[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
DRINKING WATER NEEDS AND INFRASTRUCTURE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENVIRONMENT AND HAZARDOUS MATERIALS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 28, 2001
__________
Serial No. 107-59
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
_______
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Environment and Hazardous Materials
PAUL E. GILLMOR, Ohio, Chairman
JAMES C. GREENWOOD, Pennsylvania FRANK PALLONE, Jr., New Jersey
STEVE LARGENT, Oklahoma EDOLPHUS TOWNS, New York
GREG GANSKE, Iowa SHERROD BROWN, Ohio
JOHN SHIMKUS, Illinois GENE GREEN, Texas
(Vice Chairman) KAREN McCARTHY, Missouri
HEATHER WILSON, New Mexico THOMAS M. BARRETT, Wisconsin
VITO FOSSELLA, New York BILL LUTHER, Minnesota
ROBERT L. EHRLICH, Jr., Maryland LOIS CAPPS, California
STEVE BUYER, Indiana MICHAEL F. DOYLE, Pennsylvania
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire HENRY A. WAXMAN, California
JOSEPH R. PITTS, Pennsylvania EDWARD J. MARKEY, Massachusetts
MARY BONO, California JOHN D. DINGELL, Michigan,
GREG WALDEN, Oregon (Ex Officio)
LEE TERRY, Nebraska
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Beecher, Janice A., Beecher Policy Research, Inc., on behalf
of the National Association of Water Companies............. 138
Beider, Perry, Principal Analyst, Congressional Budget Office 122
Hamill, Barker, Association of State Drinking Water
Administrators, Chief, Bureau for Safe Drinking Water, New
Jersey Department of Environmental Protection.............. 146
Ingram, Beverly, Assistant Director, Detroit Water and Sewer
Department, on behalf of the Association of Metropolitan
Water Agencies............................................. 134
Neukrug, Howard, Director, Office of Watersheds, Philadelphia
Water Department, on behalf of the American Water Works
Association................................................ 128
Olson, Erik D., Senior Attorney, Natural Resources Defense
Council.................................................... 154
Whitman, Hon. Christine Todd, Administrator, U.S.
Environmental Protection Agency............................ 25
Material submitted for the record by:
Dingell, Hon. John D., and Hon. Frank Pallone, Jr.:
Letter dated March 28, 2001, to Hon. Christine Todd
Whitman, requesting response to questions.............. 164
Letter dated May 2, 2001, to Hon. Christine Todd Whitman,
requesting response to questions....................... 169
Krenik, Edward D., Associate Administrator, Office of
Congressional and Intergovernmental Afffairs:
Letter dated June 20, 2001, to Hon. John D. Dingell...... 172
Letter dated September 26, 2001, to Hon. John D. Dingell. 175
Whitman, Hon. Christine Todd, Administrator, U.S.
Environmental Protection Agency, letter dated October 31,
2001, to Hon. John D. Dingell.............................. 179
(iii)
DRINKING WATER NEEDS AND INFRASTRUCTURE
----------
WEDNESDAY, MARCH 28, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Environment
and Hazardous Materials,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:10 p.m., in
room 2123, Rayburn House Office Building, Hon. Paul Gillmor
(chairman) presiding.
Members present: Representatives Gillmor, Shimkus, Wilson,
Pitts, Bono, Walden, Terry, Bass, Tauzin (ex officio), Pallone,
Brown, McCarthy, Barrett, Luther, Capps, Waxman, and Dingell
(ex officio).
Also present: Representative Engel.
Staff present: Jerry Couri, policy coordinator; Bob Meyers,
majority counsel; Peter Kielty, legislative clerk; Dick
Frandsen, minority counsel; and Dave Schooler, minority general
counsel.
Mr. Gillmor. The subcommittee will now come to order. The
Chair recognizes himself for 5 minutes for the purposes of
delivering an opening statement. I want to welcome our
panelists today, particularly Governor Whitman, the
Administrator of EPA, who is appearing before us for the second
time before this subcommittee.
Today's hearing focuses on the pressing needs of drinking
water systems across the country. Provision of safe drinking
water is one of the highest environmental duties that we as a
Congress could undertake.
Water quality directly relates to the future health and
well being of our population, and this should come as no
surprise to anyone who has been told by their doctor to drink
more water, or who has had to live under the effects of a water
contaminant advisory.
One of the benefits of living in this country is that over
76,000 water systems have taken great pains to construct
networks that deliver safe and affordable water. This luxury is
not available in every place throughout the world, as the
Health and Environment Subcommittee examined last year.
As the committee of sole jurisdiction over drinking water
programs, we need to work diligently to ensure that a high
standard of health protection continues. The dictionary
definition of clean drinking water is that which is free from
foreign matter or pollution, and not infected.
And I believe that underscores the root goals of the Safe
Drinking Water Act; to help guide communities in a way that
will protect their drinking water from organism that could
cause otherwise healthy people to become ill. Without the
provisions of the Act, which help build pipes and direct
disinfection efforts, public health would be seriously at risk.
The Safe Drinking Water Act of 1996 required the U.S.
Environmental Protection Agency to survey the needs of water
systems every 4 years, and I believe that anyone who has taken
the time to carefully look at this matter understands that the
pursuit of cleaner drinking water in local communities demands
additional resources.
Local and State taxes can be raised to meet those
obligations, but it is really the Revolving Loan Fund under the
1996 Act that helps localities afford safe drinking water. As
someone who has been a long supporter of funding Federal
mandates on local and State governments, I believe that the SRF
is crucial to providing Federal resources to entities trying to
comply with Federal Standards and protect public health.
Today's witnesses will help us better understand the
drinking water needs of communities across our country.
Following up on the recently released EPA's drinking water
needs assessment, we will have the Administrator tell us about
the needs of systems across our country that are trying to
ensure that water is disease and contaminant free.
Later, we will have representatives from the Congressional
Budget Office, environmental groups, and drinking water
associations to enlighten us on their past work and future
financial requirements.
I recognize that many members of our panel have varying
concerns about contaminants regulated under the Safe Drinking
Water Act, particularly arsenic, and I share your views that
our Nation has drinking water standards that are protective of
human health and the environment.
In fact, our committee has had a long dialog with the EPA
on this matter, and members may be assured that I will continue
to monitor the effort. Our hearing today has been set up under
bipartisan agreement of staff, to focus solely on drinking
water needs.
That being said, I would intend to exercise our committee's
authority as chairman of the subcommittee to review EPA's
implementation of the Drinking Water Act, and its work on all
contaminant levels and standard setting.
I want to thank the witnesses for coming to our panel, and
I want to thank Mr. Pallone for his staff's cooperation in
setting up this hearing. It is vital that we assess where
drinking water system needs lie.
The EPA currently believes that $102 billion is immediately
needed by all sizes and forms of systems, and that another $50
bill will be required over the next 20 years to guarantee that
safe drinking water reaches those who need it.
Certainly, just putting pipes into the ground to deliver
this water is not enough. The emphasis on this extra funding
needs to be on a comprehensive public health campaign that
seeks to mobilize public and private resources to purify water
from its initial source through its distribution channels, and
finally out to tap.
Let me just add one short story in closing. Yesterday's
Washington Post ran a piece in its ``Style'' section on
Hollywood Producer Mike Medavoy, who was at a swank Beverly
Hills cocktail party last Friday night.
And he said that he and everyone that he knew is unaffected
by drinking water contaminants ``because we all drink Evian.''
And when asked about people who could not afford Evian, he
announced, ``well, they should drink Pellegrino.''
Well, I guess that some people's attitude in Hollywood is
not much different than Marie Antoinette's. But I believe that
we should not be forced into making safe drinking water a
luxury for the monied classes, but it ought to be something
available for all people in our country.
And at this point, I am very pleased to recognize the
ranking member of our panel, Mr. Pallone, of New Jersey, for
the purpose of making an opening statement.
Mr. Pallone. Thank you, Mr. Chairman, and I want to thank
you again for holding this important hearing. The delivery of
safe drinking water is obviously an issue of the utmost
importance and an issue that warrants immediate attention, as
this topic continues to be exploited at the Congressional
level.
I did want to mention that I hope that the organizations
seeking more funding will respect the clear jurisdictional
divisions between the safe Drinking Water Act and the Clean
Water Act. Otherwise, our efforts will not likely succeed.
And we are going to hear today from a number of panelists,
but I believe the message will be clear and consistent from
each; the need for updates and improvements in our drinking
water infrastructure is great.
Congress must act now to renew its commitment to America's
drinking water resources. I am particularly looking forward to
hearing from Administrator Whitman on Panel One today.
And I have to say, Mrs. Whitman, that if I call you
Governor, you have to forgive me, instead of Administrator,
because once a Governor, always a Governor. So I may keep doing
that. But keeping in line with the health and safety of our
drinking water, I want to highlight my concerns about the
administration's latest actions regarding arsenic.
The proposal to reduce the acceptable amount of arsenic in
drinking water from a level of 50 parts per billion to 10 parts
per billion is not too much to ask. The European Union and the
World Health Organization have adopted a standard of 10 parts
per billion.
As a matter of fact, when Governor Whitman was serving as
Governor in New Jersey, our State Department of Environmental
Protection supported a level of 10 parts per billion, or even
less, and I know that you have previously supported that
standard.
And just to give you an idea--and again I am using my own
State as an example--after the EPA decided that they were not
going to use the 10 parts per billion, at least for now, this
was from Asbury Park Press in my District.
``The State Department of Environmental Protection of New
Jersey said they still plan to set a 10 parts per billion
limit. We certainly do not want 50 parts per billion as a
standard,'' said Eileen Murphy, Assistant Secretary of the
DEP's Division of Science, Research, and Technology, commenting
on the EPA's decision. ``That should have been changed years
ago. This is not a good thing for EPA to have done.''
So obviously I am not happy. I am hoping that Governor
Whitman will give us some indication of why that was changed. I
say this because we are talking about a substance that the EPA
itself said can cause bladder, lung, skin, and other kinds of
cancer.
The prior standard for arsenic in drinking water was
developed in 1942. I know that Administrator Whitman pointed to
the fact that the science was not available to back up the
change to 10 parts per billion.
But again we had this study by the National Academy of
Sciences, one of the most distinguished scientific bodies
referred to by Congress, and they state that exposure to
arsenic at the level of the current standard, 50 parts per
billion could easily result in a combined cancer risk on the
order of 1 in 10.
That level of risk is much higher than the maximum cancer
risk typically allowed by Safe Drinking Water Act standards. I
guess I just don't buy this idea that the science is not there.
I really do not think that the question is the science. I think
it is the special interests.
I think there are a number of special interests within the
administration that did not find the new standard acceptable.
It was interesting that the very day that the EPA announced
that it was not going to use the 10 parts per billion, there
was an article in the Washington Post that talked about the
American Timber Institute going into see the President or
somebody else at the White House, saying that they could not
live with this because they could not--you know, they were
using arsenic and painting boards that were used for docks or
boardwalks or whatever, and it was going to hurt them in their
business.
The other thing that I want to say to the Governor and with
regard to this decision on arsenic regulations, is that I am
not just concerned about the standards. I am concerned about
the infrastructure. That is the purpose of the hearing today.
And after reviewing Mrs. Whitman's statement, it was clear
that the EPA recognizes the significant needs of our Nation's
drinking water infrastructure. But if we all agree that there
is a massive shortfall in resources available for water systems
to upgrade, and replace, and expand infrastructure, I would
like to know whether President Bush plans to do anything about
it.
You know, we have the budget on the floor today. Is the
budget, the President's budget, going to meet these needs. Is
he going to be appropriating or suggesting that more money be
available for the infrastructure.
There is a problem with enforcement also with regard to
safe drinking water standards. Is the budget going to request
more money so we can enforce even the existing standards, and
find out when there is non-compliance.
Again, there is a huge discrepancy between what we are
hearing today on all sides on a bipartisan basis about what the
needs are, even from the EPA in the statements, as opposed to
what level of funding is actually going to be available.
And I seriously question whether this administration is
going to provide the additional funding given what they are
doing with the budget, and the tax cuts, and the magnitude of
the tax cuts that are going to be using up a large part of the
surplus.
The other thing that I want to say is that I believe very
strongly, Mr. Chairman, that the Federal Government has to make
this investment, and it has to make an investment in safe
drinking water infrastructure a national priority, and that of
course begins here in this subcommittee.
We have to face the fact that if the Federal Government
does not do it, the State and towns do not have the money to do
it. My Governor, I'm sure, knows that from her own experience
as a Governor, and the State cannot make up this shortfall, and
that means that the ratepayers are going to have to make it up
if the Federal Government does not provide the funds.
So what I am asking is that there be a significantly
enhanced Federal role in providing assistance for drinking
water infrastructure. Otherwise the critical investments are
not likely to be made, or they are going to be made at costs
strictly to the ratepayers.
And whether the solutions, whether it is grants, trust
funds, loans, and incentives for private investment, we can
certainly discuss that. The bottom line is that we need a
significant investment of Federal dollars, and I would like to
know again whether we are going to see that from this
administration in the budget, or in the proposals on the
appropriations level over the next fiscal year.
Thank you, Mr. Chairman, and again I want to thank you for
cooperating with us and in making the presentations today, the
panels, and working with our staffs.
Mr. Gillmor. Thank you, Mr. Pallone. The Chair recognizes
the gentleman from Illinois, Mr. Shimkus, for an opening
statement.
Mr. Shimkus. Thank you, Mr. Chairman, and I will just be
brief. We are going to hear a lot from my friends about
obviously the arsenic decision, but what I want to say is that
we had 8 years of a previous administration who dropped this
rule as they were going out the door, probably because they
couldn't get their own side to help them move legislation or
the process through and so they waited until the end.
I think it is very credible to make sure that we are doing
the right thing, and I have full faith and credit in your
desire to uphold the safe drinking water standards of our
citizens.
I will just say on--and so I hope that we do not have to
get all emotional. We can just get down to facts and realize
that we have to base our decisions on science and not on
emotions. Senator Miller, when he came to Washington, was quote
as saying, ``I use it all the time now.''
Washington, DC is the only place where the election is
never over, and here is a former Governor of a State saying
that, and that is so true in this city, and I think we are
going to hear some of that today.
Administrator, my concern and questions are going to be on
rural America and rural parts of my district. Even without
higher standards, we still have parts in the rural United
States where even under the current standards we don't have
safe drinking water.
I mean, I have still got farmers who are going into town
loading up their water in the back of a pickup and driving it
home, and that is not uncommon, I'm sure, even in some of the
rural parts of New Jersey. There may be some of that still.
Through U.S.D.A. and rural development, they made a great
effort to leverage with local water districts and the like to
get usable clean water out to rural Illinois, and what I would
like the EPA to look at is how you can all partner with those
existing programs through U.S.D.A., and cross over these
administrative boundary lines.
And also with the States, and with what they have locally,
because that is of concern to the 20th District of Illinois,
and I appreciate you being here, and with that, Mr. Chairman, I
yield back my time.
Mr. Gillmor. Thank you very much. The ranking member of the
full committee, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you, and I commend you
for holding today's hearings on the Capital Investment needs of
American's public water systems. These infrastructures are
vital to protect the public health and provide safe drinking
water for our citizens.
Last month, EPA reported that the current needs to ensure
provision of safe drinking water to our people are $102.5
billion and growing, a huge sum of money. Billions more were
documented as necessary for future years, and the EPA has
acknowledged that its estimates are in fact conservative.
The funding to reduce aging pipes, facilities, and other
parts of our water infrastructure systems is a critical issue
for the city of Detroit, where pipes were first installed in
1887, over 100 years ago, are still being used.
Mr. Chairman, this is not a partisan issue. It is
thoroughly bipartisan, and I am pleased that addressing water
infrastructure funding to protect public health is a priority
of this subcommittee.
For the administration of those who are seeking increased
funding, I would advise them to keep in mind that drinking
water infrastructure funding lies in the exclusive jurisdiction
of the Committee on Energy and Commerce under the Safe Drinking
Water Act.
Matters relative to waste water funding under the Clean
Water Act have traditionally been dealt with by the
Transportation Committee. Failure to work each committee in
proper fashion will not achieve the worthier goal of obtaining
increased funding for our water infrastructure needs.
One of the purposes of the State revolving fund program
created by the Safe Drinking Water Act amendments of 1996 was
to assist drinking water systems to comply with the cost of new
protective standards, such as the arsenic standard.
Since 1996, EPA drinking water State revolving fund program
has made available over $3.6 billion to assist drinking water
systems, but contrast that if you will to a need of $102.5
billion, and you will find that we have much to do.
Also in 1996, this committee on a bipartisan basis mandated
that EPA promulgate new drinking water standards for arsenic
within 5 years. And if my $40 calendar watch tells me
correctly, that 5 years is about up.
I believe that the Bush Administration's recent
announcement to delay or withdraw the new arsenic standards of
10 parts per billion is a serious mistake, one which
jeopardizes the health of the American people, and one which
Administrator Whitman will come to regret.
Americans should not be subject to health risks from
arsenic in their drinking water, and I note that arsenic is a
deadly poison that exceed those of other developed nations, and
that exceed levels recommended by the World Health
Organization.
The EPA has found that long term exposure to low
concentrations of arsenic in drinking water can lead to skin,
bladder, lung, and prostate cancer, cardiovascular disease,
diabetes, and reproductive and adverse neurological effects.
I support sound science, but not those who use the term as
a shibboleth for more delay in changing the current
unprotective arsenic standard. Thank you, Mr. Chairman. I look
forward to the testimony of our witnesses, with some emphasis
on the subject of arsenic and why the change was made.
Mr. Gillmor. Thank you very much, Mr. Dingell. The Chair
would also point out that the focus of our hearing today is the
funding needs of drinking water systems, which is an item as
the ranking member pointed out exclusively under our
jurisdiction.
I know that a lot of people may want to talk about arsenic,
and there is free speech, and so people can talk about whatever
they want. But as I indicated in my opening statement, arsenic
really deals with standards, and not needs and infrastructure.
We hope to get into that later, and I would point out that
the witnesses, under bipartisan agreement, when we asked them
to come today, had only been asked to talk upon the needs
subject.
So recognizing that it is impossible for it to work that
way, the Chair would still request that the members try to
stick to the agenda as much as possible. The gentlelady from
New Mexico, Mrs. Wilson.
Mrs. Wilson. Thank you, Mr. Chairman. With that admonition,
I would start out by saying that the first form of self-
government in the State of New Mexico after the Spanish settled
over 400 years ago was not the town hall meeting, and it was
not the parish church.
It was the acequia commissions, and acequias are ditches,
and where we get our water from, and where we still get our
water from today as we irrigate up and down the Rio Grande
Valley.
And in the American West, water is a big issue, and in some
ways it is the issue for everyone. It is kid of a--it is so
serious that you often find folks on ditches with shotguns to
keep everybody else from the ditches.
It has been a serious issue throughout the history of the
West, and it is a very important issue as we look at the
development of the West to make sure that safe drinking water
is available.
In this country, 60 percent of our water supply is deemed
drinkable, which is a big deal. Not many countries have
achieved that, but it also means that 40 percent is not, and
there is much left to do with respect to infrastructure.
I also want to say something about arsenic in response to
my colleague from New Jersey, and that is that the State of New
Mexico has one of the highest naturally occurring arsenic
levels in the water because we are a volcanic State.
The water comes out of the ground with high levels of
arsenic, and we don't have much timber industry. So the concern
is not what industry wants, but the fact is that in New Mexico
we have been drinking this water for generations, and many of
the public health effects that people fear are actually lower
in New Mexico, including the instances of things like bladder
cancer and so forth.
So if you look at the public health issues impacts, I can
only conclude from those two things that there is missing data
at those levels below 50 parts per billion that we need to
gather, or that green chile is the natural antidote to arsenic.
But with respect to arsenic, the real issue for us is this.
If we are to change the arsenic standard for public health
reasons, that is an investment just in capital costs alone of
probably three-quarters of a billion dollars in New Mexico.
I can think of a lot of ways to impact public health with
$750 million, whether it is the vaccination of children,
improvement of water and waste water. There are public policy
decisions that we have to make on where we spend the marginal
dollars making an impact.
And when I don't see the public health evidence that tells
me that we know what that level should be, between 5 and 50
parts per billion, it is hard for me to say that that is the
right way to spend the money. And that is the issue for those
of us in the Southwest. Thank you.
Mr. Gillmor. Thank you. The Chair recognizes the gentleman
from California, Mr. Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman. I was
Chairman of the Health and the Environment Subcommittee 15
years ago, and as such, I was one of the leaders in writing the
1986 Safe Drinking Water Act.
And 5 years ago, I was the ranking member on the Health and
the Environment Subcommittee when we did the 1996 drinking
water amendments. So I have some experience with these drinking
water issues, and that's why I was particularly disappointed
with the Bush Administration's first drinking water action,
this action to revoke the arsenic standard.
That decision has left most Americans scratching their
heads in puzzlement to try to figure out why the Bush
Administration wants more arsenic in drinking water. Meanwhile,
mining and chemical lobbyists are celebrating.
Now, this weekend in my District in Hollywood, we had the
Academy Awards, and that got me to thinking. We should have
some awards here in Washington to recognize truly remarkable
performances in lobbying that result in mind-boggling
government decisions.
So I have modestly decided to initiate a new award called
the Golden Jackpot, and I have a Golden Jackpot here which has
in it coins, but they are candy coins. This award is something
that I think from time to time I will be giving out to
recognize particularly indefensible and outrageous windfall
given to special interest groups.
And today we have three outstanding nominees; starting with
President Bush's decision to break his campaign promise to
curve carbon dioxide emissions. The President's decision was
made possible by an all-out pressure from the oil and the coal
industries.
Not only was this the first campaign promise that the
President broke, but for good measure, it jeopardizes the
international effort to combat global warming. It has
everything that a jackpot nominee needs to win.
The second nominee is Congress' decision to repeal at the
request of the Bush Administration's ergonomics rule. This is
an important work safety rule which was put into effect over a
long deliberation for a decade.
The Chamber of Commerce, the National Association of
Manufacturers, pulled out all the stops on this one, and it is
an example of special interests being the real interests of
thousands of workers, whether they be store clerks, meat
packers, or nursing home aides.
And the third nominee is President Bush's and Administrator
Whitman's decision to revoke these arsenic standards. Here the
mining and the chemical industries gave an unforgettable
performance, and repeal means that dangerous levels of arsenic
will remain in the drinking water of millions of American
families.
Well, all of these as they say at the Academy Awards are
real winners. But the envelope, and the award I believe should
go to EPA's decision to revoke the arsenic standard, and
therefore I am going to give to the Governor the Golden Jackpot
Award on behalf of the Bush Administration. It was not a
difficult decision----
Mr. Terry. Would the gentleman yield?
Mr. Waxman. And to stop telling the American people that
they need more arsenic in their drinking water. Governor
Whitman, my time is about up, but I wanted you to accept----
Mr. Terry. Would the gentleman yield?
Mr. Waxman. [continuing] this award on behalf of the
administration, and maybe you will even enjoy eating some of
these chocolates. But in 1996, we asked for a tighter arsenic
standard, because we wanted to protect the American people.
We should invest in trying to prevent disease. I don't know
whether they are going to spend the money in New Mexico, but
they should not be spending money to invest in how to cure
arsenic poisoning if we can make an investment in our water
systems that will keep people healthy, and prevent a pollutant
that can cause cancer and other problems.
EPA has set the standard under the mandate of the law by
January 1 of 2001, and this administration deserves this Golden
Jackpot Award for repealing it, and I think harm to the public
interest as a result.
[The prepared statement of Hon. Henry A. Waxman follows:]
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
Mr. Chairman, fifteen years ago, as Chairman of the Health and the
Environment Subcommittee, I was one of the leaders in writing the 1986
Safe Drinking Water Act. And five years ago, as the Ranking Democrat on
that Subcommittee, I was one of the leaders in writing the 1996 Safe
Drinking Water Act. So I have some experience with drinking water
issues.
That's why I was particularly disappointed with the Bush
Administration's first drinking water action: it's decision to revoke
the arsenic standard. That decision has left most Americans scratching
their heads trying to figure out why the Bush Administration wants more
arsenic in drinking water. Meanwhile, mining and chemical lobbyists are
celebrating.
Now this weekend in Hollywood, as everyone knows, the Academy
Awards were held. That got me to thinking that we should have some
award here in Washington to recognize truly remarkable performances in
lobbying that result in mind-boggling government decisions. So I've
modestly decided to initiate a new award, called the ``Golden
Jackpot.'' The award is a golden jackpot filled with chocolate gold and
silver coins.
From time to time I'll be giving this award to recognize a
particularly indefensible and outrageous windfall given to a special
interest group.
Today, we have three outstanding nominees, starting with President
Bush's decision to break his campaign promise to curb carbon dioxide
emissions. The President's decision was made possible by an all-out
pressure campaign by oil and coal companies. Not only was this the
first campaign promise the President broke, but for good measure it
jeopardizes the international effort to combat global warming. It has
everything a jackpot nominee needs to win.
The second nominee is Congress' decision to repeal the ergonomics
rule, the most important workplace safety regulation in the last
decade. The Chamber of Commerce and the National Association of
Manufacturers pulled out all the stops on this one. It is a memorable
example of special interests beating the real interests of thousands of
workers, such as store clerks, meatpackers, and nursing home aides.
And the third nominee is President Bush's and Governor Whitman's
decision to revoke the arsenic standard. Here, the mining and chemical
industries gave an unforgettable performance, and repeal means that
dangerous levels of arsenic will remain in the drinking water of
millions of American families.
As they say during the Academy Awards, there is no loser among this
group. All of the special interests involved--the oil industry, the
manufacturers, the mining companies--received extraordinary windfalls
from official action by the Administration or Congress.
Now, Price/Waterhouse have not audited the results, but I do have
an envelope with the winner. And . . . the Golden Jackpot goes to EPA's
decision to revoke the arsenic standard. It was a difficult decision,
but it's tough to beat telling the American people that they need more
arsenic in their drinking water.
Governor Whitman, after the hearing you'll have the opportunity to
accept the Golden Jackpot on behalf of the Bush Administration. You
might disagree with the judges' decision, but I hope you at least enjoy
the chocolate that goes with the prize.
You know, back in 1996, the science was clear that we needed a
tighter standard for arsenic, and efforts to revise the safety level
had already been debated for years. But the industry argued that
reducing arsenic would be too expensive and that more study was needed.
So we reached a compromise. We required EPA to issue a new regulation--
after even more study--by January 1, 2001.
After the law was passed, EPA commissioned a comprehensive study by
the National Academy of Sciences, which found that EPA should lower the
standard ``as promptly as possible.'' And in January 2001, former EPA
Administrator Carol Browner finally issued the new standard--just as
this Committee had directed and the science dictated.
It makes absolutely no sense to undo the new arsenic standard, and
I will soon be introducing legislation to make sure every American is
protected from this unnecessary risk.
Mr. Gillmor. The gentleman's time has expired. When I was a
very young State Senator in Ohio, by our desks we had
spittoons, and those all disappeared as they became collectors
items, and nobody knew where they went, but it looks a lot like
that.
Mr. Waxman. Well, this is the Golden Jackpot award, and the
first time it has been given out. I hope that it is the last,
but I expect with this administration in just this short 3
months that we are going to have a lot of examples of Golden
Jackpots for special interests winning out over the public
interest.
Mr. Gillmor. The Chair at this point would like to lay
before the committee a letter that he has received from the
Small Business Administration that was sent to the EPA, talking
about its very strong support of the administration's action in
this, of the EPA and the current Administrator's action, and
pointing out that the average cost to households in the
smallest systems would have exceeded $320 a year.
I would ask for unanimous consent simply to enter the
letter in the record.
Mr. Waxman. Reserving the right to object, would the
chairman also agree to put in the National Academy of Science's
report on why the arsenic in drinking water ought to be in
their words, ``promptly reduced as promptly as possible in
order to protect the public health.''
Mr. Gillmor. It would be very difficult for me to do that
since I don't have it with me here, but we would also be happy
to entertain a summary of that going in if the gentleman from
California would like to present it.
We probably could not take the whole report into the record
simply as a model of volume. If you would like to present a
summary, we would be happy to do it.
Mr. Waxman. I would be pleased to do that.
Mr. Gillmor. Very good.
Mr. Waxman. I withdraw my objection.
Mr. Brown. I would like to also submit for the record the
standards suggested by the World Health Organization also.
Mr. Gillmor. The members may do that at any point. We would
be happy to have them do that. Without objection then, the
Chair--does the gentleman from California withdraw his
objection?
Mr. Waxman. I withdraw my objection.
Mr. Gillmor. Without objection then, the letter will be
entered in the record.
[The material referred to follows:]
U.S. Small Business Administration
March 27, 2001
The Honorable Christine Todd Whitman
Administrator
U.S. Environmental Protection Agency
Ariel Rios Building
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460
Subject: EPA Review of Safe Drinking Water Standard
Dear Administrator Whitman: We are writing in support of your
recent decision to revisit the 10 ppb arsenic standard that was
promulgated in January of this year. The Office of Advocacy of the U.S.
Small Business Administration was established by Congress pursuant to
Pub. L. 94-305 to represent the views of small business before Federal
agencies and Congress. One of the primary functions of the office is to
measure the costs and other effects of Government regulation on small
businesses and make recommendations for eliminating excessive or
unnecessary regulation of small businesses.
