February 2015, Vol. 70, No. 2
Features
Details Of Water Finance Bill Still A Mystery
Water infrastructure funding will take center stage in Washington in 2015 as industry groups push hard for Congress to provide the first grant funds for the new Water Infrastructure Finance and Innovation Act (WIFIA) program.
It will be headquartered at the Environmental Protection Agency (EPA), although the U.S. Army Corps of Engineers (USACE) will have some involvement in the program, since funds to local and state governments can be used for Corps projects as well as drinking and sewer construction financed in the past by the two State Revolving Funds (SRFs). The Clean Water and Drinking Water SRFs have been the go-to sources for funding for the latter two categories for two decades. But repeated EPA “needs assessments” have shown that construction needs across the country far exceed what can be done with SRF funding.
Hence the birth of WIFIA, which Congress authorized in 2014. When the House and Senate passed the fiscal 2015 government-wide appropriations bill at the end of December, they included $2.2 million for the EPA so it could start the administrative wheels turning on the new program. However, there was no provision of funds for grants. Congress was authorized to make $20 million available, but declined to do so. The WIFIA program is authorized at $25 million a year for fiscal 2016, which begins on Oct.1, 2015. Based on the way the federal funds will be translated to actual spending on the ground, that $25 million will equal $250 million in loans for water infrastructure projects. The most recent EPA needs assessment for just drinking water, released in 2009, found the nation’s 53,000 community water systems and 21,400 not-for-profit non-community water systems will need to invest an estimated $334.8 billion between 2007 and 2027.
The question going forward may be whether a congressional appropriation for WIFIA, whether in fiscal 2016 and/or beyond, comes at the expense of the appropriations for the SRFs. President Obama had proposed dramatically reducing funding for the SRFs by $581 million total in fiscal 2015. But the appropriations bill Congress passed at the end of December maintained SRF funding levels in 2015 at 2014 levels. That will be $906.9 million and $1.449 billion, respectively, for the Drinking Water and Clean Water SRFs.
“We have been hearing on the Hill that Congress believes WIFIA is a great, new idea, and in providing this funding to get the program established, Congress has proven that it believes in WIFIA,” says Tommy Holmes, legislative director of the American Water Works Association (AWWA). “Next we will focus on obtaining appropriations so the WIFIA program can issue the actual loans.”
Getting appropriations for new federal programs such as WIFIA may face headwinds from Republicans, who now control both houses of Congress. However, new Senate Majority Leader Mitch McConnell (R-KY) has said that infrastructure legislation is one area where he thinks Democrats and Republicans can find common ground. He hasn’t mentioned WIFIA or the SRFs specifically. But there is reason for hope that water infrastructure spending may get renewed attention in 2016.
Energy
What is certain is that Republican control of the House means energy legislation becomes a top priority for Congress. McConnell said the first bill he would bring to the Senate floor would be one approving the Keystone XL Pipeline. The XL segment would run 1,200 miles through Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas.
The key to look for is the number of votes any Keystone approval bill gets in the Senate. Last year, that number was 59, one short of the 60 needed to stop a filibuster, which essentially killed the bill. However, with the 2015 Senate, probably every one of the large new Republican freshman class, some replacing Democrats, will vote to approve the pipeline which means 54 Republican votes. Most likely there will be some additional Democratic “aye” votes, placing the 60 vote threshold in reach. Republican sponsors of the Keystone approval bill such as Sen. John Hoeven (ND) say they hope to get 67 which would be enough to overturn an expected President Obama veto.
EPA rulemaking
It is also likely the new GOP congressional majority will have something to say about rulemaking at the EPA. The agency rulemaking which is likely to have the biggest impact on underground construction is the effort to redefine “waters of the United States” in the context of the Clean Water Act. Any construction activity that disturbs those waters requires a permit, in some cases a complicated, individual permit; in other cases a simple, general one. Typically, oil and gas companies qualify for easy-to-obtain streamlined national permits when they do “minimal” work near streams and other bodies of water.
Obtaining those general permits – NWP 12 and NWP 39 are the favorite streamlined permits for the utility industry – saves considerable time and money compared to having to go through the individual, full section 404 permitting process. For example, the underlying assumption is that NWP 12 permitted activities would not result in impacts greater than 112 acre of waters of the United States for each single and complete project.
But in following up on a Supreme Court dictate, the EPA has proposed to redefine “waters of the U.S.” to include new acreage such as the drainage area of a tributary and adjacent wetlands. That means many more construction projects would require either a NWP (where no permit was required previously) or a full section 404 permits. “The changes proposed by the USACE and EPA to Section 404 of the CWA could significantly impact oil and natural gas operations,” says Lee Fuller, executive vice president, Independent Petroleum Association of America.
Pipeline cost recovery
At least one proposed federal regulatory change seems positive. That would be the proposed policy statement from the Federal Regulatory Commission (FERC) making it easier for pipelines to recover the costs of pipeline construction. Pipeline connections to the shale areas, particularly Marcellus, are severely lacking. But interstate transporters have been hesitant to build or expand capacity on existing lines for a couple of reasons, to some extent because of what they are spending to comply with current environmental and safety regulations. The FERC proposed policy statement. would allow interstate natural gas pipelines to recover certain capital expenditures made to modernize pipeline system infrastructure in a manner that enhances system reliability, safety and regulatory compliance through a surcharge mechanism, as long as the resulting rates are just, reasonable and protect natural gas consumers from excessive costs.
Given the start of some 2016 presidential campaigns and the effort by the congressional GOP to show it can govern, 2015 will be a hectic policy year in Washington, in contrast to 2014 which was vilified by many as a wasteland for congressional or federal action, whether positive or negative.
Comments