costs so that all of the randomized cost functions 
result in the same total cost. Expected variable costs are equal to 4 
units \1/2\ x 8). Eliminating 3 steps could result in a reduction of 
between 0 and 3 units of effort. Of the eight possible combinations, a 
reduction of 1.5 is the average. Thus, the average reduction in total 
costs would be 18.75 percent, which we observe in simulations. The 
median and mode of our distribution is often lower, however, and equal 
to 12.5 percent. For this reason we use a range of between 10 and 15 
percent as a measure of central tendency.
    If eliminating the 3 steps saves 10 to 15 percent of the total 
labor cost of compliance, then each rehabilitation project would save 
between $32 and $48. Costs to publish the notices would be added to 
this amount for the overall cost of compliance. The precise number of 
proposed rehabilitation, repair, and improvement projects is not 
available, although the overall number is estimated through a survey of 
HUD field staff to be less than 100 annually. Although the reduced 
compliance costs could, on the margin, induce an increase in the 
requests for funding, that increase is unlikely considering that the 
cost of these projects generally range from thousands to millions of 
dollars. For this analysis, HUD estimates an annual total of 100 
projects, including the induced projects. One hundred such projects 
would produce benefits ranging from $3,200 and $4,800 plus minimal 
costs of publication. Since these assessments rarely lead to a 
different outcome for rehabilitation, repair, and improvement projects, 
the lost benefits (additional public notice) of not conducting a full 
floodplain assessment--the cost of this provision--are negligible. 
These publication steps are typically not costly beyond the publication 
costs due to HUD providing notice templates to HUD staff and 
recipients.

Prohibition on New Construction in Coastal High Hazard Areas

    Prohibiting new construction in Coastal High Hazard Areas would 
force developers to locate HUD-funded or FHA-insured properties out of 
hazard areas subject to high velocity waters. This prohibition would 
not affect developments that are destroyed by floods and that need to 
be rebuilt. Existing property owners interested in developing in 
Coastal High Hazard Areas would either incur transaction costs from 
selling the existing property and purchasing an alternative site, or 
obtain a more expensive source of funding/assistance. HUD would prefer 
to mitigate existing units from storm damage rather than increase the 
number of units in these areas. In addition, increasing the footprint 
of structures in Coastal High Hazard Areas can prevent open spaces from 
absorbing the storm surge and increase debris that will be carried 
inland causing additional damage to preexisting structures.
    Based on HUD's records, it is extremely rare for HUD to fund, or 
provide mortgage insurance for, a new construction proposal in these 
coastal areas. HUD found only one project that had been completed in a 
Coastal High Hazard Area, and one additional project was recently under 
review but never built. These projects were approximately 6 years 
apart.
    The benefits are not expected to be significant because only very 
few properties appear to be affected (2 over 6 years). Calculating the 
benefits (as measured by the reduction in expected damage) would 
require an extensive analysis of weather data. Additionally, the use of 
sea walls and dunes has effectively removed areas from V Zones \2\ in 
many areas by protecting structures from storm surge. This type of 
approach would eliminate some risk and lower flood insurance costs 
while allowing the land to be developed with HUD funds. However, it 
would be difficult to estimate the number of seawalls and dunes, if 
any, that would be built due to this rule change. HUD believes that 
this provision will not have a significant impact. For developers 
preferring to build in V Zones, this rule would require them to acquire 
an alternate source of funding or mortgage insurance or relocate to a 
potentially less preferable location.
---------------------------------------------------------------------------

    \2\ Coastal areas with a 1 percent or greater chance of flooding 
and an additional hazard associated with storm waves.
---------------------------------------------------------------------------

Preference for Nonstructural Alternatives

    When HUD or recipients analyze alternatives, the nonstructural 
alternative should be chosen if all other factors are considered to be 
equal. This complies with E.O. 11988's purpose of avoiding floodplain 
development. This provision is intended to focus on resiliency in the 
8-Step Process.
    The provision is advisory and is not a binding requirement. If a 
decisionmaker were to avoid floodplain development, the cost savings 
associated with not purchasing flood insurance, floodproofing or 
elevating, or creating and maintaining a levee would result in cost 
savings. In addition, threats to safety and investment would also 
decrease as the hazard area is avoided. This provision helps HUD 
accomplish its mission of supplying safe, decent, and affordable 
housing.

Use of Individual Permits Under Section 404 of the Clean Water Act for 
HUD Executive Order 11990 Processing Where All Wetlands Are Covered by 
the Permit

    This final rule permits recipients of HUD assistance to use permits 
issued by state and tribal governments under section 404 of the Clean 
Water Act in lieu of 5 steps of the E.O. 11990 8-Step Process. 
Specifically, the rule permits applicants that have obtained an 
individual Section 404 permit to submit it with his or her application 
for a HUD program. By doing so, HUD or the responsible entity assuming 
HUD's authority would only need to complete the last 3 steps of the 8-
Step Process. HUD expects that this provision would apply to fewer than 
five projects a year since recipients generally complete an 
environmental review prior to obtaining a Section 404 permit or general 
or nationwide permit. As a result, HUD has determined that the costs 
and benefits of eliminating these steps, specifically the reduced delay 
of one notice and cost of documenting other steps, would be minimal.
    Accordingly, this regulation is expected to create an annual 
economic impact ranging from $3,200 to $4,800, which are avoided costs 
resulting from a streamlined approval process for rehabilitations of 
properties located in floodplains. Thus, the implementation of this 
rule will not create an impact exceeding the $100 million threshold 
established by E.O. 12866.
    The docket file is available for public inspection in the 
Regulations Division, Office of General Counsel, Department of Housing 
and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 
20410-0500. Due to security measures at the HUD Headquarters building, 
please schedule an appointment to review the docket file by calling the 
Regulations Division at 202-402-3055 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access this number 
via TTY by calling the Federal Relay Service at 800-877-8339 (this is a 
toll-free number).

