Implementation of Program for Capital Grants for Rail Line Relocation and Improvement Projects, 39875-39889 [E8-15160]

Agencies

• Federal Railroad Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 73, Number 134 (Friday, July 11, 2008)]
[Rules and Regulations]
[Pages 39875-39889]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-15160]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

49 CFR Part 262

[Docket No. FRA 2005-23774, Notice No. 2]
RIN 2130-AB74


Implementation of Program for Capital Grants for Rail Line 
Relocation and Improvement Projects

AGENCY: Federal Railroad Administration (FRA), Department of 
Transportation (DOT).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: Section 9002 of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (Pub. L. 
109-59, August 10, 2005) amends chapter 201 of Title 49 of the United 
States Code by adding section 20154. Section 20154 authorizes--but does 
not appropriate--$350,000,000 per year for each of the fiscal years 
(FY) 2006 through 2009 for the purpose of funding a grant program to 
provide financial assistance for local rail line relocation and 
improvement projects. Section 20154 directs the Secretary of 
Transportation (Secretary) to issue regulations implementing this grant 
program, and the Secretary has delegated this responsibility to FRA. 
This final rule establishes a regulation intended to carry out that 
statutory mandate. As of the publication of this final rule, Congress 
did not appropriate any funding for the program for FY 2006 or FY 2007 
but did appropriate $20,040,200 for fiscal year 2008.

DATES: August 11, 2008.

ADDRESSES: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov at any time or to 
Room W-12-140, West Building Ground Floor at the DOT's new headquarters 
at 1200 New Jersey Avenue, SE., Washington, DC 20590 between 9 a.m. and 
5 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: John A. Winkle, Transportation 
Industry Analyst, Office of Railroad Development, Federal Railroad 
Administration, 1200 New Jersey Avenue, SE., Mail Stop 13, Washington, 
DC 20590 (John.Winkle@dot.gov or 202-493-6067); or Elizabeth A. 
Sorrells, Attorney-Advisor, Office of Chief Counsel, Federal Railroad 
Administration, 1200 New Jersey Avenue, SE., Mail Stop 10, Washington, 
DC 20590 (Betty.Sorrells@dot.gov or 202-493-6057).

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Authority

    On January 17, 2007, FRA published a notice of proposed rulemaking 
(NPRM) proposing to add part 262 to Title 49, Code of Federal 
Regulations. Part 262 would carry out the statutory mandate of section 
9002 of SAFETEA-LU which amends chapter 201 of Title 49 of the United 
States Code by adding a new section 20154. Section 20154 authorizes--
but does not appropriate--$350,000,000 per year for each of the fiscal 
years (FY) 2006 through 2009 for the purpose of funding a grant program 
to provide financial assistance for local rail line relocation and 
improvement projects. The statute requires the Secretary to implement 
the grant program through regulations. The Secretary has delegated this 
responsibility to FRA. The language and provisions of Part 262 as 
reflected in the NPRM and this final rule closely track the language 
set out in section 20154.

B. Program Purpose

    As noted in the background section of the NPRM, state and local 
governments are looking for ways to eliminate the problems created by 
the presence of railroad infrastructure in many communities, 
infrastructure that at one time was critical to the development of the 
community but which now presents problems as well as benefits. Problems 
that have been identified range from community separation to blocked 
grade crossings to limits on economic development. Many times, the 
solution is to relocate or raise track vertically or move the track to 
an area that is better suited for it. In addition to relocation 
projects, many communities are eager to improve existing rail 
infrastructure in an effort to mitigate the perceived negative effects 
of rail traffic on safety in general, motor vehicle traffic flow, 
economic development, or the overall quality of life of the community.

II. SAFETEA-LU

    On August 10, 2005, President George W. Bush signed SAFETEA-LU, 
(Pub. L. 109-59) into law. Section 9002 of SAFETEA-LU amended chapter 
201 of Title 49 of the United States Code by adding a new Sec.  20154, 
which establishes the basic elements of a funding program for capital 
grants for local rail line relocation and improvement projects. 
Subsection (b) of the new Sec.  20154 mandates that the Secretary issue 
``temporary regulations'' to implement the capital grants program and 
then issue final regulations by October 1, 2006. This final rule 
carries out that statutory mandate.
    In order to be eligible for a grant for a relocation or improvement 
construction project, the project must mitigate the adverse effects of 
rail traffic on safety, motor vehicle traffic flow, community quality 
of life, including noise mitigation, or economic development, or 
involve a lateral or vertical relocation of any portion of the rail 
line, presumably to reduce the number of grade crossings and/or serve 
to mitigate noise, visual issues, or other externality that negatively 
impacts a community. A more detailed explanation of the rule text is 
provided below in the Section-by-Section Analysis.
    In section 20154, Congress authorized, but did not appropriate, 
$350 million per year for each fiscal year 2006 through 2009. At least 
half of the funds awarded under this program shall be provided as grant 
awards of not more than $20 million each. A State or other eligible 
entity will be required to pay at least 10 percent of the shared costs 
of the project, whether in the form of a contribution of real property 
or tangible personal property, contribution of employee services, or 
previous costs spent on the project before the application was filed. 
The State or FRA may also seek financial contributions from private 
entities benefiting from the rail line relocation or improvement 
project.
    In section 20154, Congress directed FRA to issue ``temporary 
regulations'' by April 1, 2006. As noted in the NPRM, under the 
Administrative Procedure Act and Executive Orders governing rulemaking, 
FRA could comply with Congress's deadline only by issuing a direct 
final rule or an interim final rule by April 1, 2006. However, the FRA

[[Page 39876]]

cannot use either a direct final rule or an interim final rule because 
the legal requirements for using those instruments cannot be satisfied. 
The case law is clear that a statutory deadline does not suffice to 
justify dispensing with notice and comment prior to issuing a rule on 
grounds that notice and comment are ``impracticable, unnecessary, or 
contrary to the public interest'' under section 553(b)(3)(B) of the 
Administrative Procedure Act. Because as of the date of the NPRM no 
funding had been appropriated for the program and no projects could be 
funded at that time, FRA concluded that the purposes of SAFETEA-LU 
could best be achieved by proceeding with an NPRM in lieu of an interim 
final rule. Proceeding this way also satisfies the requirements of the 
Administrative Procedure Act and allows for greater public 
participation in the rulemaking process.

