Batten Down the Hatches

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Stormy 2014

Funding Uncertainty, Regulatory Initiatives Could Make for a Stormy 2014

By Sarah Fister Gale

Legislatively speaking, 2013 was a tough year for the water industry. Budget cuts and battling politicians meant little was accomplished beyond creating an environment of stagnation and uncertainty.

The Word on WRRDA

Just 30 of the roughly 5,000 bills related to the water industry were introduced in the last session of Congress, and of those 30, only three saw any movement, said Dawn Kristof Champney, president of the Water and Wastewater Equipment Manufacturers Association (WWEMA). "I think this is symbolic of the divisiveness and paralysis that has overtaken our legislative body," she said.

One bill the industry is paying close attention to is the Water Resources Reform and Development Act of 2013 (H.R. 3080) or WRRDA, which passed the House with surprising bipartisanship support in October. A related bill, the Water Resources Development Act (S. 601) also passed in the Senate.

Both bills authorize more than $8 billion in federal waterway improvement projects to be conducted by the Army Corps of Engineers over the next 10 years. They include harbor dredging, dam and lock construction, flood management and other initiatives. It also caps Army Corps feasibility studies at three years and $3 million.

"Passing of WRRDA is extremely important," said Ben Grumbles, president of the U.S. Water Alliance. "These bills are closely tied to economic development."

As Champney noted, however, authorization isn't the same as funding. "It's possible that only a fraction of the money promised may ever be spent."

The Senate version of the bill includes support for the Water Infrastructure Finance and Innovation Act (WIFIA), which will establish a five-year, $50 million pilot program allowing the Environmental Protection Agency (EPA) and the Corps of Engineers to offer low-interest loans for water and wastewater infrastructure projects costing at least $20 million (or $5 million for water systems serving 25,000 or fewer people).

WIFIA is separate from the state revolving fund (SRF) framework for water lending.

"WIFIA is intended to complement SRF," said Tom Curtis, deputy executive director for the American Water Works Association. SRF low interest loans support smaller clean water and wastewater improvement projects in hard hit communities, while WIFIA will focus on larger capital initiatives.

The House did not include WIFIA in its version of the bill, likely because it is still looking at jurisdictional concerns, but it has indicated that it supports the program, Curtis said.

The Sustainable Water Infrastructure Investment Act has also been introduced in the Senate to remove state volume caps on private activity bonds (PABs) for water and wastewater projects.

This Act has strong support in the Senate and across the water and wastewater industry, said Champney. "It would be the quickest, easiest and most productive way to let the private sector invest in our industry."

Declining SRF funding

One of the concerns about WIFIA in 2014 is whether it will impact SRF funding, which falls under the EPA's budget and has been slowly shrinking over the years. "We all believe that the SRFs are underfunded and deserve more support," Curtis said.

Regardless of WIFIA's impact, few industry experts are optimistic about where SRFs are headed.

Prior to the government shutdown, the Obama administration proposed accepting sequester cuts from FY2013 as baseline funding for FY2014. That will leave funding levels at $1.45 billion for the clean water SRF and $907 million for the drinking water SRF.

That's substantially better than the alternative - a proposal from the House Appropriations Committee to fund the clean water SRF at $250 million in FY14, which is a $1.2 billion cut over FY13; and fund the drinking water SRF at $350 million, which is a reduction of $550 million from the prior year for a total of $1.75 billion cut from both programs. The Obama administration's proposed FY14 budget also would have cut a combined $472 million from these programs.

A group of water associations have warned congressmen that such rote funding is unacceptable for the two SRFs, but there is little hope that funding will increase in the near term. "Our best-case scenario now is that SRF funding won't be reduced further," said Tim Williams, senior director of government affairs for Water Environment Federation (WEF) in Alexandria, Va.

Water industry professionals are also concerned about proposals to eliminate the tax exempt status of local government bonds for water and wastewater infrastructure projects, Curtis said. "That is a big concern because it would raise the cost of bonds and utility bills for customers."

