Small Business Administration Withdraws Proposed Rule Applying Federal Flood Risk Management Standards to Disaster Loan Program

The Small Business Association (SBA) has withdrawn a proposed rule to apply the Federal Food Risk Management Standard (FFRMS) to SBA disaster loans, pursuant to President Trump’s memorandum calling for a regulatory freeze pending review of regulations.

SBA submitted the proposed rule to the Office of Information and Regulatory Affairs (OIRA) for review and publication on November 10, 2016. It had not yet been published in the Federal Register by January 21, 2017 (the date of the regulatory freeze) and was therefore withdrawn in its entirety.

The proposed rule would have applied the FFRMS to SBA disaster loans that exceed $2 million for repair or replacement of a damaged or destroyed structure. Specifically, SBA was proposing to apply the FFRMS and corresponding elevation requirements to disaster loans that meet one of the following conditions: (1) SBA funds will be used for total real estate reconstruction at the damaged site that is located in the Special Flood Hazard Area (SFHA); (2) SBA funds will be used for new real estate construction at a relocation site that is located in the SFHA; or (3) SBA funds will be used for code required elevation at the damaged site that is located in the SFHA.

The rule was aimed at implementing President Obama’s Executive Order 11988, Floodplain Management, as amended by Executive Order 13690, Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input. Notably, Executive Order 13690 specifically recognized the linkages between climate change and flood risk and noted that the FFRMS was being developed to increase resilience against flooding and “ensure that agencies expand management from current base flood level to a higher vertical elevation and corresponding horizontal floodplain to address current and future flood risk.” The federal government has also introduced draft guidelines for implementing the FFRMS consistent with Executive Order 13690, which recognize that climate change should be accounted for when determining flood risk.

SBA’s proposed rule would have ensured that the FFRMS and accompanying guidelines were applied to major projects receiving SBA disaster loans.

The full text of the proposed rule (RIN: 3245-AG77) is not available, but a summary of the rule is available through SBA’s semi-annual regulatory agenda (see section 405).