[[Page 68727]]

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule would not have 
a significant economic impact on a substantial number of small 
entities. This final rule will not have a significant economic impact 
on a substantial number of small entities.
    As discussed more fully in the Background section of the preamble, 
this final rule is largely a procedural rule that codifies HUD's 
existing policies and procedures implementing E.O. 11990, Protection of 
Wetlands. The goal of E.O. 11990 is to prevent adverse impacts 
associated with the destruction or modification of wetlands. E.O. 11990 
establishes a uniform set of requirements designed to meet this goal, 
which are applicable to both large and small entities that propose to 
use HUD financial assistance in wetlands. HUD is codifying these 
procedures in 24 CFR part 55 to increase consistency and transparency 
in these processes and to reduce confusion when working with other 
Federal agencies. The rule also broadens the use of the abbreviated 8-
Step Process, also known as the 5-Step Process, used by HUD and 
responsible entities when considering the impact on floodplains in 
connection with the repair of existing structures. Specifically, the 
rule authorizes the use of the abbreviated process for all of HUD's 
rehabilitation programs. The current regulations limit the use of the 
abbreviated process to repairs financed under HUD's mortgage insurance 
programs. Finally, the rule requires the use of preliminary flood maps 
and advisory base flood elevations where FEMA has determined that 
existing FIRMs may not be the best available information.
    Section 601 of the Regulatory Flexibility Act defines the term 
``small entity'' to include small businesses, small organizations, and 
small governmental jurisdictions. HUD asserts that this rule would 
neither increase the incidence of floodplain and wetlands assessments 
nor increase the burdens associated with carrying out such an 
assessment. As discussed above, the focus of this rule is to codify 
procedures for protection of wetlands that are already in place. The 
rule would not prohibit HUD support of activities in floodplains or 
wetlands (except for certain activities in Coastal High Hazard Areas), 
but would create a consistent departmental policy governing such 
support. HUD's codification of these procedures will neither increase 
the incidence of floodplain and wetlands assessment nor increase the 
burdens of carrying out an assessment. The rule also streamlines 
floodplain and wetland environmental review procedures to avoid 
unnecessary processing delays. As described in HUD's Regulatory Impact 
Analysis, the benefits of HUD's streamlined floodplain and wetland 
review will provide a beneficial cost impact on entities of all sizes 
and decrease burdens on both large and small entities.
    This final rule contains several other provisions that will reduce 
administrative burden for entities of all sizes. It removes the 
footprint qualification for the categorical exclusion for minor 
rehabilitation of one- to four-unit residential properties and, to 
avoid unnecessary delays, exempts leasing from the 8-Step Process for 
floodplain management where the building is insured with the National 
Flood Insurance Program and not located in a floodway or Coastal High 
Hazard Area. Exemptions are also added for special projects directed to 
the removal of material and architectural barriers that restrict the 
mobility of and accessibility to elderly and persons with disabilities, 
and activities that involve ships or waterborne vessels. The rule also 
exempts from review activities that restore and preserve natural and 
beneficial functions of floodplains and wetlands. Together, these 
changes will reduce administrative burdens and unnecessary delays and 
assist communities that choose to engage in actions beneficial to 
floodplains and wetlands.
    In HUD's December 12, 2011, proposed rule, HUD certified that this 
rule would not have a significant economic impact on a substantial 
number of small entities and invited public comment on HUD's 
certification. HUD received no comment in response to its 
certification. Therefore, the undersigned has determined that the rule 
will not have a significant economic impact on a substantial number of 
small entities.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to 
environment was made at the proposed rule stage in accordance with HUD 
regulations at 24 CFR part 50, which implement section 102(2)(C) of 
NEPA (42 U.S.C. 4332(2)(C)). The FONSI remains applicable to this final 
rule and is available for public inspection at www.regulations.gov 
under docket number FR-5423-F-02. The FONSI is also available for 
public inspection between the hours of 8 a.m. and 5 p.m., weekdays, in 
the Regulations Division, Office of General Counsel, Room 10276, 
Department of Housing and Urban Development, 451 7th Street SW., 
Washington, DC 20410. Due to security measures at the HUD Headquarters 
building, please schedule an appointment to review the FONSI by calling 
the Regulations Division at 202-708-3055 (this is not a toll-free 
number). Individuals with speech or hearing impairments may access this 
number via TTY by calling the Federal Relay Service at (800) 877-8339 
(this is a toll-free number).

E.O. 13132 Federalism

    E.O. 13132 (entitled ``Federalism'') prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or preempts state law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Order. This rule does not have federalism implications 
and would not impose substantial direct compliance costs on state and 
local governments nor preempt state law within the meaning of the 
Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments, and on the private sector. This rule does not 
impose any Federal mandates on any state, local, or tribal governments, 
or on the private sector, within the meaning of UMRA.

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been submitted to OMB for review and approval under the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3520 et seq.). The information 
collection requirement for Floodplain Management and Wetland Protection 
is assigned OMB control number 2506-0151. The information collection 
requirements in this final rule include largely preexisting information 
collection requirements. However, the preexisting information 
collection requirements are being revised to reduce the paperwork 
burden. Specifically, the information collection requirements reflect a 
slight decrease to the paperwork burden as a result of revising the 
scope of assistance eligible for the streamlined 5-Step

[[Page 68728]]

Process. Under the rule, recipients' actions under any HUD program for 
the repair, rehabilitation, modernization, or improvement of existing 
multifamily housing projects are eligible for the 5-Step Process for 
residential and nonresidential rehabilitations as long as the action 
does not meet the threshold of substantial improvement under Sec.  
55.2(b)(10). Similarly, financial assistance for weatherizations and 
floodplain and wetland restoration activities would also be granted the 
use of the shortened 5-Step Process. These changes will allow for 
expedited processing and a decreased amount of analysis for projects 
that have no or little adverse impact or have beneficial effects.
    The sections in this rule that contain the current information 
collection requirements and the upcoming revisions that are awaiting 
OMB approval, as well as the estimated adjusted burden of the pending 
revisions, are set forth in the following table.

----------------------------------------------------------------------------------------------------------------
                                     Number of     Total annual    Average hours   Total annual    Total annual
           CFR Section              respondents      responses     per response    burden hours   cost  ($40/hr)
----------------------------------------------------------------------------------------------------------------
Sec.   55.20 Decisionmaking                  275               1               8            2200         $88,000
 process........................
Sec.   55.21 Notification of                 300               1               1             300          12,000
 floodplain hazard..............
                                 -------------------------------------------------------------------------------
    Totals......................             575               2               9            2500         100,000
----------------------------------------------------------------------------------------------------------------

    All estimates include the time for reviewing instructions, 
searching existing data sources, gathering or maintaining the needed 
data, and reviewing the information. The docket file is available for 
public inspection. For information on, or a copy of, the paperwork 
package submitted to OMB, contact Colette Pollard at 202-708-0306 (this 
is not a toll-free number) or via email at Colette.Pollard@hud.gov. In 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), an agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information, unless the 
collection displays a valid OMB control number.

List of Subjects

24 CFR Part 50

    Environmental impact statements.

24 CFR Part 55

    Environmental impact statements, Floodplains, Wetlands.

24 CFR Part 58

    Community development block grants, Environmental impact 
statements, Grant programs--housing and community development, 
Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble above, HUD 
amends 24 CFR parts 50, 55, and 58 as follows:

PART 50--PROTECTION AND ENHANCEMENT OF ENVIRONMENTAL QUALITY

0
1. The authority citation for part 50 is revised to read as follows:

    Authority: 42 U.S.C. 3535(d) and 4332; and Executive Order 
11991, 3 CFR, 1977 Comp., p. 123.


