Congress set up a new federal financing authority for water infrastructure construction.
In the area of sewer and drinking water pipe instillation and replacement, the Water Infrastructure Finance and Innovation Authority (WIFIA) would supplement the grants provided to states and their local subsidiaries by the Clean Water and Drinking Water State Revolving Funds (SRFs). Congress has steadily been reducing funding to those grants, with the Obama administration’s compliance.
Congress established a “pilot” WIFIA but before it can begin to operate Congress needs to appropriate the $20 million authorized in the Water Resources Reform and Development Act (H.R. 3080). A number of water infrastructure groups called authorization of the WIFIA a good first step, but also cited limitations on its financing imposed by Congress. The WIFIA will be able to extend loans and loan guarantees. There is a ceiling of $20 million on what Congress can appropriate to WIFIA in fiscal 2015 (starting Oct. 1). That increases each year until it hits $50 million in fiscal 2019. Loans are limited to 49 percent of the total cost of the project, although the WIFIA can use up to 25 percent of its funding for loans exceeding 49 percent.
“WIFIA will be most effective when communities can fund 100 percent of project costs, and any non-WIFIA share should be allowed to be financed with tax-exempt debt,” says David LaFrance, chief executive officer of the American Water Works Association. “We are committed to working with our leaders in Congress and our colleagues in the water community to build off today’s success.”
A large variety of water infrastructure projects could be funded through WIFIA, including those having been caused by storm damage, irrigation control projects, harbor maintenance and other water problems. There will be competition for the fairly small amount of financing that will become available should Congress appropriate the $125 million over five years. The WIFIA concept is very similar to a parallel financing authority already operating for highway projects called the Transportation Infrastructure Finance and Innovation Authority. The WIFIA would borrow funds from the U.S. Treasury at low rates, provide that money in some form of concessionary financing to either a local government or even a private party, with the “subsidy” for that low rate covered by a congressional appropriation. Then the loan is paid back, and the funds are returned to the Treasury. This “credit assistance,” with its subsidy built in, allows a city getting a loan to leverage loan dollars many times.
Congress appropriated $750 million and $1 billion for the TIFIA in fiscal 2013 and 2014. One would think it would not be too great a stretch for Democrats and Republicans to agree on a meager $20 million for the WIFIA in fiscal 2015. Tommy Holmes, legislative director for the American Water Works Association, does not want to forecast what appropriation, if any, Congress will make. The AWWA and other water groups sent a letter to Senate and House members on requisite committees asking them to appropriate the $20 million in fiscal 2015, and to avoid funding reductions for the SRFs. Holmes says the response from Capitol Hill has so far been non-committal.
Any sewer or drinking water funding through WIFIA is expected to go to large, nationally or regionally “significant” projects, which generally do not receive SRF grants. The money can be used for construction, rehabilitation and replacement.
The water resources bill also makes some changes to what Clean Water SRF funds can be used for, and what municipalities and states have to prove before they can get a loan from the EPA. In the first instance, the bill expands the kinds of projects CWSRF money can be used for, particularly in the area of “green” projects. “It opens the door to new uses,” states Hannah Mellman, manager, legislative affairs, National Association of Clean Water Agencies, for example, for the purpose of reducing water use by a publicly-owned treatment works.
With regard to new steps SRF applicants will have to take, in 2016 they will have to have studied the cost effectiveness of processes, materials, techniques and technologies for carrying out a proposed project. “That might take a little more work,” opines Mellman, “but we don’t see that as a big hindrance. We would expect projects which receive SRF money to be cost effective.”
DOE Plans To Eliminate ‘Conditional’ LNG Export Applications
The Department of Energy is changing its approach to the review of liquefied natural gas (LNG) export applications. This has been a controversial issue for a few years now as U.S. gas reserves have exploded, metaphorically, in the face of shale fracking. Producers want to be able to export LNG to countries that do not have a free trade agreement with the U.S. without having to wait for DOE approval, which is currently the case. But the DOE has been slow to approve those applications, in part because of concerns about the impact of greater exports on domestic natural gas prices, a concern the manufacturing industry has highlighted.
The DOE proposed change, which won’t be finalized for months, if at all, doesn’t go that far. In fact, it is simply procedural. Instead of allowing potential LNG exporters to come to the DOE for “conditional” approval to export to non-FTA countries, the DOE would require the exporters to first get environmental approval for construction of export terminals from the Federal Energy Regulatory Commission (FERC). Then the exporter could apply to the DOE for export approval. Exporters now often come to the DOE first, before approaching FERC, to get conditional approval because that ostensibly helps them get financing for their projects.
The DOE has lately been flooded by export applications; thirty-one companies have asked the Energy Department for export permits. Fifteen are for exports to non-FTA countries. Many of those projects will never be built because they will not pass muster with FERC. The DOE wants to focus its attention on projects that are likely to be built, so it will no longer issue conditional approvals.
Sabine Pass already has FERC and DOE approval to export to non-FTA nations from trains 1-4 in Cameron Parish, LA, and is now looking for additional approval for exports to FTA and non-FTA from Trains 5 and 6, whose construction has not been approved by the FERC, nor has Sabine received conditional approval for T5/6 exports from the DOE. Cheniere has also initiated a project to develop liquefaction facilities near Corpus Christi, TX. The FERC has not approved construction there yet, but Cheniere has been signing LNG export deals from that location in anticipation of construction beginning sometime in the future.
Cheniere is the only company that has passed FERC and DOE muster to export to non-FTA countries, although it has additional applications in the queue. ConocoPhillips Alaska Natural Gas Corp. has received numerous DOE approvals over the years to export to non-FTA countries from long-established facilities in Kenai, AK, and in much smaller amounts than Cheniere is planning on. Other companies wanting to export to non-FTA countries include Texas LNG, Gasfin Development and Trunkline LNG.