We strongly agree that the Environmental Protection Agency (EPA)
should take time to carefully examine the various issues involved in
the establishment of this Safe Drinking Water Act standard. In our
review of the record last year, we concluded that the science and cost
evidence did not justify the 10 ppb standard at that time. We support
the swift implementation of an interim final regulation, pending the
establishment of an arsenic standard that can be supported by the
science evaluations still underway at EPA. We would retain the current
schedule for implementation in the final rule (effective in 2006).
Thus, the new rule would not cause any reduction in public health
benefits over the January final rule.
In 1999, the Office of Advocacy, Office of Management and Budget,
and EPA participated in a Small Business Regulatory Enforcement
Fairness Act (SBREFA) panel regarding arsenic in drinking water. During
the Panel, Advocacy supported lowering the arsenic standard to a level
that is protective of public health. Questions were raised about the
costs and benefits of lowering the arsenic standard (Maximum
Containment Limit) from the current 50 ppb to a much lower standard. To
do so would be expensive for small water systems. National costs would
exceed $180 million annually, by EPA's estimate. The average costs to
households in the smallest systems (under 100 persons served) would
exceed $320 per year. Hundreds of small systems, predominantly in
poorer rural America, would be forced to bear the costs of this rule
with undemonstrated benefits.
The EPA Science Advisory Board (SAB) noted numerous factors that
would lead EPA to an overestimate of the health risks by using high
concentration risk data from the Taiwanese population, which has
different nutritional ,selenium, zinc and arsenic food intake
characteristics than the U.S. population. In addition, in the only
large scale study of arsenic exposure in the U.S., the SAB found ``no
evidence of either bladder or lung cancer where mean drinking water
concentrations approached 200 ppb. While these concentrations are up to
an order of magnitude lower than found in sites where positive
associations with cancer have been obtained, these results give rise to
significant questions about whether the Taiwan data apply
quantitatively to those U.S. populations that have a more adequate
nutritional status.'' SAB Report at 30. Thus, there is no direct
evidence that U.S. citizens would experience any excess bladder or lung
cancers due to arsenic exposure at the concentrations found in the U.S.
Further, both the NRC and the SAB suggested that the risk at lower
levels found in the U.S. would be significantly less than the risk
indicated by the default linear extrapolation model employed by EPA.
While both agree that the burden of proof of existence of these
nonlinear modes of action had not been met, and EPA properly employed
the model in the risk estimates, both agreed that the risk was
significantly overestimated in this regard.
As the SBREFA panel stated, it would be poor public policy to set a
standard that was too low, require water utilities to make the
considerable investment in treatment capacity, only to learn too late
that the arsenic effects at low levels were considerably smaller or non
existent. The SAB advocated a phased standard setting approach, which
would establish an interim standard protecting the higher risk
populations that would be superseded after a period of additional
research and analysis. SAB Report at 39. We agree wholeheartedly with
the SAB phased approach. A phased approach would allow the arsenic
research to proceed and avoid waste of taxpayer and rate payer
resources.
A higher standard would be sound public policy. It would be
consistent with the Safe Drinking Water Act Provision allowing EPA to
select a less stringent standard that ``maximizes health risk reduction
benefits at a cost that is justified by the benefits.''
We look forward to working with EPA and interested parties in the
expeditious promulgation of a new standard that would address the
health needs of our Nation, without unnecessary damage to small water
companies, small communities, and our citizens in rural America.
Sincerely,
Susan M. Walthall
Acting Chief Counsel for Advocacy
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Arsenic in Drinking Water International Standards
Countries that have a 10 parts per billion standard:
Belgium, Denmark, United Kingdom, Germany, Spain, Finland,
France, Ireland, Greece, Italy, Luxembourg, Netherlands,
Austria, Portugal, Sweden, Japan, Jordan, Laos, Mongolia,
Namibia, and Syria.
Countries that have a 50 parts per billion standard:
Bahrain, Bangladesh, Bolivia, China, Egypt, India, Indonesia,
and Oman.
Australia has a 7 parts per billion standard
Mr. Gillmor. And the Chair recognizes the gentleman, Mr.
Terry.
Mr. Terry. I will yield back in the interest of hearing
from the witness.
Mr. Gillmor. Very good.
Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. The purpose of today's
hearing is to discuss water infrastructures, and I am glad to
welcome Administrator Whitman to the hearing, and I am glad
that you have joined us.
I would hope, Mr. Chairman, that the Bush-Whitman arsenic
repeal, the repeal of the arsenic standard, would be a subject
for future hearings specifically on that. This inexplicable
assault on a straightforward consumer protection policy baffled
the scientific community as was pointed out by Mr. Waxman and
Mr. Pallone.
And outraged those of us who ushered in these protections
since passage of the 1996 Safe Drinking Water Act. In 1981,
then President Reagan tried a similar approach to undo another
pro-consumer regulation. He overturned a safety standard on air
bags promulgated by the previous administration.
Like the arsenic standard, this measure reflected
substantial research, and years and years of input, from
private and public sector experts. The Supreme Court overturned
President Reagan's action, calling it an arbitrary decision. It
was not based on any new information that countered the
evidence of the support of the air bag standard.
The Supreme Court protected consumers in those days when
the President would not. We can only hope that this
administration's arsenic decision meets the same fate. Mr.
Chairman, the European community, and the World Health
Organization, and the National Academy of Sciences, all relying
on objective, sound scientific research, have endorsed lowering
the arsenic standard from 50 parts per billion to 10 parts per
billion.
This administration provided no factual rationale for
dismissing the recommendation from these respected
organizations. The only rationale that I can find in our
research for repeal of the arsenic standard lies in President
Bush's campaign finance report.
And in the last election cycle, mining companies gave $5.6
million in political contributions to Republicans. The chemical
industry gave almost $9 million to Republicans. We know that
the smelting of metal ores in mining can release arsenic into
the environment.
A group of chemical and mining companies wrote to the EPA
and argued that we did not need new protections. This later
group formed something called the Environmental Arsenic
Council. Yes, the Environmental Arsenic Council. It sounds like
somebody needs a little better public relations agency.
You have to hand it to PR firms like this. They can make
any anti-health or anti-environment group sound like the garden
club. My hat is off to these spinmeisters. What the
Environmental Arsenic Council won't tell you, and what
President Bush does not remind us is that arsenic imperils
human health in at least three ways.
It is a toxic. We have all known that in this society for
years. It is a carcinogen, and we found that out, and it causes
birth defects. If we are gambling on the environment, we would
call arsenic the trifecta of health hazards. It is not
conjecture. It is science, and that's why the administration's
excuse that it wants to conduct more research rings so hollow
with responsible non-industry people in the scientific
community.
I look forward to hearing the administration explain how it
could be in the best interests of the public's health to
condone higher levels of arsenic in drinking water.
Administrator Whitman has a tough job, and her agency's
historical mission is under direct assault from the White
House.
Given these circumstances, I look forward to hearing from
her about these important water related issues. And, Mr.
Chairman, I would also want to submit in the record--this is a
list of arsenic and drinking water international standards.
Australia has a 7 parts per billion standard, and let me
read a handful in my last 30 seconds. Countries that have 10
parts per billion standard are Belgium, Denmark, Jordan,
Mongolia, Laos, The Netherlands, France, Greece, Spain, and
several others.
Countries that have a 50 parts per billion standard, joined
with the United States again now apparently are Bahrain,
Bangladesh, Bolivia, The People's Republic of China, Egypt,
India, Indonesia, Oman, and alphabetically, the United States
of America. Mr. Chair, if I could submit this. Thank you.
Mr. Gillmor. Without objection, the Chair hearing none, it
will be entered in the record.
Are there further opening statements? The gentleman, Mr.
Luther.
Mr. Luther. Thank you, Mr. Chairman. I want to thank
Administrator Whitman for being before the committee again. I
hope that she is enjoying herself. I am not sure. I think we
can all agree that America's drinking water infrastructure is
in critical need of reinvestment.
One issue that I would like to hear about in this hearing
is whether the drinking water State revolving fund should focus
more on existing infrastructure rather than on new
infrastructure.
With the concern that we have over sprawl and quality of
life today, would that in fact remove an incentive from
developers who are rapidly expanding into the outer suburbs of
our Metropolitan areas in the country. So I think it would be
good if we could focus a bit on that.
Last, Mr. Chairman, I would also like to express my concern
over the Bush Administration's decision to withdraw the
standard on arsenic in the Nation's drinking water.
Indeed, it was our committee, I believe, on a bipartisan
basis urged the EPA to promulgate new final standards on
arsenic. So it is my hope--I don't have an award for you today
or anything, Administrator, and I apologize for that.
But it is my hope that if not today, Mr. Chairman, our
subcommittee in the very near future can in fact focus on this
issue and hear it out. So thank you very much.
Mr. Gillmor. Thank you. Are there further opening
statements? The gentlelady from California.
Ms. Capps. Thank you for holding this hearing, Mr.
Chairman, and I realize that a vote is on, and I will be as
brief as I can. I am so pleased that the subcommittee is
turning its attention to drinking water infrastructure needs of
this country.
There is a clear need for upgrades to our system to ensure
that all communities have safe drinking water and drinking
water systems, and as a member of this committee, I am pleased
that we will bring to bear the substantial expertise of our
members on this important topic.
Ensuring clean sources of water is indeed a public health
issue, and properly belongs before this committee. Our
witnesses are to be commended for appearing today, and
especially I want to thank Administrator Whitman for your
presence today.
I also want to take a moment to mention a related drinking
water issue, MTBE pollution. This is a real problem in my
district, and I believe throughout the State of California and
across this country.
MTBE has polluted the ground water of many communities,
including the Town of Cambria in San Luis Obispo County, which
has at this moment no safe backup drinking water system because
of MTBE pollution.
There are two issues regarding MTBE that I want to raise.
We need to stop the harm that it is causing and fix the damage
that it has already caused. California has a waiver request
before the EPA from the Clean Water Act's 2 percent oxygenate
requirement, and I hope that you will give this request quick
attention.
California needs this waiver to help protect public health
and their environment. Second, I have a bill that would help
communities whose drinking water has been contaminated by MTBE.
It dedicates $200 million out of the leaking underground
storage tank fund, the LUST fund, toward MTBE cleanup.
I believe that this is something that Congress could move
forward on I hope that Administrator Whitman will look at my
legislation and work with me and this committee on this and any
other steps that we can take to help communities like Cambria.
Ensuring clean drinking water is just about the most basic
service that any government does, and that's why I, like other
members of this committee, who have been eloquent in their
statements, have also been disturbed by the recent action on
arsenic and drinking water.
The standards for allowable levels of arsenic in drinking
water were set in 1942. One would think that we could update
this 59 year old public health protection act. And Knight-
Ritter has reported just in the last couple of days that a
Dartmouth University toxicologist, Joshua Hamilton, says that
there is sufficient evidence that 50 parts per billion is not
protective, and 10 parts per billion is reasonable.
In fact, this committee directed EPA to come up with the
standards, and now the rules have been withdrawn. I believe, as
a public health nurse, that this action comes at the expense of
public health. It is one more in a disturbing pattern where
this administration is putting the health and safety of the
American people behind more powerful interests.
We have seen this with the CO2 flip-flop and the
apparent abandonment of global warming efforts that I read
about in today's Washington Post. These decisions are going to
have a real life impact. They are going to reduce our ability
to ensure our air and water are clean and to fight global
warming.
So I am hoping that the EPA and the administration will
reconsider these moves. I say that with all due respect and I
yield back the balance of my time. Thank you.
Mr. Gillmor. Thank you, Ms. Capps. We are going to take a
very short recess, because we do have a vote on. And, Mr.
Shimkus, the vice chairman, using a system that we frequently
use, left to vote early, and as soon as he comes back, he will
start the hearing so that we do not keep you any longer,
Governor.
And I will return as soon as possible so that we can keep
the hearing moving. So, the Chair now declares this in a brief
recess.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
First, I want to thank Subcommittee Chairman Gillmor for scheduling
today's hearing on drinking water needs and infrastructure. I believe
Chairman Gillmor is off to a great start as Subcommittee Chairman and
today's hearing only affirms his--and my--desire to aggressively pursue
major issues which fall under the Subcommittee's jurisdiction.
I also want to thank Administrator Whitman for her appearance
before us today. I appreciate the effort Administrator Whitman
displayed in providing testimony on what EPA has been doing to analyze
drinking water needs and to provide assistance through authorities
contained in the Safe Drinking Water Act.
Let me begin my formal remarks by stating what should be obvious.
The Energy and Commerce Committee has jurisdiction over public health
and the Safe Drinking Water Act. Since the original Safe Drinking Water
Act was added as an amendment to the Public Health Service Act in 1974,
this Committee has amended the law and reauthorized provisions of the
Act several times.
Most recently, this Committee made substantial alterations and
enhancements to the underlying statute through the 1996 Safe Drinking
Water Act Amendments. Many of the interested parties in this room
participated in that process. The Environmental Protection Agency
provided technical assistance to the 1996 effort and, through several
long months during the winter, spring and summer of 1996, we were able
to pass a comprehensive measure into law.
As part of that effort, this Committee created the first
substantial source of federal funding for drinking water systems. We
authorized the Drinking Water State Revolving Fund to provide a
sustainable source of assistance for both infrastructure projects and
state drinking water programs. As of this year, $4.4 billion has been
appropriated by Congress for the Drinking Water SRF.
EPA informs us that through September of last year, the money
Congress and the states have provided to the Drinking Water SRF has
funded over 1,400 projects nationwide. These projects address treatment
facilities, transmission and distribution systems, source and storage
projects, planning and design, land acquisition, the purchase of
systems, system restructuring and other expenses associated with
drinking water systems.
In brief, the tree we planted in 1996 is now bearing fruit. But
rather than sit back and admire our handiwork, the question now is:
what can we do to increase its yield? How can we make our system of
financing water infrastructure work better to further protect the
public health?
In addressing this question, I believe we must first analyze how
well the Drinking Water SRF has worked since its creation. We need to
know where the program has succeeded, as well as where there might be
shortcomings. We also need to review the interaction of this fund with
the Clean Water SRF, since states have been allowed under the 1996
Amendments to shift resources between each entity. We also need to
closely examine the available evidence on the need for additional water
infrastructure, including EPA's analytical efforts and studies like
those produced by the Water Infrastructure Network. In this regard, it
is my sincere hope that we will be able to work with the Administration
and all interested public and private parties in this endeavor.
But let me be clear on one overriding issue. The Energy and
Commerce Committee has broad and substantial jurisdictional interest in
the matter of water infrastructure. And this is an interest we intend
to thoroughly pursue as Congress considers any effort to channel more
resources into this area, no matter what legislative vehicle is
constructed. Water infrastructure is not built because such things are
nice to have around; they are built because they are needed to preserve
the environment and protect the public health. Our Committee's interest
in such matters is widespread and longstanding.
Again, I want to thank all of the witnesses who are with us today.
[Brief recess.]
Mr. Gillmor. The committee will come to order, and we will
proceed with our first panel, which consists of the--Ms.
McCarthy, we closed opening statements. Could you submit yours
in writing?
Ms. McCarthy. Yes, Mr. Chairman.
Mr. Gillmor. Or do you feel an absolute compulsion to give
it?
Ms. McCarthy. I would be happy to do so.
Mr. Gillmor. Thank you. I appreciate it.
[The prepared statement of Hon. Karen McCarthy follows:]
Prepared Statement of Hon. Karen McCarthy, a Representative in Congress
from the State of Missouri
Thank you, Mr. Chairman, for holding this hearing to examine the
very important issue of the status of our nation's drinking water
infrastructure and to determine what critical needs we have before us,
and for having EPA Administrator Whitman and the distinguished panel of
experts here to testify. This Subcommittee, with legislative
jurisdiction over the nation's drinking water, and specifically the
Safe Drinking Water State Revolving Fund (SRF) program, is in a unique
position to protect the public health in a significant way.
In my district, Kansas City has made substantial progress in
meeting the high and growing expectations of drinking water consumers.
In fact, I am proud to share with the committee that the Kansas City
Water Services Department (WSD) has recently been recognized by the
Association of Metropolitan Water Agencies' (AMWA) as a winner of its
2001 Gold Award for Competitiveness Achievement for using exceptional
management practices and achieving high performance--I am pleased to
see that AMWA is here to testify today on the needs of drinking water
utilities and the gap that exists between spending and need. The Kansas
City Water Department has worked hard to keep rates fair and equitable
while producing a quality product, but the infrastructure system is
simply deteriorating far too quickly for them to fund such a staggering
undertaking on their own.
I am interested to hear from our witnesses on the success, or
failures, of the Drinking Water State Revolving Loan Fund. Has the
program created the necessary flexibility to allow the states to manage
and run their programs effectively? Is there more that can be done to
assist states in ensuring the safety of our drinking water?
Unfortunately, Kansas City has not been able to utilize the fund.
Because our water quality is high and the Water Services Department is
in compliance with the many regulations, it falls so low on the State
Revolving Fund priority list that they are unable to receive the much-
needed funds to assist with their many needs. As the old adage goes,
there is no reward for being good. I am interested to hear from our
witness on we can address issues such as these.
Clearly, as the recent EPA Drinking Water Infrastructure Needs
Survey illustrates, if we are to continue the responsibility of
protecting our nation's drinking water from harmful contamination, we
must begin to make substantial investments in its infrastructure now. I
am interested to hear our witnesses' perspectives on how we can best
accomplish this given the dire state of current resources.
This is an issue that effects us all, from the small town of
Grandview to urban Kansas City, Missouri. While cost-estimates for
drinking water investment needs over the next 20-years may vary, I
think we can all agree that more needs to be done to ensure that public
health is kept safe now and that future needs are met. We must do all
we can in order to avoid a future infrastructure crisis and ensure that
the consumer does not bear the costly burden of infrastructure neglect.
The Federal government must invest in drinking water infrastructure and
make it a national priority. I welcome the input of our witnesses on
how best to get there.
Mr. Gillmor. We will now proceed to our first panel, which
is the Administrator of the Environmental Protection Agency,
Governor Whitman. Go ahead.
STATEMENT OF HON. CHRISTINE TODD WHITMAN, ADMINISTRATOR, U.S.
ENVIRONMENTAL PROTECTION AGENCY
Ms. Whitman. Thank you, Mr. Chairman. I appreciate the
opportunity to testify on this very important area, but I beg
leave of the chairman to stray a little bit given all the
discussion that has been held heretofore. I must say that when
cameras are in the room that it heightens the discussion. We
get a lot more interest and interesting discussion.
Mr. Gillmor. There has been a lot of strain, and so feel
free.
Ms. Whitman. I just wanted to say a couple of things. One
is that if all that we heard here today was true, I would be
worried as well on the arsenic rule. Something to be made very
clear is the standard.
The arsenic rule as proposed by the previous
administration, dropping 50 parts per billion of arsenic to 10
parts per billion would not have become effective, or is not
due to become effective until 2006.
We will have a new regulation in place that will have an
effective date of 2006. It will be well below 50 parts per
billion. However, as it has been pointed out, there is no
definitive and scientific study that says that 10 is it.
And while the National Academy of Sciences said very
clearly that 50 parts per billion was too high, they did not
endorse 3, 5, 7, or 10, or 20. Given that uncertainty, I think
it is important that we hear from all the affected parties.
And the way that rule was promulgated at the last minute,
while the scientific studies may have been going on for years,
there was not, I do not feel, an adequate time for full input
from all the affected communities.
We need to know what the full impact is so that we don't
suffer from unintended consequences, and when I talk about
unintended consequences, I can tell you of a real instance
where a town, where the water company was purveying water at 90
parts per billion, and they were told to come into line with 50
parts per billion.
The water company closed up and walked away, and that left
the 30 people on that system with no water and no choice but to
sink their own wells, which they then did and are now ingesting
90 parts per billion, without the same protections that we
could offer them if we had done it through the water company
system.
The concern that I have is not that we have any lesser
standard because of the cost, but that we fully understand what
the costs are, and we make sure that we have in place the tools
necessary, whether it be strictly financial or technical, for
what we need to do to help those small and mid-sized
communities where arsenic is a naturally occurring substance,
and to be able to reach whatever the standard is that we set.
We have had a new study that indicates that arsenic may
well be an endocrine disrupter. In that instance, we may find
that it should be at 3, or 5, and not just 10. But it might
also be above that, slightly above that.
I can't tell you what the final will be, but I will tell
you that this administration has put nobody's drinking water in
jeopardy, and nobody is drinking any more unsafe drinking water
today than they were last month, last year, nor will they for
the next 2 years, because that standard was not going into
effect until the year 2006.
There will be a new standard going into effect in the year
2006. I also beg to differ with some of the allegations about
how this decision was reached, and I would just like to say
that I fully accept responsibility for the decision, when in
fact I gave to the administration both that decision and the
decision on the reviewing of pesticides, which nobody mentions
when they say how anti-environment the administration is.
And in fact that was a decision that the environmentalists
were looking for, but that has been shunned aside. The one that
they asked questions about and pushed back on was the arsenic
decision. Why was I doing it, and was I satisfied that this is
what we needed to do.
I never read a letter from the timber industry, and I never
read a letter from a miner. I sat with staff to listen to how
this rule had been promulgated, and I wanted to make sure that
we had fully included all that needed to be heard.
We can do that, and we can do that in a way that allows us
to move forward with the standard, because as all of you know,
the process is that when EPA finalizes a regulation, there is 3
years from finalization to implementation.
In this instance the Agency chose to give the water
companies 5 years. So we will meet that 3 years, and we will
hopefully meet 4 years, and I would like to get it done much
sooner than that.
We are going to ask for outside review by the National
Academy of Sciences to see if there is any new science to be
taken into account, and then those who look at cost benefit--
because by the way, that is also part of the law. We are
required by law to look at cost benefit.
That is something that is in the Safe Drinking Water Act,
and we need to meet that obligation, and unfortunately I did
not feel that that had been satisfactorily addressed during the
original rule promulgation.
Having said that, Mr. Chairman, I will keep my opening
statement brief. If it is all right, I will submit a longer
statement on the issue at hand that gets more to the specifics.
Mr. Gillmor. Thank you.
Ms. Whitman. I think it is safe to say that over the past
25 years that America has indeed made great progress in
reducing water pollution and ensuring safe, affordable, and an
abundant supply of drinking water to the people.
Our drinking water system is among the most safe and
reliable in the world. The 265 million Americans who rely on
public water can have full confidence that the water that they
use is safe for them and safe for their families.
We can, however, do better. As you know, the primary
mechanism EPA uses to help local communities finance water
infrastructure projects is the State Revolving Loan Funds.
The Federal Government provides grants to States to
capitalize loan funds for drinking water in each State. States
then use these funds to make low cost loans to communities to
finance drinking water projects.
Because this is a revolving loan fund, the money invested
in SRFs provides about four times as much purchasing power over
20 years as straight grants would. In addition, because the
funds make loans to local communities at below market rates,
communities have over the years saved their taxpayers literally
millions of dollars.
It is also worth noting that almost 3 out of every 4 loans
made for drinking water projects have been provided to small
water systems that usually have a difficult time in affording
and accessing affordable financing.
These funds have made an important contribution to our
success in America's drinking water, but as I said before, the
job is certainly not finished. Under the law, EPA is required
to take a periodic look at drinking water and clean water
infrastructure investments needed around the country.
Last month, EPA released the second of these reports
describing needed water investments. The bottom line, Mr.
Chairman, is that we perceive the need of about $150 billion
over the next 20 years to ensure the continued safety and
availability of water.
Other outside groups have also issued reports estimating
water infrastructure needs, estimates that exceed ours. But no
matter which estimate you use, there are several key components
of water infrastructure funding that must be fully evaluated.
These include population growth, aging infrastructure,
emerging environmental and public health demands, increasing
operation and maintenance costs, and maintaining affordability.
We need to keep affordability in mind as we move forward
with both funding and regulatory proposals. I am pleased to
report that the President's fiscal year 2002 budget maintains
Federal support for drinking water infrastructure.
EPA expects that the drinking water SRF will be able to
provide average annual assistance of $500 million over the long
term life if this capitalization funding is maintained.
Furthermore, in keeping with the President's commitment to
focus on goals rather than process, the administration supports
the mechanism currently in the law that gives States the
flexibility to move funds between clean water and its drinking
water revolving loan funds.
Mr. Chairman, this proposed funding will help communities
across America finance important drinking water projects. As
your committee continues to study America's drinking water
needs, we look forward to a constructive dialog on the
appropriate role that the Federal Government can play.
There is no doubt that ensuring safe drinking water will
require a shared commitment on the part of Federal, State, and
local governments, as well as in private business and
consumers.
You have my pledge that EPA will continue to work in
partnership with Congress and with all the other stakeholders
to better understand, and then meet the needs of our water
infrastructure. Thank you, Mr. Chairman, and I would be happy
to answer questions.
[The prepared statement of Hon. Christine Todd Whitman
follows:]
Prepared Statement of Hon. Christine Todd Whitman, Administrator, U.S.
Environmental Protection Agency
Good afternoon, Mr. Chairman and Members of the Subcommittee. I am
Christine Todd Whitman, Administrator of the Environmental Protection
Agency.
I welcome this opportunity to discuss the Nation's investment in
drinking water infrastructure-the pipes and treatment plants that
deliver safe drinking water to our taps. These drinking water
facilities are critical to protecting human health.
As a Nation, we have made great progress over the past quarter
century in assuring the safety of drinking water. The Safe Drinking
Water Act has served us well and provides the solid foundation we need
to make sure that all Americans will continue to enjoy safe drinking
water.
Our success in improving drinking water quality is the result of
many programs and projects by local, State and Federal governments in
partnership with the private sector. But our cooperative,
intergovernmental investment in drinking water infrastructure
facilities has, more than any other single effort, paid dramatic
dividends for public health and water quality.
This afternoon, I want to give you a brief overview of the progress
we have made in improving water quality, and the public health
challenges we still face. I also will summarize what EPA knows about
the need for future investment in drinking water and identify the key
challenges I see in meeting this need. I will conclude with some
thoughts about how Congress and others could proceed when addressing
the problems of financing drinking water infrastructure.
SAFE WATER--ACCOMPLISHMENTS AND CHALLENGES
Most Americans would agree that the quality of drinking water has
improved dramatically over the past quarter century.
We have made dramatic progress in improving the safety of our
Nation's drinking water. Disinfection of drinking water is one of the
major public health advances in the 20th century. In the early 1970's,
however, growing concern for the presence of contaminants in drinking
water around the country prompted Congress to pass the Safe Drinking
Water Act. Today, the more than 265 million Americans who rely on
public water systems enjoy one of the safest supplies of drinking water
in the world.
Under the Safe Drinking Water Act, EPA has established standards
for 90 drinking water contaminants. Public water systems have an
excellent compliance record-more than 90 percent of the population
served by community water systems receive water from systems with no
reported violations of health based standards.
In the past decade, the number of people served by public water
systems meeting Federal health standards has increased by more than 23
million. Although compliance with drinking water contaminant standards
is good, public health risks from drinking water can be further
reduced.
DRINKING WATER STATE REVOLVING LOAN FUND
The primary mechanism that EPA uses to help local communities
finance drinking water infrastructure projects is the State Revolving
Loan Fund (SRF) established in the Safe Drinking Water Act. The SRF was
designed to provide a national financial resource for clean and safe
water that would be managed by States and would provide a funding
resource ``in perpetuity.'' These important goals are being achieved.
Other Federal, State, and private sector funding sources are available
for community water infrastructure investments.
Under the SRF program, EPA makes grants to each State to capitalize
their SRFs. States provide a 20% match to the Federal capitalization
payment. Local governments get loans for up to 100% of the project
costs at below market interest rates. After completion of the project,
the community repays the loan and these loan repayments are used to
make new loans on a perpetual basis. Because of the revolving nature of
the funds, the dollars invested in the SRF provides about four times
the purchasing power over twenty years compared to what would occur if
the funds were distributed as grants.
In addition, low interest SRF loans provide local communities with
dramatic savings compared to loans with higher, market interest rates.
An SRF loan at the interest rate of 2.6% (the average rate during the
year 2000) saves communities 25% compared to using commercial financing
at an average of 5.8%.
The drinking water SRFs, which this Committee created as part of
the 1996 amendments to the Safe Drinking Water Act, were modeled after
the clean water SRFs, but included several important improvements.
States were given broader authority to use drinking water SRFs to
help disadvantaged communities and fund programs that look to prevent
contamination of sources of drinking water and promote better
management and operations of drinking water systems.
Through fiscal year 2001, Congress has appropriated $4.4 billion
for the Drinking Water SRF program. EPA has reserved $83 million for
monitoring of unregulated contaminants and operator certification
reimbursement grants. Through June 30, 2000 States had received $2.7
billion in capitalization grants, which when combined with state match,
bond proceeds and other funds provided $3.7 billion in total cumulative
funds available for loans. Through June 30, 2000, States had made close
to 1,200 loans totaling $2.3 billion and $1.4 billion remained
available for loans. Approximately 74% of the agreements (38% of
dollars) were provided to small water systems that frequently have a
more difficult time obtaining affordable financing. States also
reserved a total of approximately $420 million of SRF capitalization
grants for other activities that support the drinking water program.
DRINKING WATER INFRASTRUCTURE--FUTURE NEEDS
The Safe Drinking Water Act requires that EPA periodically develop
a ``needs survey'' to identify water infrastructure investments.
One month ago, EPA released its second report on drinking water
infrastructure needs. The new survey shows that $150.9 billion is
needed over the next 20 years to ensure the continued provision of safe
drinking water to consumers.