0
2. In Sec.  50.4, revise paragraphs (b)(2) and (3) to read as follows:


Sec.  50.4  Related federal laws and authorities.

* * * * *
    (b) * * *
    (2) HUD procedure for the implementation of Executive Order 11988 
(Floodplain Management), (3 CFR, 1977 Comp., p. 117)--24 CFR part 55, 
Floodplain Management and Protection of Wetlands.
    (3) HUD procedure for the implementation of Executive Order 11990 
(Protection of Wetlands), (3 CFR, 1977 Comp., p. 121)--24 CFR part 55, 
Floodplain Management and Protection of Wetlands.
* * * * *

PART 55--FLOODPLAIN MANAGEMENT AND PROTECTION OF WETLANDS

0
3. The authority citation for part 55 is revised to read as follows:

    Authority: 42 U.S.C. 3535(d), 4001-4128 and 5154a; E.O. 11988, 
42 FR 26951, 3 CFR, 1977 Comp., p. 117; E.O. 11990, 42 FR 26961, 3 
CFR, 1977 Comp., p 121.


0
4. Revise the part heading for part 55 to read as set forth above.
0
5. Amend Sec.  55.1 as follows:
0
a. Revise paragraph (a);
0
b. Redesignate paragraph (b) as paragraph (b)(1);
0
c. Add paragraph (b)(2); and
0
d. Revise paragraphs (c)(1), (c)(3) introductory text, and (c)(3)(i).
    The revisions and addition read as follows:


Sec.  55.1  Purpose and basic responsibility.

    (a)(1) The purpose of Executive Order 11988, Floodplain Management, 
is ``to avoid to the extent possible the long and short-term adverse 
impacts associated with the occupancy and modification of floodplains 
and to avoid direct or indirect support of floodplain development 
wherever there is a practicable alternative.''
    (2) The purpose of Executive Order 11990, Protection of Wetlands, 
is ``to avoid to the extent possible the long- and short-term adverse 
impacts associated with the destruction or modification of wetlands and 
to avoid direct or indirect support of new construction in wetlands 
wherever there is a practicable alternative.''
    (3) This part implements the requirements of Executive Order 11988, 
Floodplain Management, and Executive Order 11990, Protection of 
Wetlands, and employs the principles of the Unified National Program 
for Floodplain Management. These regulations apply to all HUD (or 
responsible entity) actions that are subject to potential harm by 
location in floodplains or wetlands. Covered actions include the 
proposed acquisition, construction, demolition, improvement, 
disposition, financing, and use of properties located in floodplains or 
wetlands for which approval is required either from HUD, under any 
applicable HUD program, or from a responsible entity authorized by 24 
CFR part 58.
    (4) This part does not prohibit approval of such actions (except 
for certain actions in Coastal High Hazard Areas), but provides a 
consistent means for implementing the Department's interpretation of 
the Executive Orders in the project approval decisionmaking processes 
of HUD and of responsible entities subject to 24 CFR part 58. The 
implementation of Executive Orders 11988 and 11990 under this part 
shall be conducted by HUD for Department-administered programs subject 
to environmental review under 24 CFR part 50 and by authorized 
responsible entities that are responsible for environmental review 
under 24 CFR part 58.

[[Page 68729]]

    (5) Nonstructural alternatives to floodplain development and the 
destruction of wetlands are both favored and encouraged to reduce the 
loss of life and property caused by floods, and to restore the natural 
resources and functions of floodplains and wetlands. Nonstructural 
alternatives should be discussed in the decisionmaking process where 
practicable.
    (b) * * *
    (2) Under section 582 of the National Flood Insurance Reform Act of 
1994 (42 U.S.C. 5154a), HUD disaster assistance that is made available 
in a special flood hazard area may not be used to make a payment 
(including any loan assistance payment) to a person for repair, 
replacement, or restoration of damage to any personal, residential, or 
commercial property if:
    (i) The person had previously received Federal flood disaster 
assistance conditioned on obtaining and maintaining flood insurance; 
and
    (ii) The person failed to obtain and maintain the flood insurance.
    (c) * * *
    (1) Any action other than a functionally dependent use or 
floodplain function restoration activity, located in a floodway;
* * * * *
    (3) Any noncritical action located in a Coastal High Hazard Area, 
unless the action is a functionally dependent use, existing 
construction (including improvements), or reconstruction following 
destruction caused by a disaster. If the action is not a functionally 
dependent use, the action must be designed for location in a Coastal 
High Hazard Area. An action will be considered designed for a Coastal 
High Hazard Area if:
    (i) In the case of reconstruction following destruction caused by a 
disaster or substantial improvement, the work meets the current 
standards for V zones in FEMA regulations (44 CFR 60.3(e)) and, if 
applicable, the Minimum Property Standards for such construction in 24 
CFR 200.926d(c)(4)(iii); or
* * * * *

0
6. Amend Sec.  55.2 as follows:
0
a. Revise paragraph (a);
0
b. Revise paragraphs (b) introductory text and (b)(1);
0
c. Redesignate paragraphs (b)(2) through (6) and (7) and (8) as 
paragraphs (b)(3) through (7) and (9) and (10), respectively;
0
d. Add new paragraphs (b)(2) and (b)(8);
0
e. Revise newly designated paragraph (b)(9); and
0
f. Add paragraph (b)(11).
    The revisions read as follows:


Sec.  55.2  Terminology.

