Notice2026-05864
EPA's Clean Water Act (CWA) Financial Capability Assessment (FCA) Guidance; Request for Comment
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 26, 2026
Issuing agencies
Environmental Protection Agency
Abstract
The U.S. Environmental Protection Agency (EPA) invites written feedback on its Clean Water Act (CWA) Financial Capability Assessment (FCA) Guidance. The FCA Guidance provides information on how to assess a community's financial capability as part of negotiating implementation schedules under both permits and enforcement agreements. In addition, the FCA Guidance identifies specific methodologies, supplementing the Interim Economic Guidance for Water Quality Standards (1995; https://www.epa.gov/system/files/documents/2024-01/interim- economic-guidance-water-quality-standards-workbook-1995.pdf), that can be used to consider economic impacts to public entities when determining water quality standards (WQS) variances and antidegradation reviews. In appropriate cases, these methodologies also inform decisions about revisions to designated uses. As part of the agency's commitment to implementing CWA objectives in an effective manner, EPA continues to enhance understanding of the issues surrounding FCAs for communities and seeks ways to improve the guidance. The agency will use this input to determine whether updates to the guidance are necessary to provide clear recommendations that accurately identify a community's financial capability. EPA is requesting comment on its CWA FCA guidance.
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 58 (Thursday, March 26, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 58 (Thursday, March 26, 2026)]
[Notices]
[Pages 14694-14696]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05864]
=======================================================================
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
[EPA-HQ-OW-2026-1090; FRL-13236-01-OW]
EPA's Clean Water Act (CWA) Financial Capability Assessment (FCA)
Guidance; Request for Comment
AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice; request for comment.
-----------------------------------------------------------------------
SUMMARY: The U.S. Environmental Protection Agency (EPA) invites written
feedback on its Clean Water Act (CWA) Financial Capability Assessment
(FCA) Guidance. The FCA Guidance provides information on how to assess
a community's financial capability as part of negotiating
implementation schedules under both permits and enforcement agreements.
In addition, the FCA Guidance identifies specific methodologies,
supplementing the Interim Economic Guidance for Water Quality Standards
(1995; <a href="https://www.epa.gov/system/files/documents/2024-01/interim-economic-guidance-water-quality-standards-workbook-1995.pdf">https://www.epa.gov/system/files/documents/2024-01/interim-economic-guidance-water-quality-standards-workbook-1995.pdf</a>), that can
be used to consider economic impacts to public entities when
determining water quality standards (WQS) variances and antidegradation
reviews. In appropriate cases, these methodologies also inform
decisions about revisions to designated uses.
As part of the agency's commitment to implementing CWA objectives
in an effective manner, EPA continues to enhance understanding of the
issues surrounding FCAs for communities and seeks ways to improve the
guidance. The agency will use this input to determine whether updates
to the guidance are necessary to provide clear recommendations that
accurately identify a community's financial capability. EPA is
requesting comment on its CWA FCA guidance.
DATES: Comments must be received on or before May 26, 2026.
ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OW-2026-1090, by the following method:
<bullet> Federal eRulemaking portal: <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Follow the online instructions for submitting comments.
Instructions: All submissions received must include the Docket ID
No. for this guidance. Comments received may be posted without change
to <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>, including any personal information
provided. For detailed instructions on sending comments and additional
information on the guidance process, see the ``Request for Public
Comments'' heading of the SUPPLEMENTARY INFORMATION section of this
document.
Tips for Preparing Comments: When submitting comments, remember to:
<bullet> Identify the guidance by docket number and other
identifying information (subject heading, Federal Register date, and
page number).
<bullet> Follow directions--the agency asks commenters to respond
to specific questions and provide information according to the National
Academy of Public Administration (NAPA) recommended criteria.
<bullet> Explain why you agree or disagree; suggest alternatives
and substitute language for your requested changes.
<bullet> Describe any assumptions and provide any technical
information and/or data that you used.
[[Page 14695]]
<bullet> Provide specific examples to illustrate your comments and
suggest alternatives.
<bullet> Explain your views as clearly as possible.
<bullet> Adhere to the comment period deadline.