C. Discussion of Comments

    FRA received approximately 28 written comments in response to the 
NPRM, including comments from state and local governments, the railroad 
industry and trade organizations, as well as members of the general 
public. Specifically, comments were received from the following 
organizations and individuals: Missouri Department of Transportation, 
Charlotte (NC) Area Transit System, South Dakota Department of 
Transportation, City of Marceline, MO, Sacramento (CA) Regional Transit 
District Capitol Corridor Joint Powers Authority (CA), Gateway Rural 
Improvement Pilot Association, Inc. (VT), International Air Rail 
Organization, City of Sacramento (CA), City of Greenville (NC), States 
for Passenger Rail Coalition, North Carolina Department of 
Transportation, County of Sacramento Department of Transportation, 
American Public Transportation Association, Board of Sumner County 
Commissioners (Wellington, KS), The New York Sate Department of 
Transportation, National Capital Planning Commission, North Carolina 
Railroad Company, Spokane Regional Transportation Council (WA), 
Caldwell Police Department (KS), City of Caldwell (KS), Idaho 
Transportation Department, Sacramento Area Council of Governments (CA), 
Kansas Department of Transportation, Troy Dierking.
    The following discussion provides an overview of the written 
comments received in response to the NPRM. More detailed discussions of 
the specific comments and how FRA has chosen to address those comments 
in the final rule can be found in the relevant Section-by-Section 
portion of this preamble.
    All of the comments submitted were in favor of the capital grants 
program. Many of the commenters had specific projects that they were 
interested in obtaining funding for under this program. A few 
commenters expressed concerns that the definition of allowable/
reimbursable costs was too narrowly drawn and needed to include 
reimbursement for environmental assessments that may need to be 
performed or have already been performed prior to the application for 
grant funds. Several of the commenters observed that environmental 
costs constitute the great majority of the project costs, particularly 
in the early stages. Several other commenters wanted to add specific 
items as allowable/reimbursable costs. Others wanted specific 
assurances that a particular project fit within the parameters and 
eligibility criteria set out in the NPRM.
    A few commenters had concerns regarding the potential distribution 
of any grant monies, wanting to ensure that rural areas were not 
overlooked in the application and selection process. Some commenters 
wanted changes or adjustments to the definitions section.
    Finally, a few commenters requested that FRA hold a public hearing 
on the NPRM. Given the lack of substantial controversy raised in any of 
the comments and the effort and expense involved in holding a public 
hearing, FRA concluded that a public hearing was not necessary or 
justifiable. None of the requests for a hearing indicated how a hearing 
would assist in evaluating the NPRM. In addition, some of the hearing 
requests appeared more focused on increasing the visibility of the 
capital grants for rail line relocation and improvement program rather 
than addressing specific issues with the NPRM.

III. Section-by-Section Analysis and Response to Comments

    SAFETEA-LU contains very specific language regarding implementation 
of the rail line relocation and improvement program. In several 
sections, the language in this final regulation is reprinted directly 
from 49 CFR 20154. Given such an unambiguous statutory mandate, FRA has 
made only a few additions in this final regulation to include language 
that was not in the statute. For those sections, there is a further 
discussion of FRA's intent. This Section-by-Section Analysis does not 
discuss Congressional intent or address the costs or benefits of the 
program as a whole or any potential relocation project. Decisions 
regarding the advisability of the program were made by the Congress in 
enacting section 20154.

Section 262.1 Purpose

    This section, which has not changed from that which was proposed in 
the NPRM, merely states that the purpose of this final rule is to carry 
out the Congressional mandate in Sec.  9002 of SAFETEA-LU by 
promulgating regulations which implement the grant financial assistance 
program for local rail relocation and improvement projects set forth in 
new Sec.  20154 of Title 49 of the United States Code. No comments were 
received on this section.

Section 262.3 Definitions

    One commenter (New York DOT) suggested adding a definition for the 
term ``project'' and specifically mentioned a highway bridge over rail 
tracks as a potentially eligible activity. The commenter expressed 
concern that such a bridge could constitute a grade separation and add 
to the safety and efficiency of rail service but might be excluded 
because the rail line would not be physically touched. While FRA makes 
no comment herein upon the eligibility or ineligibility of specific 
projects proposed by commenters, the agency believes that the current 
definition of ``project'' under subsection 262.3 clearly reflects the 
mandate of Congress to use the capital grant funds for local rail line 
relocation or improvement projects. The current definitions of the 
terms ``project'' and ``improvement'' along with the eligibility 
standards detailed in subsection 262.7 provide an adequate 
identification of eligible projects. The agency also notes that the 
term ``improvement'' encompasses rail infrastructure and not just 
railroad lines.
    One commenter (Missouri DOT) wants to add language reading ``any 
combination thereof'' to the definition of ``Non-Federal share.'' 
Missouri DOT indicated that the current definition is too restrictive 
because the definition ends with ``by a State or other non-Federal 
entity'' when a particular project might receive financial support from 
a variety of sources. FRA agrees that adding this language is 
appropriate because non-Federal share funding is contemplated to come 
from a variety of sources and be supplied through a variety of 
channels. The definition has been revised to reflect this change.
    Missouri DOT also wants to specifically add to the definition of 
``construction'' the costs of consultants who are designing a project. 
FRA notes that the definition of construction,

[[Page 39877]]