    (a) With the exception of those terms defined in paragraph (b) of 
this section, the terms used in this part shall follow the definitions 
contained in section 6 of Executive Order 11988, section 7 of Executive 
Order 11990, and the Floodplain Management Guidelines for Implementing 
Executive Order 11988 (43 FR 6030, February 10, 1978), issued by the 
Water Resources Council; the terms ``special flood hazard area,'' 
``criteria,'' and ``Regular Program'' shall follow the definitions 
contained in FEMA regulations at 44 CFR 59.1; and the terms ``Letter of 
Map Revision'' and ``Letter of Map Amendment'' shall refer to letters 
issued by FEMA, as provided in 44 CFR part 65 and 44 CFR part 70, 
respectively.
    (b) For purposes of this part, the following definitions apply:
    (1) Coastal high hazard area means the area subject to high 
velocity waters, including but not limited to hurricane wave wash or 
tsunamis. The area is designated on a Flood Insurance Rate Map (FIRM) 
or Flood Insurance Study (FIS) under FEMA regulations. FIRMs and FISs 
are also relied upon for the designation of ``100-year floodplains'' 
(Sec.  55.2(b)(9)), ``500-year floodplains'' (Sec.  55.2(b)(4)), and 
``floodways'' (Sec.  55.2(b)(5)). When FEMA provides interim flood 
hazard data, such as Advisory Base Flood Elevations (ABFE) or 
preliminary maps and studies, HUD or the responsible entity shall use 
the latest of these sources. If FEMA information is unavailable or 
insufficiently detailed, other Federal, state, or local data may be 
used as ``best available information'' in accordance with Executive 
Order 11988. However, a base flood elevation from an interim or 
preliminary or non-FEMA source cannot be used if it is lower than the 
current FIRM and FIS.
    (2) Compensatory mitigation means the restoration (reestablishment 
or rehabilitation), establishment (creation), enhancement, and/or, in 
certain circumstances, preservation of aquatic resources for the 
purposes of offsetting unavoidable adverse impacts that remain after 
all appropriate and practicable avoidance and minimization have been 
achieved.
    Examples include, but are not limited to:
    (i) Permittee-responsible mitigation: On-site or off-site 
mitigation undertaken by the holder of a wetlands permit under section 
404 of the Clean Water Act (or an authorized agent or contractor), for 
which the permittee retains full responsibility;
    (ii) Mitigation banking: A permittee's purchase of credits from a 
wetlands mitigation bank, comprising wetlands that have been set aside 
to compensate for conversions of other wetlands; the mitigation 
obligation is transferred to the sponsor of the mitigation bank; and
    (iii) In-lieu fee mitigation: A permittee's provision of funds to 
an in-lieu fee sponsor (public agency or nonprofit organization) that 
builds and maintains a mitigation site, often after the permitted 
adverse wetland impacts have occurred; the mitigation obligation is 
transferred to the in-lieu fee sponsor.
* * * * *
    (8) New construction includes draining, dredging, channelizing, 
filling, diking, impounding, and related activities and any structures 
or facilities begun after the effective date of Executive Order 11990. 
(See section 7(b) of Executive Order 11990.)
    (9) 100-year floodplain means the floodplain of concern for this 
part and is the area subject to inundation from a flood having a one 
percent or greater chance of being equaled or exceeded in any given 
year. (See Sec.  55.2(b)(1) for appropriate data sources.)
* * * * *
    (11) Wetlands means those areas that are inundated by surface or 
ground water with a frequency sufficient to support, and under normal 
circumstances does or would support, a prevalence of vegetative or 
aquatic life that requires saturated or seasonally saturated soil 
conditions for growth and reproduction. Wetlands generally include 
swamps, marshes, bogs, and similar areas such as sloughs, potholes, wet 
meadows, river overflows, mud flats, and natural ponds. This definition 
includes those wetland areas separated from their natural supply of 
water as a result of activities such as the construction of structural 
flood protection methods or solid-fill road beds and activities such as 
mineral extraction and navigation improvements. This definition 
includes both wetlands subject to and those not subject to section 404 
of the Clean Water Act as well as constructed wetlands. The following 
process shall be followed in making the wetlands determination:
    (i) HUD or, for programs subject to 24 CFR part 58, the responsible 
entity, shall make a determination whether the action is new 
construction that is located in a wetland. These actions are subject to 
processing under the Sec.  55.20 decisionmaking process for the 
protection of wetlands.
    (ii) As primary screening, HUD or the responsible entity shall 
verify whether the project area is located in proximity

[[Page 68730]]

to wetlands identified on the National Wetlands Inventory (NWI). If so, 
HUD or the responsible entity should make a reasonable attempt to 
consult with the Department of the Interior, Fish and Wildlife Service 
(FWS), for information concerning the location, boundaries, scale, and 
classification of wetlands within the area. If an NWI map indicates the 
presence of wetlands, FWS staff, if available, must find that no 
wetland is present in order for the action to proceed without further 
processing. Where FWS staff is unavailable to resolve any NWI map 
ambiguity or controversy, an appropriate wetlands professional must 
find that no wetland is present in order for the action to proceed 
without Sec.  55.20 processing.
    (iii) As secondary screening used in conjunction with NWI maps, HUD 
or the responsible entity is encouraged to use the Department of 
Agriculture, Natural Resources Conservation Service (NRCS) National 
Soil Survey (NSS) and any state and local information concerning the 
location, boundaries, scale, and classification of wetlands within the 
action area.
    (iv) Any challenges from the public or other interested parties to 
the wetlands determinations made under this part must be made in 
writing to HUD (or the responsible entity authorized under 24 CFR part 
58) during the commenting period and must be substantiated with 
verifiable scientific information. Commenters may request a reasonable 
extension of the time for the commenting period for the purpose of 
substantiating any objections with verifiable scientific information. 
HUD or the responsible entity shall consult FWS staff, if available, on 
the validity of the challenger's scientific information prior to making 
a final wetlands determination.

0
7. In Sec.  55.3, revise paragraphs (a)(1), (b)(1) and (2), and (c) and 
add paragraph (d) to read as follows:


Sec.  55.3  Assignment of responsibilities.

    (a)(1) The Assistant Secretary for Community Planning and 
Development (CPD) shall oversee:
    (i) The Department's implementation of Executive Orders 11988 and 
11990 and this part in all HUD programs; and
    (ii) The implementation activities of HUD program managers and, for 
HUD financial assistance subject to 24 CFR part 58, of grant recipients 
and responsible entities.
* * * * *
    (b) * * *
    (1) Ensure compliance with this part for all actions under their 
jurisdiction that are proposed to be conducted, supported, or permitted 
in a floodplain or wetland;
    (2) Ensure that actions approved by HUD or responsible entities are 
monitored and that any prescribed mitigation is implemented;
* * * * *
    (c) Responsible Entity Certifying Officer. Certifying Officers of 
responsible entities administering or reviewing activities subject to 
24 CFR part 58 shall comply with this part in carrying out HUD-assisted 
programs. Certifying Officers of responsible entities subject to 24 CFR 
part 58 shall monitor approved actions and ensure that any prescribed 
mitigation is implemented.
    (d) Recipient. Recipients subject to 24 CFR part 58 shall monitor 
approved actions and ensure that any prescribed mitigation is 
implemented. Recipients shall:
    (1) Supply HUD (or the responsible entity authorized by 24 CFR part 
58) with all available, relevant information necessary for HUD (or the 
responsible entity) to perform the compliance required by this part; 
and
    (2) Implement mitigating measures required by HUD (or the 
responsible entity authorized by 24 CFR part 58) under this part or 
select alternate eligible property.

0
8. The heading for subpart B is revised to read as follows:

Subpart B--Application of Executive Orders on Floodplain Management 
and Protection of Wetlands

0
9. Revise Sec.  55.10 to read as follows:


Sec.  55.10  Environmental review procedures under 24 CFR parts 50 and 
58.