The survey found that water systems need to invest $102.5 billion,
approximately 68% of the total need, in what the report calls ``current
needs.'' In most cases current needs would involve installing,
upgrading or replacing infrastructure to enable a water system to
continue to deliver safe drinking water. A system with a current need
therefore, usually is not in violation of any health-based drinking
water standard. For example, a surface water treatment plant may
currently produce safe drinking water, but the plant's filters may
require replacement due to their age and declining effectiveness, if
the plant is to continue to provide safe water. Future needs account
for the remaining $48.4 billion in needs; for example, projects that
systems would undertake over the next 20 years as part of routine
replacement such as reaching the end of a facility's service life.
The survey includes needs that are required to protect public
health, such as projects to preserve the physical integrity of the
water system, convey treated water to homes, or to ensure continued
compliance with specific Safe Drinking Water Act regulations (See Chart
1). Transmission and distribution projects represented the largest
category of need (56%) with $83 billion needed over the next 20 years.
This result is not surprising given that, for most water systems, the
majority of their capital value exists in the form of transmission and
distribution lines. Treatment projects, which have a significant
benefit for public health, make up the second largest category of needs
at 25%.
Although all of the 74,000 projects in the survey would promote
public health protection, also water systems identified capital needs
that are directly related to specific regulations under the Safe
Drinking Water Act. Approximately 21%, or $31.2 billion, is needed for
compliance with current and proposed regulations under the Act. Most
(nearly 80%) of the remaining need is to comply with rules which
protect consumers from harmful microbial contaminants, such as Giardia
and E. coli. Most of the total needs derive from the costs of
installing, upgrading and replacing the basic infrastructure that is
required to deliver drinking water to consumers--costs that water
systems would face independent of any Safe Drinking Water Act
regulations. These findings indicate that most of the total need stems
from the inherent costs of being a water system, which involves the
almost continual need to install, upgrade, and replace the basic
infrastructure that is required to provide safe drinking water.
The survey also examined capital need by system size. The survey
found that while small systems (serving fewer than 3,300 people)
represent more than 80% of the nation's community water systems, they
contribute 22% to the total national need. By contrast, large systems
(serving more than 50,000) represent just 2 percent of the nation's
water systems, yet account for more than 44% of the national need. This
finding reflects the fact that small systems collectively serve about
26 million people, whereas large systems serve a total of 138 million
people.
BROADER CONTEXT OF WATER INFRASTRUCTURE FINANCING
Over the past year, several interest groups including the Water
Infrastructure Network, and the Water Environment Federation issued
reports estimating water infrastructure needs. These estimates were all
substantially above those of EPA's Needs Surveys. In general, these
cost estimates differ from EPA's because the methodologies and
definitions for developing them differs. For example, EPA Needs Surveys
include only projects that are eligible for SRF funding under the Clean
Water Act and Safe Drinking Water Act. Also, EPA requires that costs
included in the Needs Surveys be established by planning or design
documentation.
Nevertheless, EPA recognizes that effective decision-making
concerning water infrastructure financing would benefit from a better
understanding of the broader context of this effort. Key components in
the broader context of water infrastructure funding that need to be
more fully evaluated include:
--Population Growth: Steady growth and shifts in population puts
substantial pressure on local governments to provide expanded
drinking water and sewer services. More and more communities
are searching for ways to grow that fully protects their
quality of life and natural resources.
--Aging Infrastructure: Many sewage and drinking water pipes were
installed between 50 and 100 years ago and these pipes are
nearing the end of their useful life.
--Emerging Environmental and Public Health Demands: As our knowledge of
threats to water quality and public health improves, the public
expects its water infrastructure to continue to provide clean
safe water at reasonable cost.
--Increasing Operation and Maintenance Costs: As the size and
complexity of water and sewer systems increases, and facilities
get older, the costs of operations and maintenance tend to
increase.
--Affordability: Although water has historically been underpriced, some
systems may find it difficult to replace or update aging water
and sewer systems and keep household user charges at affordable
levels. This issue needs to be kept in mind as future
regulations are developed.
In an effort to better understand the issues related to water
infrastructure financing, the Agency is reviewing issues related to
long-term needs, assessing different analytical approaches to
estimating those needs, and estimating the gap between needs and
spending. Some elements of this analysis--known as the Gap Analysis--
have been presented to a range of interested parties and EPA is
committed to improving and refining this important work. To this end,
the EPA plans to make this analysis available for peer review by expert
organizations in the near future.
FY 2002--DRINKING WATER INFRASTRUCTURE INVESTMENTS
The President's FY 2002 budget proposes to maintain Federal support
for drinking water infrastructure. The Administration proposes to
maintain capitalization of the drinking water SRFs in FY 2002. By the
end of FY 2002, we expect loans issued by State drinking water SRFs to
reach 2,400, with about 850 SRF funded projects having initiated
operations by that date.
In addition, the law currently grants a State flexibility to
transfer funds between its clean water and drinking water SRFs. The
Administration supports this mechanism to help States fund their
priority needs.
This proposed FY 2002 funding will help communities across the
country finance important drinking water projects. As your Committee
continues to study the drinking water infrastructure needs, the
Administration would like to encourage a constructive dialogue on the
appropriate role of the federal government in addressing these needs.
CONCLUSION
Thank you, Mr. Chairman, for giving me the chance to outline EPA's
view of the drinking water infrastructure challenges the Nation is
facing. Let me conclude by identifying some of the key issues that
Congress, the Administration, the private sector and other interested
parties will need to consider as we work toward a common approach to
solving drinking water infrastructure problems.
1) We need a common view of the scale of the water infrastructure
problem that we face and the long-term timeframe for making
needed investments.
2) We need to consider the best role for the Federal government to play
in helping States and local governments finance drinking water
infrastructure projects and evaluate any barriers faced by
local governments in getting access to needed capital as part
of this process (such as poor bond ratings, or interest rates).
3) We need to consider the strengths and weaknesses of the existing
funding mechanisms and consider the best mix of financing under
various circumstances. We also need to review the role that
privatization might play in the future.
4) We need to review water rate structures, encourage rates that make
systems sustainable and address concerns that rates are
affordable, especially in poor communities.
5) We need to look closely at Federal mandates to ensure that those
mandates are not needlessly costly and burdensome.
6) Finally, addressing water investment needs in years to come will not
only require a strong commitment from Federal, State and local
governments, it will call for innovative funding mechanisms,
public/private partnerships, advancements in technologies, and
a commitment to sustainable management practices.
Ensuring that our drinking water infrastructure needs are addressed
will require a shared commitment on the part of the Federal, State and
local governments, private business, and consumers.
I pledge that EPA will continue to work in partnership with
Congress, States, local governments, the private sector and others to
better understand the drinking water infrastructure needs we face and
to play a constructive role in helping to define an effective approach
to meeting these needs in the future.
I will be happy to answer any questions.
Mr. Gillmor. Thank you very much. If I might begin. EPA's
February 2001 Drinking Water Infrastructure Needs Survey
indicated the purpose of the survey is to include
infrastructure needs that are required to protect public
health, such as projects to preserve the physical integrity of
the water system, convey treated water to homes, or ensure
compliance of specific SDWA regulations.
Could you briefly describe each need and its relationship
to maintaining public health?
Ms. Whitman. Well, Mr. Chairman, public health is at the
basis of all of these. It is the primary focus of the Safe
Drinking Water Act. Each one of the needs to which you refer is
tied directly to assuring safe drinking water.
A needs survey report discusses the needs associated with
components of the water system and its regulatory needs, but
all of those are geared toward health, and we would obviously
be more than happy to work with the subcommittee to provide
additional information on the direct linkage and the importance
of those health standards.
Mr. Gillmor. And I thank you very much, and will look
forward to whatever additional information you may have. That
needs survey also indicates that most of the total need results
from the costs of installing, upgrading, and replacing the
basic infrastructure that is required to deliver drinking
water, the consumer costs that are borne by water systems
independent of SDWA.
For a need to be included in the survey, however, it must
be required to protect public health. Therefore, if a system
fails to address a need, then a health based violation of the
standard eventually may occur.
And in more simple terms does that mean that the needs that
EPA has identified in its survey are, one, public health needs;
and, two, public health needs that ought to be addressed by
SDWA?
Ms. Whitman. Yes, Mr. Chairman. The survey only includes
those infrastructure needs that are directed toward public
health, but let me just add that many of those investments are
being made by companies and proactive investments in order to
prevent degradation of the water supply, and not necessarily
because they are currently in violation.
In order to ensure continuous safe drinking water, these
systems face the constant need for upgrading of the system, and
improving the pipes to meet the demand, and upgrading and
replacing all that basic infrastructure.
Mr. Gillmor. Thank you very much. Just one more question
from me. You indicate that the operation of the Safe Drinking
Water SRF, like the Clean Water SRF, essentially provides funds
in perpetuity.
And you also note the ability of Federal money to leverage
State money, and provide multiple increases in actual
purchasing power. These appear to be substantial benefits of
the revolving fund concept. Could you expand on those benefits
a little more, as well as any possible drawbacks with revolving
funds?
Ms. Whitman. Well, obviously we feel that this is a very
appropriate way to approach the issue, because with a revolving
loan fund, you are able to actually capitalize your money much
faster and to ensure that you have a continuous flow of money
able to go out to the communities to help where they must need
it.
That is also a--it also provides a saving, because we are
there for communities when they have the need, and they are
able to do some planning. The low interest rates, of course,
save them directly, save them money.
Now, of course, there are always those communities for whom
even the lowest rates are too high, and provide a burden to
them. So that is obviously a concern, but we believe that the
approach is appropriate, and that the loan approach is
appropriate, and we do have as you know certain grants that are
available.
But overall the loan approach allows us to maximize the
dollars available and provide real support and real relief to
these communities.
Mr. Gillmor. Thank you very much, Governor. Mr. Pallone.
Mr. Pallone. Thank you, Mr. Chairman. I want to ask two
questions, and I guess the first one has to do with the arsenic
standard and the second one is on infrastructure. As far as the
arsenic standard is concerned, again, you know that I was very
disappointed in the fact that you decided not to implement the
10 parts per billion.
And what you seem to be saying today is that you definitely
think it should be lowered from 50, but you don't know if the
10 is the right one. Again, I don't understand that because we
have so many indications--the European Union, the World Health
Organization, our own State of New Jersey, that has used 10.
You even stated that maybe even 5 or 3, but it seems like
the general consensus is that 10 is certainly what it should
be. I mean, there is certainly some that say it should be 5 or
3, but there are very few that are suggesting that it should be
more than 10.
And so I still don't understand why it was not the logical
and the right thing to do to go to 10, and then if you wanted
to reduce it to 5 or 3 later, that's fine. But to suggest that
somehow it does not matter because it is not going to be
implemented for a couple of years, but I still think it serves
as an example for States and for water systems.
And if we defer this 10 for a significant period of time
before announcing it, that does have a public health impact. So
would you please respond to that.
Ms. Whitman. Well, first of all, we have not withdrawn the
10. We have put a notice to withdraw the regulation as it
currently exists. I am having a difficult time understanding
how there is a public health issue if the new standard of 10
parts per billion would not have been effective until 2006, and
we will have a new standard effective by 2006 which may well be
10.
But as you yourself indicated--first of all, let me say
also that it is very expensive for water companies. While it
may sound all right to go to 10, and then if we find that it
should be 7 or 5, to drop it lower than that later on, that is
a huge incremental cost.
So we want to make sure that we are at the right level, and
my concern is that the previous rulemaking did not allow
adequate time for us to hear of what I have seen of what we
were able to get from all of the stakeholders, and all those
affected.
And we have made on a cost benefit analysis that the costs
that we used were based on a national average, when what we see
is the heavier concentrations of naturally occurring arsenic
occur in the west and southwest; many and very small water
systems, with populations that don't have a lot of disposable
income.
And I just think that it is fair that we hear all of that
and understand what more we might need to do from either
additional loans, grants, or technological help, to ensure that
these small water companies--that we are not forcing people out
of their homes or don't cause them as in the case that I cited
before, don't cause them to sink their own wells and get
unprotected water that is at the higher standards.
Mr. Pallone. I guess my concern, Governor, is that I think
10 is pretty much the consensus, although it may not be 90 or
100 percent, and it would have been better to just proceed with
that.
And I guess I am also fearful that as much as you have the
best intentions in trying to say that we are going to do
something well, that that may not be what the administration
does.
The second thing though. With regard to the funding levels
dedicated, I am very concerned as I said before that we are not
going to see this administration and its budget actually
provide for any significant increase in the funding levels for
safe drinking water.
You said in your statement that the administration proposes
to maintain capitalization, which suggests to me that maybe
that means that they are just going to stay at the same level.
And the 500 million that I think that you suggested, is
that for safe drinking water, or is that for clean water in
general? I was not clear if you were putting the clean water
and the safe drinking water together, and whether there was
going to be an actual increase for the safe drinking water
component.
Ms. Whitman. What we are looking at is maintaining the same
commitment as the previous administration on the clean water.
Mr. Pallone. And, you see, that is the problem again. We
are hearing figures here and testimony from that latest survey
of 150 billion over 20 years. If we are just going to maintain
the same level, we are never going to get to deal with these
infrastructure problems the way they need to be dealt with.
And I think what happens is that it goes back to the States
and the ratepayers, and I don't think that is going to
accomplish the goal of really making the kind of investment
that they want.
I don't think that these investments are going to be made
if the Federal Government does not provide significant monies.
What about the enforcement aspect? I mean, do you envision that
we are going to have more money for staff, and for compliance
to go out and look at the bad actors and see that there is
adequate compliance with the existing standards?
Ms. Whitman. We are certainly going to have a very active
enforcement effort. As you know, we have not finalized the
budget numbers. They will come to you. I believe it is the 9th
of April.
But we are also looking to maximize the ability of States
to help us with that enforcement. We will enter into
partnership with the States. Many as you know have done a very,
very good job at this, and we want to ensure that we have the
ability to do what needs to be done, and we feel that we can
maximize that by working in partnership with the States.
Mr. Pallone. Thank you, Mr. Chairman.
Mr. Gillmor. Thank you, Mr. Pallone. The chairman of the
full committee, Mr. Tauzin.
Chairman Tauzin. Thank you, Mr. Chairman. Governor, let me
thank you for coming to discuss with us critical issues
concerning the Safe Water Drinking Water Act and its
implementation.
I missed the chance to give an opening statement, but I
would have recognized the fact that since we started the
Drinking Water State Revolving Fund as a result of the 1996
Safe Drinking Water Act Amendments we have, as of this year,
allocated $4.4 billion for drinking water specific funding
across the country.
And the result has been that there have been over 1,400
projects funded nationwide, providing safer drinking water and
safer health conditions for Americans. So it has been an
extraordinary successful program, and I wanted to thank you for
your commitment to it, and your willingness to come and share
your thoughts with us today.
I do want to make one thing, however, clear, and that is
that if there has been a failure in the 1996 Safe Water
Drinking Act, much of it has been the result of problems that
we have had with the prior administration carrying out the 1996
Act as we intended it.
When it comes to this arsenic rule, for example, the prior
administration was 1 year late in establishing the research
plan, the scientific research plan, that was going to form the
basis of this rule.
And the former Chairman of this committee every year had to
write EPA to complain about recommended cuts in the funding of
that basic scientific research, and delays in the distribution
of those research funds.
It was the intent in 1996 to let science make the judgment
on whatever level the 50 parts per billion would be lowered to,
and to make that a correct scientific decision--as you have
pointed out--because of the extraordinary expense in achieving
this lower level all over this country, in water districts
throughout America.
And it was our intent then that science drive the standard,
and EPA simply punted and punted, and this committee had to
continually complain to EPA for its cuts in that research
funding. It was no surprise to us, then, that the rule was
issued in the last few days of the last administration. It was
not even published until after President Clinton left office.
So frankly, I want to commend you for putting science back
into the process, and leaving science fiction where it belongs,
in Hollywood.
And for making sure that when we come up with the rule,
which won't be effective as you point out until 2006, that it
is the right number, whatever that number is, whether it is 10,
12, 6, 3. You have got it just right. And I hope that your
administration, and I know it will, will begin to rely upon
real science rather than a phony science or science fiction to
make these judgments.
More importantly, I hope that when we pass statutes like
the 1996 Act, and that Congress instructs very specifically on
deadlines and dates to establish things like a scientific
research plan, that the EPA under your administration will meet
those deadlines. Can we have that kind of assurance from you?
Ms. Whitman. You will certainly have my commitment to do
our very best at that.
Chairman Tauzin. We always get that assurance.
Ms. Whitman. Well, when you are dealing with a scientist,
sir, sometimes they push back at you in ways that I am not
competent to second-guess.
Chairman Tauzin. I know, but do you understand that in 21
years on this committee that one of our biggest problems with
every EPA administration has been the fact that when we tried
to set deadlines for things as important as a scientific
research plan that backs up an arsenic regulation, that those
deadlines are always missed, and we always end up as we found
ourselves at the end of this last administration, seeing a rule
that may not have had the proper time to be vented and
understood properly before it was promulgated?
Ms. Whitman. Mr. Chairman, if I might, the commitment that
I will make to you is if we can't meet a deadline, you will
know it up front, and as you establish those deadlines, if
there is anyone who is telling me that that is too tight a
deadline, that for some reason, scientific or otherwise, that
it is impossible to meet, I will certainly let you know.
Otherwise, we take it as our obligation to meet those
deadlines.
Chairman Tauzin. And sometimes it is our own fault when we
set a deadline that doesn't take that into account. I give you
my word, as I know the chairman will give you his word, that we
will always consult with you as we go forward on fixing these
deadlines, and trying to make sure that they are realistic, and
that you have the resources to meet them.
And we had to do that with the Firestone issue recently
when we put a significant amount of funds into NITSA to make
sure that they could meet the standards of that new Act for
Highway Safety.
And we obviously have the same concerns here. When it comes
to safe drinking water, obviously we are not talking about a
nice thing to do. We are talking about something that
critically impacts the health of all Americans, men, women, and
children.
And so this is a critical area, where we know that the
science has to be right, and I basically wanted to take a few
minutes that I had to welcome you and ask for your continued
cooperation. I know that you have offered it privately and
publicly to help us do our work.
But most importantly to encourage you, and not to be
deterred by critics who complain that you are going to take
your time and do this thing right. Do it right, and make sure
that science is the basis of your decision.
And I guarantee that this committee will back you up when
that is apparent to us in whatever decisions that EPA makes for
the good of our country. I thank you very much, Mr. Chairman,
and I yield back my time.
Mr. Gillmor. The gentleman yields back. The gentleman from
California, Mr. Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman. Mrs.
Whitman, you have been the Administrator of the EPA for less
than 2 months; isn't that correct?
Ms. Whitman. That's correct.
Mr. Waxman. This drinking water standard for arsenic has
been in the works for 10 years. During those 10 years the
professionals at EPA heard from all the different parties that
had something to say about the matter.
They heard from the scientists, and they heard from the
industry, and they heard from the communities, and they came up
with a clear decision that it ought not to be 50 parts per
billion, but 10 parts per billion.
But the industry said we may need some more time to comply.
So EPA, before you got there, said all right. You have until
2006 to comply, but the effective date was March 23, 2001.
So when you talk about an effective date, and when you talk
about there is no loss of time, that can't be true, because if
the rule is effective on March 23, that means that is when they
have to start complying. And the absolute deadline for
complying is 2006.
If you pull back that regulation, there is no deadline.
There is no standard, except the old one that was set in 1942
at 50 parts per billion; isn't that accurate?
Ms. Whitman. We will ensure that we have enforcement ready
for 2006, the same as this particular rule would have required.
We do have a June 22nd deadline that you extended as a courtesy
to the last administration for a year last year.
I will obviously work with you to see if we can get the
same kind of extension to do this. I just want to make sure
that we have done everything that we need to do to be able to
have all the information necessary to make the best possible
decision, including as we are required to do by law what the
whole fiscal impacts are.
And again while the staff has definitely done a fiscal
impact, and they have looked at what the potential impact is,
they then did an averaging across the country, and when you
look at how that comes into effect, it is very different.
Mr. Waxman. Let me--excuse me, because I have a limited
time. I just want to point out to you that the General
Accounting Office reviewed the EPA's decision that was
promulgated and that you have now lifted off the calendar, and
the GAO said that the EPA has done an effective cost benefit
analysis.
They have got a long and complete record of many years, and
so in 2 months you have come in and pulled off the regulation
that was supposed to protect the public health. Now, I have to
tell you that I cannot ignore the fact that the mining industry
gave $5.6 million to the Republican Party.
The chemical industry gave $9 million to the Republican
Party. You maybe did not read any letters from the mining
industry, but they were on file at EPA. It was well known that
they did not like this regulation. They even filed a lawsuit
about it.
So I know that Mr. Dingell has sent a letter to you, and I
think we ought to have an answer to it, that would tell us who
met with your staff, who did the White House people talk to
within the industry, and get a complete record of their
influence in what is clearly to me a huge giveaway to the
mining industry and to the chemical industry, I believe at the
expense of the health of the American people.
They are not going to be able to comply by 2006 unless you
give them a standard, and the standard has been set and ought
to be at 10 parts per billion. Isn't it accurate that when you
were Governor of New Jersey that you set a standard of 10 parts
per billion?
Ms. Whitman. As an advisor, yes, absolutely. We are in the
fortunate position of not having a lot of naturally occurring
arsenic. We were able to do that, and we think it is
appropriate. That's why I am not adverse to 10 parts per
billion, but I have a responsibility----
Mr. Waxman. Wasn't that based on sound science?
Ms. Whitman. It was based on where we thought things were
going, but we had no definitive scientific report that said 10
parts per billion is the measurement at which you are fully
protecting public health; and at 11 or 12, you are endangering
people, and at 7 or 9, they are very healthy.
We did not have that. We just took it. And, Congressman, I
don't disagree with you that there are other States that have
done the same thing, which shows you that people do want to do
the right thing, but we have a responsibility----
Mr. Waxman. States want to do the right thing because they
are waiting for the EPA to set a national standard. Everyone in
this country ought to be protected from levels of arsenic in
their drinking water that could endanger people's health.
Ms. Whitman. I could not agree with you more. I could not
agree with you more, and we will, and I do believe that the
companies are going to be able to reach that goal. They could
do it in 3 years.
Mr. Waxman. But you don't need them to do it by then. That
is the last deadline for them to do it. They could start doing
it now if EPA would set the standard at 10 parts per billion,
and they could start meeting that standard now. And the
deadline for all of them to meet it is in 2006, and a lot of
them would meet it long before.
Ms. Whitman. I wish that were the case, but I doubt that
you would see that, and Congressman, just as I would never--I
would hope that we would all understand that no one, and
particularly this administration, would jeopardize the public
health because of campaign contributions.
I don't see that happening as decisions are made, where
unions have given great deals of contributions. I don't see
anybody making a decision that would jeopardize the public
health on that. That is simply not what any administration
would do, and we did no do this.
As I indicated to you, when this decision was presented to
the White House, they were concerned about that. They wanted to
make sure that I was comfortable with that.
Mr. Gillmor. The gentleman's time has expired.
Mr. Waxman. One last sentence, Mr. Chairman. I can't ignore
the fact that contributions were there. I just also want to
comment about your statement about why didn't you get praised
for not rolling back the pesticide regulations.
Ms. Whitman. No, just recognition.
Mr. Waxman. The recognition shouldn't be that you should be
praised for not rolling back more environmental protections.
You should be criticized if you have rolled back environmental
protections that are needed to protect the public, and I don't
think you ought to be complimented for not doing worse.
Ms. Whitman. If we do, you can criticize us.
Mr. Gillmor. The gentleman's time has long since expired.
The gentlelady from New Mexico.
Mrs. Wilson. Thank you, Mr. Chairman. Before I interrupted
Mr. Waxman, I was hoping that I could get some chocolate, and I
was very disappointed that I wasn't given that opportunity.
Sometimes I wonder how it is that I could be seeing
something from such a completely different perspective, and in
this job you end up dealing with thousands of issues and some
you really have to focus on because they are extremely
important to your constituents.
And I find myself in a hearing here today with a completely
different perspective, and I asked my staff to go up and pull
up my file from last year when we started looking at this from
a public health point of view, and a science point of view to
benefit the citizens of the State of New Mexico.
There are several things that I would like to enter into
the record with unanimous consent, Mr. Chairman. And I think I
have now figured out one of the reasons, anyway, why I have
this very different perspective.
And that is that if you look at the East Coast and the West
Coast, less than 3 percent of your water systems are going to
be even affected. So what do you care? It is a bunch of New
Mexicans that are going to have to pay for this.
And it is us in New Mexico who show no adverse health
effects at levels between 2 parts per billion, and 50 parts per
billion. The question then becomes why. What is different?
I would like to put several things into the record. One is
a letter from the Mayor of the Village of Los Lunas explaining
what this will do to the Village of Los Lunas, which is a
little place south of Albuquerque.
The second is a letter from the State Water Commission, the
Water Quality Commission in the State of New Mexico, which is
responsible for water quality in the State of New Mexico, which
expresses significant concern about the science behind the rule
and the science at what level the arsenic level should be set
at between 2 parts and 50 parts.
The third letter is from the Mayor of the city of
Albuquerque, whose name is Jim Baca. He is a Clinton appointee
in the Bureau of Land Management, and strongly supported by the
environmental movement in this country, who with the entire set
of mayors in the Rio Grande River Valley is opposed to setting
the arsenic standard at this level for reasons based on science
and public policy.
And I have to tell you that I looked down this list, and I
don't see many Republican mayors on the list. We don't have too
many in the State of New Mexico.
Mr. Gillmor. Does the gentlelady request unanimous consent?
Mrs. Wilson. Yes.
Mr. Gillmor. Without objection, and the Chair hearing none,
they shall be entered in the record.
[The information referred to follows:]
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Mrs. Wilson. And the third is a map. This is the State of
New Mexico, and every little dot here is a water system that is
going to be impacted by these rules. Some of these are in my
district.
This little county over here isn't so little. New Mexico,
by geography, is the fifth largest State in the country. This
county over here is Harding County, and it has two water
systems affected.
In the census, they were very pleased. They are now at 871
people in the entire county of Harding County. Bernalillo, in
New Mexico, in my district, has 6,700 souls. Their estimate of
the cost, the Mayor has estimated--Mayor Charles Aguilar has
estimated the cost of this standard of about $91 on everybody's
water bill.
This is a town where the median household income is
$19,000. That's why New Mexicans care about this. We want clean
water for our families, but we want to get this right so that
we have the money to be able to pay it, and we don't lose our
water systems.
The people that I am listening to are not folks in the
timber industry. I don't even have enough trees to have a
timber industry. What I care about is public health and good
science, and I think it is possible to do that on a bipartisan
basis because we have done it in the State of New Mexico. And I
yield the balance of my time.
Mr. Gillmor. The Gentle Lady yields back. The gentleman
from Ohio, Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. I listened to my friend
from New Mexico, and we have worked on several infectious
disease and other issues together, and I appreciate her
integrity and her good work.
The subject though of this hearing is to discuss the
massive funding of the water infrastructure in this country,
and some of this money should be diverted to communities like
yours, but it doesn't mean that you delay cleaning up the water
in those communities.
I mean, that is what we are really here for, I think.
Administrator Whitman, let me understand this. Now, when you
were the Governor of New Jersey, you accepted--you used the
word advisor, and I don't know quite what that meant. But you
accepted the 10 parts per billion as making sense for New
Jersey, correct?
Ms. Whitman. Yes.
Mr. Brown. But now you say that going from 50 to 10 that
you don't want to do it without more studies and more science.
So, as Governor of New Jersey, you thought 10 made sense.
And you didn't care about the science so much then, and the
thoroughness of the science, and sound science as my friends on
the other side of the aisle always like to say when they have
industry scientists spewing their point of view. But why today
you want more science, more studies, more delay?
Ms. Whitman. Well, Congressman, we have the luxury of being
able to accept something that was accepted but not
scientifically definitive. We could do it without, because we
don't have a great deal of naturally occurring arsenic in our
water.
We have not as many water companies as you saw in the map
that the gentlewoman from New Mexico showed us. We are able to
do it in a way that did not push any of our people to the point
where they have to make a decision whether they were going to
be able to afford their water or food, or the constant things
that we always hear of in tradeoffs.
So this was a decision that we came to without the same
kinds of constraints. Again, I would like to assure everyone,
and to repeat, that what we are doing here is looking to make
sure that we fully understand all the impacts of the decision
that we are making, and are there other steps that we need to
take so that we don't have unintended consequences from this
rule.
Simply because I would love nothing better than to have the
definitive study that says that it is 10, and that's it, or it
is five, and that's it. We may end up at five.
Mr. Brown. Administrator Whitman, we hear that around here
from people that don't particularly have a good record in the
environment. We need a definitive study, and we need sound
science, and we need absolutely 100 percent proof.
Ms. Whitman. We are not going to get it. We need to make a
decision without everything that we would like to have.
Mr. Brown. Yes, but you are the agency. It is my
understanding that the EPA's established numbers are maximum
contaminant levels for 83 contaminants under the Safe Drinking
Water Act. Is every single one of those--I know that you have
not been there very long, but is every single one of those a
product of a definitive scientific study that clearly
identified the exact number for the EPA to act every time?
Ms. Whitman. And I am not saying that we are going to hold
up a decision on this until we get that kind of a study,
because I don't think that we ever will get that kind of a
study with arsenic. So we have to be prepared to make a
decision without everything that we would like to have. That is
what I would love to have, but we are prepared to go forward.