which includes architectural and engineering costs under item number 
six of the definition, contains no requirement that these be incurred 
solely by in-house personnel. Thus, consultant costs should be eligible 
if they are a part of a project that meets all of the criteria under 
subsections 262.7 and 262.9.
    Missouri DOT also recommends that the reasonable costs of closures 
should be included within the definition of existing rail crossings. 
FRA does not fully understand the intent of this comment but notes that 
the definitions of ``construction'' and ``improvement'' are broad 
enough to support consideration of reasonable costs of closing existing 
rail crossings.
    One commenter (City of Marceline, MO) wants to add to the costs 
included in the definition of ``construction'' the costs associated 
with construction inspection management. The statute which mandates 
these regulations gives the Secretary discretion to determine eligible 
costs and while FRA has made clear that the costs listed in the 
definition under subsection 262.3 are not limited to those specifically 
mentioned, ``construction inspection management'' costs that are 
germane to the particular project certainly seem to qualify. The 
definition of ``construction'' also includes references to both 
supervising and inspecting as components of building a project. 
However, FRA does not believe it is necessary to add this particular 
item to the definitions section of the rule text.
    The City of Marceline, MO also wants FRA to place greater emphasis 
on three areas in the definition of ``quality of life:'' (1) Impact on 
emergency services; (2) accessibility to the disabled as required under 
the Americans with Disabilities Act; and (3) school access. FRA notes 
that the statutory definition of ``Quality of Life'' in subsection 
20154(h)(2) includes ``first responders' emergency response time.'' 
This specific portion of the comment appears to be addressing a broader 
view of ``quality of life'' by expanding the definition to include 
``impact on emergency services.'' Accordingly, FRA has added this 
proposed language into the rule text.
    The second proposed addition suggested by this commenter, while not 
elaborated upon, is an excellent addition to the definition of 
``quality of life.'' Poorly located, hard-to-reach (or difficult to get 
around) rail lines that have little or no access to disabled 
passengers/commuters/citizens certainly can impact quality of life. FRA 
will incorporate this suggestion with a slight modification to include 
section 504 of the Rehabilitation Act of 1973, as amended. Third, the 
commenter proposed to add ``school access'' as a ``quality of life'' 
measure noting that the commenter's local school is located on the 
opposite side of the railroad from the central business district, the 
fire and police stations and a large portion of the residential 
neighborhoods. Insofar as the commenter was expressing concern that 
poorly or inconveniently placed rail lines contribute to students/
parents/teachers' difficulties in getting to and from school, then this 
portion of the comment will also be adopted.
    Kansas DOT also suggests that traffic, delay, and congestion should 
be taken into account when measuring ``quality of life'' under 
subsection 262.9(d). FRA agrees that these are important quality of 
life factors. The definition of ``quality of life'' has been expanded 
in subsection 262.3 to include these factors.
    North Carolina DOT suggests that safety, congestion and air quality 
should be taken into account when measuring ``quality of life'' under 
subsection 262.9(d). FRA agrees that these are important quality of 
life factors. The definition of ``quality of life'' has been expanded 
in subsection 262.3 to include these factors, with the exception of 
``air quality'' which FRA believes is already adequately addressed in 
the ``environmental'' factor.
    Several commenters (City of Sacramento DOT, Sacramento Regional 
Transit District, County of Sacramento, Sacramento Area Council of 
Governments, Capital Corridor Joint Powers Authority CA) requested that 
relocation, reconstruction or construction of passenger rail facilities 
or stations be specifically mentioned in the definition of an 
``improvement'' in subsection 262.3. The statute's mandate is clear: 
The purpose of the capital grants program is for the ``improvement of 
the route or structure of a rail line.'' The statute also makes clear 
that one of the considerations in approval of a project is the 
``effects of the rail line on the freight and passenger rail operations 
on the line.'' FRA believes that these mandates are broad enough to 
support consideration of passenger rail facilities or stations if they 
are a part of a project that meets all the criteria under subsections 
262.7 and 262.9; therefore, FRA has determined that it is not necessary 
to add ``relocation, reconstruction or construction of passenger rail 
facilities or station'' to the definition of ``improvement'' under 
subsection 262.3.
    One commenter (Kansas DOT) is concerned that the definition of 
``allowable costs'' states that only construction costs are 
reimbursable and that KDOT believes that right of way and utility 
adjustment costs should also be valid reimbursable construction costs. 
FRA notes that the definition of construction costs specifically 
includes both of those costs under subsection 262.3 in the definition 
of ``construction,'' items (3) and (5). Subsections 20154(h)(1)(C) and 
(E) also specifically list right of way acquisition and utilities 
relocation.

Administrator

    This definition makes clear that when the term ``Administrator'' is 
used in this Part, it refers to the Administrator of the Federal 
Railroad Administration. It also provides that the Administrator may 
delegate authority under this rule to other Federal Railroad 
Administration officials.

Allowable Costs

    This definition makes clear that only costs classified as 
``allowable'' will be reimbursable under a grant awarded under this 
Part. Specifically, construction costs are the only costs that are 
reimbursable.

Construction

    This definition sets out the types of project costs that are 
contemplated as being reimbursable under this Part. Only these costs 
will be allowable under a grant from this program. This definition 
closely tracks 49 U.S.C. 20154(h)(1). Subsection 20154(h)(1)(F) gave 
the Secretary the authority to prescribe additional costs, other than 
those specifically listed in Sec.  20154(h)(1), as allowable under this 
Part. As the authority to promulgate this rule has been delegated to 
FRA by the Secretary, subsection 262.3, in the definition of 
``construction,'' item (6) makes clear that FRA has that authority to 
prescribe additional costs. In addition, item (6) also makes clear that 
architectural and engineering costs associated with the project as well 
as costs incurred in compliance with applicable environmental laws and 
regulations are considered construction costs, and will be allowable.

FRA

    This definition makes clear that when the term ``FRA'' is used in 
this Part, it refers to the Federal Railroad Administration.

Improvement

    The program established by the Act is intended to provide funds for 
both rail line relocation and improvement projects. This definition 
makes clear the types of projects that fall under the category of 
``improvements.'' FRA

[[Page 39878]]

considers improvements to be projects such as those that repair 
defective aspects of a rail system's infrastructure, projects that 
enhance an existing system to provide for improved operations, or new 
construction projects that result in better operational efficiencies. 
Examples include track work that increases the class of track, signal 
system improvements, and lengthening existing sidings or building new 
sidings.

Non-Federal Share

    This definition indicates that Non-Federal share means the portion 
of the allowable cost of the local rail line relocation or improvement 
project that is being paid for through cash or in-kind contributions by 
a State or other non-Federal entity. The definition has been revised in 
the final rule as explained above.

Private Entity

    This definition makes clear what types of entities are contemplated 
under Sec.  262.13. A private entity must be a nongovernmental entity, 
but can be a domestic or foreign entity and can be either for-profit or 
not-for-profit.

Project

    This definition makes clear that the term ``project'' refers only 
to a local rail line relocation or improvement project undertaken with 
funding from a grant from FRA under this Part.

Quality of Life

    FRA requested comments in the NPRM on what factors should be 
considered when measuring ``quality of life.'' The Act requires only 
that the definition include first responders' emergency response time, 
the environment, noise levels, and other factors as determined by FRA. 
Thus, Congress left FRA some discretion in determining what else should 
be considered under this definition. FRA believes ``quality of life'' 
should include factors associated with an individual's overall 
enjoyment of life or a community's ability both to function and to 
provide services to its residents at a reasonable level. Commenters 
were invited to discuss specific factors that can measure these 
somewhat amorphous concepts, as well as any other factors that may be 
appropriate. The definition has been revised in the final rule as 
discussed above.

Real Property

    This definition makes clear that ``real property'' refers to land, 
including land improvements, structures and appurtenances thereto, 
excluding movable machinery and equipment.