    (a) Where an environmental review is required under the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.), and 
24 CFR part 50 or part 58, compliance with this part shall be completed 
before the completion of an environmental assessment (EA), including a 
finding of no significant impact (FONSI), or an environmental impact 
statement (EIS), in accordance with the decision points listed in 24 
CFR 50.17(a) through (h), or before the preparation of an EA under 24 
CFR 58.40 or an EIS under 24 CFR 58.37. For types of proposed actions 
that are categorically excluded from NEPA requirements under 24 CFR 
part 50 (or part 58), compliance with this part shall be completed 
before the Department's initial approval (or approval by a responsible 
entity authorized by 24 CFR part 58) of proposed actions in a 
floodplain or wetland.
    (b) The categorical exclusion of certain proposed actions from 
environmental review requirements under NEPA and 24 CFR parts 50 and 58 
(see 24 CFR 50.20 and 58.35(a)) does not exclude those actions from 
compliance with this part.

0
10. Revise Sec.  55.11 to read as follows:


Sec.  55.11  Applicability of Subpart C decisionmaking process.

    (a) Before reaching the decision points described in Sec.  
55.10(a), HUD (for Department-administered programs) or the responsible 
entity (for HUD financial assistance subject to 24 CFR part 58) shall 
determine whether Executive Order 11988, Executive Order 11990, and 
this part apply to the proposed action.
    (b) If Executive Order 11988 or Executive Order 11990 and this part 
apply, the approval of a proposed action or initial commitment shall be 
made in accordance with this part. The primary purpose of Executive 
Order 11988 is ``to avoid to the extent possible the long and short 
term adverse impacts associated with the occupancy and modification of 
floodplains and to avoid direct or indirect support of floodplain 
development wherever there is a practicable alternative.'' The primary 
purpose of Executive Order 11990 is ``to avoid to the extent possible 
the long and short-term adverse impacts associated with the destruction 
or modification of wetlands and to avoid direct or indirect support of 
new construction in wetlands wherever there is a practicable 
alternative.''
    (c) The following table indicates the applicability, by location 
and type of action, of the decisionmaking process for implementing 
Executive Order 11988 and Executive Order 11990 under subpart C of this 
part.

[[Page 68731]]



                                                     TABLE 1
----------------------------------------------------------------------------------------------------------------
                                                              Type of proposed action
                                 -------------------------------------------------------------------------------
  Type of proposed action (new                                             Wetlands or 100-    Nonwetlands area
     reviewable action or an                                                year floodplain   outside of the 100-
         amendment) \1\                Floodways         Coastal high       outside coastal     year and within
                                                         hazard areas      high hazard area      the 500-year
                                                                             and floodways        floodplain
----------------------------------------------------------------------------------------------------------------
Critical Actions as defined in    Critical actions    Critical actions    Allowed if the      Allowed if the
 Sec.   55.12(b)(2).               not allowed.        not allowed.        proposed critical   proposed critical
                                                                           action is           action is
                                                                           processed under     processed under
                                                                           Sec.   55.20.\2\    Sec.   55.20.\2\
Noncritical actions not excluded  Allowed only if     Allowed only if     Allowed if          Any noncritical
 under Sec.   55.12(b) or (c).     the proposed non-   the proposed        proposed            action is allowed
                                   critical action     noncritical         noncritical         without
                                   is a functionally   action is           action is           processing under
                                   dependent use and   processed under     processed under     this part.
                                   processed under     Sec.   55.20 \2\    Sec.   55.20.\2\
                                   Sec.   55.20.\2\    and is (1) a
                                                       functionally
                                                       dependent use,
                                                       (2) existing
                                                       construction
                                                       (including
                                                       improvements), or
                                                       (3)
                                                       reconstruction
                                                       following
                                                       destruction
                                                       caused by a
                                                       disaster. If the
                                                       action is not a
                                                       functionally
                                                       dependent use,
                                                       the action must
                                                       be designed for
                                                       location in a
                                                       Coastal High
                                                       Hazard Area under
                                                       Sec.   55.1(c)(3).
----------------------------------------------------------------------------------------------------------------
\1\ Under Executive Order 11990, the decisionmaking process in Sec.   55.20 only applies to Federal assistance
  for new construction in wetlands locations.
\2\ Or those paragraphs of Sec.   55.20 that are applicable to an action listed in Sec.   55.12(a).


0
11. Revise 55.12 to read as follows:


Sec.  55.12  Inapplicability of 24 CFR part 55 to certain categories of 
proposed actions.

    (a) The decisionmaking steps in Sec.  55.20(b), (c), and (g) (steps 
2, 3, and 7) do not apply to the following categories of proposed 
actions:
    (1) HUD's or the recipient's actions involving the disposition of 
acquired multifamily housing projects or ``bulk sales'' of HUD-acquired 
(or under part 58 of recipients') one- to four-family properties in 
communities that are in the Regular Program of National Flood Insurance 
Program and in good standing (i.e., not suspended from program 
eligibility or placed on probation under 44 CFR 59.24). For programs 
subject to part 58, this paragraph applies only to recipients' 
disposition activities that are subject to review under part 58.
    (2) HUD's actions under the National Housing Act (12 U.S.C. 1701) 
for the purchase or refinancing of existing multifamily housing 
projects, hospitals, nursing homes, assisted living facilities, board 
and care facilities, and intermediate care facilities, in communities 
that are in good standing under the NFIP.
    (3) HUD's or the recipient's actions under any HUD program 
involving the repair, rehabilitation, modernization, weatherization, or 
improvement of existing multifamily housing projects, hospitals, 
nursing homes, assisted living facilities, board and care facilities, 
intermediate care facilities, and one- to four-family properties, in 
communities that are in the Regular Program of the National Flood 
Insurance Program (NFIP) and are in good standing, provided that the 
number of units is not increased more than 20 percent, the action does 
not involve a conversion from nonresidential to residential land use, 
the action does not meet the thresholds for ``substantial improvement'' 
under Sec.  55.2(b)(10), and the footprint of the structure and paved 
areas is not significantly increased.
    (4) HUD's or the recipient's actions under any HUD program 
involving the repair, rehabilitation, modernization, weatherization, or 
improvement of existing nonresidential buildings and structures, in 
communities that are in the Regular Program of the NFIP and are in good 
standing, provided that the action does not meet the thresholds for 
``substantial improvement'' under Sec.  55.2(b)(10) and that the 
footprint of the structure and paved areas is not significantly 
increased.
    (b) The decisionmaking process in Sec.  55.20 shall not apply to 
the following categories of proposed actions:
    (1) HUD's mortgage insurance actions and other financial assistance 
for the purchasing, mortgaging or refinancing of existing one- to four-
family properties in communities that are in the Regular Program of the 
NFIP and in good standing (i.e., not suspended from program eligibility 
or placed on probation under 44 CFR 59.24), where the action is not a 
critical action and the property is not located in a floodway or 
Coastal High Hazard Area;
    (2) Financial assistance for minor repairs or improvements on one- 
to four-family properties that do not meet the thresholds for 
``substantial improvement'' under Sec.  55.2(b)(10);
    (3) HUD or a recipient's actions involving the disposition of 
individual HUD-acquired, one- to four-family properties;
    (4) HUD guarantees under the Loan Guarantee Recovery Fund Program 
(24 CFR part 573) of loans that refinance existing loans and mortgages, 
where any new construction or rehabilitation financed by the existing 
loan or mortgage has been completed prior to the filing of an 
application under the program, and the refinancing will not allow 
further construction or rehabilitation, nor result in any physical 
impacts or changes except for routine maintenance; and
    (5) The approval of financial assistance to lease an existing 
structure located within the floodplain, but only if;
    (i) The structure is located outside the floodway or Coastal High 
Hazard Area, and is in a community that is in the Regular Program of 
the NFIP and in good standing (i.e., not suspended from program 
eligibility or placed on probation under 44 CFR 59.24);