Mr. Brown. If I may, in light of what this list of
countries--and I mentioned some of them earlier--have done;
Australia is 7 parts per billion, and Belgium, Denmark, United
Kingdom, German, Spain, Finland, France, Ireland, Greece,
Italy, Luxembourg, The Netherlands, Portugal, Syria, Nunibia,
Mongolia, Laos, Jordan, Japan, Sweden, they have all come down
to 10 parts per billion.
And the European Union has said 10 parts per billion, and
the World Health Organization, as reputable an organization as
there is on international public health, has said 10 parts per
billion; and because you are not sure, you maybe need one more
study to be sure.
You don't want to join New Jersey, and you don't want to
join all of these countries. You don't want to join the world
health organization and the EU to say let's do 10 in this
country because maybe we ought to delay it. Who is going to pay
the cost for that delay?
Who is going to get sick, and who is going to be a victim
of an endocrine disrupter, or who are going to be victims of
birth detects, or who is going to be the victims of the toxic
substance of arsenic or cancer because of this delay?
Ms. Whitman. Congressman, if we determine that it should be
five, I would like the flexibility to take it to five right
away. Not wait, and not do 10, and then have them come down to
five, and that is maybe where we end up.
Mr. Brown. Maybe it is, but from the record so far of this
administration, from the Governor of Texas' record on the
environment, and from the record--and I don't know much about
your record in New Jersey, but from the record so far with
carbon dioxide, with others, and with all that we have seen in
this administration already, for us to think that there is not
some interest in delay, when the clock began or was supposed to
begin March 23, and then these communities began to comply.
We can do some things for Ms. Wilson and others through the
revolving fund. We ought to be doing that, but to begin this
delay doesn't send a very good message to the people of this
country for an administration that has already established a
pretty poor environmental record in a record of a hundred days.
Ms. Whitman. Well, Congressman, did you feel that way about
the diesel regulation as well? Because I would say when you
look at the record of this administration on the environment,
the important thing is to understand that we will judge each
issue on its merit individually.
We do not come to it, I will admit it, with an over arching
desire to end up in one place predetermined. We want to
determine each issue on its merits, and that is the way that we
will do it. And sometimes we will agree and sometimes we won't.
Mr. Gillmor. The gentleman from Illinois, Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. Administrator, your
testimony indicates that some infrastructure needs which need
to be more fully evaluated are population growth, aging
infrastructure, merging environment and public health demands,
operation and maintenance costs, and the affordability of water
services.
And as I said in my opening statement, I would think access
would be another one that we would want to make sure that we
consider. I think those make an assumption that everyone has
access, and so we are going to evaluate on new standards.
And we are going to evaluate on how old the equipment is.
Again, I still want to continue to put the plug in for maybe
just simple access that some people still need regardless of a
standard. I thought I would throw that out.
Two questions. Are these items, or in other words the ones
that I mentioned, to be addressed in further refinement of the
gap analysis?
Ms. Whitman. Yes, those are all going to be things that we
are going to be looking at with that gap analysis, and with an
idea to seeing where we can tighten the way that we do our
assessments. And we will also submit that gap analysis for peer
review.
Mr. Shimkus. Can you also at least as you go through the
process--and I again look at what we are doing for access, and
what we are doing in conjunction with the U.S.D.A.
And again I just want to make the point that there are
places out there where they are still hauling water in to their
homes. Also, could you provide the subcommittee with any study
design plans, or other documentation, upon how the evaluation
of these elements will proceed?
Ms. Whitman. Certainly. We will be happy to provide you
with anything that you need on that.
Mr. Shimkus. And let me again finally ask. I was trying to
explain this arsenic debate on the radio a few minutes ago, and
I was talking about 50 basketballs in a gymnasium, versus 10
basketballs parts per billion. Is that 10 versus 50, is that a
good analysis, or should it be in an arena, or should it be in
the Super Dome?
Do we have any idea of how you could put it down in
layman's terms? How many basketballs and what size of a----
Ms. Whitman. Well, I would say off the top of my head that
if we are doing basketballs that it would be in an arena,
because we are talking about parts per billion.
Mr. Shimkus. State your name for the recorder so that he
can get it.
Mr. Hamill. Barker Hamill, for the State of New Jersey. Ten
seconds versus 50 seconds out of 32 years.
Mr. Shimkus. Thank you very much. That clears--but you did
not answer the basketball. Could I get submitted for the record
the basketball analysis?
Ms. Whitman. Unfortunately, Congressman, our professional
basketball team is not something that we----
Mr. Shimkus. Thank you, and I yield back my time, Mr.
Chairman. Thank you.
Mr. Gillmor. The gentleman yields back. Mr. Engle.
Mr. Engel. Well, thank you, Mr. Chairman, for holding this
hearing today on safe drinking water infrastructure. Governor,
welcome. From my district, I can look across the Hudson River
and see New Jersey. So I am aware of your record as a Governor
and the environment and I hope that as other issues are being
decided in this administration that you will continue to weigh
in heavily on your feelings about this.
I want to talk about something that is very parochial to my
district in New York. As you may know, in New York there has
been a problem implementing the Safe Drinking Water Act,
particularly within my district.
About a decade ago, a filtration plant was mandated for the
Crotin Reservoir, and since then four different areas in my
district in The Bronx, and several sites in Westchester County
just north, have been identified by the New York City
Department of Environmental Protection as possible sites for
the filtration plant.
There are several problems with the four possible sites in
The Bronx, including the fact that they are located in densely
populated areas. Now, I have problems with the filtration
plant, and its potential location, and have been working to
find alternatives to filtration.
I have a bill which would explore alternatives to
filtration. Now, the New York city of Environmental Protection
has been on a dual track; while starting the building of a
filtration plant, they have also studied filtration
alternatives.
And it is my understanding that there are several
alternatives to filtration that might adequately protect the
water supply, thereby circumventing the need to build a
filtration plant.
As I have mentioned, I have introduced legislation in the
past and I am drafting legislation for the current Congress,
which amends the Safe Drinking Water Act to allow the use of
new technologies as an alternative to filtration if it is
appropriate.
Your predecessor, Carol Browner, visited the possible sites
for a filtration plant and I would hope that you would consider
joining me in visiting those sites and talking to community
leaders about the potential of non-industrial techniques to
protect the water supply i the Crotin Reservoir.
I hope that you could do that in The Bronx, and if that is
difficult, I hope that we could have a meeting here in
Washington with you personally to discuss these different
alternatives, and I just wanted to raise that. And I would look
forward to sitting down with you either in New York or here in
Washington to discuss this.
Ms. Whitman. I would be happy to discuss that with you,
Congressman.
Mr. Engel. I thank you very much. Thank you, Mr. Chair.
Mr. Gillmor. Thank you, Mr. Engel. I would like to enter
into the record two items. First, comments from the American
Water Works Association regarding the arsenic standard, in
summary form.
And, second, correspondence and contacts between Chair
Bliley and the EPA regarding delay in the arsenic research plan
and funding of arsenic research, and without objection, and the
Chair hearing none, those will be entered in the record.
[The information referred to follows:]
Association of State Drinking Water Administrators--3/28/01
ASDWA POSITION STATEMENT--Drinking Water Infrastructure Funding
(#01-2001)
Reference: None
ASDWA Position
It is the position of the Association of State Drinking Water
Administrators (ASDWA) that current and future funding vehicles for
drinking water infrastructure improvements and state implementation
activities should: 1) maintain maximum state flexibility in structure
and implementation; 2) ensure long-term sustainability of the funds as
well as water system capacity; 3) expand upon the current Drinking
Water State Revolving Loan Fund (DWSRF) as the preferred funding
vehicle; and 4) unless sufficient funding is made available through the
base state Public Water Supply Supervision (PWSS) grant, maintain
sufficient support through set-aside funding or other viable mechanisms
to provide for administration and state SDWA implementation costs.
Rationale
The Safe Drinking Water Act (SDWA) Amendments of 1996 created
enormous new programs and a complex regulatory structure that will
require water systems to continue improving their water system
infrastructure, and expand state implementation requirements. The SDWA
provided for the creation of the DWSRF program to help finance water
system infrastructure needs and for set-asides for states to supplement
administrative and program implementation costs. The SDWA authorized a
total of $9.6 billion for FY-94 through FY-03 for the DWSRF (although
only $4.42 billion has been appropriated through FY-01). Congress
authorized broad eligibilities for the drinking water funding to
address serious risks to human health, ensure compliance with the SDWA,
and to assist systems most in need on a per household basis. Projects
that address present or prevent future violations of health-based
standards as well as to replace aging infrastructure are eligible for
funding. Eligible project categories include treatment, installation or
replacement of transmission and distribution pipes, rehabilitation or
replacement of contaminated sources, water storage, consolidation, and
creating new or regional community water systems to address unsafe
drinking water supplies.
Congress and the U.S. Environmental Protection Agency (EPA)
provided for loans at or below market interest rates including zero
interest rate loans and provided further flexibility for states to
provide loan subsidies such as principal forgiveness and negative
interest rate loans to disadvantaged communities or communities that
would become disadvantaged as a result of a project. They also allowed
specified transfers of funds between the Drinking Water and Clean Water
revolving funds, and created set-asides for states to fund training and
technical assistance, fund administration, source water protection,
operator certification, and state PWSS program implementation.
To date, the DWSRF has proven extremely successful. Through June
30, 2000, EPA had made available more than $2.7 billion to all 50
states and Puerto Rico to capitalize state revolving loan funds. States
had made approximately 1,200 low-interest loans totaling more than $2.3
billion with 75 percent of the loans (40 percent of the funds) going to
small water systems. States reserved and matched approximately $445
million of the fund for capacity development, operator certification,
source water protection, PWSS program implementation, source water
assessments and delineations, technical assistance to small systems,
and fund administration. This flexibility has allowed states to
maximize infrastructure funding as well as ensure that needed tools and
assistance are provided to water systems.
Maintaining and expanding this successful DWSRF structure must be
ensured if we are to continue to meet growing drinking water
infrastructure needs. EPA's recent 1999 Drinking Water Infrastructure
Needs Survey highlights $150.9 billion in infrastructure need
nationwide over the next 20-year period through 2018. Of this total, 68
percent, or $102.5 billion is needed now to ensure the provision of
safe drinking water. Transmission and distribution projects represent
the largest category of identified need followed by treatment, storage,
and source.
As Congress debates the future of infrastructure funding needs and
funding vehicles, ASDWA strongly encourages the continued support of
the DWSRF as a viable, successful model.
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Mr. Gillmor. The gentleman, Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman, and I will keep my
remarks fairly brief. And, Governor, welcome. One of the issues
that I hear about out in my district, as much as some of these
new standards that impact on very small rural communities, is
the spin-off into TMDLs, because some of these areas tell me
that they may in fact be required to treat water going out of
their systems to a level that is cleaner than naturally
occurring because of the minerals and things in the water.
And I hope that you will flag that. I am not trying to
create another presser here for another week of nightly news
reports on poisoning people. But it is an extraordinary problem
out there that we are setting standards that may well exceed
what naturally occurs in streams in the West.
And I hope my friends from the East understand that, but we
each have our own set of problems and I think we all want clean
water that is safe. So I would encourage you to take a look at
that as well.
Ms. Whitman. And we are reviewing that.
Mr. Walden. Thank you.
Mr. Gillmor. Mr. Terry, do you have a question?
Mr. Terry. May I?
Mr. Gillmor. You may.
Mr. Terry. Good afternoon.
Ms. Whitman. Good afternoon.
Mr. Terry. I have worked in some of our rural communities,
even though I am from Omaha, Nebraska, representing
predominantly urban. As I say, we have more cement than fields
in my district.
But I have a memo from our Lieutenant Governor, and Health
and Human Services Director, about the impact of the copper and
arsenic rules, and I appreciate the movement, because as my
friend from New Mexico said, just the natural state of our
ground water that has been used for years will fall within and
capture with the revised rules, placing a great burden on local
communities in how they treat the water to meet the new
standards.
And I have two questions for you in that regard. First of
all, is the EPA open to alternatives instead of providing the
revolving fund or dollars? For example, in some of our
communities with copper, for example, the copper leeches into
the water from the piping in the house when it sits overnight,
because the natural ground water is a little bit more acidic
than in some other areas of the country.
But yet they would rather--the EPA mandate basically is
that they treat that. So they have to build facilities or alter
their facilities at great cost to that community, as opposed to
being open for less costly alternatives; filtration systems,
pipe flushing, education.
Whereas, one community came and asked me last week that it
would be cheaper for us to go into the number of houses and
replace their copper piping than to do what the EPA is
mandating by way of the treatment facilities.
So do you believe as the head of the EPA, and not
necessarily that localities or States should have greater
flexibility to adopt remedies that best fit the locality and
the situation without necessarily having to go to
infrastructure changes?
Ms. Whitman. Well, Congressman, one of the things that I
believe is important for us and incumbent upon us as an agency
is to set the standards that we believe best protect the public
health.
But I do not believe it is therefore incumbent on us to
dictate the technology that reaches that standard, whether it
be in drinking water or air. It really does not matter, and
that we have that obligation to set the standards to protect
people, but I don't believe that we are in the business of
managing any of these companies, or any of these businesses
that are impacted or communities.
And that we should allow them to reach those standards in a
way that reflects their needs and is responsive to their needs.
Mr. Terry. Well, what you say certainly is different than
what the past Administrator was telling the State of Nebraska
in how to do with that, and so I appreciate that level of
flexibility.
Ms. Whitman. We will try to work with you to see if we can
resolve these issues.
Mr. Terry. That is much appreciated, because there is
sometimes common sense in easy solutions that just seem to
escape or be beyond the grasp of some Administrators out here.
So I appreciate that.
Now, with that, if we continue though to force some of
these communities with lowering the standards, and then having
to expand their infrastructure to meet the new standards with
the Drinking Water State Revolving Fund, according to this memo
there could be as many as 120 communities in the State of
Nebraska that would have to sp end infrastructure dollars.
I am not sure the revolving fund as it sits today has
enough money that all of these communities could take part in
the program, receive some dollars, and comply by 2001 or 2006.
Ms. Whitman. Well, it is important to understand that we
also have--and while there are as you know special provisions
within the SRF that allows for States to provide additional
dollars to the small water companies in the small areas, and in
fact they have done that to a great degree, we have a number of
other tools available to help the small water systems, with
technical assistance, and training, and capacity development,
operational help that we can give them.
And it is the kind of thing that--operational
certification. Last year's budget included approximately $14
million specifically targeted to helping the small companies.
And that is something that I believe that we need to look at
and review, and make sure that we have the necessary tools
available to be able to support small water companies, and that
they know what is available.
Because very often I found that sometimes we have--there
either may be money in a particular form that is available to
them, or this other assistance, and they don't even know it is
available. So they are not taking advantage of it.
And we could be. We are already in a position to provide
more aid overall than we are, and they are not getting it
because they don't know about it.
Mr. Terry. Well, I appreciate that you recognize that and
have a commitment to that. Certainly in Omaha, when the
standards change, we can absorb that cost without much
difficulty, but the smaller communities can't without that
assistance, and I appreciate your recognition of that fact.
Thank you, Mr. Chairman.
Mr. Gillmor. Thank you. That concludes--oh, I beg your
pardon. Mr. Barrett. Excuse me.
Mr. Barrett. Thank you very much, Mr. Chairman.
Mr. Gillmor. Most important for last.
Mr. Barrett I appreciate that warm introduction. Last
Friday, there was an article in the Night Ritter Services that
said that on Tuesday, Environmental Protection Agency
Administrator, Christine Todd Whitman, said Clinton's proposal
to limit arsenic in drinking water to 10 parts per billion was
too expensive and, ``the scientific indicators are unclear.
Today it seems that you are talking more about the
scientific indicators, as opposed to the expense. Can you
comment on that?
Ms. Whitman. No, it is both. It is that we don't
unfortunately--and I don't know that we ever will have that
definitive study that says that it is 10. But that is becoming
more and more a common accepted number.
But it is not hard and firm that says that over 10 that you
are endangering people, and under 10, they are protected. We
know that 50 is too high. That was set back 50 years ago or 60
years ago.
Mr. Barrett. I understand that. But my question is it the
science or is it the expense? This article said that you had
two.
Ms. Whitman. It is a combination. We have an obligation as
you know under the Safe Drinking Water Act to go through a
process that identifies the science, and then we also have an
obligation under the Act to look at the fiscal implications of
that.
Mr. Barrett. And what was the information that led you to
the belief that the Clinton proposal was too expensive?
Ms. Whitman. I was listening--well, not listening. I had
heard a lot of concern about the arsenic rule overall, and in
talking to staff and asking about the amount of time they had,
and the kind of impact that they had for public comment, I
became very troubled that this number wasn't--and the
implementation wasn't based on all of the available input that
was necessary.
It might be as I have indicated before that we stay at 10,
but I was not satisfied that we thoroughly understood all the
implications of this decision.
Mr. Barrett. And was there a legal challenge to this rule?
Ms. Whitman. I don't know that there has been one yet.
There are legal challenges to everything that we do.
Mr. Barrett. Okay. Was there a legal challenge?
Ms. Whitman. Yes, there was, I am told.
Mr. Barrett. By the American Metropolitan Water
Association?
Ms. Whitman. I don't know. No.
Mr. Barrett. American Water Works Association?
Ms. Whitman. No.
Mr. Barrett. National Association of Water Companies?
Ms. Whitman. No.
Mrs. Wilson. Would the gentleman yield?
Mr. Barrett. Just a moment, please. The National----
Ms. Whitman. I think it is in New Mexico.
Mrs. Wilson. I was going to say it is New Mexico.
Mr. Barrett. Okay. The National Rural Water Association?
There is no legal challenge there.
Ms. Whitman. No.
Mr. Barrett. You stated that you did not talk to any
industry individuals. How extensive was the lobbying by the
industry against this rule?
Ms. Whitman. I don't know. I did not receive any calls on
it. I know that there are letters in the record on both sides.
I mean, we have an enormous number of--I mean, we have letters
from small town mayors who are Democrats who oppose it in
enormous amounts.
But my concern as someone who comes from the East and who
cares greatly about the environment, and whose State went to
10, I did not feel in asking questions of the staff that there
had been enough time for them to do what ordinarily would have
been done in getting all the input from the rest of the country
to fully understand the implications.
Mr. Barrett. I assume that you knew there was opposition
from small town mayors.
Ms. Whitman. I knew that there was a lot of concern about
this rule, yes. Of course.
Mr. Barrett. And I assume that you knew that there was
opposition from the industry?
Ms. Whitman. Not particularly. I mean, I knew that there
was a lot of controversy around this rule. We pulled back as
you know based on the Card memo all the last minute regulations
promulgated by the previous administration, and this was one
that was done after--you know, in January, in late January. So
we looked at all of them.
Mr. Barrett. You are painting a picture of sitting in a
room and knowing of the concern of small town mayors, but not
of the concern of the industry.
Ms. Whitman. No, it is a picture of sitting in a room
knowing that this is a very controversial rule.
Mr. Barrett. And who did you know that it was controversial
with?
Ms. Whitman. It was in the papers all the time. There was a
lot of talk about it.
Mr. Barrett. Yes, I know, but who? Who as it controversial
with? I mean, Ms. Wilson I think eloquently described her
controversy, but I am having a little trouble here when I hear
Mr. Waxman talk about these huge contributions; that somehow
you did not know that the industry was opposed.
Ms. Whitman. I did not know that the timber industry was
opposed because of cricetine in the wood, although growing up
on a farm, I am very familiar with cricetine in the fence
posts, and probably we ought to check our water, too, because
we are on a well, and for a period of time we were sinking
those posts in the land.
But it may be hard for anyone to understand us, but I got
no pressure from the White House on this rule. None. I didn't
talk to any member, no member of the President's staff. I mean,
I can't make it any clearer than that. Nobody associated with
the President called about this rule.
I did not take any calls from any industry members. We knew
that it was controversial, and there are suits about this rule.
I didn't say, okay, who is suing and how much did they give.
Mr. Barrett. Well, I have to admit that I didn't know that
there was a pro-arsenic lobby. I just didn't know that there
was one that existed, but apparently there is from what we have
heard today.
Ms. Whitman. This is the first that I have heard of it.
Mr. Barrett. And I just have to say I find it troubling. It
just strikes me that obviously industry from what we have
learned today was very opposed to this, and I just find it hard
to believe that that was not something that the EPA was
concerning. So I would yield back my time.
Ms. Whitman. Well, again, there may be a lot of industry
opposition. There is also a lot of opposition from real people
out there as well.
Mr. Gillmor. Thank you very much. The gentleman from New
Jersey, Mr. Pallone.
Mr. Pallone. Mr. Chairman, I just wanted to ask two things.
First of all, there is a letter to Mrs. Whitman from myself and
Mr. Dingell with additional questions, written questions, that
we would like to have answered.
Ms. Whitman. Certainly.
Mr. Pallone. And that I would like to have entered into the
record and ask for unanimous consent.
Mr. Gillmor. Without objection, the letter will be entered
into the record.
Mr. Pallone. And then, I know, Mr. Chairman, that a lot of
documents have been entered into the record today, including
one that was entered from--a statement by A.W.W.A., and I would
just like to ask that the record remain open for additional
comments, because in some cases documents from either side, we
really have not had a change to look at, and it would be nice
if we could leave the record open so we could do that.
Mr. Gillmor. Without objection, we will hold the record
open for that purpose for a week.
Mr. Pallone. Thank you, Mr. Chairman.
Mr. Gillmor. Well, I want to thank you, Administrator. You
have been very generous with your time and your wisdom, and we
appreciate you being here. Thank you very much.
Ms. Whitman. Thank you very much, Mr. Chairman.
Mr. Gillmor. That will conclude our first panel. We have a
vote, and we will come back immediately after the vote and we
will begin with Panel Two. Panel Two will consist of Perry
Beider, the Principal Analyst from the Congressional Budget
Office; Mr. Tom Curtis, the Deputy Executive Director of the
American Water Works Association; Ms. Diane Van de Hei,
Executive Director of the Association of Metropolitan Water
Agencies; Ms. Janice Beecher, Director of the National
Association of Water Companies; Mr. Barker Hamill, the Bureau
Chief of New Jersey's Drinking Water Protection Office; and
Erik Olson, the Senior Attorney at the Natural Resources
Defense Council.
We will recess now and begin with that panel as soon as we
get back.
[Brief recess.]
Mr. Gillmor. All right. We will begin with the second
panel. You have 5 minutes to summarize your statements before
members may begin asking questions, and so you may begin as
soon as you are ready, and I think we will begin with Mr. Perry
Beider of the Congressional Budget Office.
STATEMENT OF PERRY BEIDER, PRINCIPAL ANALYST, CONGRESSIONAL
BUDGET OFFICE
Mr. Beider. Mr. Chairman and members of the subcommittee,
thank you for inviting me to testify. The Congressional Budget
Office, CBO, appreciates this opportunity to contribute to your
review of the needs for investment in drinking water
infrastructure.
My testimony today reflects some initial findings from an
ongoing CBO study requested by this subcommittee and your
colleagues on the Transportation and Infrastructure Committee.
With me today is Dr. Natalie Tawail, who is also working on
the CBO study. I would like to make four points today about
water infrastructure investment needs. Point One is that there
is a lot of uncertainty surrounding the existing estimates of
those needs.
As you know, the Water Infrastructure Network, or WIN, has
estimated that annual needs for investment in drinking water
will average $24 billion between 2000 and 2019, exceeding
current spending from all ratepayers and public sources by $11
billion per year, as shown in the chart.
Summary of the Water Infrastructure Network's Estimate for the Annual
Funding Gap for Drinking Water
(In billions of 1997 dollars)
------------------------------------------------------------------------
------------------------------------------------------------------------
Capital Investment......................................... 19
Financing.................................................. 5
------------
Total Capital............................................ 24
Less 1996 Capital Funding.................................. -13
------------
Estimated Funding Gap...................................... 11
Memorandum:
Operation and Maintenance.................................. 27
------------------------------------------------------------------------
Of course, any 20-year projection is uncertain, but the
uncertainty here is compounded by a shortage of critical data
on the water pipe networks. Without looking system by system at
pipes age and condition, it is very difficult to say exactly
when replacement will be required.
In the absence of a national inventory of drinking water
pipes and other detailed local data, the WIN analysis uses some
simple national assumptions. For example, it assumes that, on
average, 1 percent of pipes will need to replaced each year
through 2019.
Although that assumption is grounded in a common rule of
thumb, CBO considers it quite possible that the assumption
could be off by 30 or 40 percent. That factor alone could imply
an error of 20 or 30 percent in the overall funding gap.
Point Two is that the WIN estimates are not independently
confirmed by EPA's preliminary and unpublished gap analysis.
The two estimates of drinking water needs are indeed
independent, unlike their wastewater counterparts, but they are
also significantly different.
Of course, EPA's analysis could change as it undergoes
agency review. Point Three is that some of the assumptions used
in the analyses to date could tend to overstate costs.
First, the analyses assume efficiency savings in operations
and maintenance, O&M, but not in capital investment. While the
data to support capital efficiencies are sparse, a growing
number of systems have achieved significant savings from
various innovative methods.
Second, the WIN report appears to misstate the financing
costs. Those costs seem to reflect all future debt-service
payments associated with the average annual capital investment
between 2000 and 2019, regardless of when those payments would
be made.
CBO estimates that the average annual debt service actually
paid during those 20 years could be roughly 25 percent less
than the reported $5 billion per year. And, third, the analyses
may also overstate O&M costs for wastewater, and perhaps for
drinking water also.
They assume that in the absence of specific efficiency
gains, the ratio of O&M to capital stock will rise steadily
over time. My final point is that water investment needs are
not only uncertain and perhaps overstated by current estimates,
but also subject to influence by Federal policies.
In particular, a broad increase in Federal funding intended
to help keep water rates affordable could keep total investment
needs higher than they would be otherwise by reducing the
pressure on systems to operate more efficiently, and on
customers to economize on their water use.
Drinking water systems around the country have improved
their operational efficiency in recent years, but industry
experts see room for further savings in both operational and
capital costs.
Promising methods include consolidation of systems to
achieve economies of scale; strategic use of preventive
maintenance to minimize long-run costs; demand management,
including the use of pricing strategies to reduce peak use; and
innovative contracting for new construction, such as design/
build and design/build/operate construction.
But such potential future savings could go unrealized if
Federal policies undermine the growing incentives for
efficiency. We have seen this before. A 1985 CBO study found
that high Federal cost shares in the original construction
grant program for wastewater treatment raised capital costs by
more than 30 percent.
In summary, CBO finds that the existing estimates of
investment needs for drinking water are accompanied by
significant uncertainty and may be too high. Moreover, how big
the needs turn out to be will be influenced by who pays to meet
them and how. I will be happy to try to answer any questions.
[The prepared statement of Perry Beider follows:]
Prepared Statement of Perry Beider, Principal Analyst, Microeconomic
and Financial Studies Division, Congressional Budget Office
Mr. Chairman and Members of the Subcommittee, thank you for
inviting me to testify. The Congressional Budget Office (CBO)
appreciates this opportunity to contribute to your review of the needs
for investment in drinking water infrastructure. My testimony today
reflects some initial findings from an ongoing CBO study requested by
this Subcommittee and your colleagues on the Transportation and
Infrastructure Committee.
Safe drinking water is essential to the economy and to human
health. But how much and how to invest in order to maintain an adequate
drinking water infrastructure are difficult issues. I hope to shed some
light on those issues today.
In particular, I want to impart two main points:
First, the existing estimates of how much investment will be
needed over the next 20 years are very uncertain and may be too
large. The lion's share of the investment will be used to
rehabilitate or replace water pipes, but there is no national
inventory of pipes' ages and conditions on which to base
estimates of investment needs. In the absence of such an
inventory, analysts have to rely on rough national assumptions,
which add significantly to the uncertainty inherent in any 20-
year projection. Moreover, notwithstanding claims that the
existing estimates are, if anything, likely to underestimate
the needs, CBO has identified some factors suggesting that
those estimates may be too large. Thus, policymakers should not
give undue credence to the estimates of future needs or the
associated ``funding gaps.''
Second, the very concept of an investment ``need'' is a fuzzy
one. The amount of money that water systems must spend in order
to provide the necessary services can vary dramatically
depending on how efficiently the systems operate and invest.
Therefore, from the standpoint of economic efficiency, it is
important that any federal support for water infrastructure be
provided in a way that gives system operators and water users
the appropriate incentives to keep costs and usage down.
the existing estimates of drinking water needs
Projecting 20 years into the future is always difficult. Even the
best 20-year estimate is only an extrapolation of what would happen
under current and currently anticipated trends. In the case of
projecting the needs for investment in water infrastructure, the
difficulty is compounded by a shortage of data. The Environmental
Protection Agency's (EPA's) quadrennial Drinking Water Infrastructure
Needs Survey provides relevant data collected from systems around the
country. However, EPA's reports based on the survey note that it
underestimates infrastructure needs over its 20-year horizon because
many systems are not able to identify and document all of their needs
for the full period.1 According to EPA staff, follow-up
visits to some systems after the first drinking water survey yielded
revised estimates that averaged 55 percent above those initially
reported.
---------------------------------------------------------------------------
\1\ For example, see Environmental Protection Agency, Drinking
Water Infrastructure Needs Survey: First Report to Congress (January
1997), p. 1. EPA recently released a report on a second survey of
drinking water needs but has not yet incorporated the results of that
survey into its analysis of the infrastructure funding gap.