While there is no specific bill being introduced, it's a conversation that is continuing on Capitol Hill in the context of budget discussions.

Clean Water Act needs a makeover

There was also much discussion in 2013 about updating the Clean Water Act, and the push for change will continue. "There are an incredible number of voices in the water and wastewater community who believe that the Clean Water Act needs to be revised," Curtis argued. "The act has outlived its original design, and many provisions need to be reconsidered."

Progress is being made. EPA and the U.S. Army Corps of Engineers produced a draft rule to clarify the jurisdiction of the Clean Water Act, and to more clearly define the various waters of the United States. These improvements are anticipated to reduce costs, minimize delays in the permit process, and provide clarity on which waters are or are not subject to Clean Water Act jurisdiction.

There is much support to pass this new regulation, though it's unlikely to happen in 2014, Curtis said. "It's a long way from becoming a reality on Capitol Hill, but the conversation is growing louder every year."

Perchlorate and other contaminants

Changes are also afoot at the EPA, which is developing a national regulation for perchlorate in drinking water as part of the Safe Drinking Water Act requirements around contaminants. The agency is also evaluating the feasibility and affordability of treatment technologies to remove perchlorate from drinking water and will examine the costs and benefits of a Maximum Contaminant Level (MCL) and alternative MCLs.

To support that review process, the AWWA recently developed a cost-impact assessment for the anticipated perchlorate regulation. The assessment revises a 2009 review of cost by including additional treatment strategies and accounting for local regulatory limits. In addition to ion exchange, the assessment considers costs associated with blending, source abandonment and development of new sources.

The cost of the proposed regulation is low overall, however it will have a significant impact on communities that have substantial levels of perchlorate contaminants in their water systems, Curtis said. "There are a small fraction cities that will face very high costs."

In 2014, EPA plans to revisit water quality criteria for chloride and selenium, and will be working on revisions to the Long-Term Lead and Copper Rule (LT-LCR) and a carcinogenic Volatile Organic Compound (cVOC) Rule. The cVOC rule would be the first proposal for a group of contaminants resulting from EPA's 2010 Drinking Water Strategy.

"The big concern in the utility sector (relating to these rules) is how much more can we ask the customer to spend for incremental protections," Curtis said.

While AWWA is not against regulations that protect the public, Curtis pointed out that it is important for EPA to carefully consider the scientific studies and the cost-benefit analysis of these rules. "What we are looking at in 2014 are regulations that will carry a large cost to deliver hypothetically incremental improvements," he explained. "At a time when incomes are not going up, and people are hard-pressed to pay their bills, it is important to weigh the benefits of these projects against those costs."

Stormwater revisions

EPA is also in the planning phase of a considerable update to its stormwater regulations. The most significant change is a new program to control stormwater discharge from all newly developed or redeveloped sites - including subdivisions, roadways, and shopping centers - using stormwater control technologies. EPA is also considering stricter standards for stormwater control in environmentally sensitive regions, including the Chesapeake Bay watershed. The regulation is likely to include green infrastructure among the options for minimizing stormwater runoff.

EPA had originally expected to propose the regulations in December 2011. By the agency's latest projections, it expects to release something in early 2014.

"There is strong interest within the administration to update stormwater regulations, and that will continue to generate a lot of interest in 2014," Grumbles said. He believes the current administration would like to make the new regulations official before the end of President Obama's second term in office, although it remains to be seen if that can be accomplished.

The road ahead

As they consider the opportunities in 2014, water and wastewater industry experts would like to see a more productive legislative environment. "My hope for 2014 is that Congress grows up," Champney said, "and will go about the business of government and regulatory rule-making, which is so important to our industry."

About the Author: Sarah Fister Gale is a freelance journalist based in Chicago. Over the last 15 years, she has researched and written dozens of articles on water management trends, wastewater treatment systems, and the impact of water scarcity on businesses and municipalities around the world.

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