[[Page 68732]]

    (ii) The project is not a critical action; and
    (iii) The entire structure is or will be fully insured or insured 
to the maximum under the NFIP for at least the term of the lease.
    (c) This part shall not apply to the following categories of 
proposed HUD actions:
    (1) HUD-assisted activities described in 24 CFR 58.34 and 58.35(b);
    (2) HUD-assisted activities described in 24 CFR 50.19, except as 
otherwise indicated in Sec.  50.19;
    (3) The approval of financial assistance for restoring and 
preserving the natural and beneficial functions and values of 
floodplains and wetlands, including through acquisition of such 
floodplain and wetland property, but only if:
    (i) The property is cleared of all existing structures and related 
improvements;
    (ii) The property is dedicated for permanent use for flood control, 
wetland protection, park land, or open space; and
    (iii) A permanent covenant or comparable restriction is placed on 
the property's continued use to preserve the floodplain or wetland from 
future development.
    (4) An action involving a repossession, receivership, foreclosure, 
or similar acquisition of property to protect or enforce HUD's 
financial interests under previously approved loans, grants, mortgage 
insurance, or other HUD assistance;
    (5) Policy-level actions described at 24 CFR 50.16 that do not 
involve site-based decisions;
    (6) A minor amendment to a previously approved action with no 
additional adverse impact on or from a floodplain or wetland;
    (7) HUD's or the responsible entity's approval of a project site, 
an incidental portion of which is situated in an adjacent floodplain, 
including the floodway or Coastal High Hazard Area, or wetland, but 
only if:
    (i) The proposed construction and landscaping activities (except 
for minor grubbing, clearing of debris, pruning, sodding, seeding, or 
other similar activities) do not occupy or modify the 100-year 
floodplain (or the 500-year floodplain for critical actions) or the 
wetland;
    (ii) Appropriate provision is made for site drainage that would not 
have an adverse effect on the wetland; and
    (iii) A permanent covenant or comparable restriction is placed on 
the property's continued use to preserve the floodplain or wetland;
    (8) HUD's or the responsible entity's approval of financial 
assistance for a project on any nonwetland site in a floodplain for 
which FEMA has issued:
    (i) A final Letter of Map Amendment (LOMA), final Letter of Map 
Revision (LOMR), or final Letter of Map Revision Based on Fill (LOMR-F) 
that removed the property from a FEMA-designated floodplain location; 
or
    (ii) A conditional LOMA, conditional LOMR, or conditional LOMR-F if 
HUD or the responsible entity's approval is subject to the requirements 
and conditions of the conditional LOMA or conditional LOMR;
    (9) Issuance or use of Housing Vouchers, Certificates under the 
Section 8 Existing Housing Program, or other forms of rental subsidy 
where HUD, the awarding community, or the public housing agency that 
administers the contract awards rental subsidies that are not project-
based (i.e., do not involve site-specific subsidies);
    (10) Special projects directed to the removal of material and 
architectural barriers that restrict the mobility of and accessibility 
to elderly and persons with disabilities;
    (11) The approval of financial assistance for acquisition, leasing, 
construction, rehabilitation, repair, maintenance, or operation of 
ships and other waterborne vessels that will be used for transportation 
or cruises and will not be permanently moored.
    (12) The approval of financial assistance for restoring and 
preserving the natural and beneficial functions and values of 
floodplains and wetlands, including through acquisition of such 
floodplain and wetland property, but only if:
    (i) The property is cleared of all existing structures and related 
improvements;
    (ii) The property is dedicated for permanent use for flood control, 
wetland protection, park land, or open space; and
    (iii) A permanent covenant or comparable restriction is placed on 
the property's continued use to preserve the floodplain or wetland from 
future development.

0
12. The heading for subpart C is revised to read as follows:

Subpart C--Procedures for Making Determinations on Floodplain 
Management and Protection of Wetlands

0
13. Amend Sec.  55.20 by revising the introductory text and paragraphs 
(a), (b) introductory text, (b)(3), (c), (d), (e), (f), (g)(1), and (h) 
to read as follows:


Sec.  55.20  Decisionmaking process.

    Except for actions covered by Sec.  55.12(a), the decisionmaking 
process for compliance with this part contains eight steps, including 
public notices and an examination of practicable alternatives when 
addressing floodplains and wetlands. The steps to be followed in the 
decisionmaking process are as follows:
    (a) Step 1. Determine whether the proposed action is located in the 
100-year floodplain (500-year floodplain for critical actions) or 
results in new construction in a wetland. If the action does not occur 
in a floodplain or result in new construction in a wetland, then no 
further compliance with this part is required. The following process 
shall be followed by HUD (or the responsible entity) in making wetland 
determinations.
    (1) Refer to Sec.  55.28(a) where an applicant has submitted with 
its application to HUD (or to the recipient under programs subject to 
24 CFR part 58) an individual Section 404 permit (including approval 
conditions and related environmental review).
    (2) Refer to Sec.  55.2(b)(11) for making wetland determinations 
under this part.
    (3) For proposed actions occurring in both a wetland and a 
floodplain, completion of the decisionmaking process under Sec.  55.20 
is required regardless of the issuance of a Section 404 permit. In such 
a case, the wetland will be considered among the primary natural and 
beneficial functions and values of the floodplain.
    (b) Step 2. Notify the public and agencies responsible for 
floodplain management or wetlands protection at the earliest possible 
time of a proposal to consider an action in a 100-year floodplain (or a 
500-year floodplain for a Critical Action) or wetland and involve the 
affected and interested public and agencies in the decisionmaking 
process.
* * * * *
    (3) A notice under this paragraph shall state: The name, proposed 
location, and description of the activity; the total number of acres of 
floodplain or wetland involved; the related natural and beneficial 
functions and values of the floodplain or wetland that may be adversely 
affected by the proposed activity; the HUD approving official (or the 
Certifying Officer of the responsible entity authorized by 24 CFR part 
58); and the phone number to call for information. The notice shall 
indicate the hours of HUD or the responsible entity's office, and any 
Web site at which a full description of the proposed action may be 
reviewed.
    (c) Step 3. Identify and evaluate practicable alternatives to 
locating the proposed action in a 100-year floodplain