---------------------------------------------------------------------------
Prompted in part by the incompleteness of EPA's survey, a
consortium called the Water Infrastructure Network (WIN) has developed
more comprehensive estimates of 20-year infrastructure needs,
supplementing the data from the survey with assumptions based on
professional judgments. According to WIN's estimates, shown in Table 1,
investment needs for drinking water will average about $24 billion per
year through 2019 (expressed in 1997 dollars and including financing
costs). WIN estimates that capital spending in 1996 from all sources--
primarily local funds from ratepayers but also federal and state aid--
was roughly half of the estimated future needs; thus, relative to the
1996 investment level, future needs for drinking water infrastructure
represent an average annual funding gap of $11 billion.2
(The table also shows WIN's estimates of average annual spending for
operation and maintenance [O&M]. Because little outside funding is
available for O&M, ratepayers cover almost all of those costs as well
as a portion of capital costs; thus, the O&M estimates bear on the
question of total costs facing future ratepayers.) EPA is also
conducting a similar ``gap analysis'' but has not yet published its
results.
---------------------------------------------------------------------------
\2\ Water Infrastructure Network, ``Clean & Safe Water for the 21st
Century: A Renewed National Commitment to Water and Wastewater
Infrastructure'' (undated), available from the American Water Works
Association (www.awwa.org/govtaff/win/finalreport.pdf), pp. 3-1 and 3-
3.
TABLE 1
Summary of the Water Infrastructure Network's Estimate of the Annual
Funding Gap
(In billions of 1997 dollars)
------------------------------------------------------------------------
Drinking
Water
------------------------------------------------------------------------
Capital Investment............................................ 19
Financing..................................................... 5
---------
Total Capital............................................... 24
Less 1996 Capital Fundinga.................................... -13
---------
Estimated Funding Gap......................................... 11
Memorandum:
Operation and Maintenance..................................... 27
------------------------------------------------------------------------
SOURCE: Congressional Budget Office based on Water Infrastructure
Network, ``Clean & Safe Water for the 21st Century: A Renewed National
Commitment to Water and Wastewater Infrastructure'' (undated),
available from the American Water Works Association (www.awwa.org/
govtaff/win/finalreport.pdf).
a. From all sources, including ratepayers and federal and state aid.
Uncertainty of the Estimates
The assumptions and judgments required in the absence of detailed
data increase the uncertainty surrounding the estimates. The analysis
underlying WIN's estimate illustrates that uncertainty. Part of that
analysis comes from a 1998 report done for the American Water Works
Association (AWWA), which focused only on investments in transmission
and distribution systems and only on capital costs, not financing or
O&M.3
---------------------------------------------------------------------------
\3\ Stratus Consulting Inc., ``Infrastructure Needs for the Public
Water Supply Sector: Final Report'' (unpublished paper prepared for the
American Water Works Association, Boulder, Colo., December 22, 1998).
---------------------------------------------------------------------------
The 1998 report estimated needs of $325.1 billion over 20 years (an
average of $16.3 billion per year), including $101.4 billion for large
systems, $198.0 billion for medium-sized systems, and $25.7 billion for
small systems.4 The analysis took the figure for small
systems directly from EPA's 1995 needs survey and estimated the other
figures using probability distributions to reflect uncertainty in four
factors: the annual rate of pipes' replacement, the miles of pipe per
water system, the distribution of pipes by size, and the cost per foot
of replacing pipes of each size. To reflect the uncertainty about
systems' replacement of pipes, for example, the analysis randomly
selected replacement rates between 0.5 percent and 1.5 percent per
year.
---------------------------------------------------------------------------
\4\ Ibid., p. 3-11. CBO has been unable to learn exactly how WIN's
consultants adapted the AWWA's estimate. Presumably, investments in
treatment facilities and equipment account for at least some of the
difference between the AWWA's annual average of $16.3 billion and WIN's
figure of $19 billion (for capital costs).
---------------------------------------------------------------------------
The resulting distributions of estimated needs were wide (see Table
2). For medium-sized systems, the analysis found that the ``80 percent
confidence interval'' around the mean estimate of $198 billion spanned
$116 billion to $272 billion--leaving a 10 percent chance that the need
was less than $116 billion and another 10 percent chance that it
exceeded $272 billion. For large systems, the 80 percent confidence
interval spanned $19 billion to $193 billion--or from 82 percent below
the mean to 91 percent above it.
Notwithstanding those results, CBO does not believe that the
existing estimates of total needs for drinking water investment are
likely to be off by as much as 80 percent or 90 percent.5
However, the results do illustrate the point that the use of
assumptions in the absence of hard data inevitably increases the
imprecision of a future projection. CBO further notes that the range of
uncertainty around the needs does not have to be plus or minus 80
percent to have a dramatic impact on the potential scope of the policy
problem that the needs represent. Because the estimated funding gap for
capital investment--that is, the amount above recent funding levels--is
roughly half of the total projected investment needs (according to
WIN's numbers), an error of, for example, 30 percent or 40 percent in
the projected needs translates to an error of 60 percent or 80 percent
in the funding gap. According to rough calculations by CBO, an error of
30 percent or 40 percent just in the assumptions about the necessary
rate of replacing pipes, which CBO believes is quite possible, could
imply an error of 20 percent or 30 percent in the funding gap.
6
---------------------------------------------------------------------------
\5\ The analysts who developed the AWWA's estimate may have
inadvertently overstated its uncertainty by using simple flat
probability distributions for most of the uncertain factors. They
probably would have been justified in giving greater weight to outcomes
near the center of the range of possible values, which would have
required using more complex peaked or bell-shaped distributions.
Moreover, confidence intervals tend to get smaller in percentage terms
as individual components of an estimate (for example, the needs of
large systems and medium- sized systems) are added together, allowing
random errors to offset one another.
\6\ The probability distribution of replacement rates for pipes
assumed in the AWWA's analysis of drinking water infrastructure ranged
from 0.5 percent to 1.5 percent per year, as noted in the text, and
averaged 1.0 percent per year. That analysis also discussed an
alternative approach, which assumed that pipe footage was laid in
proportion to nationwide population growth. Under that alternative, the
replacement rate between 2000 and 2019 would be about 0.6 percent per
year, 40 percent less than under the selected approach.
Pipes represent roughly three-quarters of total capital assets of
drinking water systems, and--at least in the wastewater analysis--
replacement of existing assets represents about half of total
investment needs. Therefore, an error of 40 percent in the assumed rate
of pipes' replacement could imply an error of 15 percent in total
investment needs and, hence, of 30 percent in the funding gap.
TABLE 2.
The American Water Works Association's Estimate of 20-Year Investment
Needs for Drinking Water Transmission and Distribution Systems
(In billions of 1998 dollars)
------------------------------------------------------------------------
80 Percent
Size of System Mean Confidence
Estimate Interval
------------------------------------------------------------------------
Small....................................... 25.7 N.A.
Medium...................................... 198.0 115.6 to 271.6
Large....................................... 101.4 18.6 to 193.2
Total..................................... 325.1 N.A.
Memorandum:
Estimated Needs per Year.................... 16.3
WIN's Estimate of Total Capital Investment 19
per Year (Including for treatment and
storage)...................................
------------------------------------------------------------------------
SOURCE: Congressional Budget Office based on Stratus Consulting Inc.,
``Infrastructure Needs for the Public Water Supply Sector: Final
Report'' (unpublished paper prepared for the American Water Works
Association, Boulder, Colo., December 22, 1998),'' and Water
Infrastructure Network, ``Clean & Safe Water for the 21st Century: A
Renewed National Commitment to Water and Wastewater Infrastructure''
(undated), available from the American Water Works Association
(www.awwa.org/govtaff/win/finalreport.pdf).
NOTE: N.A. = not available.
Similar estimates derived independently can raise one's confidence
in those estimates. Contrary to the common perception, however, the
current, preliminary version of EPA's ``gap analysis'' does not reach
the same conclusion as the WIN report. Although both analyses present
estimated gaps of $23 billion per year for drinking water and
wastewater combined, that figure means different things in the two
cases: in the WIN analysis, it is the 20-year average of a gap that
grows year by year, whereas in EPA's preliminary analysis, it is the
gap at the end of the 20-year period.7 The differences are
concentrated on the drinking water needs; for wastewater, the two
estimates of needs are indeed very similar, if not identical--but that
is because they were derived using the same methodology from the same
consultants. In short, the two drinking water estimates are independent
but not similar, and the two wastewater estimates are similar but not
independent.
---------------------------------------------------------------------------
\7\ Personal communication, Steve Allbee, Environmental Protection
Agency.
---------------------------------------------------------------------------
Possible Biases in the Estimates
Given that the estimates of needs are surrounded by significant
uncertainty, the question arises as to whether that uncertainty is
roughly balanced--that is, whether the estimates are about equally
likely to prove too low as too high, or to lie primarily on one side or
the other. WIN and EPA analysts argue that they have deliberately erred
on the low side in their assumptions on capital and O&M spending and,
therefore, that their estimates probably understate future needs. In
particular, they point to their assumptions that 25 percent of the
investment is financed without borrowing, that the rest is financed at
a real interest rate of 3 percent, and that increased efficiency
reduces O&M costs by 20 percent to 25 percent.
Those assumptions are reasonably conservative. But CBO has
identified other factors that could tend to overstate the estimated
costs for capital investment, financing, and O&M:
First, in estimating needed capital investment, the existing
analyses do not assume any savings from improved efficiency.
Although the data to support such savings are sparser than they
are for O&M, evidence from a growing number of case studies
suggests savings from methods such as design/build contracting,
preventive maintenance, and demand management (discussed
below). Incorporating efficiencies in capital investment would
also reduce the estimates for financing and O&M costs, because
each dollar not invested cuts 75 cents from the debt to be
financed and reduces the capital stock to be operated and
maintained.8
---------------------------------------------------------------------------
\8\ Of course, some methods used to reduce investment needs require
more O&M spending rather than less. As noted later in the text, the
existing analyses do not reflect a detailed model of the relationship
between capital spending and O&M spending.
---------------------------------------------------------------------------
Second, the financing costs in the WIN report may be
overstated. They appear to be the lifetime debt-service
payments associated with the average annual capital investment
over the period of 2000 to 2019. However, debt payments on
investments made late in the period will primarily occur after
2019 and therefore have little influence on the average payment
for debt service within the period. Conversely, the amount of
debt paid in much of the first decade will primarily reflect
the level of investment made before 2000, which is
significantly lower than the level the report recommends from
2000 on. According to CBO's rough calculations, under WIN's
assumptions the average annual debt service paid within the
period would be roughly 25 percent below the reported $5
billion.
Third, the assumed reductions in O&M costs resulting from
increased efficiency are relative to a baseline that may be too
high for wastewater and perhaps for drinking water as well. CBO
does not have specific information on the methods used to
calculate O&M costs for drinking water systems, but the
wastewater analysis used in both the WIN report and EPA's
preliminary study assumes that the baseline ratio of O&M to
capital stock rises steadily throughout the 20-year period,
extrapolating from a general trend in data from 1972 to 1996.
Although additional capital stock is typically associated with
additional costs for O&M, it is not obvious that the ratio of
O&M to capital would continue rising indefinitely in the
absence of efficiency gains. Increases in that ratio during the
1970s and 1980s may reflect unique causes, such as the initial
introduction of many secondary treatment facilities and
biosolids disposal programs. Going forward, some investments,
such as those to replace deteriorated pipes or install
automated sensing and measurement equipment, could reduce the
O&M required per unit of capital stock.
In short, there is much about future investment needs in drinking
water infrastructure that is unknown, and assumptions based on even the
best professional judgments can be significant sources of error.
EFFICIENCY, EQUITY, AND THE DEFINITION OF ``NEED''
Although considerable uncertainty surrounds the available
estimates, CBO accepts the judgment of industry professionals that
drinking water systems will require large investments over the next few
decades. But future ``needs'' are not a predetermined reality; they are
partly the result of many federal, state, local, and private choices
yet to be made. The amount of investment needed to maintain services
and meet water quality requirements under current industry practices
and current government policy is likely to differ from the amount
needed under evolving industry practices, under alternative government
policies, or under a least-cost approach.
In particular, a broad increase in federal funding intended to help
keep water rates affordable could reduce the pressure on systems to
operate more efficiently and on customers to economize on their use of
water services and thereby keep total investment needs higher than they
would be otherwise. That is another example of the familiar trade-off
between equity and efficiency.
In recent years, both drinking water and wastewater systems around
the country have taken steps to become more efficient. The results are
illustrated by data from a survey conducted periodically by the
Association of Metropolitan Sewerage Agencies. For example, the average
sum of O&M costs and administrative costs per million gallons declined
from $1,108 in the 1996 survey to $987 in the 1999 survey.9
One method used to reduce costs has been more efficient use of
employees: among 45 municipal wastewater agencies that responded in
both 1996 and 1999, full-time-equivalent staffing per 10,000 people in
the served area declined from 5.0 to 4.7.10
---------------------------------------------------------------------------
\9\ CBO's calculations, using data from Association of Metropolitan
Sewerage Agencies, The AMSA Financial Survey, 1999: A National Survey
of Municipal Wastewater Management Financing and Trends (Washington,
D.C.: AMSA, 1999) and its 1996 counterpart. The averages cover 84
responding wastewater systems in the 1999 report and 97 systems in
1996. CBO recalculated the 1996 average shown in the reports to exclude
five high-cost systems that did not respond to the later survey. Also,
the 1999 average that CBO obtained using available data for 84 systems
differs slightly from AMSA's average of $930 for 87 systems.
\10\ Ibid., p. 67. Both the opinions of industry experts and more
detailed data on the nature of the reductions in staffing and
operational costs indicate that those savings primarily reflect true
gains in efficiency, rather than reductions in necessary maintenance or
other vital services.
---------------------------------------------------------------------------
Experts in the water industry see room for further cost savings,
not only in operational costs but also in capital costs. Promising
methods include the following:
Consolidation of systems to achieve economies of scale.
Reportedly, 50 percent of small drinking water systems lie
within a standard metropolitan statistical area.
Asset management, which involves analyzing local data on
assets' age, performance, and condition in order to identify a
maintenance and replacement strategy that minimizes long-run
costs.
Demand management, including the use of pricing strategies to
reduce peak use.11
---------------------------------------------------------------------------
\11\ See Allan Dietemann, ``A Peek at the Peak: Reducing Seattle's
Peak Water Demand'' (Seattle Public Utilities, Resource Conservation
Section, February 9, 1998).
---------------------------------------------------------------------------
Innovative contracting for new construction, such as the use
of contracts covering both design and construction, or even
design, construction, and operation.12
---------------------------------------------------------------------------
\12\ For a well-documented example involving wastewater, see David
Higgens and Frank Mangravite, ``Comparison of Design-Build-Operate and
Conventional Procurements on Washington Borough, N.J., Wastewater
Treatment Plant,'' International Supplement to RCC's Public Works
Financing (July-August 1999), pp. 1-7.
---------------------------------------------------------------------------
But those potential future savings could go unrealized if federal
policy inadvertently undermines the forces pushing for efficiency. The
savings observed to date have occurred primarily because of pressures
from two sources. One source has been competition from private firms
seeking contracts to operate municipal systems. The actual or potential
threat of such competition has led to significant increases in
efficiency in systems that remain publicly operated as well as in those
contracted out to private operators. The second source of pressure has
been resistance from customers and oversight bodies to large rate
increases. That pressure too has led system operators to reexamine
their management practices and find many ways to reduce costs without
sacrificing quality of service.
Whether federal aid would undermine or reverse the progress in
water systems' efficiency would depend on how much aid the government
provided and in what form. Clearly, if the federal government issued
blank checks for infrastructure, local systems would lose any incentive
to keep capital costs down. But the issue is also relevant in less
extreme cases: a 1985 CBO analysis found that high federal cost shares
in the original construction grant program for wastewater treatment
raised capital costs by more than 30 percent.13
Unfortunately, CBO cannot describe the precise relationship between
federal support and total nationwide costs.
---------------------------------------------------------------------------
\13\ Congressional Budget Office, Efficient Investments in
Wastewater Treatment Plants (June 1985), p. xi.
---------------------------------------------------------------------------
But if it is not clear ``how much is too much'' federal aid from
the standpoint of efficiency, it is also not clear ``how little is too
little'' for equity purposes--that is, to address the affordability and
fairness issues. A large, broad program would probably benefit not only
the neediest water users but also well-off users, with little
additional gain in equity. CBO is analyzing the affordability issues
associated with water infrastructure needs and expects to provide
additional information on them in a report to be issued later this
year.
In summary, CBO's analysis of the existing estimates of investment
needs for drinking water infrastructure leads the agency to conclude
that those estimates are accompanied by significant uncertainty and may
be too high. Moreover, how big the needs turn out to be will be
influenced by who pays to meet them; in particular, proposals intended
to address the equity problem of keeping rates affordable may adversely
affect efficiency by raising total national costs.
Mr. Gillmor. Thank you very much. And we will now go to Mr.
Howard Neukrug, from Philadelphia, representing the American
Water Works Association.
STATEMENT OF HOWARD NEUKRUG, DIRECTOR, OFFICE OF WATERSHEDS,
PHILADELPHIA WATER DEPARTMENT, ON BEHALF OF THE AMERICAN WATER
WORKS ASSOCIATION
Mr. Neukrug. Well, thank you, and good afternoon, Mr.
Chairman. My name is Howard Neukrug, and I am the Director of
the Office of Watersheds for the Philadelphia Water Department,
which is a drinking water, waste water, and storm water
utility, which services about 2 million people in the greater
Philadelphia area.
I am speaking to you today on behalf of A.W.W.A, where I
serve as the Chair Elect of the Water Utility Council. We thank
you for holding this hearing, and for providing this
opportunity to present our views on the Nation's critical
drinking water infrastructure needs.
As you know, drinking water systems in the United States
invest billions of dollars each year toward its mission of
providing safe drinking water at rates affordable to the
public. However, it is now clear that many customers will need
to invest significantly more over the next 20 years to replace
aging and failing water pipes.
These investments, along with those required for new
federally mandated regulations, drive the need for enormous new
capital dollars in water related infrastructure.
Compounding this problem is local competition for limited
capital dollars from our storm water and waste water utility
partners, as they move forward to repair and replace aging
sewer pipe and meet requirements of major EPA programs, such as
the national CSO and SSO control policies.
As reported in WIN, the combined water and waste water
capital dollar needs over the next 20 years amounts to an
unprecedented $1 trillion. I am here today to ask Congress to
work with the drinking water industry as we move forward to
invest in our future and the future of all Americans.
We do not come here asking for Federal subsidies, but
looking for a partner in investment to secure America's future.
The A.W.W.A. will continue to do everything possible to support
our utility search for solutions, identify the infrastructure
capital requirements, minimize the need for new capital,
explore new opportunities for capital in innovative funding
mechanisms, and education and outreach to the public, our
regulators, Congress, and other utility partners to increase
this awareness and our understanding of the issues.
Everyone knows that utilities are sensitive to rising rate
pressures, be it water, gas, electric, or telephone. Underlying
the sensitivity is the understanding that there exists a class
of customers who must make a monthly choice of which bills to
pay.
The choice between water, food, heat, and shelter are not
often talked about in the development of new drinking water
regulations, but is a subject that must be considered as we
move forward in this and other deliberations concerning our
Nation's drinking water supply.
In Philadelphia, where 40 percent of the population lives
in poverty, the rise in water bills will remain a significant
social issue into the foreseeable future. In order to
understand how we got here, one must first understand the
history of drinking water supply in the U.S.
Quite simply, beginning in the 1870's, thousands of miles
of Victorian era pipe were laid to meet a new demand called
indoor plumbing. Pipe manufacturing was cruder than the process
used today, but the manufacturers compensated for this by
producing pipe of substantial wall thickness and strength.
Today, a 120 years later, much of this pipe remains in
service in our urban areas. The need to replace this pipe is
dependent on more than just simply age, but soil conditions,
and the quality of manufacturer, and the installation playing
equally important roles.
The pattern of water main installation during the 20th
century is a simple reflection of the overall pattern of
population growth in large and small cities across the United
States. There was an 1890's boom, a World War I boom, and
roaring 20's boom, and a massive post-World War II baby boom.
For every boom in housing construction, there was a
commensurate boom in the water and sewer pipe installation
business. Pipe quality and useful life can vary as much as the
quality of homes built in the 20th century. The A.W.W.A. is
currently undertaking a study into the nature and scope of the
emerging infrastructure challenge based on the history of pipe
installation and prediction of remaining useful pipe life for
20 U.S. leading utilities.
Using useful remaining pipe life estimates for the various
types of pipe installed, and counting the years since the
original installations, the A.W.W.A. developed ``Nessie
Curves'' which forecast that investment needs will rise
steadily, extending throughout the 21st century.
Replacement of water treatment plant assets presents a
different picture from that of the pipes, but greatly
complicates infrastructure funding for utilities. Treatment
assets are also much more shortlived than pipes, with pipe
expectancies between 20 and 70 years.
Many are about due for replacement in the next decade in
Philadelphia, and our annual capital expenditure for waste
water and water treatment plants has recently been increased
from $30 to $50 million. Thank you very much.
[The prepared statement of Howard Neukrug follows:]
Prepared Statement of Howard Neukrug, Director, Office of Watersheds,
Philadelphia Water Department, on Behalf of the American Water Works
Association
INTRODUCTION
Good morning Mr. Chairman. I am Howard Neukrug, Director of the
Office of Watersheds for the Philadelphia Water Department in
Pennsylvania. The Philadelphia Water Department is a municipal water,
wastewater and stormwater utility serving over two million people in
the Philadelphia metropolitan area. I serve as the Vice Chair of the
American Water Works Association (AWWA) Water Utility Council and am
here today on behalf of AWWA. AWWA appreciates the opportunity to
present its views on drinking water needs and infrastructure.
Founded in 1881, AWWA is the world's largest and oldest scientific
and educational association representing drinking water supply
professionals. The association's 57,000 members are comprised of
administrators, utility operators, professional engineers, contractors,
manufacturers, scientists, professors and health professionals. The
association's membership includes over 4,2000 utilities that provide
over 80 percent of the nation's drinking water. AWWA and its members
are dedicated to providing safe, reliable drinking water to the
American people.
AWWA utility members are regulated under the Safe Drinking Water
Act (SDWA) and other statutes. AWWA believes few environmental
activities are more important to the health of this country than
assuring the protection of water supply sources, and the treatment,
distribution and consumption of a safe, healthful and adequate supply
of drinking water.
AWWA is also a member of the Water Infrastructure Network (WIN)--a
broad-based coalition of drinking water, wastewater, municipal and
state government, engineering and environmental groups, dedicated to
preserving and protecting the hard-won public health, environmental and
economic gains that America's water and wastewater infrastructure
provides. AWWA and its members thank you for holding this hearing
concerning the infrastructure needs of the Nation's drinking water
utilities. AWWA looks forward to working with the subcommittee in its
efforts to address the growing infrastructure costs facing drinking
water utilities and consumers.
The Drinking Water Infrastructure Need
Last fall WIN released Clean & Safe Water for the 21st Century,
which summarized infrastructure needs and the funding shortfall facing
drinking water and wastewater systems. That report estimates that the
total drinking water and waste water infrastructure needs over a
twenty-year period approaches one trillion dollars. According to report
estimates, drinking water utilities across the nation collectively need
to spend about $24 billion per year for the next 20 years, for a total
of $480 billion. The report identified an $11 billion annual gap
between current spending and overall need.
A separate needs estimate was released in February by the U.S.
Environmental Protection Agency (EPA), based on a survey of water
systems. The survey results suggest water systems will need $150
billion during the next twenty years. However, the EPA estimate is
limited to identifying eligible Safe Drinking Water Act compliance
needs for the Drinking Water State Revolving Fund (DWSRF) and does not
include many needs, such as the replacement of treatment facilities and
distribution systems due to age. These needs are not eligible for
funding from the DWSRF yet they are the largest infrastructure expense
facing the nation's water suppliers. EPA also relied on five-year
capital improvement plans (CIPs) by utilities and included them in the
20-year period, leaving the remaining out-years compliance needs
undocumented.
None-the-less, both estimates suggest an emerging large cost for
drinking water infrastructure.
Why is the need emerging now?
Water is by far the most capital intensive of all utility services,
mostly due to the cost of pipes--water infrastructure that is buried
out of sight. Most of drinking water pipes were originally installed
and paid-for by previous generations. They were laid down during the
economic booms that characterized the last century's periods of growth
and expansion. Pipes last a long time (some more than a century) before
they cost very much in maintenance expense near the end of their useful
life, or ultimately need replacement. For the most part, then, the huge
capital expense of pipes is a cost that today's customers have never
had to bear. However, replacement of pipes installed from the late
1800s to the 1950s is now hard upon us at the beginning of the 21st
Century and replacement of pipes installed in the latter half of the
20th Century will dominate the remainder of the 21st Century. This is a
significant change that ushers in a completely new era in water utility
financing.
Recognizing that we are at the doorstep of a new era in the
economics of water supply, the replacement era, the American Water
Works Association (AWWA) has undertaken an analysis of 20 utilities
throughout the nation to understand the nature and scope of the
emerging infrastructure challenge. The project involved correlating the
estimated life of pipes with actual operations experience in the sample
of 20 utilities. Projecting future investment needs for pipe
replacement in those utilities yields a forecast of the annual
replacement needs for a particular utility, based on the age of the
pipes and how long they are expected to last in that utility. By
modeling the demographic pattern of installation and knowing the life
expectancy of the pipes, we can estimate the timing and magnitude of
that obligation. This analysis graphically portrays the nature of the
challenge ahead of us. We will summarize the highlights of the analysis
in this statement and AWWA will provide the subcommittee with a copy of
the report when it is completed shortly.
Pipe Replacement Value
The original pattern of water main installation from 1870 to 2000
in 20 utilities throughout the nation analyzed by AWWA is a reflection
of the overall pattern of population growth in large cities across the
country. There was an 1890s boom, a World War I boom, a roaring '20s
boom, and the massive post-World War II baby boom.
The oldest cast iron pipes--dating to the late1800s--have an
average useful life of about 120 years. This means that as a group
these pipes will last anywhere from 90 to 150 years before they need to
be replaced, but on average they need to be replaced after they have
been in the ground about 120 years. Because manufacturing techniques
and materials changed, the roaring '20s vintage of cast iron pipes has
an average life of about 100 years. And because techniques and
materials continued to evolve, pipes laid down in the post World War II
boom have an average life of 75 years, more or less. Using these
average life estimates and counting the years since the original
installations, it's clear that water utilities will face significant
needs for pipe replacement in the next couple of decades.
The cumulative replacement cost value (the cost of replacement in
constant year 2000 dollars) of water main assets has increased steadily
over the last century in our sample of 20 utilities. In aggregate
across our sample of utilities, the replacement value of water mains in
today's dollars is about $2,400 per person. This is more than three
times what it was in 1930 in constant year 2000 dollar terms. The
difference is not due to inflation; rather, there is simply more than
three times as much of this infrastructure today as there was in 1930,
in order to support improved service standards and the changing nature
of urban development. In older cities the per capita replacement cost
value of mains today is as high as nine times the 1930 level (in
constant year 2000 dollars) due to loss of center city population.
Reflecting the pattern of population growth in large cities over
the last 120 years, the AWWA analysis forecasts investment needs that
will rise steadily like a ramp, extending throughout the 21st Century.
By 2030, the average utility in our sample of 20 will have to spend
about three and half times as much on pipe replacement as it spends
today.
Many water systems all across America have seen this day coming and
have already begun to ramp-up their expenditures on pipe rehabilitation
and replacement. But it is clear that for most utilities this problem
is just emerging and is enormous in scope.
Pipe Repair Costs
As pipe assets age, they tend to break more frequently. But it is
not cost-effective to replace most pipes before, or even after, the
first break. Like the old family car, it is cost efficient for
utilities to endure some number of breaks before funding complete
replacement of their pipes.
Considering the huge wave of aging pipe infrastructure created in
the last century, we can expect to see significant increases in break
rates and therefore repair costs over the coming decades. This will
occur even when utilities are making efficient levels of investment in
replacement that may be several times today's levels. In the utilities
studied by AWWA, there will be a three-fold increase in repair costs by
the year 2030 despite a concurrent increase of three and one-half times
in annual investments to replace pipes.
Water Treatment Plant Costs.
Replacement of water treatment assets presents a different picture
from that of the pipes, but greatly complicates infrastructure funding
for utilities. Major investments in water and wastewater treatment
plants were made in several waves following the growing understanding
of public health and sanitary engineering that evolved during the 20th
Century. Of course, the installation pattern of treatment assets also
reflects major population growth trends. But whereas pipes can be
expanded incrementally to serve growth, treatment must be built in
larger blocks. Investments in treatment thus present a more
concentrated financing demand than investments in pipes.
Treatment assets are also much more short-lived than pipes.
Concrete structures within a treatment plant may be the longest lasting
elements in the plant, and may be good for 50 to 70 years. However,
most of the treatment components themselves typically need to be
replaced after 25 to 40 years or less. Replacement of treatment assets
is therefore within the historical experience of today's utility
managers. Even so, many treatment plants built or overhauled to meet
EPA standards over the last 25 years are too young to have been through
a replacement cycle. Many are about due for their first replacement in
the next decade or so.
The concurrent need to finance replacement of pipes and of
treatment plants greatly increases the challenge facing utilities.