Relocation

    This definition states what relocation consists of and provides the 
distinction between the two types of rail line relocations. A lateral 
relocation occurs when a rail line is horizontally moved from one 
location to another, usually away from dense urban development, grade 
crossings, etc., in an effort to allow trains to operate more 
efficiently and the community surrounding the old line to function more 
effectively. The typical example is moving a rail line that runs 
through the middle of a town or city to a location outside of the town 
or city. A vertical relocation occurs when a rail line remains in the 
same location, but the track is lifted above the ground, as with an 
overpass, or is sunk below ground level, as with a trench.

Secretary

    This definition makes clear that ``Secretary'' refers to the 
Secretary of Transportation.

State

    This definition is reprinted from SAFETEA-LU and can be found at 49 
U.S.C. 20154(h)(3). It makes clear that, for the purposes of this Part 
except for Sec.  262.17, any of the fifty States, political 
subdivisions of the States, and the District of Columbia is a ``State'' 
and eligible for funding from this program. The definition also makes 
clear, however, that for purposes of Sec.  262.17 only, ``State'' does 
not include political subdivisions of States, but instead only the 
fifty States and the District of Columbia.

Tangible Personal Property

    This definition indicates that ``tangible personal property'' 
refers to property that has physical substance and can be touched, but 
is not real property. Examples of tangible personal property include 
machinery, equipment and vehicles.

Section 262.5 Allocation Requirements

    This section is based on the language included in 49 U.S.C. 
20154(d). It mandates that at least fifty percent of all grant funds 
awarded under this Part out of funds appropriated for a fiscal year be 
provided as grant awards of not more than $20,000,000 each. Designated, 
high-priority projects will be excluded from this allocation formula. 
The statute states that the $20,000,000 amount will be adjusted by the 
Secretary to reflect inflation for each fiscal year of the program 
beginning in FY 2007. Under the Secretary's delegation of rulemaking 
authority to FRA, however, FRA will make the annual inflationary 
adjustment. In making the adjustment for inflation, FRA will use 
guidance published by the Association of American Railroads (AAR). 
Specifically, FRA will use the materials and supplies component of the 
AAR Railroad Cost Indexes. FRA will make the adjustment each October 
based on the most recent edition of the Cost Indexes.
    Several commenters (North Carolina Railroad Company, Sacramento 
Area Council of Governments) suggested that the requirements could be 
more clearly defined by FRA, specifically what type of projects will be 
considered high-priority, and therefore, excluded from the allocation 
formula. FRA did not include a definition of ``high priority 
projects,'' because Congress designates certain projects as ``high-
priority'' when it determines that specific projects will be funded and 
appropriates funds for those particular projects through the 
appropriations process. Subsection 262.5 remains unchanged from the 
NPRM.

Section 262.7 Eligibility

    This section is reprinted directly from SAFETEA-LU and can be found 
at 49 U.S.C. 20154(b). It sets out the eligibility criteria for 
projects and declares that any State (or political subdivision of a 
state) is eligible for a grant under this section for any construction 
project for the improvement of a route or structure of a rail line that 
either is carried out for the purpose of mitigating the adverse effects 
of rail traffic on safety, motor vehicle, traffic flow, community 
quality of life, or economic development, or involves a lateral or 
vertical relocation of any portion of a rail line. As noted above, 
lateral relocation refers to horizontally moving the rail line to 
another location while vertical relocation refers to either lifting the 
rail line above the ground or sinking it below the ground. Subpart (b) 
of this section also makes clear that only costs associated with 
construction, as defined in this Part, will be allowable costs for 
purposes of this Part. Therefore, only construction costs will be 
eligible for reimbursement under a grant agreement administered under 
this Part.
    One commenter (New York DOT) suggested that FRA clarify what, if 
any, retroactive expenses will be eligible for reimbursement through 
identification of a time frame or project start date that would vary 
with expense type. This section was taken verbatim from the statute and 
can be found at 49 U.S.C. 20154(b). The statute is clear that ``only 
costs associated with construction, as defined in this Part [subsection 
20154(h)(1)] will be considered allowable costs for purposes of this 
Part [section 20154].'' FRA has determined

[[Page 39879]]

that identifying specific expenses, including retroactive expenses, 
runs counter to the purposes of the statute which ties allowable costs 
to ``costs associated with construction.'' FRA does not opine on 
whether specific expenses, including retroactive expenses might be 
``allowable costs'' as contemplated under the statute. This 
determination is best left to the individual grant agreements on a 
case-by-case basis.
    New York DOT also requests that FRA clarify whether public or 
private grade crossings will be eligible for the program. Although it 
was not exactly clear what kind of grade crossing the commenter was 
referring to, FRA assumes the comment refers to any grade crossing, 
public or private within the confines of an otherwise eligible project. 
The statute's mandate is clear: The purpose of the capital grants 
program is for the ``improvement of the route or structure of a rail 
line.'' The statute also states that one of the considerations in 
approval of a project is the ``effects of the rail line on the freight 
and passenger rail operations on the line.'' FRA has concluded that 
these mandates are broad enough to support consideration of grade 
crossings if they are a part of a project that meets all the criteria 
under subsections 262.7 and 262.9. It is not necessary to specifically 
refer to ``public or private grade crossings'' as a potentially 
eligible project under subsection 262.7
    New York DOT also suggests that FRA define more specifically what 
costs would be eligible for reimbursement under subsection 262.7 and to 
clarify how those costs will be verified. The commenter suggests 
referencing 23 CFR 140, Subpart 1--Reimbursement for Railroad Work. FRA 
has reviewed the regulation cited by the commenter. These regulations 
address reimbursement to the States for railroad work on projects 
undertaken in accordance with the provisions of 23 CFR 646, subpart B, 
entitled, ``Railroad-Highway Projects.'' The purpose of this subpart is 
to prescribe policies and procedures for advancing federal-aid projects 
involving railroad facilities.
    While somewhat similar in nature, there are marked differences in 
the purposes of the two programs. This program is being promulgated 
under 49 CFR 262 and is solely applicable to rail line relocations and/
or improvements. The statute has set out what costs are to be allowable 
and these criteria will be incorporated into any grant agreement. While 
23 CFR 140, Subpart 1 is helpful as a reference and reminder of the 
different costs associated with a project, FRA has determined that it 
will be more in keeping with the statutory directions to craft grant 
agreements that are specifically geared to the statutory criteria and 
the project being funded.
    One commenter (Charlotte Area Transit System) wants to ensure that 
a rail line, even though it may be currently out-of-service, would 
potentially be eligible for the program. Specifically, the commenter 
proposes to revise ``mitigating adverse effects'' in subsection 
262.7(a)(1) to ``mitigating current or anticipated adverse effects.'' 
Additionally the commenter proposes to add the following language to 
the end of subsection 262.7(a)(2): ``whether or not currently in use.'' 
Both of these subsections incorporate the statutory language and FRA 
cannot make changes to Congressional mandates where it has not been 
given discretion to do so. In the case of out-of-service rail lines, 
however, the current language of subsection 262.7 appears to be broad 
enough to support such a project if it meets other requirements of the 
program as set out in the statute and regulation. NC DOT offered a very 
similar concern requesting that the final rule authorize projects that 
make use of both active and out-of-service rail rights of way and 
programmed service expansions.
    One commenter (Sacramento Regional Transit) wanted FRA to expand 
the eligibility of projects that can be funded under the program to 
include facilities that are already in use as passenger rail stations 
under subsection 262.7 In the case of facilities already in use as 
passenger rail stations, the current language of subsection 262.7 
appears to be broad enough to support such a project if it meets the 
other requirements of the program as set out in the statute and 
regulation. Additionally, as previously discussed in the FRA response 
to comments under subsection 262.3, the statute's mandate is clear: The 
purpose of the capital grants program is for the ``improvement of the 
route or structure of a rail line.'' The statute also states that one 
of the considerations in approval of a project is the ``effects of the 
rail line on the freight and passenger rail operations on the line.'' 
FRA believes that these mandates are broad enough to support 
consideration of passenger rail facilities or stations if they are a 
part of a project that meets all the criteria under subsections 262.7 
and 262.9. It is not necessary to specifically refer to ``facilities 
already in use as passenger rail stations'' as a potential 
``improvement'' under subsection 262.3.
    One commenter (Gateway Rural Improvement Pilot Association (VT)) 
criticized the exclusion of public authorities and special-purpose non-
profit corporations as eligible applicants for the program. FRA again 
emphasizes that the eligibility criteria were established by Congress 
and the statutory language directed that only States or political 
subdivisions of States are eligible applicants. FRA cannot make changes 
to Congressional mandates where it has not been given discretion to do 
so.
    One commenter (the National Capital Planning Commission) thought 
that subsection 262.7(b) should be clarified as it relates to NEPA 
requirements to state that only NEPA costs associated with construction 
of a particular project be considered ``allowable costs.'' FRA agrees 
that some clarification is needed in this regard and adopts NCPC's 
comment to include ``as defined in section 262.3'' in section 262.7(b), 
which now reads ``(b) Only costs associated with construction, as 
defined in Sec.  262.3, will be considered allowable costs.'' This is 
the only revision made to subsection 262.7 from the NPRM.