FOR FURTHER INFORMATION CONTACT: Tara Johnson, Office of Wastewater
Management, Water Infrastructure Division (MC4204M), Environmental
Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460;
telephone number: (202) 809-7368; email address: <a href="/cdn-cgi/l/email-protection#d2b8bdbabca1bdbcfca6b3a0b392b7a2b3fcb5bda4"><span class="__cf_email__" data-cfemail="751f1a1d1b061a1b5b01140714351005145b121a03">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Purpose of Revisions to the Current FCA Guidance
II. Four Key Areas for FCA Revision
III. Request for Public Comments
EPA's Financial Capability Assessment Guidance
I. Purpose of Revisions to the Current FCA Guidance
This effort will revise, as needed, previous versions of the CWA
FCA Guidance, including the draft guidance released in 2022 (<a href="https://www.regulations.gov/document/EPA-HQ-OW-2020-0426-0071">https://www.regulations.gov/document/EPA-HQ-OW-2020-0426-0071</a>) and the most
recent guidance originally published in March 2023 and revised in March
2024 (<a href="https://www.epa.gov/system/files/documents/2023-01/cwa-financial-capability-assessment-guidance.pdf">https://www.epa.gov/system/files/documents/2023-01/cwa-financial-capability-assessment-guidance.pdf</a>). The FCA Guidance is not legally
binding and is intended only to provide clarity to the public regarding
existing requirements under the law or agency policies.
Since releasing the 2023 guidance, EPA has received significant
feedback on the document. Much of the feedback is focused on the
practical implications of several elements. The agency is revisiting
the guidance to address these concerns through possible revisions, as
part of its ongoing commitment to working with communities to ensure
practical implementation and public health protection. Several
questions/concerns/areas for further discussion have emerged as EPA has
engaged with states, authorized tribes, communities, and other
stakeholders to implement CWA permitting, enforcement, and WQS
programs, specifically:
1. The ability of metrics that assess the severity and prevalence
of poverty within a utility's service area to accurately reflect any
economic impacts on rural and small communities and low-income
households;
2. How to consider the effect cost of living has on the economic
impacts to a community and its financial capacity;
3. Appropriate schedule lengths for compliance with CWA
requirements; and
4. Specific to the WQS program, additional guidance that would help
determine whether and how to account for costs when identifying a
community's current financial burden.
EPA requests public comment on how to better assess these four
topics, including any specific approaches and/or metrics that the
agency should consider. If commenters suggest new or revised metrics of
financial capability for consideration, EPA requests that the commenter
identify the frequency at which the proposed data sources are published
and how EPA and interested parties can obtain such data. In making
revisions to its FCA Guidance, the agency intends to follow the
criteria recommended by the NAPA for metrics:
<bullet> Readily available from publicly available data sources.
<bullet> Clearly defined and understood.
<bullet> Simple, direct, and consistent.
<bullet> Valid and reliable measures, according to conventional
research standards, and applicable for comparative analyses among
permittees.
II. Four Key Areas for FCA Revision
1. Prevalence and Severity of Poverty
In 2021, EPA proposed to supplement the Residential Indicator (RI)
and the Financial Capability Indicator (FCI) metrics with two new
metrics: the Lowest Quintile Residential Indicator (LQRI) and the
Poverty Indicator (PI). The LQRI was intended to evaluate the financial
impact of CWA costs on lowest quintile households in a community by
calculating the ratio of adjusted costs per lowest quintile household
to the service area's lowest quintile income.
While commenters from local governments, the wastewater sector, and
environmental organizations were supportive of the new poverty
measures, some of these commentors also expressed concerns about the
methodology proposed to scale the costs for lowest quintile households
and the proposed LQRI thresholds. A number of community-specific
factors--such as age of infrastructure, housing type, and efficiency of
water appliances--may impact water usage and costs to lowest quintile
households.
In response to public feedback, the 2023 guidance added a single
new metric called the Lowest Quintile Poverty Indicator (LQPI) to be
considered with the RI and FCI. EPA has received requests to explicitly
address concerns regarding metrics used to encompass the prevalence and
severity of poverty in the FCA Guidance. The LQPI evaluates the
economic impact on low-income households by assessing the prevalence
and severity of poverty in a community or service area using U.S.
Census Bureau American Community Survey (ACS) data. These ACS data meet
the criteria for data recommended by NAPA (see above).
Whereas the LQRI and the PI were each individual indicators for
analysis, the LQPI methodology consists of six indicators.
<bullet> LQPI #1: Upper limit of the lowest income quintile (50%
weight).
<bullet> LQPI #2: Percentage of population with income below 200%
of the Federal Poverty Level (10% weight).
<bullet> LQPI #3: Percentage of households receiving food stamps/
SNAP benefits (10% weight).
<bullet> LQPI #4: Percentage of vacant housing units (10% weight).
<bullet> LQPI #5: Trend in household growth (10% weight).
<bullet> LQPI #6: Percentage of unemployed population 16 and over
in civilian labor force (10% weight).