[[Page 68733]]

(or a 500-year floodplain for a Critical Action) or wetland.
    (1) Except as provided in paragraph (c)(3) of this section, HUD's 
or the responsible entity's consideration of practicable alternatives 
to the proposed site selected for a project should include:
    (i) Locations outside and not affecting the 100-year floodplain (or 
the 500-year floodplain for a Critical Action) or wetland;
    (ii) Alternative methods to serve the identical project objective, 
including feasible technological alternatives; and
    (iii) A determination not to approve any action proposing the 
occupancy or modification of a floodplain or wetland.
    (2) Practicability of alternative sites should be addressed in 
light of the following:
    (i) Natural values such as topography, habitat, and hazards;
    (ii) Social values such as aesthetics, historic and cultural 
values, land use patterns, and environmental justice; and
    (iii) Economic values such as the cost of space, construction, 
services, and relocation.
    (3) For multifamily projects involving HUD mortgage insurance that 
are initiated by third parties, HUD's consideration of practicable 
alternatives should include a determination not to approve the request.
    (d) Step 4. Identify and evaluate the potential direct and indirect 
impacts associated with the occupancy or modification of the 100-year 
floodplain (or the 500-year floodplain for a Critical Action) or the 
wetland and the potential direct and indirect support of floodplain and 
wetland development that could result from the proposed action.
    (1) Floodplain evaluation: The focus of the floodplain evaluation 
should be on adverse impacts to lives and property, and on natural and 
beneficial floodplain values. Natural and beneficial values include:
    (i) Water resources such as natural moderation of floods, water 
quality maintenance, and groundwater recharge;
    (ii) Living resources such as flora and fauna;
    (iii) Cultural resources such as archaeological, historic, and 
recreational aspects; and
    (iv) Agricultural, aquacultural, and forestry resources.
    (2) Wetland evaluation: In accordance with Section 5 of Executive 
Order 11990, the decisionmaker shall consider factors relevant to a 
proposal's effect on the survival and quality of the wetland. Among 
these factors that should be evaluated are:
    (i) Public health, safety, and welfare, including water supply, 
quality, recharge, and discharge; pollution; flood and storm hazards 
and hazard protection; and sediment and erosion;
    (ii) Maintenance of natural systems, including conservation and 
long-term productivity of existing flora and fauna; species and habitat 
diversity and stability; natural hydrologic function; wetland type; 
fish; wildlife; timber; and food and fiber resources;
    (iii) Cost increases attributed to wetland-required new 
construction and mitigation measures to minimize harm to wetlands that 
may result from such use; and
    (iv) Other uses of wetlands in the public interest, including 
recreational, scientific, and cultural uses.
    (e) Step 5. Where practicable, design or modify the proposed action 
to minimize the potential adverse impacts to and from the 100-year 
floodplain (or the 500-year floodplain for a Critical Action) or the 
wetland and to restore and preserve its natural and beneficial 
functions and values.
    (1) Minimization techniques for floodplain and wetland purposes 
include, but are not limited to: the use of permeable surfaces, natural 
landscape enhancements that maintain or restore natural hydrology 
through infiltration, native plant species, bioswales, 
evapotranspiration, stormwater capture and reuse, green or vegetative 
roofs with drainage provisions, and Natural Resource Conservation 
Service conservation easements. Floodproofing and elevating structures, 
including freeboard above the required base flood elevations, are also 
minimization techniques for floodplain purposes.
    (2) Appropriate and practicable compensatory mitigation is 
recommended for unavoidable adverse impacts to more than one acre of 
wetland. Compensatory mitigation includes, but is not limited to: 
permitee-responsible mitigation, mitigation banking, in-lieu fee 
mitigation, the use of preservation easements or protective covenants, 
and any form of mitigation promoted by state or Federal agencies. The 
use of compensatory mitigation may not substitute for the requirement 
to avoid and minimize impacts to the maximum extent practicable.
    (3) Actions covered by Sec.  55.12(a) must be rejected if the 
proposed minimization is financially or physically unworkable. All 
critical actions in the 500-year floodplain shall be designed and built 
at or above the 100-year floodplain (in the case of new construction) 
and modified to include:
    (i) Preparation of and participation in an early warning system;
    (ii) An emergency evacuation and relocation plan;
    (iii) Identification of evacuation route(s) out of the 500-year 
floodplain; and
    (iv) Identification marks of past or estimated flood levels on all 
structures.
    (f) Step 6. Reevaluate the proposed action to determine:
    (1) Whether the action is still practicable in light of exposure to 
flood hazards in the floodplain or wetland, possible adverse impacts on 
the floodplain or wetland, the extent to which it will aggravate the 
current hazards to other floodplains or wetlands, and the potential to 
disrupt the natural and beneficial functions and values of floodplains 
or wetlands; and
    (2) Whether alternatives preliminarily rejected at Step 3 
(paragraph (c)) of this section are practicable in light of information 
gained in Steps 4 and 5 (paragraphs (d) and (e)) of this section.
    (i) The reevaluation of alternatives shall include the potential 
impacts avoided or caused inside and outside the floodplain or wetland 
area. The impacts should include the protection of human life, real 
property, and the natural and beneficial functions and values served by 
the floodplain or wetland.
    (ii) A reevaluation of alternatives under this step should include 
a discussion of economic costs. For floodplains, the cost estimates 
should include savings or the costs of flood insurance, where 
applicable; flood proofing; replacement of services or functions of 
critical actions that might be lost; and elevation to at least the base 
flood elevation for sites located in floodplains, as appropriate on the 
applicable source under Sec.  55.2(b)(1). For wetlands, the cost 
estimates should include the cost of filling the wetlands and 
mitigation.
    (g) Step 7. (1) If the reevaluation results in a determination that 
there is no practicable alternative to locating the proposal in the 
100-year floodplain (or the 500-year floodplain for a Critical Action) 
or the wetland, publish a final notice that includes:
    (i) The reasons why the proposal must be located in the floodplain 
or wetland;
    (ii) A list of the alternatives considered in accordance with 
paragraphs(c)(1) and (c)(2) of this section; and
    (iii) All mitigation measures to be taken to minimize adverse 
impacts and to restore and preserve natural and beneficial functions 
and values.
* * * * *
    (h) Step 8. Upon completion of the decisionmaking process in Steps 
1 through 7, implement the proposed action. There is a continuing

[[Page 68734]]

responsibility on HUD (or on the responsible entity authorized by 24 
CFR part 58) and the recipient (if other than the responsible entity) 
to ensure that the mitigating measures identified in Step 7 are 
implemented.