Section 262.9 Criteria for Selection of Rail Lines

    This section is based extensively on 49 U.S.C. 20154. It sets out 
the criteria for FRA to use in determining which projects should be 
approved for grants under this Part. The statute specifies that in 
determining whether to award a grant to an eligible State (as defined 
in this Part) under this section, the Secretary shall consider the 
following factors:
     The capability of the State (as defined in this part) to 
fund the project without Federal grant funding;
     The requirement and limitation relating to allocation of 
grant funds provided in Sec.  262.5 of this Part;
     Equitable treatment of the various regions of the United 
States;
     The effects of the rail line, relocated or improved as 
proposed, on motor vehicle and pedestrian traffic, safety, community 
quality of life, and area commerce; and
     The effects of the rail line, relocated or improved as 
proposed, on the freight and rail passenger operations on the rail 
line.

Although the listed factors are fairly comprehensive, FRA sought to 
retain the flexibility to consider other factors that may not be 
readily apparent, but may be critical in evaluating the effectiveness 
of expending funds to achieve the expected benefits of a project. 
Accordingly, FRA included an additional ``catchall'' criterion in its 
NPRM subsection 262.9(f). This additional criterion would allow FRA to 
consider any other factors FRA determines to be relevant to assessing

[[Page 39880]]

the effectiveness and/or efficiency of the grant application in 
achieving the goals of the national program, including the level of 
commitment of non-Federal and/or private funds to a project and the 
anticipated public and private benefits.
    FRA's NPRM solicited comments on this addition and any other 
potential factors that the FRA may consider in determining whether to 
award a grant.
    The South Dakota Department of Transportation commented:
    ``We are not opposed to the FRA having some flexibility in weighing 
applications, but note that neither the statute not{r{time}  the 
proposed rule includes a statement of the `goals of the national 
program.' We are concerned that this approach implies that FRA could 
develop `national' program goals on its own, with no notice and comment 
process, and then apply them in weighing the merits of applications. 
Because the NPRM does not identify the national goals that would 
receive weight under subsection (f) we cannot support the proposed 
additional language. Again, we are not against all flexibility for FRA 
but, with the exception of one factor, discussed below [the level of 
commitment of non-Federal and or private funds to a project] subsection 
(f) is too open-ended and vague to warrant our support.''
    In response to comments received, FRA believes that additional 
clarification is needed regarding how it will select from eligible 
projects. FRA as well as the federal government, believes that one of 
the national goals is to select projects that are cost effective in 
that the benefits exceed the cost. States, the FRA and the federal 
government have an interest in maximizing the benefits derived from the 
investment of Federal, State, local or private funding in rail line 
relocation projects and in proposing and selecting projects that are 
cost effective in terms of the benefits achieved in relation to the 
funds expended. Statutory criteria in subsections 262.9(d) and (e) each 
require an assessment of the benefits to be derived from a project. The 
criterion in subsection 262.9(f) seeks to expand the universe of 
factors the FRA will consider in assessing effectiveness and efficiency 
of the project. To be clear, in evaluating applicant projects for 
funding, FRA will examine the evidence of the project's cost 
effectiveness. While we will consider all the statutory criteria in 
evaluating applications, we intend to approve only those projects where 
the benefits can reasonably be expected to exceed the costs. FRA will 
attempt to target funds to projects that produce the greatest net 
benefits.
    Therefore, the rule language has been clarified to require 
applicants to submit evidence sufficient for the FRA to determine 
whether projects proposed for Federal investment are cost-effective in 
terms of the benefits achieved in relation to the funds expended. In 
addition, as provided for in subsection 262.11 a State must submit a 
description of the anticipated public and private benefits associated 
with each rail line relocation or improvement project described in 
subsections 262.7(a)(1) and (2) and the State's assessment of how those 
benefits outweigh the costs of the proposed project. The determination 
of such benefits should be developed in consultation with the owner and 
user of the rail line being relocated or improved or other private 
entity involved in the project. The State shall also identify any 
financial contributions or commitments it has secured from private 
entities that are expected to benefit from the proposed project. 
Project applications that include a realistic projection of and 
detailed analysis of the project's costs and benefits will be 
considered most favorably. The FRA does not intend to impose a rigid 
list of data elements that applicants could address in demonstrating 
cost effectiveness, and we will consider all relevant information, 
consistent with our statutory obligation. However, the following are 
among the considerations that might be relevant factors.
     Vehicle counts at highway crossings; distinguishing among 
passenger, heavy truck, emergency, etc., vehicles would strengthen an 
application.
     Pedestrian counts.
     Trains per day (passenger and freight). Average train 
length and for freights the frequency of hazmat in train consists.
     Train horn frequency (passenger and freight). Average 
number (and volume) of train horns daily near populated areas that a 
relocation or improvement project could potentially reduce.
     Class of track under FRA's track safety standards for both 
the existing and the proposed relocated rail line.
     Average train speeds (passenger and freight) and length of 
time any crossing is blocked.
     Proximity of switching yards to a crossing and length of 
time any crossing is blocked by freight switching moves.
     Movement of emergency vehicles through a crossing and 
distance of the crossing from a hospital, nursing home, fire station, 
military base, power plant, school or similar facility where time lost 
waiting for a crossing to clear could contribute to injury or death.
     Relocation/closing of a grade crossing so that volunteer 
firefighters can travel more quickly from their office/home to the fire 
station, potentially resulting in better time to emergency calls.
     Number of crossings in a particular community/segment and 
the impact of frequent crossings on a community (e.g., traffic 
congestion, train whistles/horns).
     Amount of railroad-owned land in a town/city/political 
jurisdiction that might be abandoned, leading to the loss of property 
tax receipts, resulting from a relocation.
     With respect to local industries served by the line 
proposed for relocation, identify transport alternatives that would be 
available if the relocation is approved; identify industries that would 
be newly served by the relocated rail line; and identify economic 
impacts on the community from the project such as jobs created/lost, 
tax revenues, etc.
     Documented incursions of vehicles on to rail right-of-way. 
Number of accidents per year, severity (fatalities), dollar value 
(current dollars) of each accident, and any findings of fault by 
police, railroads, FRA, National Transportation Safety Board.
     Any pertinent information taken from FRA's on-line safety 
data base www.fra.gov/safetydata. (e.g., number of grade crossing or 
trespasser accidents/incidents, injuries, fatalities, ranking in the 
FRA Highway Rail Grade Crossing Web Accident Prediction System.)
     Environmental impacts from the existing rail line (noise, 
vibration, air pollution) that would be eliminated by the relocation; 
environmental impacts from the relocated rail line (positive and 
negative).
    As noted above, this list presents examples of the types of data 
