New Funding Authority For Water Infrastructure Moves Forward In Senate

A Senate committee gave a big boost to a new source of water infrastructure spending by including an amendment in the Water Resources Development Act (S. 601). That WRDA bill passed the Senate Environment and Public Works Committee on March 20 by a unanimous vote.

It included an amendment which would create a five-year pilot program to test a Water Infrastructure Finance and Innovation Authority (WIFIA), a development the American Water Works Association hailed as pivotal in confronting America’s trillion-dollar water infrastructure challenge.

The bill now goes to the Senate floor. Although no one on either side of the aisle objected to the WIFIA provision in the bill when it passed committee, it is always possible that a Senator could put a “hold” on the bill for any reason — including an attempt to eject the WIFIA amendment. A “hold” on a bill prevents it from coming up for a vote.

The House Transportation and Infrastructure Committee is slowly gearing up for its own vote on an omnibus WRDA. Rep. Bob Gibbs (R-OH), chair of the House Subcommittee on Water Resources and Environment, floated a draft bill to create a WIFIA last year. It never even mutated into an actual bill, much less advanced through the House.

Any potential opposition to establishing a WIFIA would be generated by the need to create a new federal spending program. The Senate authorized $100 million a year ago. Many Republicans and some Democrats oppose creating new federal spending programs because of concerns about the federal deficit. In this case, WIFIA, once established via an authorization, could not be funded without a separate vote by the Appropriations Committees in both houses. Supporters of WIFIA argue that any appropriation would be repaid to the federal Treasury, making WIFIA “revenue neutral.”

The fund would be authorized to get $50 million a year from both the EPA and Army Corps of Engineers. The total of $100 million would be used to offer loans or loan guarantees at Treasury rates, with 35 years to repay after substantial project completion. The minimum project size is $20 million. Water and wastewater utilities and authorities would be eligible, as would be state infrastructure finance authorities (SRFs).

Currently, this legislation would provide a loan for a maximum of 49 percent of a project’s costs. Eligible projects include: pipe replacement or rehabilitation, CSO and wastewater projects and new water supply projects.

The interest rates paid by WIFIA loan recipients could be a tad higher than the interest rates offered by state SRFs; but SRF loans are generally available to small and medium-sized projects only. The water fund would be based on an existing Transportation Infrastructure Finance and Innovation Act (commonly called TIFIA). The beauty of these infrastructure funds is that Congress only has to appropriate enough money to cover the “subsidy” cost of providing the low-interest Treasury loan.

Pipeline infrastructure shortfalls key to gas/electric interconnection concerns
Concern in Congress about insufficient interstate pipeline infrastructure has prompted imminent introduction of a bill to speed up construction applications at the Federal Energy Regulatory Commission (FERC). The bill would force federal agencies required to provide input on a pipeline’s environmental impact to meet deadlines for submitting comments to the Federal Energy Regulatory Commission (FERC). An increasing reliance on natural gas by electric utilities has sparked worries about pipeline bottlenecks, particularly in New England and the Midwest. Those concerns were expressed at hearings in the House Energy & Commerce Committee’s subcommittee on energy and power which took place on March 19.

At those hearings, Rep. Mike Pompeo (R-KS), a member of the Energy and Power Subcommittee, referred to a February 2013 report from the Government Accountability Office (GAO) which reported that FERC does not track the time it takes for a construction permit to be approved because the agency believes that information has “limited usefulness.” Doing its own research, the GAO found that for those projects that were approved from January 2010 to October 2012, the average time from pre-filing to certification was 558 days; the average time for those projects that began at the application phase was 225 days.

Two FERC commissioners testified at the hearings: Philip Moeller and Cheryl LaFleur. Pompeo asked them whether FERC should keep statistics on how long it takes to approve a new pipeline. Both answered “yes.” Then he asked whether they were aware that an INGAA report said that 20 percent of pipelines experience delays of six months or more after a National Environmental Policy Act (NEPA) review of the application is completed. NEPA requires environmental impact statements on a project which, in the case of pipelines, means that FERC must wait for input from agencies around the government, such as the Fish and Wildlife Service, to name one. Those agencies often drag their feet.

Pompeo said he is developing legislation that will force agencies outside of the FERC to meet strict timetables for providing environmental input. “This will allow pipelines to move forward so they can have a little more certainty,” he explained. “I hope my bill will have bi-partisan support.” Pompeo did not indicate when he will introduce his bill.

Moeller responded: “The challenges that you alluded to are the resource agencies that typically don’t have the accountability to come back with an answer. It is the way the statute is. If you created a timeline of responsibility, I think they would be a lot more responsive.”

In addition, Pompeo criticized President Obama for suggesting in mid-March that the FERC include the impact on “climate change” in any NEPA analysis it does on a new pipeline or any other project. He asked Moeller whether the FERC currently has the authority to do that. Moeller said he would have to review court decisions before reaching a conclusion on that question.

Most of the hearing, however, was devoted to questions about what the FERC could or should do to help electric utilities obtain dependable access to natural gas. Demand for natural gas has skyrocketed as coal-fired generation has been taken off the board because, in good part, of Environmental Protection Agency regulations meant to discourage the use of coal. The FERC has been conducting technical conferences and meetings over the past year dedicated to determining whether it needs to either develop new federal rules on such things as “scheduling” and “communications” or leave solutions to the regions that have different mixes of energy inputs and pipeline infrastructures.

“The challenges are serious, very real and somewhat urgent, especially in New England and the Midwest,” said Moeller. “Indeed, some in the industry believe nothing short of a major blackout will provide sufficient motivation to the various stakeholders to solve the problems facing us.”

After the hearings, Don Santa, president and CEO of INGAA, urged the FERC to take prompt action to address the deficiencies in current electric power market rules that create unnecessary and avoidable risks to electric power reliability. “We recognize that many see the problem as one of insufficient pipeline capacity. While we agree that pipeline capacity expansion in some regions is necessary, it is important to clarify that the root cause of the problem is a structural flaw in the deregulated wholesale electric power markets. These markets fail to compensate for electric reliability, regardless of what fuel the generator uses to create electricity. This, in turn, discourages electric generators from holding firm pipeline capacity, a prerequisite for natural gas pipeline expansion.”

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