Budget Proposals Increase For Water Infrastructure

President Obama’s fiscal 2011 budget proposal (for the year starting Oct. 1, 2010) contains significant sums for the Clean Water and Drinking Water State Revolving Funds in spite of pressure to reduce non-defense, non-entitlement spending because of the anticipated $1.5 trillion deficit for the year. In addition, despite a tight budget, the White House wants to spend $4 billion to create a new National Infrastructure Innovation and Finance Fund, similar to a proposal the administration tried to get passed, unsuccessfully, last year.

SRF funding is the big issue in the budget as far as water infrastructure advocates are concerned. Clean water would get $2 billion and drinking water $1.28 billion, down slightly from what Obama proposed last year ($2.4/$1.5 billion) and what Congress finally appropriated ($2.1/$1.387 billion). But given the tight constraints on federal funding, water groups were happy with the numbers.

“The President’s investment in clean and safe water is greatly needed and provides benefits to the economy, the environment and public health,” National Association of Clean Water Agencies (NACWA) Executive Director Ken Kirk says.

John Krohn, manager, legislative affairs, NACWA, says Obama’s proposed Infrastructure Fund would be a useful tool because the infrastructure deficits are so large across a variety of sectors: water, telecommunications, highways, energy, airports, railroads and ports. “But if an Infrastructure Fund or bank was seen as the Holy Grail, we would still have some concerns,” he explains. He thinks it would be hard for sewers and drinking water to compete for funding with many of the needy sectors, almost all of which might be considered higher priorities. The Highway Trust Fund is nearly bankrupt, for example, and Congress refuses to increase the federal gas tax, which underpins the highway fund, even though it has been stuck at 18.4 cents per gallon since 1994.

Moreover, the White House description of the Infrastructure Fund says it would be used to spur “projects of regional or national significance.” It is not clear whether many, if any, of the local water projects applying these days for the two SRFs would meet that qualification.”

Gas companies wary of EPA involvement with fracturing regulation
The Mobil/Exxon purchase of XTO Energy has sparked new congressional interest in the environmental safety of horizontal shale gas drilling, a concern also lately exhibited by the Environmental Protection Agency (EPA) which has urged New York State to expand its analysis of the impact of shale gas drilling in the Marcellus area. A House energy and environmental subcommittee held hearings on the XTO sale on Jan. 20 where the heads of both companies — Exxon Mobil and XTO — said they had a problem with a new piece of congressional legislation requiring natural gas producers to disclose the chemicals they use when fracturing gas deposits in shale. Both men said they had no problem making the disclosure; however, they would oppose including that disclosure requirement in the Safe Drinking Water Act, a law enforced by the EPA.

That is what the Fracturing Responsibility and Awareness of Chemicals Act (FRAC ACT) would do. It was introduced in both the House and Senate last summer. Both Rex Tillerson, chairman and CEO, ExxonMobil Corporation, and Bob R. Simpson, chairman of the board and founder, XTO Energy Inc., opposed the bill. Tillerson explained he opposed EPA’s involvement because “the devil is always in the details.” Pressed by Rep. Diana DeGette (D-CO), one of the key sponsors, on what he meant by that, Tillerson expanded on his original statement by saying, “It means I don’t know how the EPA is going to enact or implement the regulation that you are promoting in your bill.” Neither the House nor Senate has held hearings on the FRAC Act.

The back-and-forth between DeGette and Tillerson is important because Exxon-Mobil insisted that a clause be put in the contract allowing ExxonMobil to cancel the deal if Congress passes a law making hydraulic fracturing “illegal or commercially impracticable.” Neither Tillerson nor Simpson said the DeGette bill would do that; but Tillerson clearly implied that EPA regulatory involvement in hydraulic fracturing could be a problem.

Any congressional legislation seen as hamstringing new shale gas development would potentially be a crimp in some pipeline expansions. For example, Texas Eastern has announced two separate projects in anticipation of bountiful Marcellus shale gas. One expansion project could handle 300 million cubic feet of gas a day; the second 500 million cubic feet. According to Spectra Energy Corp. (which owns Texas Eastern) spokesperson Wendy Olson, Marcellus gas would account for 80 percent of the first project’s contracts and “a significant amount” in the second instance.

The production of Marcellus gas in New York State is already a red-hot political issue. There are only 15 shale gas wells in New York State, all of them vertical, according to Yancey Roy, spokesman for the NY Department of Environmental Conservation. That is what makes New York’s draft Supplemental Generic Environmental Impact Statement (dSGEIS) for horizontal shale gas fracturing so important. It was published Sept. 30, and the comment period closed at the end of December. Roy says the department is going through the 13,000 comments it received, some of them “ganged” signatures on single pieces of correspondence. Once the document becomes final, natural gas companies will be able to drill horizontally in the Marcellus area of New York for the first time. The dSGEIS proposes first-time permitting conditions for horizontal hydraulic fracturing, including disclosure of liquids used.

New York City has already weighed in against drilling in sections of Marcellus containing drinking water sources for the city. Steven Lawitts, the city’s top environmental official, said hydraulic fracturing represented “unacceptable threats to the unfiltered fresh water supply of 9 million New Yorkers.” Roy explains that New York City water sources account for a small portion of the Marcellus area.

Chesapeake Energy, a major producer in New York but not yet in the shale game there, complained that the dSGEIS’s proposed regulatory requirements and mitigation measures “are both costly and, in some cases, unnecessarily onerous . . . and have left New York with relatively few producers willing to devote scarce capital to New York. “However, the comments went on to say “Chesapeake is prepared to meet the extraordinarily high bar proposed in the dSGEIS.”

Natural gas sectors nervous about EPA GHG tailoring rule
Based on comments it recently submitted, the pipeline industry is concerned that the Environmental Protection Agency (EPA) will put tight constraints on methane gas emissions from compressor stations. Last fall, the EPA started the process by publishing a proposed “tailoring” rule that would require all facilities emitting more than 25,000 metric tons of CO2 equivalent annually to use “best available control technology” to reduce those emissions. About 874 of the nation’s 1,944 natural gas transmission compressor stations emitted 25,000 or more metric tons per year of GHGs — most of it methane — according to government statistics cited by INGAA. But INGAA thinks the numbers are actually much higher.

In comments by INGAA and other gas industry trade groups sent to the EPA, INGAA argued that forcing compressor stations to both obtain operating permits for methane emissions and to, where required, reduce those emissions below 25,000 tons a year would “severely challenge natural gas production, transmission, storage and gas distribution facilities, leading to adverse implications for regional and national energy security.” The American Gas Association is asking the EPA to increase the threshold to 50,000-100,000 metric tons annually.

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