While spending for the replacement of pipes rises like a ramp over the
first part of the 21st Century, spending for treatment plant
replacement will occur at intervals causing ``humps'' in capital needs
on top of the infrastructure replacement capital needs. This is
graphically illustrated in the attached ``Relative Asset Replacement
Projections'' graph of the BHC Company water utility in Bridgeport,
Connecticut, from the forthcoming AWWA report. This pattern has been
found to be common in many water utilities and has been nicknamed ``The
Nessie Curve'' because of its resemblance to depictions of the Loch
Ness Monster.
Demographic Changes.
Water utilities are the last natural monopolies. The large
investment required in pipe networks makes it impossible to have more
than a single provider of water service within a given area. These
large investments are also a major source of financial vulnerability
for water utilities due to the very fixed nature of the assets and the
very mobile nature of the customers. When populations grow, the
infrastructure is expanded, but when people move away, the pipe assets
and the liability for repair and replacement remain behind, creating a
financial burden on the remaining customers. This problem, known as
``stranded capacity'' (essentially, capital facilities that are not
matched by rate revenue from current customers), is typical of the
demographics of older cities and adds considerably to the challenge of
funding replacement in these cities.
In Philadelphia, over the one hundred years from 1850 to 1950, the
population grew from 100,000 to 2 million people. But from 1950 to the
end of the century, Philadelphia lost 25 percent of its population,
dropping to 1,500,000. This situated was replicated again and again
throughout the older cities of the Northeast and Midwest. The effect is
to increase the burden of replacement funding on the remaining
residents of the city.
As previously mentioned, the average per capita value of water main
assets in place today across our sample of 20 utilities is estimated to
be three times the amount that was present in 1930. In Philadelphia,
however, that ratio is almost eight times the average per capita value
of water main assets in 1930 due to population declines since about
1950.
Demographic change, then, places financial strain on all public
water systems and has a direct impact on affordability of the
investment required.
Affordability of Rates
A central question for policy makers and utilities, then, is
whether the increased rate of infrastructure spending that utilities
now face over the next 30 years can be financed by the utilities
themselves at rates customers can afford.
WIN estimates that total water and wastewater infrastructure bills
will have to double or triple in most communities to meet these needs,
if consumers are forced to bear the entire infrastructure cost. The
cost of compliance with storm water regulations alone may dwarf
domestic drinking water and wastewater expenditures. Therefore, the
impact on household affordability and rates of projected drinking water
infrastructure expenditures must be viewed in the context of the total
water and wastewater utility infrastructure bill to be paid by the
consumer.
In the sample of 20 utilities studied by AWWA, the analysis showed
an aggregate increase in needed utility expenditures above current
spending levels of $3 billion by 2020 and $6 billion by 2030. This
implies the need for collection of an additional $1,575 per household
for infrastructure repair and replacement over 30 years. The estimated
$1,575 per household is an average of the individual results. The
individual utilities in the survey present wide-ranging needs for
increased expenditure (from $550 per household over 30 years to $2,290
per household over 30 years) and ``lumpy'' patterns of increased
expenditure needs that are unique to each set of circumstances.
The sample of 20 utilities represents relatively large utilities
that are on the ``cutting-edge'' of utility management. The household
expenditure increase will be much higher in small systems that do not
have a large rate-base over which to spread the costs. Extrapolating
from EPA's estimated 20-year capital need for small systems, the AWWA
analysis projects the total 30-year expenditure for infrastructure
repair and replacement in small systems might be in a range of $1,490
per household to $6,200 per household.
Moreover, there is no guarantee that the projected expenditures per
household can be spread evenly or taken on gradually over the 30-year
period. There are ``humps'' for treatment plant replacement throughout
the period. Additionally, expenditure ``humps'' for compliance with a
dozen or more new regulations is not included in this
analysis.Conclusion
How we address our emerging drinking water infrastructure needs is
a critical question facing the Nation and this Congress. To help reduce
the burden on consumers, many water utilities have made great strides
in efficiencies, with some utilities achieving a 20 percent savings in
operations and maintenance. Water utilities will continue to reduce
costs, seek cost-effective financing and employ innovative management
strategies. Regardless, there will be significantly increased costs for
needed infrastructure investment.
AWWA does not expect that federal funds will be available for 100
percent of the increase in infrastructure needs facing the nation's
water utilities. However, AWWA does believe that due to concurrent
needs for investment in water and wastewater infrastructure,
replacement of treatment plants, new drinking water standards, and
demographics, many utilities will be very hard pressed to meet their
capital needs without some form of federal assistance. Over the next
twenty years, it is clear that Safe Drinking Water Act (SDWA) and Clean
Water Act (CWA) compliance requirements and infrastructure needs will
compete for limited capital resources. Customers are likely to be very
hard pressed in many areas of the country. Compliance and
infrastructure needs under the SDWA and CWA can no longer be approached
as separate issues. Solutions need to be developed in the context of
the total drinking water and wastewater compliance and infrastructure
needs.
AWWA pledges to work with Congress to develop a responsible and
fair solution to the Nation's growing drinking water infrastructure
challenge. As a start, AWWA will provide a copy of the forthcoming AWWA
report to members of the subcommittee to assist the subcommittee
deliberations on this issue. We thank you for your consideration of our
views.
This concludes the AWWA statement on drinking water needs and
infrastructure. I would be pleased to answer any questions or provide
additional material for the committee.
Mr. Gillmor. Thank you very much, and we will go to Ms.
Beverly Ingram, from Detroit, the Association of Metropolitan
Water Agencies.
STATEMENT OF BEVERLY INGRAM, ASSISTANT DIRECTOR, DETROIT WATER
AND SEWER DEPARTMENT, ON BEHALF OF THE ASSOCIATION OF
METROPOLITAN WATER AGENCIES
Ms. Ingram. Thank you. Good afternoon, Chairman Gillmor and
Congressman Pallone, and members of the subcommittee. My name
is Beverly Ingram, and I am an Assistant Director with the
Detroit Water and Sewerage Department. I am here today to
discuss water infrastructure needs on behalf of the Association
of Metropolitan Water Agencies.
I would like to thank you for holding this hearing to learn
more about the infrastructure needs of local water utilities. I
would like to begin my statement by giving you a snapshot of
the Detroit system.
Detroit is recognizably one of the largest water and
sewerage treatment facilities in North America. The Detroit
system, built 160 years ago, serves drinking water to 4.2
million people in southeastern Michigan.
We pump approximately 239 billion gallons of water a day.
We are also responsible for treating 634 million gallons a day
of waste water. Our waste water system covers 857 square miles,
and our water system over a thousand miles.
Last fall, the water infrastructure network released clean
and safe water for the 21st century, which summarized
infrastructure needs in the funding shortfall, replacing
drinking water and waste water systems.
AWWA is a member of WIN. The report estimates that drinking
water utilities across the Nation collectively need to spent
about $24 billion per year for the next 20 years, for a total
of $480 billion.
WIN's analysis also concluded that water systems currently
spend $13 billion per year on drinking water infrastructure,
leaving an $11 billion annual gap between current spending and
overall need.
A separate needs estimate was released in February by EPA.
The survey results suggest water systems will need $150 billion
during the next 20 years. Mr. Chairman, since my written
statement clearly spells out the reasons for the disparity in
these numbers, I will not go into them here.
Like the Nation's other 55,000 water utilities, the Detroit
Water and Sewer Department is responsible for providing safe,
clean drinking water to protect public health and complying
with drinking water regulations.
In addition, our customers, both families and businesses,
expect reliable service. To meet our responsibilities, major
metropolitan areas are currently funding repairs on old pipes
and outdated treatment facilities at an astounding rate.
To better understand the types of investments that public
water systems are doing to meet these infrastructure needs,
here are some local examples. In Kansas City, Missouri, they
raised rates by 100 percent over the last 10 years; and the
utility plans water rate increases of 4 percent each year, and
sewer rate increases of 6 percent each year.
The Water Department anticipates spending $85 million per
year for the next 6 years just to resolve its infrastructure
backlog. With these rate increases and new efficiencies will
net the utility only $55 million a year, leaving an annual
shortfall of $30 million.
And Cleveland, Ohio, has been investing an average of $60
million per year over the last 10 years for drinking water
infrastructure. Over the next 8 years, Cleveland must invest
$500 million to rehabilitate and modernize 3 of its 4 water
plants. To finance this, Cleveland has adopted an 18 percent
annual rate increase over the next 5 years.
This is after 10 consecutive years of increases totaling 80
percent. Yet, this does not even address Cleveland's
distribution system needs in any substantial way. In Portland,
Oregon, $1 billion mandated combined sewer overflow program
will result in double-digit rate increases for about 15 years.
At the same time the need for infrastructure funding for
drinking water is $400 to $800 million in the next 10 years.
The likelihood that water rates can be raised to cover those
costs is doubtful.
Given that the increase in sewer bills has virtually used
up the elasticity that existed to raise rates, the Knoxville
Utility Board has spent $40 million in capital improvements
over the last 5 years for the drinking water system, and the
utility is anticipating another $64 million in water systems
improvement during the next 5 years.
The Knoxville Utility Board is also a waste water utility,
which has its own infrastructure needs, including $63 million
in sewer system improvements over the next 5 years, In addition
to $80 million, which they have spent over the previous 14
years.
How we close this $11 billion drinking water infrastructure
gap between historical spending and overall need is the next
question. To help reduce this gap, water utilities, especially
large metropolitan systems, have raised rates and have made
great strides in efficiencies, with some utilities achieving 20
percent savings in operations and maintenance.
Utilities will continue to reduce costs, seek cost
effective financing, and employee innovative management
strategies. There will remain a gap between the available funds
and the significant level of investment required.
AWWA does not expect the Federal Government to completely
fill the gap, but some help is needed. AWWA pledges to work
with Congress to develop a fair solution to this problem. Thank
you again for holding this important hearing.
[The prepared statement of Beverly Ingram follows:]
Prepared Statement of Beverly Ingram, Assistant Director, Detroit Water
and Sewer Department, on Behalf of the Association of Metropolitan
Water Agencies
Good afternoon, Chairman Gillmor, Congressman Pallone, members of
the subcommittee. My name is Beverly Ingram, and I am the Assistant
Director for Administration of the Detroit Water and Sewer Department.
This testimony was prepared on behalf of the Association of
Metropolitan Water Agencies, which is comprised of the nation's largest
drinking water agencies. All AMWA member-agencies are publicly owned.
Represented by city water commissioners and utility chief executives,
AMWA's member-agencies collectively serve more than 110 million
Americans with clean, safe drinking water.
Thank you for holding this hearing to learn more about the
infrastructure needs of local water utilities. Our goal is to provide
you with information to help you understand the enormous challenges we
are facing over the next 20 years.
Overall Need and the Gap
Last fall, the Water Infrastructure Network (WIN) released Clean &
Safe Water for the 21st Century, which summarized infrastructure needs
and the funding shortfall facing drinking water and wastewater systems.
AMWA is a member of WIN. The report estimates that drinking water
utilities across the nation collectively need to spend about $24
billion per year for the next 20 years, for a total of $480 billion.
WIN's analysis also concluded that water systems currently spend $13
billion per year on drinking water infrastructure, leaving an $11
billion annual gap between current spending and overall need.
A separate needs estimate was released in February by the U.S.
Environmental Protection Agency (EPA), based on a survey of public
water systems. The survey results suggest water systems will need $150
billion during the next twenty years. But according to EPA, their
survey underestimates the true need. The survey is intended to be used
as the basis for the Drinking Water SRF distribution formula. Because
the Drinking Water SRF is primarily concerned with projects that will
help systems comply with drinking water quality regulations, so is the
survey. Therefore, EPA's estimate excludes many needs, such as the
replacement of treatment facilities and distribution systems due to
age. This is the largest infrastructure expense facing the nation's
water suppliers. The survey also excludes capital projects related to
raw water storage, and EPA's estimate for medium and large systems is
substantially under-evaluated because the agency relied on five-year
capital improvement plans (CIPs) and included them in the 20-year
picture. Utilities may estimate their needs for many years into the
future, but most CIPs cover five-year periods, leaving the remaining
out-years undocumented, and thus excluded by the survey.
In contrast, WIN's $24 billion per year estimate is more
comprehensive. It relies on historical system construction data,
population figures from the Census Bureau, actual cost data from the
drinking water community, data on infrastructure spending from the
Department of Commerce, as well as needs estimates by EPA and AWWA.
Like the nation's other 55,000 water utilities, the Detroit Water
and Sewer Department is responsible for providing safe, clean drinking
water to protect public heath and comply with drinking water
regulations. In addition, our customers--both families and businesses--
expect reliable service. Detroit's 4.2 million customers expect and
deserve safe water to come out of their taps each morning.
To meet our responsibilities, old pipes and out-of-date treatment
facilities must be replaced, repaired and refurbished. Distribution
pipes in some of our cities were laid in the late 1800s, when municipal
water systems were first built. These cast iron pipes are said to last
as long as 120 years. Pipes laid in the 1920s, during a second wave of
water system construction, are made of different materials that are
said to last as many as 100 years. And experts say that pipes laid
during a boom in construction after World War II could last 75 years.
Similarly, treatment plants built in the 1950s have outlived their
maximum life spans. Even treatment facilities built soon after passage
of the Safe Drinking Water Act, in 1970s, are 25 to 30 years old, and
must be replaced with advanced treatment technology.
Considering the average life span of this infrastructure, it
becomes clear that the time for refurbishment and replacement is upon
us.
Operations and maintenance costs must be taken into account, as
well. AWWA estimates that water utilities will spend an additional $27
billion per year to operate and maintain their facilities. We note this
because electricity costs comprise between 20 to 80 percent of a water
utility's total operating budget. The inevitable rise in energy costs
will increase the O&M expenses of utilities, leaving fewer dollars for
drinking water infrastructure.
Similarly, the cost to finance infrastructure can affect the
availability of funds and whether a community can afford to build a
needed water project. AWWA and EPA estimate drinking water and
wastewater systems will each spend $5 billion per year to finance their
projects.
WIN estimates that household water bills must double or triple in
most communities, on average, if utilities are forced to absorb the
entire infrastructure bill. This scenario is complicated by rate
inelasticity. A household's water bill often covers drinking water
supply, sewer and storm-water control. Raising rates to cover one,
diminishes the ability to pay for the other two. Unfortunately, all
three sectors are facing massive infrastructure challenges.
Further compounding this issue is demographics and its impact on
large urban centers, such as Detroit. When people move to the suburbs,
the pipe and the liability for repair and replacement remain behind,
creating a financial burden on the remaining, often less affluent,
customers. Nevertheless, these cities cannot forgo infrastructure
improvements.
To better understand these infrastructure needs, here are some
local examples.
Kansas City, Missouri. Kansas City raised rates by 100 percent over
the last 10 years, and the utility plans water rate increases of four
percent each year and sewer rate increases of six percent each year.
The water department anticipates spending $85 million per year for the
next six years just to resolve its infrastructure back-log, but these
rate increases and new efficiencies will net the utility only $55
million per year, leaving an annual shortfall of $30 million.
Cleveland, Ohio. Cleveland has been investing an average of $60
million per year over the last 10 years for drinking water
infrastructure. Over the next eight years, Cleveland must invest $500
million to rehabilitate and modernize three of its four water plants.
To finance this, Cleveland has adopted an 18 percent annual rate
increases over the next five years. This is after 10 consecutive years
of increases totaling 80 percent. Yet this does not even address
Cleveland's distribution system needs in any substantial way.
Portland, Oregon. In Portland, a $1 billion mandated combined sewer
overflow program will result in double digit rate increases for about
15 years. At the same time, the need for infrastructure funding for
drinking water is $400-800 million in the next 10 years. The likelihood
that water rates can be raised to cover these costs is doubtful, given
that the increase in sewer bills has virtually used up the elasticity
that existed to raise rates.
Knoxville, Tennessee. The Knoxville Utility Board (KUB) has spent
$40 million in capital improvements over the last five years for the
drinking water system, and the utility is anticipating another $64
million in water system improvements during the next five years. KUB is
also a wastewater utility which has its own infrastructure needs,
including $63 million in sewer system improvements over the next five
years in addition to the $80 million KUB spent over the previous 14
years.
Conclusion
How we close the $11 billion drinking water infrastructure gap
between historical spending and overall need is the next question. To
help reduce this gap, water utilities, especially large metropolitan
systems, are raising rates and have made great strides in efficiencies,
with some utilities achieving a 20 percent savings in operations and
maintenance. Utilities will continue to reduce costs, seek cost-
effective financing and employ innovative management strategies.
Regardless, there will remain a gap between the available funds and the
significant level of investment required. AMWA does not expect the
federal government to completely fill the gap, but some help is needed.
AMWA pledges to work with Congress to develop a fair solution to
this problem. Thank you, again, for holding this important hearing.
Mr. Gillmor. Thank you, and we will proceed with Dr. Janice
Beecher, representing the National Association of Water
Companies.
STATEMENT OF JANICE A. BEECHER, BEECHER POLICY RESEARCH, INC.,
ON BEHALF OF THE NATIONAL ASSOCIATION OF WATER COMPANIES
Ms. Beecher. Thank you, Mr. Chairman, and Congressman
Pallone. I am pleased to be here to discuss this very important
issue. My name is Jan Beecher, and I am an independent policy
research consultant. I specialize in the structure and
regulation of the water industry.
This testimony is based on my independent analysis of this
subject that I prepared for a recent water infrastructure
conference. Let me begin by emphasizing that my purpose here is
not to dispute the fact that the water and waste water
industries face substantial and accelerating infrastructure
needs associated with a variety of cost drivers, not all of
which are compliance driven.
My purpose is to promote an informed dialog about some of
the assumptions behind this infrastructure funding gap and some
of the presumptions about how to best address it.
The $1 trillion 20 year needs estimate for water and waste
water systems has become a focal point for discussion, but the
trillion dollar estimate is imprecise and may be inflated as I
think was also suggested by the CBO analysis.
Frankly, O&M costs I do not believe should be included. I
also believe the costs of growth should not be included. Growth
should pay for growth. I think that is a good principle.
Plus, and as equally important, estimates of the needs seem
to give little weight to the potential for lowering total costs
through industry restructuring, innovation, operational
efficiency, markets, and integrated resource management.
The gap is essentially a construct, but not an
inevitability. The projected cumulative shortfall will result
if, and only if, the need estimate is accurate and funding and
expenditure levels are not increased. A number of interrelated
myths have emerged in the context of this infrastructure
funding debate.
First, that a national crisis is looming. Second, that the
cost of water services cannot be supported through rates.
Third, that a funding gap is inevitable, and fourth, that
Federal funding solutions provide the centerpiece in terms of
attending to the issue.
Some of the assumptions behind these beliefs can be
challenged. To this end, I will highlight a few basic reality
checks. First, aggregate municipal finance data indicate that
many water and waste water utilities are not collecting
sufficient revenues relative to their expenditures.xxx
Some communities have deferred investments, as well as
deliberately maintained unrealistically low water and waste
water rates. This persistent underpricing of water services
contributes to the anticipated funding gap, and sends
inappropriate signals to customers about the value of water
services, which will lead to inefficient consumption and
inefficient supply decisions to meet that inflated level of
demand.
Second, water services today are a relative bargain for
many households. Water and other public services actually
account in the aggregate for a relatively small share of the
average household utility budget. Less than $400 per year, or
.08 percent of the total household expenditures.
And while I realize that there are variations from these
averages, I think it is important to note these data. Consumers
spend more than twice as much on electricity and
telecommunications services.
On average, a four person household spends about the same
amount each year on cable TV and tobacco products as on water
services. In addition, U.S. consumers pay much less for water
services than consumers in many other developed countries.
Third, Americans are very concerned about the quality of
their drinking water and protection of water resources. The
consumers are also more willing to pay for bottled water than
tap water, at least it seems in many cases.
Conservatively, the average price of one gallon of
community supplied water conveniently delivered to the tap is
less than one-third of one penny. Every other water alternative
is no more safe, much less convenient, and astronomically more
expensive.
At a $1.15 per gallon, what I call designer water, costs
347 times the price of tap water. We obviously need to do a lot
in terms of public education in this area. Fourth, it is
important for the water industries to have realistic
expectations about future Federal funding for water programs in
order to plan sufficiently to meet their infrastructure and
service obligations.
Federal health and environmental standards are not
necessarily the primary cost driver, nor a rationale for
general revenue funding. Massive Federal grant subsidies that
go beyond affordability issues seem neither likely nor
beneficial from a societal standpoint.
Subsidies can perpetuate dependence, inefficiency, and
technological stagnation on the part of recipients. The
argument for public subsidies should also be examined in the
context of local funding priorities. As an example, I will
suggest that the price tags for municipal stadiums often are
comparable to estimated water infrastructure needs.
Finally, many systems can and do manage their assets
effectively and support the cost of services through rates. The
transition to cost base rates for water services can trigger
rate shock and raise very legitimate affordability concerns for
disadvantaged communities and low income households.
And I think there has been some very pertinent discussion
of that here today, but financing, rate design, and assistance
methods can be used to mitigate these effects. The regulatory
capacity development and funding principles embodied in the
current Safe Drinking Water Act and SRF programs place
appropriate priority on public health and affordability, and I
think they can guide us in this area.
In sum, the concept of a funding gap merits further
analysis, consideration, and debate. The need to invest in the
Nation's water and waste water infrastructure is real, but the
funding gap is essentially a construct.
The water industries should take responsibility, provide
leadership, and effectively manage their current and future
assets on the public's behalf. Aggressive action can close the
projected gap from the top, in terms of reducing total and
operating costs, and funding for research and development can
play a role here.
The essential tool for closing the gap from the bottom is
cost based rates for water services. Subsidies should be used
minimally, judiciously, and on a needs basis to address genuine
affordability concerns. But the goals should be sustainable
systems, and not sustainable subsidies. Thank you very much.
[The prepared statement of Janice A. Beecher follows:]
Prepared Statement of Janice A. Beecher,\1\ Beecher Policy Research,
Inc., On Behalf of The H2O Coalition 2
---------------------------------------------------------------------------
\1\ Janice Beecher is an independent policy research consultant
specializing in the structure and regulation of the water industry. Dr.
Beecher has a Ph.D. in Political Science from Northwestern University
and more than fifteen years experience in the field of utility policy,
including research positions at Ohio State University and Indiana
University. Dr. Beecher works on contract for clients that include the
U.S. Environmental Protection Agency, the National Association of Water
Companies, the American Water Works Association Research Foundation,
and individual public agencies and private companies. Dr. Beecher is a
nationally recognized researcher, author, and lecturer in her field and
has participated in projects for the World Bank and the National
Academy of Sciences.
This testimony is based on an annotated graphic presentation, which
is available to interested parties. This presentation was originally
presented at the Infrastructure Conference of the American Water Works
Association (Orlando, March 2001). The presentation has been expanded,
revised, and annotated for distribution.
This testimony is based on Dr. Beecher's independent analysis of
the issues. Her participation in this hearing is sponsored by the
H2O coalition. The opinions expressed in this presentation
are those of the author and do not necessarily represent the views of
research clients and sponsors.
\2\ The H2O Coalition is made up of the National
Association of Water Companies, the National Council for Public-Private
Partnerships, and the Water and Wastewater Equipment Manufacturers
Association.
---------------------------------------------------------------------------
Purpose
Water and wastewater services are vital to the quality of life for
citizens across this country. Although estimates of the industries'
total infrastructure needs lack precision, there is actually a
considerable amount of consensus that the water sector faces its most
formidable challenge in terms of replacing and upgrading the aged
delivery infrastructure.
The purpose of this testimony is to provide some general ``reality
checks'' in relation to the current national debate over infrastructure
funding. The purpose of the analysis is not to critique any particular
perspective, but rather to help inform the dialog on these most
important issues.
The Infrastructure Funding Issue
Why is water infrastructure funding on the Policy agenda? The
infrastructure needs of the water and wastewater industries have
recently taken a prominent place on the policy agenda, even though this
issue is not entirely new. The industries are experiencing
extraordinary increases in costs and investment needs that are closely
related to ``people and pipe'' demographics--that is, historical
patterns of urban development and the age and condition of the physical
plant in place. Today, new data, models, and other tools have improved
our understanding of this issue. The various stakeholders that
recognize these needs have reached a critical mass.
Estimating Needs
General agreement exists on the physical condition of the nation's
many local water and wastewater systems. A recent report card issued by
the American Society of Civil Engineers (ASCE) assigned low grades to
most of the nation's various infrastructure sectors, including ``Ds''
for water and wastewater.
In 1995, studies by the U.S. EPA estimated that water industry
assets totaled about $144 billion (Community Water System Survey,
inflation-adjusted to 1999), while the estimated 20-year infrastructure
need totaled about $151 billion (Needs Survey, inflation-adjusted to
1999). USEPA has recently issued an updated 20-year needs estimate that
also is in the range of $151 billion. EPA's estimates focus on needs
directly and indirectly associated with Safe Drinking Water Act (SDWA)
compliance.
USEPA found that more than half of the total infrastructure need is
for transmission and distribution system needs. About 25 percent of the
total need is for water treatment facilities. USEPA has also estimated
the impact of infrastructure costs on households served by systems of
different sizes. These findings demonstrate how scale economies are a
key determinant of cost impacts. Smaller water systems are
disadvantaged in this regard, although the service populations of small
systems vary in their ability to support the cost of service.
In 1998, the American Water Works Association (AWWA) escalated
total 20-year water needs to $366, billion (inflation-adjusted to
1999), focusing in particular on distribution system needs. Today,
various groups have coalesced around a total 20-year needs estimate in
the realm of $1 trillion for the water and wastewater industries.
The $1 trillion 20-year needs estimate for water and wastewater
systems has become a focal point for discussion. The $1 trillion
estimate is imprecise. Comprehensive, valid, and reliable technical and
financial data on the nation's water and wastewater systems is not
readily available. A precise needs estimate is not as important as
recognizing the general need. Indeed, devoting scarce analytical
resources to estimating the need may not be beneficial. The gap is the
projected cumulative shortfall that will result if--and only if--(1)
the infrastructure need estimate is accurate and (2) expenditures on
infrastructure are not increased. In other words, the gap will
materialize only if no action is taken to close it.
Understanding the Infrastructure Monster
Understanding the ``infrastructure monster'' is a challenge. It is
instructive to look back to earlier research on water utility costs.
Evidence from earlier studies suggests an awareness of rising costs and
the role of infrastructure replacement in the cost profile:
The Nation's Public Works: Report on Water Supply (Wade Miller
Associates, 1987) forecast annual needs for the water industry
in the range of $4.8 to 7.1 billion as follows: 37-49% for
deferred infrastructure maintenance/replacement; 39-55% for
meeting demand growth; and 8-13% for Safe Drinking Water Act
(SDWA) regulatory compliance
Meeting Water Utility Revenue Requirements (NRRI, 1993) found
that ``In reality, SDWA compliance costs may pale in comparison
to costs associated with infrastructure and demand growth
needs.''
Some of the larger utility systems also have been aware of the need
to step-up the pace of infrastructure replacement. Some of the
investor-owned (private) water utilities have been particularly active
in this area. As an example, St. Louis County Water prepared detailed
assessment of its distribution system in 1994. According to the
company:
``An accelerated replacement program is needed now if we are
to avoid excessive customer reaction and a `crisis' response
plan . . .
The Company's infrastructure replacement program is unique
because it does not involve the construction of one
extraordinary asset over a long construction cycle (e.g., a
nuclear plant), but a multitude of short-cycle construction
projects which, taken as a whole, are extraordinary in nature .
. .
The Company believes it is critical and in the public interest
. . . [to] synchronize rate recovery with plant completion.''
(St Louis County Water Company, 1994).
Capital Intensity, Age, and Deferral
The water industry is very capital intensive, that is, physical
plant or infrastructure is a substantial core cost. Water investments
also have very long service lives that benefit generations of
customers. Measured as a ratio of utility plant to revenues generated,
water utilities are more capital intensive than the natural gas,
electric, and telecommunications industries. Water utilities must
invest more than $3.50 for every dollar of annual revenues received
from customers. Trend data (and projected investments) indicate that
the water industry is becoming even more capital intensive.
Industry experts have estimated that pipes were installed in the
early part of the century at a cost of about $5 per foot (or less). It
is not unusual for replacement costs to total $100 per foot--which is
more than double the overall rate of inflation for the same period. The
rate of replacement reflects the anticipated life expectancy for a
physical investment. A replacement rate of 1 percent implies a life
expectancy of 100 years. Lower rates imply a much longer--and
unrealistic--life expectancy. Today's pipe materials today are expected
to last about 75 years, serving generations of customers.
The rate of pipe breakage increases as infrastructure ages.
Breakages lose water, disrupt service, and pose public health risks.
Emergency repairs typically are much more costly than planned repairs.
The rate of breakage varies with pipe material, which also correlates
with the period of installation. Also, as facilities age, the overall
percentage of ``accounted-for'' water declines; that is, more water is
lost. The value of water losses has increased with the increased cost
of water supplies, treatment, and pumping.
Following its assessment, St. Louis County proposed to pick up the
pace of replacement from 5 (.13%) to 30 (.8%) miles of pipe per year
(total pipe miles equal 3,882). But even the accelerated pace of
replacement now used by some systems is probably inadequate based on
current knowledge about the life expectancy of materials. But making
the case for replacement needs to rate regulators and other oversight
bodies (mayors and city councils) has been a significant challenge.
