House, EPA Move To Address Water Infrastructure

Both the Environmental Protection Agency (EPA) and Congress took steps to address additional funding for water infrastructure projects. A House committee unanimously passed a bill on July 29 which would raise the authorization ceiling on the Drinking Water State Revolving Fund (DWSRF), and make some other ostensibly positive changes to the program. Meanwhile, the EPA finally selected 12 state and local water projects to receive funding from the Water Infrastructure

Finance and Innovation Act (WIFIA) program, which Congress created in 2014 but has been slow to get off the ground.

The House Energy & Commerce Committee passed the Drinking Water System Improvement Act which authorizes the DWSRF at $1.2 billion in fiscal (FY) 2018, $1.4 billion in FY 2019, $1.6 billion in FY 2020, $1.8 billion in FY 2021 and $2 billion in FY 2022. Authorizations set funding ceilings; appropriations set final dollar levels.

The Congress appropriated $906.8 million in fiscal years 2014 and 2015, and $863.2 million in fiscal 2016 and ‘17. President Trump has asked for $2.3 billion to capitalize the State Revolving Funds in 2018. That total would leave the DWSRF at the fiscal 2017 level in 2018. Final congressional appropriations for fiscal 2018 won’t be established for months, but chances are the DWSRF appropriation won’t hit the level in the new authorization, which must be agreed to by the Senate.

Besides setting new, considerably higher authorization levels, the House bill also expands eligible uses of DWSRF to now cover costs associated with preconstruction activities and replacing or rehabilitating aging treatment, storage or distribution facilities.

Regardless of what level Congress finally appropriates for the DWSRF in fiscal 2018, that total will be augmented in 12 states that are likely to receive the first credit subsidies under the WIFIA program. Those subsidies essentially allow states to expand SRF loans. The Indiana Finance Authority was one of the state and local programs asked to submit applications under WIFIA in an announcement the EPA made in July. A spokeswoman for the authority says projects would be eligible to apply via the state’s SRF loan program.

The 12 programs will share, unless some disqualifying factor suddenly interferes, about $20 million in credit subsidies. The EPA states the 12 projects will also leverage more than $1 billion in private capital and other funding sources including EPA’s State Revolving Fund (SRF) loans, to help finance a total of $5.1 billion in water infrastructure investments. The selected projects demonstrate the broad range of project types that the WIFIA program can finance including wastewater, drinking water, stormwater and water recycling projects.

The EPA has not produced details about the 12 projects, but from just their titles they seem to be heavily weighted toward wastewater and storm treatment. Those are generally big-dollar projects, which WIFIA was established to help. That said, there appears to be, at first glance, few drinking water projects involving laying of pipe underground. “I would have liked to see more drinking water projects,” said Tommy Holmes, legislative director of the American Water Works Association. “But because of the public health implications, the EPA may have been a bit more conservative about including drinking water projects. And this is only the first round of funding.”

Appeals Court Decision May Trump House Pipeline Bill

The House passed two pipeline bills – which could run into trouble in the Senate for lack of Democratic support – amidst continuing industry unhappiness with federal and state regulatory agency foot-dragging on permit approvals. The U.S. Court of Appeals for the District of Columbia Circuit, which has authority to clarify federal regulations, made decisions on two separate pipeline cases in June. In one of them the court clarified that the Federal Energy Regulatory Commission (FERC) has the right to grant a pipeline an exemption from state law in the event a state drags its feet on permitting new construction. The court’s actions – and one of the House bills – are particularly germane with regard to Transco’s 200-mile Atlantic Sunrise pipeline, meant to deliver Pennsylvania shale gas south. FERC approved the project in February. However, the state of Pennsylvania has yet to grant the three permits necessary for the $3 billion project to break ground.

While clarifying FERC’s exemption authority, a victory for the pipeline industry, however, the DC court also made it clear that deadlines for issuance of  permits under the Clean Water Act (12 months) and Clean Air Acts (18 months) take precedence over timeframes FERC typically establishes under its Natural Gas Act authority. FERC normally gives state and federal agencies 90 days to issue permits after it approves an environmental impact statement.

“We are still working with the Pennsylvania Department of Environmental Protection and are awaiting clearances from the state before we can begin pipeline construction in Pennsylvania,” said Transco spokesman Chris Stockton. The project includes 183 miles of new greenfield pipeline which will take gas from Pennsylvania and move it south to Maryland, Virginia, North Caroline and South Carolina.

“After nearly three years of intense regulatory scrutiny, it is time for our own state government to complete its review of this important infrastructure project so that Pennsylvanians can immediately benefit from the economic growth and jobs it promises to deliver,” said Rep. Mike Turzai, speaker of the Pennsylvania House of Representatives, in a June statement.

The failure of states to participate in a timely manner in the FERC completion of an environmental impact statement and their ability to withhold permits after FERC project approval, were the rationales for the Promoting Interagency Coordination for Review of Natural Gas Pipelines Act (H.R. 2910) passed by the House on July 19 on mostly a party-line vote. The legislation requires that federal and state agencies conduct their respective permit reviews concurrently with the FERC, as it develops its environmental impact statement. The second bill that passed the House was the Promoting Cross-Border Energy Infrastructure Act (H.R. 2883). It replaces the Presidential permitting approval needed before constructing an oil and gas pipeline or electric transmission line that crosses a border with Canada or Mexico with a more transparent, efficient and effective review process.

Because H.R. 2910 may get hung up in the Senate, the bigger impact on pipeline construction approvals may come from the two cases decided by the DC appeals court. One case involved Millennium Pipeline Company LLC asking the court to force New York State to certify Millennium’s request for a water quality certification, required under Section 401 of the Clean Water Act, that would allow Millennium to construct its Valley Lateral Project Millennium submitted its application with the state agency in November 2015, but almost 19 months later, the agency has still failed to act. In the other case, Tennessee Gas Pipeline Co. LLC, a subsidiary of Kinder Morgan, argued a local government was refusing to issue a permit under the Clean Air Act for additional compressor capacity.

The Pennsylvania Department of  Environmental Protection has held up granting a permit to Transco for Atlantic Sunrise because of nitrogen oxide emissions generated by construction equipment involved in building the pipeline.

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