that would support an assessment of cost effectiveness, but is not all 
inclusive. FRA invites applicants to submit analysis of alternate or 
additional data, appropriate to the specific project under 
consideration for funding.
    One commenter (North Carolina Railroad Company) indicated that 
while it agreed with the FRA that the criteria for selection in 
subsection 262.9 should ensure equitable treatment of various regions 
of the United States, it suggested that FRA clarify how high priority 
projects (see subsection 262.5) will be recognized within those 
regions. It is the agency's view that the presence of designated high 
priority projects in a particular region of the country would be a 
factor to be considered by FRA in evaluating whether to award a grant 
to another project in that same area of the country as the agency seeks 
to ensure

[[Page 39881]]

equitable treatment of various regions of the United States.
    North Carolina Railroad Company additionally requests that FRA 
clarify the language, ``the capability of the State to fund the rail 
line relocation without Federal grant requirement'' criterion under 
subsection 262.9(a). Specifically, the commenter questions whether the 
above criterion means that FRA will provide greater support to poorer 
States, to States with larger projects that are more difficult to fund, 
or to States that have or are likely to have significant matching funds 
from non-Federal entities. The language found in subsection 262.9(a) 
tracks the statutory language as set out in 49 U.S.C. 20154(c)(1), 
which reads: ``[t]he capability of a State to fund the rail line 
relocation project without Federal grant funding.'' This factor as set 
out in the statute is one of five criteria that FRA must consider and 
was not assigned any greater weight than any of the other four factors. 
Congress' inclusion of this factor does suggest to the FRA that the 
rail line relocation and improvement program should not be used to fund 
a project that the State is fully capable of funding on its own. FRA 
included a discussion of some of the considerations that might be 
relevant to the agency in evaluating this factor in the NPRM section-
by-section discussion related to this section. On the other hand, a 
State or other non-Federal entity is required to provide at least 10 
percent of the shared costs of a project funded under this program. 
Logically, the program can support more improvements to the extent that 
States or other non-Federal entities cover a percentage of the shared 
costs that is in excess of 10% and this would be relevant to the agency 
in evaluating the proposed projects.
    One commenter (South Dakota DOT) is concerned that FRA's intention 
to divide the country along the lines of FRA's eight regions in 
interpreting the language in subsection 262.9(c) may put rural areas at 
a disadvantage. South Dakota DOT wants FRA to add ``including equitable 
treatment of rural and metropolitan areas'' to the end of the 
subsection. The language found in subsection 262.9(c) tracks the 
statutory language as set out in 49 U.S.C. 20154(c)(3), which reads: 
``[e]quitable treatment of the various regions of the United States.'' 
This factor as set out in the statute is one of five criteria that FRA 
must consider and there is no indication that it is to have any greater 
weight than any of the other four factors. Whether the consideration of 
this factor along with the other four factors as set out by Congress 
will disadvantage (or advantage) ``rural areas'' would have to be 
evaluated on a case-by-case basis. FRA does not have the discretion to 
change the language set out in the statute. At this point, FRA does not 
believe that its intention to use the agency's current regional 
breakdown will have an adverse impact on rural or metropolitan areas. 
FRA did not receive any suggestions for alternative ways of dividing up 
the country. The Idaho Transportation Department and the Spokane 
Regional Transportation Council urged their support for subsection 
262.9(c) as drafted.
    South Dakota DOT raises a concern about the interplay between 
subsections 262.9(a) and (f). While it recognizes the statutory basis 
for subsection 262.9(a), it is concerned that FRA's addition of the 
non-statutory language in subsection 262.9(f), and specifically the 
language relating to the level of commitment of non-Federal or private 
sector funds to a project, may potentially disadvantage those most in 
need of federal assistance as they would be least able to make a 
commitment to the project beyond the minimum required match. FRA notes 
that this is but one of six factors that must be evaluated before 
deciding whether to approve funding for a particular project. FRA 
included this language for several reasons.
    First, the statute clearly indicates that the required non-Federal 
match is not set at a certain percentage as it is with some other 
funding programs but provides for FRA to secure at least 10 percent 
from non-Federal sources. This suggests to the agency a goal of 
achieving the maximum benefit from the available Federal funds. Second, 
the statute requires the Secretary to consider the feasibility of 
seeking financial contributions or commitments from private entities 
involved with a project in proportion to the expected benefits to such 
private entities. Again, this requirement reinforces the concept of 
securing the maximum public benefit from the program funds. Leveraging 
the Federal funds along with state, local and private funds can produce 
the most benefit for Federal dollar expended.
    Several commenters (City of Sacramento DOT, Sacramento Regional 
Transit, County of Sacramento, Sacramento Area Council of Governments) 
wanted ``security risks'' or ``Homeland Security risks'' to be set 
forth in the selection criteria under subsection 262.9. FRA agrees that 
``security risks'' or ``Homeland Security risks'' are important factors 
that may be relevant in assessing the effectiveness or efficiency of a 
grant application. However, these particular considerations are only 
two among the ``other factors'' that FRA may consider under subsection 
262.9(f). Five of the six criteria in section 262, specifically 
subsections 262.9(a)-262.9(e) were mandated in the statute.
    Sacramento Regional Transit also wanted FRA to provide explicit 
scoring of project criteria, particularly giving highest priority to 
community benefit and quality of life. FRA, as discussed in some of the 
previous comments, has determined that the statute does not provide for 
giving one criterion more weight than another. Similarly, because the 
NPRM did not identify what FRA would consider a ``good'' project, New 
York State DOT suggests that FRA provide additional detail on project 
preferences to guide project development and submittals. As the 
previous discussion under this subsection has highlighted, FRA does not 
have a preconceived notion of what constitutes a good project. The 
agency intends to fairly and consistently apply the selection criteria 
included in subsection 262.9 in determining whether to award a grant to 
an eligible State under this program.
    One commenter (the Gateway Rural Improvement Pilot Association 
(VT)) recommended that FRA consider the following factors in 
identifying eligible projects: (1) The potential of a project to share 
the load for both freight and passengers in a corridor where rail lines 
run parallel to the route of a National Highway System in an area not 
served by an interstate highway; (2) the potential to address two or 
more projects within a single corridor; and (3) the potential of a 
project to support economic development and urban revitalization 
efforts. FRA agrees that the three factors suggested by this commenter 
are important factors that may be relevant in assessing the 
effectiveness or efficiency of a grant application. However, these 
factors should also be considered as one (or more) among the ``other 
factors'' that FRA may consider under subsection 262.9(f). The 
likelihood that some projects will offer public benefits not 
specifically foreseen by Congress or the agency underscores the 
importance of including subsection 262.9(f). Five of the other six 
criteria, specifically subsections 262.9(a)-(e) were mandated in the 
statute.