Recently, some private utilities have won approval for surcharge
mechanisms to help fund a continuous program of replacement, while also
mitigating rate shock (the leading example is the Distribution System
Improvement Charge, implemented in Pennsylvania).
Although much of the infrastructure challenge is simply age-
related, at least part of the current need can be attributed to capital
deferrals, or the postponement of infrastructure investments. Because
their profit is based on the value of their rate base, investor-owned
utilities have less incentive to defer capital investments. Deferrals
exacerbate the ``gap'' problem by increasing the level of need and
thereby widening the gap between future expenditure levels and current
revenue levels.
A model developed by Australian researchers suggests that the
compound effect of infrastructure replacement needs over several
decades suggests a ``Nessie curve,'' named after the mythical Loch Ness
monster. These cost curves can provide a useful model to help utilities
and other stakeholders understand needs at the system level.
In reality, the challenges of prudent capital replacement and
``lumpy capacity'' are not new to utility economics. Other utility
sectors have faced--and are facing--infrastructure needs. However,
today's water and wastewater infrastructures were cheap to begin with,
were well-subsidized (particularly for wastewater), and have long been
depreciated. These factors combine to create an extraordinary pressure
on costs. Emerging information systems, planning and management tools,
and alternative technologies can help manage the monster--and close the
funding gap.
The real risk today may be in the potential for a ``responsiveness
gap,'' that is, the gap between awareness and knowledge about an issue
or problem and taking the actions necessary to address the problem and
avoid or mitigate deleterious effects. However, debate is open as to
how to respond to the challenges now faced by the water industry,
particularly with respect to private versus public responsibilities.
The Emerging Myths
The infrastructure funding debate is contributing to a number of
emerging myths that may or may not be grounded in reality. The myths
suggest:
That a national crisis is looming.
That the cost of water services cannot be supported through
rates.
That a funding gap is inevitable.
That public (that is, federal) funding solutions are
essential.
Some reality checks may help inform the infrastructure funding
debate by challenging some of the emerging myths. These reality checks
are offered not as criticism of any given perspective, but rather to
bring an empirical perspective to the dialog about these important
issues.
Reality Check: Municipal Finances
The water and wastewater industries are dominated by municipal
ownership. Care should be taken to not over-generalize about municipal
finances. However, some of the available data (from the U.S. Census of
Governments and elsewhere) may be relevant to the funding debate.
The data indicate that in general, when municipalities provide
electricity and natural gas services, revenues from user charges exceed
expenditures. For water and sewer services (as well as solid waste and
transit services), expenditures exceed revenues from user charges. The
findings generally suggest that municipal water customers do not cover
expenditures through rates. The implications of this ``gap'' are worse
if the expenditures understate the cost of water service (as is the
case with deferrals). Of course, individual water and wastewater
systems may have very different financial profiles.
The deficit between expenditures and user charge revenues is
detectable for different types of publicly owned water systems:
municipalities, special districts, counties, and townships. Trend data
indicate that the expenditure-revenue gap has been persistent over
time, although it has closed somewhat. The difference between
expenditures and revenues must be made up through tax revenues and
subsidies (grants). The trend data are comparable when displayed on a
per-capita basis. Data for individual cities show that aggregate
expenditures on water, energy, and transit utilities exceed user-fee
revenues in some cases, but not in others. Similar results can be seen
for municipal wastewater systems.
For investor-owned water utilities, operating revenues are provided
primarily through cost-based rates charged to customers, and revenues
exceed expenditures. An investor-owned water utility must support the
full cost of service through rates in order to survive.
The difference between revenues and expenditures is used to pay for
taxes, depreciation, and the cost of capital. Rates charged by private
water utilities are strictly regulated by state public utility
commissions, which adhere to accepted systems of accounts and cost-of-
service standards of ratemaking. USEPA data (Community Water Systems
Survey, 1995) also revealed that privately owned water systems collect
more revenues per gallon than publicly owned systems.
Municipal debt can be used for long-term capital investments, such
as water treatment facilities. Debt instruments that can be used by the
water sector include traditional issuances, as well as private-activity
bonds. Debt instruments should not be used for routine maintenance
(considered an annual expense). However, debt (short-term and long-
term) can be used for major capital replacements to amortize costs over
time. Ideally, costs are recovered over the useful life of the capital
investment (although in practice shorter time periods are used).
Several interrelated financing issues have contributed to or
complicated the infrastructure funding problem. These factors include:
unrealistic service-life expectations, extraordinary cost inflation,
inadequate accounting and accounting standards, investment deferrals,
inadequate user charges, profits and reserves for a few systems, and
concerns about rates and equity. Accounting standards are the domain of
the Governmental Accounting Standards Board (GASB) for governmental
utilities and the state public utility commissions for investor-owned
utilities.
Reality Check: Household Expenditures
Household expenditures for utility services and other goods and
services provide another relevant perspective. Consumer expenditure
data are available from the Consumer Expenditure Survey (Bureau of
Labor Statistics). Although the data have limitations, they are useful
for general purposes.
Water and public services (sewer and solid waste) account for a
relatively small share of the average household utility budget (less
than .8% of total expenditures), particularly in comparison to
electricity (2.4%) and telecommunications (2.1%). In many respects,
water services are a ``bargain'' to average households. Of course,
averages mask relevant variations and actual expenditures are affected
by many factors. Over time, average household expenditures for
utilities have climbed, but expenditures for water and other public
services have retained their relative position. The percentage of
household income and expenditures devoted to utilities has declined
with time, although the share for water and other public services has
remained relatively constant.
On average, a four-person household spends about the same amount
each year on cable television and tobacco products as on water
services. Americans have shown a tremendous willingness to pay for
advanced communications and entertainment technologies, including
cellular phones ($41.24 per month), cable television ($28.92 per
month), and internet services ($21.95 per month). For many U.S.
households, the expenditures for these more discretionary services are
greater than for water services. It is noteworthy that the nation's $80
billion cellular telephony infrastructure has been entirely supported
by private providers who collect fees from users.
Reality Check: Global Comparison
Another reality check can be made using comparative international
data. Americans use more water per capita overall than most nations of
the world. Yet water prices in the United States are comparatively
lower than prices charged by water service providers in many other
developed countries. These findings also are supported by a study
conducted by researchers in the Great Britain who controlled for
international difference in the gross domestic product.
Reality Check: Rate Shock
Large rate increases have the potential to cause rate shock among
customers. Technically, rate shock applies when a rate increase is
associated with a significant drop in usage, which reflects the
willingness (and ability) to pay for service. For essential services
(with relatively price-inelastic demand), these drops may be
transitory. The term ``rate shock'' is also used to describe the pubic
outcry associated with rate increases--which may have no basis in
affordability. However, the extent of rate shock and affordability
concerns depends in part on the level of the current water bill and the
magnitude of the rate increase. Techniques are available to mitigate
rate shock and address genuine affordability problems.
Consumer Price Index data (BLS) reveal that real (inflation-
adjusted) water rates are rising faster than the overall rate of
inflation--along with prices for garbage collection, cable television,
and local telephone service. Data for individual communities suggest
that real (inflation-adjusted) rates have risen for some but declined
for others.
Any given rate increase may or may not trigger rate shock or cause
hardship. A higher percentage increase on a low base may not be
problematic for most households. The magnitude of the increase relative
to household income levels should be considered. Public involvement and
communications (including informative bills) can help customers
understand the reasons for the rate increase.
As suggested in the review of municipal finances, underpricing of
water services may be an important factor in the projected funding gap.
Underpricing sends inappropriate signals to customers about the value
of water, leading to inefficient useage. According to basic economic
theory, underpricing also leads to over-consumption and inefficient
supply decisions to meet inflated demand. Privately owned utilities are
more likely to adhere to cost-based ratemaking that recovers total
revenue requirements (capital and operating costs).
Some communities deliberately maintain ``low'' prices for water and
wastewater services for reasons that include community values, economic
development, and political expedience. In some cases, rate increases
have been avoided for very long time periods. Taking inflation into
effect, a ``stable'' rate is actually a rate that has decreased over
time. The ``loss'' of revenue presents an opportunity cost to the
community in terms of its ability to make appropriate infrastructure
investments.
Rate shock in the water sector is possible because rising costs
must be recovered over flat per-capita demand. Affordability concerns
are real but manageable. Financing, ratemaking, and conservation
strategies can mitigate rate shock to a degree. Surcharge adjustments
can be used to achieve gradualism in rate increases. Larger systems can
use consolidated rates, progressive rate structures, and conservation
targeted to low-income households. Needs-based subsidies can be used to
help eligible customers by providing direct payment assistance or
funding a lifeline rate.
From a theoretical standpoint, willingness to pay is represented by
the demand curve, which incorporates the consumer's ability to pay.
From a practical standpoint, ability to pay is a function of price and
income and can be addressed through rate design and subsidies
(respectively). For many publicly owned systems, the real problem is
not the willingness nor the ability to pay--but the ``willingness to
charge'' customers at rates closer to the true value of water service.
Reality Check: Consumer Preferences
Another ``gap'' seems to persist between customer preferences and
their willingness to pay for safe and reliable water service. According
to opinion polls (Gallup) Americans consistently express a high degree
of concern about drinking water and related issues. Paradoxically,
consumers do not necessarily appreciate the value of water services.
Consumers often appear unwilling to support rate increases necessary to
ensure drinking water quality and reliability. Indeed, low prices
reinforce the view that water services are an entitlement. Public
education is needed to close the gap between opinion and willingness to
pay the cost for arguably the most essential utility services.
Water itself has no substitutes, but alternative methods of
delivery are available. For many U.S. households, the price of one
gallon of centrally-supplied water--conveniently delivered to the tap--
is less than one-third of one penny (see Raftelis Environmental
Consulting Rate Survey). In general, every other water alternative is
no more safe, much less convenient, and astronomically more expensive.
At $1.15 per gallon, the price of ``designer water'' is 347 times the
price of tap water.
Despite the high costs, Americans continue to buy bottled water in
increasing amounts.
In 1999, bottled water sales had increased by 12 percent. In 1999,
the nation's water utilities collected revenues totaling about $29.4
billion. Wastewater treatment works collected revenues totaling about
$26.3 billion. The bottled water industry collected revenues totaling
$5.2 billion.
Rough estimates can be used to compare the profit margin for
bottled water versus tap water. For larger bottlers, total production
costs (including source costs) amount to about 10 cents for each bottle
that can be sold for 70 cents or more (a 600% markup). The ``markup''
for tap water, even for private companies, is closer to 10 percent.
Reality Check: Federal Funding
The reality of the broader context of federal funding also is
relevant to any particular constituency, including the water and
wastewater industries. It is important for the water industries to have
realistic expectations about future federal funding for water programs
in order to plan sufficiently to meet infrastructure needs.
Water services have always been and always will be subsidized to a
degree. Some subsidies are in the public interest because of equity
considerations, as well as health, safety, and environmental protection
concerns. All subsidies have distributional consequences (that is, they
result in both winners and losers). Subsidies can also perpetuate
dependence, inefficiency, and stagnation on the part of recipients.
Whether a water system or a customer, subsidies can mute incentives for
cost control. Subsidies require tax revenues and taxpayers are also
ratepayers (the same households pay one way or another). The social
benefits of subsidies should outweigh the total costs.
Programs have been established to assist low-income customers in
other utility sectors.
The LIHEAP programs provide payment assistance for energy services.
Under the 1996 Telecommunications Act, the Lifeline and Linkup programs
provide assistance to telephone customers.
In reality, water and wastewater infrastructure funding already
exceeds federal funding provided to the LIHEAP and Lifeline/Linkup
programs. Levels of funding under the WIN (Water Infrastructure NOW)
proposal would vastly exceed current levels for water infrastructure,
as well as other utility programs. The WIN proposal expands grant
subsidies, which effectively can both reward and perpetuate
inefficiency. If a subsidy rewards past inefficiency, continued
inefficiency on the part of the system is assured because underpricing
will persist.
Infrastructure funding for water is provided through the Clean
Water and Safe Drinking Water State Revolving Funds (SRF). The
principles underlying the DWSRF are sound: demonstration of capacity by
systems; priority on pubic health and affordability; emphasis on loans
(v. grants); and ineligibility of maintenance and growth-related costs.
The SRF should not reward cost avoidance and inefficiency. The SRF
should not advantage publicly owned systems (and their customers) over
privately owned systems (and their customers) and further widen the gap
in rates.
Some programmatic reforms could enhance the existing Clean Water
and Drinking Water funding programs. Potential measures include:
improving efficiency and lowering administrative costs to states and
systems; addressing barriers to access and funding equity for different
types of systems (large and small systems; publicly and privately owned
systems); establishing fair criteria for funding infrastructure costs;
and promoting sound cost accounting and rate design.
The long-term federal funding environment for all utility services
is not without uncertainty. Concerns have emerged about maintaining
funding for telecommunications assistance programs under the Bush
administration. Base-level funding for LIHEAP (excluding supplemental
appropriations) has declined over the life of the program. The budget
of the USEPA also has been targeted for budget cuts under the Bush
administration.
Reality Check: State and Local Priorities
At the local level, water and wastewater services--although vital
to communities--are not always assigned high priority. In many larger
cities, funding needs for the water sector are comparable to funding
provided for professional sports stadiums.
Given their primacy for water and wastewater policies, the state
also must play a role in addressing the infrastructure issues. Several
states have taken steps in this area, including: Pennsylvania (cost
recovery), Kentucky (regional consolidation), Rhode Island (capital
planning), Oregon (program integration), and Texas (regulatory reform).
Reality Check: The Gap
The concept of a funding gap merits further consideration and
debate. The need to invest in the nation's water and wastewater
infrastructure is real, but the ``funding gap'' is essentially a
construct. The magnitude of the gap is uncertain and may be inflated.
The potential to lower costs through restructuring, innovation,
operational efficiency, and integrated resource management (including
conservation achieved by water-efficient fixtures and practices) may
not be fully considered. The need is largely attributable to system
demographics (age and condition), although some deferrals have probably
exacerbated the problem. Many water utilities (and most other
utilities) can and do support the cost of service through rates. A
funding gap will materialize if deferrals and underpricing persist;
that is, if the responsiveness gap widens. The water industries must
provide leadership and effectively manage their current and future
assets on the public's behalf.
Aggressive action is needed to close the projected gap from the top
(infrastructure needs) and from the bottom (expenditure levels). Cost-
reduction strategies for closing the gap from the top include:
efficiency and optimization (least-cost) approaches directed at both
water production and usage; leadership and continued technological
innovation; and industry restructuring to achieve scale economies and
improve operational performance. Some gap estimates have attempted to
incorporate efficiency improvements--but a gap is still anticipated.
Technical and managerial innovation can substantially reduce operating
costs; capital costs can be reduced, but probably to a lesser degree
given the basic capital intensity of water services. Industry
restructuring includes consolidation and fundamental changes in system
ownership and management (including privatization).
The gap can be closed from the bottom by increasing revenues to
support infrastructure expenditures. Revenue-enhancement strategies
include: cost-based (marginal-cost) rates to send better price signals
to customers, along with other ratemaking strategies (such as
surcharges); private-sector investment; and public-sector funding
(local, state, and federal). With the magnitude of the infrastructure
need and the complexity of the water sector, multiple revenue-
enhancement solutions are necessary and appropriate. However, cost-
based rates should be emphasized and public subsidies should be used
judiciously.
The public sector will continue to play a central role in
addressing water and wastewater infrastructure needs. The public sector
can: leverage other public and private funding sources; provide
incentives for optimal investment, operational efficiency, and cost-
effective restructuring; support research and development, data
collection and information dissemination; address at-risk systems and
households based on demonstrable needs; and promote sustainable water
systems, not sustainable subsidies.
The private sector can play an expanded role in addressing water
and wastewater infrastructure needs. The private sector can: provide
leadership, technical innovation, and research; promote efficiency and
sustainability through market-based solutions as appropriate; develop a
range of asset ownership and management options to address capital and
operating needs; secure and utilize available public funding; and
maintain accountability through regulation.
The Real Challenges
Moving forward, the real challenges to all stakeholders in the
water and wastewater sectors may be to:
Establish a new science of prudent asset management for the
water sector.
Engage the public on water issues through open and
participatory processes.
Demonstrate a willingness to charge for the true cost of water
service.
Use public funding strategically to make lasting improvements
to operations.
Do not postpone the inevitable and perpetuate the
responsiveness gap.
Promote equity and sustainability over a long-term planning
horizon.
Be receptive to technical and institutional innovation.
Although formidable, these challenges can be met.
I look forward to working with this Committee, the H2O
Coalition, and all other stake holders on this issue. Thank you for
your attention.
Mr. Gillmor. Thank you. Barker Hamill of New Jersey, the
Association of State Drinking Water Administrators.
STATEMENT OF BARKER HAMILL, ASSOCIATION OF STATE DRINKING
WATER ADMINISTRATORS, CHIEF, BUREAU FOR SAFE DRINKING WATER,
NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION
Mr. Hamill. Thank you. My name is Barker Hamill, and I am
the Chief of the Bureau of Safe Drinking Water in the New
Jersey Department of Environmental Protection. I am here
representing the Association of State Drinking Water
Administrators, and I thank you for the opportunity to offer
comments on this subject.
We certainly agree that there is a large infrastructure
need and that there is a large portion of that need that is
subject for underground piping needs. There is also evidence
that the financing for the needs for the water infrastructure
and developing viable solutions to meet these needs will be
challenging.
The Association is prepared to work with Congress, EPA, and
the water utilities, and other stakeholders, to help define
those activities. ASDW members are highly involved in providing
the raw data used in EPA's drinking water need surveys.
This activity competes with other new activities
established by the 1996 Safe Drinking Water Act Amendments.
State programs infrastructure is also experiencing a funding
problem. Basic public water supply supervision program funding
is unchanged since a much needed increase in fiscal year 1997.
That recognized some of the increased demands of the 1996 Safe
Drinking Water Act Amendments. While significant portions of
the SRF funding theoretically can be used to support programs,
the practical reality is that States have only been able to use
about one-half of the available resources.
A shortfall of funding from current funding sources will
grow from about $110 million in fiscal year 1902 to $207
million in fiscal year 1905. The 1996 Safe Drinking Water Act
Amendments require that the EPA develop programs and
regulations to address microbial contamination, disinfectant
by-products, radon, radionuclides, arsenic, ground water
protection, filter backwash, among other rules.
The EPA must also evaluate potential contaminants for
regulation well into the future, as well as look back and do a
6 year review of existing rules. It is one of these 6 year
review existing rules, the total coliform rule, that is likely
to address major issues with distribution systems and
distribution system water quality, which is where a lot of this
activity is.
As a result, infrastructure funding needs will continue to
escalate as more regulations are promulgated that address new
contaminants in drinking water, and its current regulatory
level to lower or meet improved analytical methods to bring
standards closer to the maximum contaminant level goal.
In addition, new treatment technologies such as membrane,
ozone, and UV eradication will become more commonplace in water
treatment. Some of these technologies are capital intensive to
install and operate, while others will require significant
retrofitting of current treatment plants and upgrades to
distribution systems.
Funding of water system infrastructure needs involves the
partnership at the Federal, State, and local level. At the
Federal level, funding is available through the Drinking Water
State Revolving Loan Fund that was established under the 1996
Safe Drinking Water Act Amendments.
In the 1996 Safe Drinking Water Act Amendments, Congress
authorized $9.6 billion between fiscal year 1994 and fiscal
year 2003 for States to provide loans and grant equivalents to
water systems in need.
An important note is that although $7.6 billion was
authorized through fiscal year 2001, only $4.42 billion has
been appropriated, leaving a funding gap of $3.18 billion that
the States and water systems were expecting to be available to
meet infrastructure needs and compliance requirements of the
Safe Drinking Water Act.
Many States have had a long involvement in providing
financial assistance for drinking water projects. In New
Jersey, we have had a loan program that has made over 180 loans
for $145 million that started in 1984. We have integrated that
program with the current SRF program and anticipate an
additional 50 loans for about $300 million by the end of 2001.
It is important to note that by the end of this year
requests for SRF funds are greater than available SRF funds in
New Jersey, and we will be using additional State funding to
meet those needs, and we expect the demand to increase as time
goes on.
Finally, I would like to stress that Federal guidelines,
given the amount of detail that they provide, should be as
flexible as possible for States to deal with competing
priorities, and to deal with State planning issues and how
these funds are spent. The Association thanks you for this
opportunity to come and comment.
[The prepared statement of Barker Hamill follows:]
Prepared Statement of Barker Hamill, Chief, Bureau of Safe Drinking
Water, New Jersey Department of Environmental Protection, on Behalf of
The Association of State Drinking Water Administrators
INTRODUCTION
The Association of State Drinking Water Administrators (ASDWA) is
pleased to provide testimony before the House Committee on Energy and
Commerce Subcommittee on Environment and Hazardous Materials regarding
water infrastructure needs and state drinking water program needs.
ASDWA represents the drinking water programs in each of the fifty
states, territories, and the District of Columbia in their efforts to
ensure the provision of safe, potable drinking water to over 250
million consumers nationwide. ASDWA's primary mission is the protection
of public health through the effective management of state drinking
water programs that implement the Safe Drinking Water Act (SDWA).
WATER INFRASTRUCTURE
Water Infrastructure Needs
Providing a supply of safe, potable drinking water is critical to
protecting public health and ensuring current as well as the long-term
economic growth of this Nation. In February 2001 the United States
Environmental Protection Agency (EPA) released a report entitled 1999
Drinking Water Infrastructure Needs Survey that indicates that drinking
water systems infrastructure needs total $150.9 billion over the next
20 years and that $102.5 billion is needed today to ensure the
provision of safe drinking water. The bulk of this need, $83.2 billion,
is for transmission and distribution projects followed by treatment
($38.0 billion), storage ($18.4 billion), source ($9.6 billion), and
other needs ($1.9 billion). These needs are documented for the 54,000
community water systems and 21,400 not-for-profit noncommunity water
systems nationwide.
Large systems (serving more than 50,000 people) account for 41
percent of this need while medium sized systems account for $43.3
billion and small systems account for $31.2 billion. Not-for-profit
noncommunity water systems account for $3.1 billion of need. Although
the total small system need appears modest compared to needs of larger
systems, the costs on a per household basis are almost four times
higher than for larger systems because small systems lack the economies
of scale to spread the costs of capital improvement among many
consumers.
Why is there an Infrastucture Need?
Water utilities must continue to upgrade and improve their
infrastructure to meet new SDWA regulatory mandates and to replace
aging and failing distribution system pipes and appurtenances. While
water systems have typically had to keep pace with new requirements of
the SDWA with regard to treatment, specific upgrades and replacement of
pipes and transmission lines have been addressed, from a regulatory
perspective, only in a minor way through mandatory replacement of lead
pipes under the Lead and Copper Rule. Much has been learned over the
last decade or so; however, about specific health problems associated
with distribution system problems such as leaking pipes, cross
connections, and backflow. Many of these concerns are likely to be
addressed specifically in the future as EPA proposes developing a
distribution system rule.
The 1996 Amendments to the SDWA require that EPA develop
regulations to address microbial contamination, disinfection by-
products, radon, radionuclides, arsenic, ground water protection, and
filter backwash. EPA must also continue to evaluate potential
contaminants for regulation well into the future. As a result,
infrastructure funding needs will continue to escalate as more
contaminants are promulgated that address new contaminants in drinking
water, and as current regulatory levels are driven lower to meet
improved analytical methods to bring standards closer to the maximum
contaminant level goal. In addition, new treatment technologies such as
membranes, ozone, and UV irradiation will become more commonplace in
water treatment. Some of these technologies are capital intensive to
install and operate, while others will require significant retrofitting
of current treatment plants and upgrades to distribution systems.
In addition to meeting infrastructure needs associated with
compliance with the SDWA, water systems also face the challenge of
replacing miles of distribution pipes as materials age and begin to
fail. The demographics of distribution pipe installation indicate that
over the course of the next 20 years, many of the miles of pipes that
have been put in the ground over the last 100 years will reach the end
of their useful life and need replacement.
Current Funding Availability
Funding of water system infrastructure needs involves a partnership
at the Federal, state, and local level. At the Federal level, funding
is available through the Drinking Water State Revolving Loan Fund
(DWSRF) that was established under the 1996 SDWA Amendments. In the
SDWA, Congress authorized $9.6 billion between FY-94 and FY-03 for
states to provide loans and ``grant equivalents'' to water systems in
need. An important note is that although $7.6 billion was authorized
through FY-01, only $4.42 billion has been appropriated leaving a
funding gap of $3.18 billion that the states and water systems were
expecting to be available to meet infrastructure needs and compliance
requirements of the SDWA.
States also must match the DWSRF with 20 percent state funding as a
way to further capitalize this program. Through June 30, 2000 states
had contributed over $548 million additional funds for the program. To
the extent that the full Federal amount has not been appropriated;
however, revenue is also lost due to the loss of state matching funds.
A number of states also leverage the funds to create additional dollars
for infrastructure improvements. Through June 30, 2000, states had
leveraged over $1 billion in bonds to provide additional project
funding. A number of states have also established their own grant and
loan programs that are used to supplement DWSRF funding.
Additional Federal funding also comes through the Rural Utility
Service Water and Waste Loan and Grant Program under the U.S.
Department of Agriculture's Rural Development office. These funds
assist eligible applicants in rural areas and cities and towns serving
up to 10,000 people. The Federal Housing and Urban Development (HUD)
Agency also provides block grants to states under its Community
Development Block Grant (CDBG) program to provide assistance to small
local governments that generally serve less than 50,000 people and
counties with a population of less than 200,000 people. Water and
wastewater projects are eligible activities under the CDBG program.
Many states use these funds along with USDA and DWSRF funding to
package the appropriate mix of grants and/or loans to meet a
community's specific financing needs.
At the local level, a primary source of funding for infrastructure
improvements comes through rates charged by utilities to consumers for
water use. In many cases, however, rates have been kept artificially
low and long-term maintenance costs deferred. This has the potential to
contribute to ``rate shock'' should customers have to bear the full
cost of projected infrastructure replacement needs. Municipalities can
also borrow money from the private sector such as banks or go to the
bond market although many smaller water systems and non-municipal
systems find it more difficult to access these types of funding.
According to the Water Infrastructure Network's report Clean and Safe
Water for the 21st Century, water systems are currently investing
around $13 billion per year for infrastructure needs.
Is There a Funding Gap?
While it may be possible through instruments such as EPA's drinking
water needs survey to project drinking water infrastructure needs over
the next 20 years, it is much more problematic to define how large an
infrastructure funding gap exits. To calculate this accurately, one
needs to have a solid understanding of the current and long term
funding needs and then have a fairly accurate assessment of the total
sources of revenue at the Federal, state, and local level that can be
brought together to meet these infrastructure funding needs. The delta
(or gap) between these two numbers represents the funding gap or need
but only at the gross national level. The ``gap'' can vary
significantly on a water system-by-water system basis depending on
system size, contaminants of concern, the system's current rate
structure, access to available capital, and the age of the system,
among many factors.
Conclusion
Drinking water system infrastructure needs will continue to
increase due to new SDWA regulatory requirements as well as the need to
replace aging and failing pipes in distribution systems. A continued
partnership among Federal, state, and local funding sources will be
essential to ensure the long-term provision of safe, potable drinking
water to consumers nationwide. Numerous needs surveys, including EPA's
recent analysis, have concluded that nationally, water systems face a
daunting task in continuing to ensure safe drinking water. While ASDWA
is not able to calculate the actual definitive dollar figure between
the need and available funding, others have indicated that a gap exists
and may be quite large. ASDWA is prepared to work with Congress, EPA,
the water utility industry, and other interested stakeholders to better
refine the scope of the problem and the gap, and determine how best to
meet these needs today and into the future.
STATE INFRASTRUCTURE
State Implementation Responsibilities
State drinking water programs also need adequate funding to ensure
the effectiveness of their own ``infrastructure'' to carry out the
myriad responsibilities of the SDWA. Since the SDWA Amendments of 1996,
state program responsibilities have dramatically expanded to move
beyond compliance at the tap to delineating and assessing the sources
of all waters used for public water supplies, ensuring qualified
operators at all water systems, defining and implementing water system
capacity programs, creating a new DWSRF funding mechanism, and
providing significantly more information and outreach to the public.
These efforts are in addition to implementing Federal as well as state-
specific drinking water regulations addressing specific contaminants.
Forty-nine of the 50 states currently have ``primacy'' or
enforcement authority for the Federal SDWA. To achieve and maintain
primacy, states must adopt rules that are no less stringent than the
Federal requirements and have the ability to enforce these regulations.
Although some states have requirements that are more stringent; for the
most part, state drinking water programs are implementing and enforcing
Federal requirements.
Collectively, state programs provide oversight, implementation
assistance, and enforcement for approximately 169,000 public water
systems nationwide. These systems range from large metropolitan
municipalities to mobile home parks and schools. The vast majority
(over 95 percent) of these systems are small, serving less than 3,300
people. Many of these systems require extensive technical assistance,
training, and oversight.
Today, the regulatory landscape is significantly more complex than
ever before. Since FY-97, state Public Water Supply Supervision (PWSS)
dollars have had to stretch to cover development, implementation, and
enforcement of numerous new regulations and programs such as those to
address radionuclides, the microbial/disinfection byproducts rule
cluster, unregulated contaminant monitoring, consumer confidence
reports, capacity development, expanded operator certification
requirements, source water assessment and delineation, and the DWSRF.
