February 2020 Vol. 75 No. 2


Washington Regulatory Outlook: Changes Could Benefit Industry in 2020

Stephen Barlas | Washington Editor  

Two key Environmental Protection Agency (EPA) regulations could have a big impact on water and gas pipeline construction if they are completed this year. One proposed rule would require drinking water pipe replacement, the other limits state ability to delay or halt gas pipeline builds. 

Otherwise, the Washington scene isn’t likely to produce big surprises. With 2020 being a presidential election year, major initiatives, particularly via Congress, are less likely to finalize. On Capitol Hill, there will probably be a minor pipeline safety reauthorization, and funding levels for key underground construction programs in the sewer, drinking water and broadband areas will be continued in fiscal 2020 at current levels. 

One of the two prominent regulatory actions that may be completed this year is EPA update of the 1991-vintage lead and copper rule, which has to do with acceptable levels of each substance in drinking water pipes, both inside the house and those managed by utilities. There have been numerous lead “emergencies” around the country, often at schools and other facilities where children are present, and that is politically motivating the EPA’s push. The proposed rule only makes changes regarding lead. 

“The new requirements for lead service line inventories and replacement plans, and lead sampling in all schools and childcare facilities will necessitate significant resources for both regulated entities and primacy agencies to implement after the rule is finalized,” said Toby Baker, executive director, Texas Commission on Environmental Quality. 

There will be heavy compliance costs for state and local governments, and private water companies – not to mention business opportunities for the latter. The good news is that the Drinking Water State Revolving Funds (SRF) will be available as a funding source for individual projects. Congress has turned down the Trump administration’s demand to reduce funding for the Drinking Water and Clean Water SRFs in fiscal 2020, which began Oct. 1, 2019. In the final fiscal 2020 appropriations bill, passed in mid-December, Congress gave the CWSRF $1,638,826,000 and the DWSRF $1,126,088,000 – the same amounts they received in fiscal 2019. 

Funding for the CWSRF could have been much higher if Congress passed the Water Quality Protection and Job Creation Act of 2019 (H.R. 1497). The House Transportation and Infrastructure Committee passed that bill with bipartisan support in late October. The legislation sets the CWSRF authorization level (meaning how much Congress could appropriate, if it wants to) at a record $4-billion-a-year for five years starting in 2020. But that number is pie-in-the-sky, as appropriations will never reach that level. Moreover, there is almost no chance Congress will pass this authorization bill in 2020. 

Rural broadband funding 

As with water project funding, federal funding for broadband infrastructure is also likely to hold steady. At least in this case, Congress established a new initiative two years ago focused on rural broadband construction, that continues to benefit from bipartisan support. That is the U.S. Department of Agriculture’s Rural eConnectivity Pilot Program, which received $550 million initially and then another $600 million in fiscal 2019. 

The appropriations bill for fiscal 2020 that Congress passed in December, gives ReConnect another $555 million in fiscal 2020, which actually started Oct. 1, 2019, according to Carolyn Just, spokeswoman for the NTCA, the rural broadband association. That money is just now starting to be dispersed to broadband companies around the country, as the USDA’s Rural Utilities Service starts to put program rules in place. 

Applications for a second round of funding with fiscal 2019 dollars are due at the USDA by March 16, 2020. There are three funding components available: 100-percent loan, 100-percent grant and loan-grant combinations. Awards in the first round, announced last December, were generally under $10 million, with some as low as $2 million. For example, a $2.1 million in ReConnect Program funding grant went to the Ohio Valley Industrial and Business Development Corporation to construct a fiber-to-the-home (FTTH) network utilizing gigabit passive optical network technologies in rural West Virginia. 

Gas pipelines 

While the federal government funds broadband and water infrastructure construction, that is not the case with gas pipelines, of course. But the Trump administration is trying to remove impediments to construction as the EPA revises the Clean Water Act’s Section 401, which requires gas companies to obtain certification from state and local agencies when pipeline construction crosses streams and rivers. Section 401 certification is supposed to insure against pipeline effluent polluting the water. 

The public comment deadline for the proposed rule closed last October, so it is reasonable to assume the EPA will publish a final rule in 2020. The EPA’s initiative has been highly controversial, with several industry groups from various sectors weighing in, in favor. Environmental groups have hotly opposed the EPA, sometimes in fiery language. Different states have been for it, others against. As evidence of the controversial nature of the EPA proposal, House Democrats in their pipeline authorization bill added a provision forbidding the EPA to move forward. On the other hand, Republicans in the Senate are supporting legislation that gives the agency legal grounding to proceed. 

The Interstate Natural Gas Association of America (INGAA) and individual pipelines have been making the case that state departments of environmental regulation keep stopping and then restarting – allegedly to get additional information – what is supposed to be a one-year time limit during which states are allowed to rule on a 401-certification application. Sometimes what appear to be extraneous considerations, primarily greenhouse gas emissions, come into play in state deliberations. 

In its comments to the EPA, INGAA stated, “The language of Section 401, however, is ambiguous and variable about the scope of the certifying authority’s review, determination, and condition-setting. The proposed rule offers the first holistic, coherent reconciliation of the statute, taking into consideration the context and structure of Section 401 and the focus and purposes of the CWA.” 

The Natural Resources Defense Council takes the opposing view. It stated in its comments: “EPA makes a mockery of its claimed respect for tribal rights and cooperative federalism, proposes a rule that violates the Clean Water Act in several respects, ignores important aspects of the issue, utterly fails to identify a problem that the proposal is designed to address, and promotes an unworkable and illogical scheme that leaves waters more vulnerable to pollution and other harms.” 

Pipeline safety 

It is pipeline safety, not construction, that Congress will deal with in 2020, as the House and Senate attempt to merge two very different reauthorization bills. These big bills, passed every four years, make changes in the laws enforced by the Pipeline Hazardous Materials and Safety Administration. The House bill, with only Democratic support, has some industry-opposed provisions on methane leaks. At the same time, it includes none of the industry-supported provisions in the bipartisan Senate bill allowing pipelines to use innovative safety technologies in a limited fashion, which has been a key industry legislative objective. 

The bottom line for underground construction in 2020 is no new, significant funds, but potential, consequential regulatory initiatives from the EPA which would probably lead to an upswing in the sound of jackhammers breaking ground.

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