Sec.  55.21  [Amended]

0
14. Amend Sec.  55.21 by removing the term ``grant recipient'' and 
adding in its place the term ``responsible entity.''

0
15. Revise Sec.  55.24 to read as follows:


Sec.  55.24  Aggregation.

    Where two or more actions have been proposed, require compliance 
with subpart C of this part, affect the same floodplain or wetland, and 
are currently under review by HUD (or by a responsible entity 
authorized by 24 CFR part 58), individual or aggregated approvals may 
be issued. A single compliance review and approval under this section 
is subject to compliance with the decisionmaking process in Sec.  
55.20.


Sec.  55.25  [Amended]

0
16. Amend Sec.  55.25 as follows:
0
a. Remove, in paragraph (c), the term ``grant recipient'' and add in 
its place the term ``responsible entity;'' and
0
b. Remove in paragraph (d)(2) the term ``grant recipients'' and add in 
its place the term ``responsible entities.''

0
17. In Sec.  55.26, revise the introductory text and paragraph (a) to 
read as follows:


Sec.  55.26  Adoption of another agency's review under the executive 
orders.

    If a proposed action covered under this part is already covered in 
a prior review performed under either or both of the Executive Orders 
by another agency, including HUD or a different responsible entity, 
that review may be adopted by HUD or by a responsible entity authorized 
under 24 CFR part 58, provided that:
    (a) There is no pending litigation relating to the other agency's 
review for floodplain management or wetland protection;
* * * * *

0
18. Amend Sec.  55.27 as follows:
0
a. Revise paragraph (a);
0
b. Remove, in paragraph (b), the term ``grant recipient'' and add, in 
its place, the words ``responsible entity'' and;
0
c. Remove, in paragraph (c), the term ``grant recipients'' and add, in 
its place, the words ``responsible entities''.
    The revision reads as follows:


Sec.  55.27  Documentation.

    (a) For purposes of compliance with Sec.  55.20, the responsible 
HUD official who would approve the proposed action (or Certifying 
Officer for a responsible entity authorized by 24 CFR part 58) shall 
require that the following actions be documented:
    (1) When required by Sec.  55.20(c), practicable alternative sites 
have been considered outside the floodplain or wetland, but within the 
local housing market area, the local public utility service area, or 
the jurisdictional boundaries of a recipient unit of general local 
government, whichever geographic area is most appropriate to the 
proposed action. Actual sites under review must be identified and the 
reasons for the nonselection of those sites as practicable alternatives 
must be described; and
    (2) Under Sec.  55.20(e)(2), measures to minimize the potential 
adverse impacts of the proposed action on the affected floodplain or 
wetland as identified in Sec.  55.20(d) have been applied to the design 
for the proposed action.
* * * * *

0
19. Add Sec.  55.28 to read as follows:


Sec.  55.28  Use of individual permits under section 404 of the Clean 
Water Act for HUD Executive Order 11990 processing where all wetlands 
are covered by the permit.

    (a) Processing requirements. HUD (or the responsible entity subject 
to 24 CFR part 58) shall not be required to perform the steps at Sec.  
55.20(a) through (e) upon adoption by HUD (or the responsible entity) 
of the terms and conditions of a Section 404 permit so long as:
    (1) The project involves new construction on a property located 
outside of the 100-year floodplain (or the 500-year floodplain for 
critical actions);
    (2) The applicant has submitted, with its application to HUD (or to 
the recipient under programs subject to 24 CFR part 58), an individual 
Section 404 permit (including approval conditions) issued by the U.S. 
Army Corps of Engineers (USACE) (or by a State or Tribal government 
under Section 404(h) of the Clean Water Act) for the proposed project; 
and
    (3) All wetlands adversely affected by the action are covered by 
the permit.
    (b) Unless a project is excluded under Sec.  55.12, processing 
under all of Sec.  55.20 is required for new construction in wetlands 
that are not subject to section 404 of the Clean Water Act and for new 
construction for which the USACE (or a State or Tribal government under 
section 404(h) of the Clean Water Act) issues a general permit under 
Section 404.

PART 58--ENVIRONMENTAL REVIEW PROCEDURES FOR ENTITIES ASSUMING HUD 
ENVIRONMENTAL RESPONSIBILITIES

0
20. The authority citation for part 58 continues to read as follows:

    Authority: 12 U.S.C. 1707 note; 42 U.S.C. 1437o(i)(1) and (2), 
1437x, 3535(d), 3547, 4332, 4852, 5304(g), 11402, and 12838; E.O. 
11514, 3 CFR, 1966-1970, Comp., p. 902, as amended by E.O. 11991, 3 
CFR, 1977 Comp., p.123.


0
21. In Sec.  58.5, revise paragraph (b)(2) to read as follows:


Sec.  58.5  Related federal laws and authorities.

* * * * *
    (b) * * *
    (2) Executive Order 11990, Protection of Wetlands, May 24, 1977 (42 
FR 26961), 3 CFR, 1977 Comp., p. 121, as interpreted in HUD regulations 
at 24 CFR part 55, particularly sections 2 and 5 of the order.
* * * * *

0
22. In Sec.  58.6, add paragraph (a)(4) to read as follows:


Sec.  58.6  Other requirements.

* * * * *
    (a) * * *
    (4) Flood insurance requirements cannot be fulfilled by self-
insurance except as authorized by law for assistance to state-owned 
projects within states approved by the Federal Insurance Administrator 
consistent with 44 CFR 75.11.
* * * * *

0
23. In Sec.  58.35, revise paragraph (a)(3)(i) to read as follows:


Sec.  58.35  Categorical exclusions.

* * * * *
    (a) * * *
    (3) * * *
    (i) In the case of a building for residential use (with one to four 
units), the density is not increased beyond four units, and the land 
use is not changed;
* * * * *

    Dated: November 6, 2013.
 Mark Johnston,
 Deputy Assistant Secretary for Special Needs.
[FR Doc. 2013-27427 Filed 11-14-13; 8:45 am]
BILLING CODE 4210-67-P