Section 262.11 Application Process

    All grant applications submitted under this program must be 
submitted to FRA through the Internet at https://www.grants.gov. All 
Federal grant-making agencies are required to receive applications 
through this website. Potential applicants should note that the 
information below describes FRA's

[[Page 39882]]

typical grant application requirements. However, the specific 
requirements for individual grants will be listed in the 
``Instructions'' section for the particular grant for which FRA is 
accepting applications.
    The application process for funds appropriated under Sec.  20154 
will differ depending on whether the grant is non-competitive or 
discretionary (competitive). Non-competitive applications--usually 
projects designated as high-priority in the appropriations statute or 
in the Conference Report accompanying an annual appropriation--
generally must include the following: (1) A detailed project 
description; (2) Standard Forms (SF) 424--Application; SF 424A or C--
Budget Information; SF 424B or D--Assurances; Assurances and 
Certifications (i.e., Certification Regarding Debarment/Suspension/
Ineligibility, Certification Regarding Drug-free Work Place 
Requirements; Certification Regarding Lobbying, Certificate of Indirect 
Costs); SF 3881--Payment Information; SF 1194--Authorized Signatures; 
and (3) an Audit History. Potential applicants should keep in mind that 
these are the typical forms that FRA requests with non-competitive 
applicants. FRA may not require all of these for a particular 
application.
    For a discretionary (competitive) grant, applicants will be 
provided with certain basic information covering deadlines and 
addresses for submitting statements of interest, and an estimate of the 
amount of funding available. FRA had indicated in the preamble to the 
NPRM that FRA's staff would develop a Source Selection Plan (SSP) to be 
used for evaluating applications and that the SSP would be made 
available to all applicants. This process was described only in the 
preamble and was not included as a part of the proposed rule. The 
agency has now concluded that it is not needed and is not included in 
the final rule. The agency will make project selections on the basis of 
the criteria described in the final rule. Applicants selected for 
funding will then be required to submit some of the same information 
described above for the non-competitive projects (i.e., standard forms, 
audit history, etc.).
    All applicants should keep in mind that no funding will be 
available for this program unless and until Congress appropriates 
funding for it. SAFETEA-LU authorized, but did not appropriate, $350 
million per fiscal year for each fiscal year 2006 through 2009. As of 
the publication date of this final rule, Congress has not appropriated 
any funds for fiscal years 2006 or 2007 and has appropriated 
$20,040,200 for fiscal year 2008. As Congress has appropriated both 
competitive and non-competitive funds for specific projects under this 
Program, FRA will notify the potential recipient(s) of the non-
competitive funds and will disburse the funds as soon as this final 
rule is effective. With respect to the competitive funds, FRA will 
publish a Notice of Funds Availability (NOFA) in the Federal Register 
and eligible applicants will be able to apply for a grant through 
www.grants.gov. FRA anticipates that the NOFA will simply indicate the 
amount of funds appropriated by Congress and basic information about 
the application deadlines for applying through www.grants.gov.
    Subsection 262.11(b) mandates that, when submitting an application, 
a State must submit a description of the anticipated public and private 
benefits associated with each proposed rail line relocation or 
improvement project and its assessment of how those benefits outweigh 
the costs of the proposed project. The determination of the benefits 
must be developed in consultation with the owner and user of the rail 
line being relocated and improved or other private entity involved in 
the project. Since one of the factors that FRA will consider in 
selecting projects is the level of commitment of non-Federal and/or 
private funds available for the project (see proposed section 
subsection 262.9(f)), applications should also identify the financial 
contributions or commitments the State has secured from any private 
entities that are expected to benefit from the proposed project. The 
language for this subsection is based upon SAFETEA-LU requirements and 
can be found at 49 U.S.C. 20154(e)(4)(A) and (B).
    Subsection 262.11(c) allows for a potential applicant to request a 
meeting with the FRA Associate Administrator for Railroad Development 
or his designee to discuss a project the potential applicant is 
considering for financial assistance under this Part. Subsection 
262.11(c) does not require that such a meeting occur, but it has been 
FRA's experience that pre-application meetings generally save the 
potential applicant both time and money, and, therefore, FRA strongly 
encourages potential applicants to schedule such a meeting.
    One commenter (New York DOT) suggests that FRA clarify whether an 
application must be filed by a state DOT. The eligible applicants are 
``States, including political subdivisions of a State as defined in 
subsection 20154(h)(3).'' There is no requirement that applicants are 
limited to state Departments of Transportation. This same commenter 
also suggests that FRA address whether and how cost changes will be 
addressed. Cost changes can occur in any project and the typical grant 
process allows for them as long as the cost changes meet the specific 
criteria set out in the typical grant application and administration. 
The Web site, www.grants.gov provides general information. Specific 
information will be set out in each individual grant agreement.