EPA will use any additional comments on this issue to further
assess the need for potential modifications to the LQRI and/or the LQPI
analysis and/or additional analyses to characterize the severity and
prevalence of poverty in a community or service area to accurately
reflect economic impacts on small, rural communities and low-income
households.
2. Cost of Living
EPA has received requests to explicitly address concerns regarding
cost of living in the FCA Guidance. EPA plans to use any additional
comments on this topic to further assess the need for a new framework
or whether there are gaps in the current analytical framework that need
to be addressed to accurately reflect economic impacts on a community
and its financial capacity.
A potential proxy for assessing cost of living and local
affordability can be a service area's median household income (MHI);
however, some commenters on previous proposed FCA Guidance have noted
that MHI--or even lowest quintile income (LQI)--alone are not
sufficient measures of poverty.
3. Schedule Length for Compliance
A critical issue in many CWA permits and enforcement actions with
utilities is the length of the schedule to achieve compliance with the
CWA. When negotiating extended schedules, EPA intends to balance the
timely mitigation of human health and environmental impacts as well as
ability of the community to finance compliance costs
[[Page 14696]]
and the impacts on individual households throughout the utility's
service area. EPA will consider any relevant information presented that
illustrates the unique or atypical circumstances faced by a community
when negotiating CWA permit and enforcement compliance schedules, and
will evaluate appropriate timelines to be encompassed in the FCA based
on that information.
4. For WQS, Costs When Identifying Financial Burden
It is critical for states and tribes to accurately describe and
quantify water-related costs communities are incurring, or have made a
commitment to invest in, to demonstrate whether there will be a
substantial economic impact if the community incurs additional costs to
meet requirements derived from applicable WQS. EPA recognizes that
wastewater treatment costs are typically not the only water cost paid
by households and that aging infrastructure and shifting populations
require careful planning to maintain service levels. In the FCA
Guidance, EPA provides standardized instructions for reporting drinking
water, stormwater, and asset management costs. The agency now requests
input on whether more specific guidance, or a separate standalone
guidance document, regarding incorporating these types of information
directly into the Municipal Preliminary Screener analysis would be
helpful, if a community elects to do so.
III. Request for Public Comments
EPA requests public comment on the most recent FCA Guidance,
specifically:
1. EPA seeks comment on the effectiveness of the LQRI and the LQPI
methodologies at measuring the severity and prevalence of poverty and
whether an alternative or additional analyses may better capture
economic impacts to small and rural communities and low-income
households.
The 2020 proposed FCA Guidance uses the LQRI and PI methodology:
<bullet> Lowest Quintile Residential Indicator--cost per low-income
household as a percentage of the LQI.
<bullet> Poverty Indicator--five poverty indicators used to
benchmark the prevalence of poverty throughout the service area.
The 2024 FCA Guidance uses the LQPI methodology:
<bullet> Lowest Quintile Poverty Indicators--upper limit of the
lowest income quintile; percentage of population with income below 200%
of the Federal Poverty Level; percentage of households receiving food
stamps/SNAP benefits; percentage of vacant housing units; trend in
household growth; and percentage of unemployed population 16 and over
in civilian labor force.
Both methodologies include consideration of the following factors:
<bullet> Residential Indicator--cost per household as a percentage
of MHI
<bullet> Financial Capability Indicator--six socioeconomic, debt,
and financial indicators used to benchmark a community's financial
strength.
EPA is interested in feedback on indicators that provide distinct
information regarding the severity and prevalence of poverty in a
community or service area.
2. EPA seeks public comment on whether the FCA Guidance should
explicitly incorporate cost of living metrics. If yes, how should the
analysis incorporate cost of living? What data sources are publicly
available to consider cost of living?
3. EPA seeks public comment on the current scheduling benchmarks
for communities facing unusually high financial impacts associated with
complying with CWA requirements. Any scheduling considerations need to
be balanced with the need for the agency to ensure that CWA
requirements are complied with in a timely manner. If commentors
propose schedule benchmarks, EPA requests examples to support the basis
for such benchmarks.
4. For purposes of WQS analyses, EPA seeks comment on what
information or separate guidance would be helpful to determine whether
and how states and authorized tribes could account for costs, such as
asset management costs, stormwater costs and/or drinking water costs,
when characterizing costs that communities are incurring or have made a
commitment to invest in.
5. EPA requests comments on what, if any, additional perspectives
or considerations relevant to the implementation of the FCA Guidance
are not addressed by the focused questions above.
Andrew D. Sawyers,
Director, Office of Wastewater Management, Office of Water.
[FR Doc. 2026-05864 Filed 3-25-26; 8:45 am]
BILLING CODE 6560-50-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on March 26, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.