Section 262.13 Matching Requirements

    This section is reprinted entirely from SAFETEA-LU and can be found 
at 49 U.S.C. 20154(e). It sets out the requirement that a State or 
other non-Federal entity shall pay at least ten (10) percent of the 
shared costs of a project that is funded in part by a grant awarded 
under this Part. The ten percent may be in cash or in the form of the 
following in-kind contributions:
     Real property or tangible personal property, whether 
provided by the State (as defined by this Part) or a person for the 
State;
     The services of employees of the State or other non-
Federal entity, calculated on the basis of costs incurred by the State 
or other non-Federal entity for the pay and benefits of the employees, 
but excluding overhead and general administrative costs;
     A payment of any costs that were incurred for the project 
before the filing of an application for a grant for the project under 
this section, and any in-kind contributions that were made for the 
project before the filing of the application, if and to the extent that 
the costs were incurred or in-kind contributions were made to comply 
with a provision of a statute required to be satisfied in order to 
carry out the project.
    Finally, this section states that FRA will consider the feasibility 
of seeking financial contributions or commitments from private entities 
involved with the project in proportion to the anticipated public and 
private benefits that accrue to such entities from the project.
    FRA's NPRM invited comments and suggestions from commenters on how 
FRA can best accomplish this requirement. Because project sponsors are 
most directly involved and familiar with the details of the proposed 
projects and are required to submit a description of the anticipated 
public and private benefits associated with each rail line relocation 
or improvement project as a part of the application process, the 
requirement to seek financial contributions or commitments from

[[Page 39883]]

private entities might best be accomplished by the project sponsors in 
assembling the overall financial package to complete the project. This 
could then be one of the factors evaluated by the FRA in deciding 
whether to proceed with a project or in selecting one project over 
another should there be more than one project competing for any 
available funding.
    Several commenters (City of Sacramento DOT, Sacramento Regional 
Transit, County of Sacramento, Sacramento Area Council of Governments) 
wanted FRA to clarify whether non-Federal matches in excess of 10% will 
be ``rewarded'' in the selection criteria. Non-federal matches in 
excess of the 10% requirement will be evaluated on a case-by-case 
basis. As for the concept of being ``rewarded,'' the matching 
percentage is one of many variables that might have an effect on a 
particular application. FRA does not, at this time, plan to give an 
across-the-board advantage. Each application will judged on the entire 
spectrum of factors and criteria.
    One commenter (the Gateway Rural Improvement Pilot Association 
(VT)) wanted FRA to establish a provision similar to the ``Tapered 
Match'' allowed under FHWA's Innovative Finance program by which 
projects can provide their matching share at any point during the 
project. As a side note, GRIP was concerned that FRA recognize the 
contribution of costs incurred prior to the FRA grant under subsection 
262.13 and the time pressures faced by the applicants. There is 
currently no language in either the statute or Part 262 that calls for 
the match to be made by a certain time and FRA will consider these 
issues in evaluating individual applications.

Section 262.15 Environmental Assessment

    This section clearly states that, in order for FRA to award funding 
for any project, the National Environmental Policy Act (42 U.S.C. 4321 
et seq.) (NEPA) and related laws, regulations and orders must be 
complied with. NEPA mandates that before any ``major'' Federal action 
can take place, the Federal entity performing the action must complete 
an appropriate environmental review. The use of Federal funds in a 
project triggers the NEPA process. Thus, because FRA will be providing 
Federal funds to grantees for local rail line relocation and 
improvement projects, a completed NEPA review will be required before 
the agency decides to approve any project. FRA may request that a State 
provide environmental information and/or fund the NEPA review, either 
directly (if the entity administering the grant is a State agency with 
statewide jurisdiction) or through a third party contract. FRA's NEPA 
compliance will be governed by FRA's ``Procedures for Considering 
Environmental Impacts'' (65 Fed. Reg. 28545) and the NEPA regulations 
of the Council on Environmental Quality (40 CFR Part 1500).
    This section also notes several of the other environmental and 
historic preservation statutes that must be considered during the NEPA 
review. This is not, however, a comprehensive list of all environmental 
and historic preservation statutes and implementing regulations that 
must be considered, but instead merely illustrative of the issues that 
a State may be required to address in the environmental review.
    Several commenters (City of Marceline, MO, American Public 
Transportation Association) commented that it may be unnecessarily 
restrictive to require that NEPA review be complete before FRA decides 
to approve the project for funding. The commenter suggested 
incrementally approving funding for the preliminary engineering and 
environmental compliance and then fully funding a project after these 
steps are completed and approved. Additionally, the commenter suggested 
that FRA provide grants that assist in the project development process, 
including the NEPA process.
    Another commenter (the National Capital Planning Commission) wanted 
subsection 262.15 to include a requirement that environmental and 
historic documents be completed and approved by the Administrator prior 
to a decision by FRA to approve a project for physical construction. As 
FRA understands it, the commenters want the environmental assessment 
costs to be eligible costs before a decision is made as to whether FRA 
will approve actual physical construction funding for a particular 
project.
    FRA believes that some of the confusion arose from including NEPA 
work in the definition of construction in subsection 262.3 and then 
stating in subsection 262.15 that FRA will not fund any construction 
until the NEPA work is completed. FRA understands that NEPA work is 
more properly classified as pre-construction work. Thus, the NPRM 
suggested that the project proponent must fund NEPA work up front and 
then FRA will reimburse the proponent if FRA decides to go forward with 
construction on the project.
    FRA understands that this is a risky approach for the proponent 
especially if the proponent is unsure how many applications FRA has 
received or how their project might f