States anticipate new regulations to be put in place this year to
address radon, arsenic, and groundwater. Additionally, states are
expected to implement revisions to the surface water treatment and lead
and copper rules, public notification, and variance and exemption
requirements. These requirements are in addition to the state program
responsibilities for core activities such as compliance monitoring,
data management, training, and enforcement for 88 currently regulated
contaminants. States also are responsible for ensuring that public
health is protected through preventive measures such as disease
surveillance, risk communication, sanitary surveys, laboratory
certification, permitting, and emergency response. States expect that
their responsibilities will continue to expand as EPA promulgates
additional regulations and reviews current regulations for modification
(see attachment 1).
State Funding
The SDWA authorizes EPA to fund up to 75 percent of the costs to
states to implement the drinking water program. Historically, however,
states have contributed 65 percent of the funding while EPA has only
contributed 35 percent. While the actual contributions for individual
states vary, with some substantially over matching the Federal
contribution, the bottom line is that adequate Federal funding for
states to implement this Federal law has not historically been
provided.
The current Federal PWSS grant provides $87.3 million for states to
implement their programs (the remainder of the $93 million currently
appropriated by Congress is directed to Indian Tribes). This level has
not increased for states over the last five years (since FY-97), even
though many of the new initiatives under the 1996 Amendments became
effective almost immediately. The level funding of $87.3 million
actually means that states have lost funding due to inflation and
rising personnel costs, not to mention a FY-01 rescission that actually
reduced state PWSS and DWSRF grants.
The 1996 Amendments also allowed states to take up to 31 percent
set-asides from the DWSRF for program implementation. EPA, however, has
never requested the full $1 billion per year authorization. DWSRF funds
are also used to provide resources for new programs at the national
level such as operator certification training reimbursement and
unregulated contaminant monitoring which further reduces the corpus of
the funds available for state use. In addition, many states have
encountered significant barriers to fully accessing these funds
including:
the inability to obtain the needed one-to-one state match with
new state revenue (for program implementation activities)
the inability to shift resources directed to water system
infrastructure improvements to state program implementation
the unstable nature of the annual SRF funding allocation which
is based on water system needs and is affected by the states'
annual intended use plan for projects and set-asides
the threat of up to 40 percent withholding for failure to
implement certain program requirements such as capacity
development and operator certification
the unwillingness of state legislatures to approve new hires
using ``temporary'' funding (the drinking water SRF is only
authorized until 2003)
To supplement insufficient Federal funding, many states have turned
to state general revenues and fees to maintain an adequate core
program. These additional funds; however, have not be adequate to fully
meet state program implementation costs.
ASDWA and EPA conducted a national resource gap analysis in early
1999 to estimate state resources needed to implement the drinking water
program between 1999 and 2005. The analysis showed that in FY-99, the
funding gap for states to implement the SDWA equaled $83 million and
staffing needs fell short by 1,627 full time equivalents (FTEs). In FY-
02, the gap will widen to $110 million and 1,906 FTEs; and by FY-05,
the states' ability to implement the SDWA is expected to fall short by
$207 million and 2,670 FTEs (see charts, page 7). The situation was
exacerbated this year when the state PWSS and DWSRF dollars were
subjected to the Agency's FY-01 rescission cuts, thus further reducing
Federal funds to the states.
Even the U.S. General Accounting Office (GAO) has raised state
funding concerns. In August 2000, GAO released a report to Congress
entitled, Drinking Water: Spending Constraints Could Affect States'
Ability to Implement Increasing Program Requirements. An extrapolation
of their findings indicate that even if all states had been able to
access the maximum 31 percent of DWSRF set-asides for program
implementation and related activities, there would still be a funding
gap beginning in FY-02. Since few states are able to access the full
set-aside amounts, the funding gap is much greater than GAO's
``optimum'' estimate, and in fact, a gap already exists. The Report
further notes that even those states that felt they were managing to
keep up with the pace of implementing and enforcing the new statutory
program requirements, at least for the short term, were only able to do
so by ``. . . scaling back their drinking water programs, doing the
minimum necessary to meet requirements, and setting formal or informal
priorities among their responsibilities.'' This is a blueprint for a
public health crisis.
Conclusion
Adequate infrastructure funding needs for state SDWA program
implementation is just as critical as adequate funding for water system
infrastructure improvements. States are responsible for ensuring water
system compliance and providing ``infrastructure'' for source water
assessments; certified and trained water system operators; water system
financial, technical, and managerial competency; public outreach and
communication; and working directly with water systems to obtain and
maintain compliance. As Congress moves forward to evaluate and find
solutions for the water infrastructure funding gap attention must also
be directed to the state program funding gap.
The goal of both of these efforts is protecting public health. It
is about knowing that whenever you brush your teeth, bathe your child,
or prepare your food, the water has been monitored and tested for
contaminants; that the responsible operator has been trained and
certified; and that the drinking water system has demonstrated that it
is technically, financially, and managerially capable of providing safe
drinking water. In order to meet Congressional expectations and Federal
regulations to successfully implement the SDWA, both states and water
systems need increased funding to ensure a safe and dependable supply
of drinking water today and for future generations.
[GRAPHIC] [TIFF OMITTED] T1489.079
[GRAPHIC] [TIFF OMITTED] T1489.080
Mr. Gillmor. Thank you, Mr. Hamill, and we will go to Mr.
Erik Olson, from the Natural Resources Defense Council.
STATEMENT OF ERIK D. OLSON, SENIOR ATTORNEY, NATURAL RESOURCES
DEFENSE COUNCIL
Mr. Olson. Thank you, Mr. Chairman, and Mr. Pallone, and
other colleagues in the room. I am with the Natural Resources
Defense Council, and I also chair a coalition of about 300
public interest groups, including health, medical, and
environmental and consumer groups called the Campaign for Safe
and Affordable Drinking Water.
I wanted to specifically talk about the aging
infrastructure of the United States. The water that I just
poured for myself here came out of pipes, some of which date to
the Lincoln Administration here in DC. We have an aging
infrastructure across the United States--it is not just
Washington--that has some serious problems.
We, the NRDC, issued a report a few years ago called,
``Victorian Water Treatment Enters the 21st Century.'' What we
found is that 90 percent of the utilities in the United States,
the big utilities, continue to use World War I era drinking
water treatment technology.
There may have been some upgrades, but the basic technology
has not changed since World War I for the vast majority of big
utilities. There clearly is a need for upgrading the
infrastructure in the United States for drinking water, and
obviously the need is going to cost a lot of money.
EPA's estimates are the $100 to $150 billion number that
you have heard. There are estimates that the Water
Infrastructure Network was made that may or may not be inflated
suggest between half-a-trillion and a trillion dollars will
need to be spent on this.
And we have heard a lot about arsenic, but let's put this
in perspective. If we take the industry's own estimates of the
total infrastructure needs, it is around $500 billion to $1
trillion. The arsenic rule itself would be less than 1 percent
of that total need.
We think that it is a good investment. I don't want to
spend a lot of time talking about arsenic issues, but I think
it is important to respond to a couple of points that were
made. One suggestion was that this was rushed through at the
last minute. EPA actually took more than 20 years to put this
rule together.
It took three statutory deadlines, court orders, and a
series of extensions over a period from 1975 through 1991 for
this to happen. It was not rushed through. EPA had over 30
meetings with the public to discuss this. There were over 1,000
comments submitted to the Agency.
This was not rushed through. The other significant point is
that the costs for over 90 percent of the population that is
affected by this is $3 a month or less. Let me repeat that. For
over 90 percent of the people affected by this arsenic rule,
the cost is going to be $3 a month or less.
Clearly for small systems, the costs may be higher. We
think that the subject of the hearing today is fair in raising
the issue of whether there is a need to have more Federal
investment in infrastructure. We think the way to deal with the
difficulties of a relatively small population that is going to
have significant affordability problems as a result of arsenic
or any other rule is to have a meaningful Federal assistance
for small systems.
Senator Reid and Senator Ensign have proposed a bill
recently, S. 503, that would address targeted funding to small
water systems. We think that is the answer, and not rolling
back Federal standards. I think I will set a precedent by
finishing a minute early.
[The prepared statement of Erik D. Olson follows:]
Prepared Statement of Erik D. Olson, Senior Attorney, Natural Resources
Defense Council
INTRODUCTION
Good morning, I am Erik D. Olson, a Senior Attorney at the Natural
Resources Defense Council (NRDC), a national non-profit public interest
organization dedicated to protecting public health and the environment.
We have over 450,000 members nationwide. We appreciate the opportunity
to testify today on the need for improved drinking water
infrastructure.
Drinking water treatment improvements begun at the turn of the 20th
Century have advanced public health protection enormously, but much of
the nation's drinking water infrastructure now is aging and outdated.
We must modernize our water systems and safeguard the nation's water
supplies from new and emerging contaminants. While EPA has estimated
based on state figures that the costs of modernization will exceed $138
billion dollars, many in state and local government, in the water
industry, and public health and environmental communities believe the
true costs of this needed massive upgrade will be many times higher.
For example, a report published in March 2000 by a coalition of
state and local governments, the water industry, and water professional
trade associations called the Water Infrastructure Network (WIN)
estimated that building these costs would be far greater than previous
estimates. The WIN report found that building new and replacing old
drinking water facilities will cost $480 billion dollars (including
finance costs) over the next 20 years, and that about $1 trillion
dollars is needed for drinking water capital, financing, and operation
and maintenance over that period. The WIN investigators concluded that
there is a funding gap of about $15 billion per year for drinking water
infrastructure, operation, and maintenance.1
---------------------------------------------------------------------------
\1\ Water Infrastructure Network, Clean and Safe Water for the 21st
Century: A Renewed National Commitment to Water and Wastewater
Infrastructure (2000).
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Most of these expenses are expected to be necessary irrespective of
Safe Drinking Water Act regulatory requirements. Aging pipes in
distribution systems, antiquated water treatment plants, water
professionals' recognition of the need for infrastructure improvements,
public demands for improved water quality, taste, odor, and
reliability, growth, and other factors, all will drive this investment.
While most of these costs will be incurred with or without new EPA
regulations, it is clear that many improvements will be necessary in
water treatment and distribution systems in order to meet modern
demands for safer tap water. Major new public investments will be
needed to fund this important national priority, and to significant
research initiatives are necessary to support and guide this
modernization.
It recently has been recognized that the United States and other
developed nations' drinking water suppliers have begun a ``Third
Revolution'' in drinking water provision. It is this revolution that
the WIN report has recognized will require greater financing. These
revolutions can be summarized as follows:
The ``First Revolution,'' occurred when water was captured,
stored, and channeled or piped for household drinking and other
uses. This important advance began in pre-biblical times in the
Middle East and was expanded and refined by the Roman Empire.
The ``Second Revolution,'' took place when coagulation,
sedimentation, filtration, and ultimately chlorination were
installed by many major water suppliers, beginning in the 19th
Century and with widespread adoption by the first World War.
This Second Revolution was triggered by the steady march
forward of medical science, the acceptance of the ``germ
theory'' of disease, and the leadership of public health
proponents such as John Snow who in 1849 linked the London
cholera outbreaks to water supplies. This resulted in enormous
public health benefits, and has hailed by the Centers for
Disease Control and Prevention (CDC) as one of the ten greatest
triumphs of public health protection of the 20th Century.
The ``Third Revolution'' in drinking water provision now has
been launched by utilities in the U.S. and Europe. This
revolution is the culmination and synthesis of the ``multiple
barriers'' approach to preventing disease from drinking water
that had long been advocated by Abel Wolman and other 20th
Century water industry leaders. In essence, the Third
Revolution consists of a four-pronged approach to modern
drinking water protection:
(1) vigorous measures to prevent contamination of drinking water,
through source water protection;
(2) adoption of modern, highly effective, and broad-spectrum water
treatment technologies that can remove a wide array of
emerging contaminants simultaneously, such as membranes,
ultraviolet radiation disinfection, and granular activated
carbon with ozone disinfection;
(3) the modernization of aging, sometimes century- or more-old
water distribution systems that often contain lead, are a
frequent cause of main breaks, can harbor microbial growth,
and, according to CDC, are a significant cause of
waterborne disease outbreaks; and,
(4) The establishment and use of an efficient and open information
infrastructure and public involvement approach in which
utilities and their government regulators use advanced
methods to monitor, assess, communicate, and engage in a
dialogue with consumers regarding drinking water source
water threats, and tap water conditions, contaminants, and
quality.
Many of America's drinking water utilities are endangering public
health by providing Victorian-era service to the most technologically
advanced nation on earth. In 1994, NRDC issued a report entitled
Victorian Water Treatment Enters the 21st Century that provides an
analysis of the protection and treatment techniques used by the
nation's largest drinking water systems--those serving over 25,000
people. We found that millions of Americans are needlessly exposed to
hazardous chemicals and microorganisms because drinking water source
protection and treatment systems are inadequate. Adding to the problem
is that some drinking water utilities are using valuable resources and
energy attempting to weaken health standards instead of improving badly
outdated treatment and distribution systems. Despite decades of
technological advancement, as most Americans are now on the Information
Superhighway, too many American water utilities are traveling on the
technological dirt road. We found that:
1. The vast majority of large water suppliers do little or nothing to
prevent contamination of the watershed or groundwater that they
rely upon for source water. Most large surface water systems
have failed to adopt watershed protections such as watershed
land ownership, and stream or reservoir buffers to prevent
runoff or discharges of chemically or microbiologically
polluted water into their source water. Many groundwater-
supplied systems also have failed to adopt wellhead protection
programs to prevent contamination of their wells.
2. Despite widespread chemical contamination of drinking water, over
90% of large water utilities have failed to install modern
water treatment technologies developed after World War I to
remove chemical contaminants. Less than 10% of large Community
Water Systems are using modern treatment technologies like
Granular Activated Carbon or ozone to reduce the risks of
chemical contamination and disinfection byproducts.
3. Aged, crumbling distribution systems are neglected, and are often
the cause of waterborne disease outbreaks. In many cases, the
pipes that bring us our water are 100 or more years old and are
cracking or crumbling. These aged pipes often harbor microbial
growth, and are subject to catastrophic breakage. Broken or
``cross connected'' pipes that allow contaminated water to seep
into the water system have often been linked by the Centers for
Disease Control to waterborne disease outbreaks, yet the
average water pipe will be over a century old before it is
replaced by a large water system. Many of these old pipes also
contain lead, and leach this dangerous toxin into drinking
water.
4. Effective source water protection and water treatment are both
technically and financially feasible. Safe Drinking Water Act
standards can be met and exceeded using techniques that, for
the most part, were invented before 1930. These techniques have
been proven effective, and are widely used in other
industrialized countries. The few American cities that have
installed modern treatment systems have shown that safe
drinking water can be provided for a reasonable price.
5. The Safe Drinking Water Act and Clean Water Act must be made
stronger to protect our Drinking Water Supplies. The Safe
Drinking Water Act (SDWA)--which sets standards for the quality
of water coming from your tap--and Clean Water Act (CWA)--which
sets standards for discharges and runoff into surface waters--
need to be better integrated. Congress should enact provisions
designed to ensure coordinated public health and environmental
protection. Necessary legislative changes should include not
only increased funding to help systems pay for improvements,
but also strengthened provisions for watershed and groundwater
protection, tougher drinking water standards, and beefed-up
enforcement authority for EPA to ensure that standards are met.
It's time to modernize systems and make the changes necessary to
provide safe drinking water. Among the larger challenges now facing the
water industry include:
1. Arsenic.
The National Academy of Sciences, in a report issued in 1999,
recognized that arsenic in tap water poses a significant public health
risk in the United States, and that EPA's outdated arsenic in tap water
standard set in 1942 ``does not achieve EPA's goal for public health
protection and, therefore, requires downward revision as promptly as
possible.'' 2 The Academy concluded that drinking water
containing arsenic at the 50 parts per billion (ppb) level allowed by
the outdated current standard ``could easily'' pose a total cancer risk
of 1 in 100--about 100 times higher than EPA would ever allow for tap
water under other rules. For the sake of comparison, the cancer risk
allowed by this arsenic standard is about 10,000 times higher than EPA
may permit in food under the Food Quality Protection Act of 1996, which
Congress passed unanimously. It also is a cancer risk 100 times greater
than EPA policy has allowed for drinking water contaminants for over
two decades. The Academy also found that there was insufficient basis
to find a threshold for arsenic carcinogenesis, and that there was no
credible evidence that arsenic was a necessary nutrient for humans
---------------------------------------------------------------------------
\2\ National Research Council, Arsenic in Drinking Water, p. 9
(1999)
---------------------------------------------------------------------------
Moreover, the Academy discussed a litany of other adverse non-
cancer health effects from arsenic in tap water, including
cardiovascular effects, nervous system problems, skin lesions, and
possible reproductive and other effects. Several peer-reviewed,
published studies completed in the year since the Academy's report have
reinforced the conclusion that a much lower standard is needed for
arsenic in tap water.
EPA in January 2001 published a rule to reduce allowable arsenic
levels from 50 ppb down to 10 ppb--a level that still presents a cancer
risk significantly higher than the 1 in 10,000 cancer risk that EPA
traditionally allows in tap water. NRDC and many public health
professionals and organizations believe that EPA should set the
standard at 3 ppb, the level that EPA says is as close to the health
goal (Maximum Contaminant Level Goal) as is feasible, considering
costs, and is affordable.3 We are profoundly disappointed in
the recent EPA announcement that the Agency intends to yet again reopen
this decades-long debate, and to withdraw the new arsenic standard.
This action is scientifically unjustified, unlawful, and bad public
health policy. We believe that to the extent that action is needed on
arsenic, the need is to assure that small, needy systems will have the
resources to clean arsenic out of their water supplies. We therefore
are generally supportive of the Reid-Ensign small system infrastructure
assistance legislation (S. 503), which with certain modest
modifications would be an effective tool to help needy small systems to
pay for arsenic cleanup and other needed upgrades.
---------------------------------------------------------------------------
\3\ The underlying science supports an arsenic standard lower than
3ppb. EPA must consider that many Americans also have unavoidable
exposure to arsenic in their food, so relatively low levels of arsenic
in tap water can cause safety levels to be exceeded. A health-
protective tap water arsenic standard should allow a maximum lifetime
cancer risk no greater than that EPA has traditionally accepted (a
level presenting a lifetime cancer risk from 1 in 1,000,000 to at most
1 in 10,000 for vulnerable or highly exposed individuals). This would
require EPA to set a drinking water standard well below the current 50
ppb standard--in the range of 1 ppb. Limitations in the analytical
techniques widely used for measuring arsenic in water, however, would
likely necessitate a standard of 3 ppb, rather than a standard of 1
ppb, because reliably quantifying arsenic at levels below this would be
difficult using current standard lab equipment and practices. Based on
an extrapolation of NAS's risk estimates, even a relatively strict
arsenic standard of 3 ppb could pose a fatal cancer risk several times
higher risk than EPA has traditionally accepted in drinking water.
---------------------------------------------------------------------------
2. Radon
Radon in tap water poses significant cancer risks to over 40
million Americans. Another National Academy of Sciences report, issued
last year, found that radon is known to cause cancer, and concluded
that a multimedia mitigation strategy made the most sense in dealing
with the radon problem. The Academy found that while radon can be
present in tap water at levels posing substantial risks, on average
nationally the vast majority of radon risk comes from radon seepage
into homes from soils.
Congress enacted a provision in the 1996 Safe Drinking Water Act
Amendments that provides that states or water systems may adopt
Multimedia Mitigation (MMM) programs for radon that focus on the
highest indoor radon risks. States and public water systems with
approved MMM programs need not assure compliance with the Maximum
Contaminant Level for radon in tap water, and can instead meet a less
stringent ``Alternative Maximum Contaminant Level'' (AMCL). The theory
is that states will provide greater public health benefits by reducing
overall indoor radon levels through a MMM program than would be
achievable using only the MCL for tap water. EPA's proposed rule for
implementing this provision, while in NRDC's view suffering from
certain problems of lack of clarity to assure that the MMM programs
actually will achieve the public health benefits billed, if improved
could prove an important step toward protecting public health from
radon. This rule was supposed to be finalized last year, and is now
legally overdue.
3. Cryptosporidium, Other Microbial Risks, and Disinfection Byproducts
EPA has engaged in a lengthy, multi-stage process of negotiations
over the past eight years with the water industry, states, local
government, water treatment trade associations, public health groups,
and environmental organizations in an effort to tackle the complex
issue of microbial contaminants and disinfection byproducts. These
negotiations have wrestled with how to control the parasite
Cryptosporidium (which sickened over 400,000 people and killed over 100
in Milwaukee in 1993, and has lead to many smaller outbreaks since
then). In addition, the issue of how to deal with risks introduced or
exacerbated in the water distribution system was debated.
These negotiations have sought to produce an agreement that would
improve protection from the class of contaminants known as disinfection
byproducts, which are created when chemicals such as chlorine are used
to disinfect water, but create unwanted byproducts as a result of
chemical reactions between the disinfectant and organic matter in the
water, creating a potentially toxic soup of chemicals that have been
linked in both animal studies and epidemiological studies of people to
certain forms of cancer and to reproductive problems such as
miscarriages and certain birth defects.
After years of serious negotiations over the ``Stage 2''
disinfection byproduct rules, and the ``Long Term 2'' rule for surface
water treatment, in late 2000 we finally achieved a breakthrough in the
negotiations, and an agreement was reached. We hope that EPA will
promptly follow through by issuing these rules in a timely manner. In
addition, EPA is now legally overdue in issuing the Long Term 2
Enhanced Surface Water Treatment Rule and the Filter Backwash Rule.
4. Groundwater Rule.
EPA also was charged by Congress in the 1996 amendments with
issuing a rule requiring that groundwater supplied public water systems
disinfect their drinking water, unless such disinfection were to be
found unnecessary. EPA recently proposed a groundwater rule, upon which
the public comment period recently closed. NRDC believes that the
proposal includes several important measures that may improve public
health protection, but also has several fundamental flaws that will
need to be fixed if the rule is not to become bogged down at the state
level.4
---------------------------------------------------------------------------
\4\ Among the major flaws of the proposed rule are: (1)
Disinfection has become the last alternative. EPA has chosen to move
from a position of requiring disinfection of ground water systems, with
exceptions (where it can be shown that it is not necessary), to a
position of not disinfecting a ground water system until almost all
other options have been exhaused. (2) States do not have to set time
limits for ground water systems to fix problems. (3) Ground water
systems will not have to test for both pathogens and viruses. (4) EPA
does not require sanitary surveys to be done frequently enough to find
problems in time to correct them. (5) States may design Sanitary
Surveys that vary widely in quality and oversight. (6) States are not
required to have a cross connection control Program. (7) EPA does not
establish a baseline list of significant deficiencies which states may
exceed. (8) EPA should require public participation and Right To Know
throughout the Ground Water Rule (9) The SWAP Should Be More Tied Into
the Ground Water Rule. Though EPA advises States to take the SWAP
process into account, we feel that EPA could do much more to formally
tie source water assessments and the sanitary surveys together.
---------------------------------------------------------------------------
The 1996 SDWA Amendments should help to encourage better health
protection, and EPA should be commended for the generally open public
process used to date in implementing most of this law. There are
several other important challenges:
The Need for a National Dialogue on How to Fund the Massive
Funding Gap for Drinking Water Infrastructure Improvement and
Modernization. The massive shortfall in resources available for
water systems to upgrade, replace, and expand their
infrastructure is a problem that must be addressed. NRDC
believes there is a need for a serious national dialogue on how
this funding gap will be addressed. While certainly federal
funding will not itself plug this massive hole, the time has
come for a serious discussion of what the respective federal,
state, and local governmental roles are, and what role private
industry might play in this overhaul. We believe that there is
a need for federal leadership on this issue, and for
significantly increased federal resources to be dedicated to
this crucially important national need.
An Assured Funding Mechanism, Such as a Modest, Dedicated
Water Fee, Allocated to a Trust Fund Without Further
Appropriation, is Needed to Support Long-Term Drinking Water
Research and to Address High Priority Health Risks for Small
Systems. As part of a series of discussions with the water
industry and others, NRDC and many in the public interest
community (and frankly, some in the industry) have come to the
conclusion that Congress should enact a modest water fee that
would support a long-term guarantee of adequate research
funding for drinking water. The funds raised should be set
aside in a trust fund that is available without need for
further appropriations, so that the research agenda is not
buffeted by the ever-changing winds of the annual
appropriations process. In addition, we believe that those
funds should be made available for direct funding of the most
substantial public health threats posed by drinking water
systems, such as grants for emergency repairs, treatment, or
consolidation of small systems with serious health standard
violations.
A ``Polluter Pays'' Mechanism is Needed to assure that
consumers do not end up footing the bill for expensive
monitoring and treatment when polluters contaminate source
water. We recommend that the SDWA be amended (or that separate
legislation be enacted) to enable public water systems or
consumers to recover the full costs that source water pollution
imposes on them in the form of increased monitoring, treatment,
and other costs.
Appropriations Acts and a Court Decision Have Effectively
Eliminated the Drinking Water State Revolving Fund (DWSRF) Set-
Aside for Health Effects Research, Undercutting Funding
Assurances. This Committee and the 1996 SDWA Amendments adopted
a provision in the DWSRF assuring a $10 million set-aside for
health effects research, SDWA Sec. 1453(n). The appropriations
committees, however, have included provisions purporting to
negate this set-aside in the last several appropriations acts.
Unfortunately, a court decision--reached with the support of
EPA--effectively found that the appropriations language
overrode the set-aside in the Act. Thus, this Committee's
effort to assure long-term funding of this research has been
nullified by subsequent Congressional action. This Committee
should fight for the full set-aside for this research.
A Forum for Open Public Research Planning and Priority Setting
is Necessary. EPA should formalize an open public process for
developing its drinking water research plans, similar to the
highly successful Microbial and Disinfection Byproducts
Council, but with additional public comment and openness
assured. This is a far more effective approach than the largely
closed-door process EPA used in planning its arsenic research,
for example.
Assuring More Effective Public Right-to-Know, Better Source
Protection, More Affordable Advanced Treatment Technologies,
Better Analytical Methods. EPA needs to conduct further
research and funding, and to take regulatory and other steps to
build better public understanding of tap water challenges. The
EPA right-to-know report rules issued in 1998 that required the
annual reports to be issued beginning in 1999, are a major step
forward. It is critical, however, that methods be developed to
improve public understanding of these complex issues. Other
important areas of research include: investigations into ways
in which source water protection can be made a more effective
tool for drinking water protection; research on how modern
treatment methods can be improved and costs decreased;
development of better, cheaper, and easier analytical methods;
and improved approaches to assuring small system compliance
through restructuring or treatment upgrades.
Research to Support Treatment, Occurrence, and Related Issues
for Microbes, Disinfection Byproducts, Groundwater, and
Distribution System Risks. New standards will be issued over
the next several years for many contaminants, yet EPA resources
for research on the availability of treatment and on occurrence
are inadequate. These rules will be determinative as to whether
the ``Third Revolution'' in drinking water protection--
involving true multiple barriers to contamination in the form
of source water protection, advanced ``leap frog'' treatment
technologies, and modern distribution system management--will
occur in the early 21st Century, or whether the nation's aging
and often outdated water supplies will continue to inadequately
address these emerging problems and to deteriorate. A stronger
research commitment is needed.
Compliance Problems that Continue to Plague the Drinking Water
Program. Widespread violations of the SDWA, and inadequate
state and EPA enforcement against even the most recalcitrant
violators continue to be a major problem. Improved data
collection and management, and a stronger commitment to
enforcement, are crucial to assist EPA, states, and the public
to address these issues. Compliance problems and data
collection and management failures have been catalogued in a
USA Today series published in October, 1998, in an EPA audit
discussed in a front page USA Today article in late 1999, and
in EPA's own 1998 and 1999 Annual Compliance Reports. The EPA
drinking water program and states need to upgrade their
management systems and programs. Routine audits of federally-
funded state programs are a crucial part of this effort. The
new SDWA small system viability provisions could begin to
reduce these problems, but substantial additional resources and
research are needed to assure that these programs bear fruit.
Additionally, small system technical assistance should be
granted on a competitive basis, based upon the best available
research, so that these assistance providers demonstrate that
they can deliver accurate technical assistance to small systems
in a cost-efficient manner. We oppose ``earmarked'' assistance
funding that is non-competitive, as it often fails to allocate
resources so as to maximize health benefits.
Improved Data Management, Reporting, and A Comprehensive
National Contaminant Occurrence Database. EPA must work with
states and the public to develop a fully integrated and fully
automated joint data management system for the drinking water
program. Included in this system should be accurate, reliable
and real-time compliance, water quality, enforcement, and other
key information. In addition, an effective National Contaminant
Occurrence Database (NCOD) is needed that will require
compatible data systems across states, electronic data
reporting to EPA by states and testing labs, and sufficient
will to ensure that national contaminant reporting is complete
and timely. A well-organized NCOD will provide an essential
national right-to-know counterpart to the consumer confidence
or ``right to know'' reports that water utilities provide
directly to their customers.
Better Integration of Clean Water Act and SDWA Programs. While
modest progress and much discussion have occurred in the effort
to better integrate the Clean Water Act and SDWA programs, in
fact we have a long way to go at the state and federal levels.
It is an unfortunate historical and jurisdictional byproduct
that hampers full integration of these programs and impedes
progress. For example, EPA's source water assessments and
protection programs, filtration avoidance programs, the
groundwater rule, wellhead protection programs, sole source
aquifer programs, and UIC programs under the SDWA, need to be
better integrated with the CWA Sec. Sec. 319, 305(b), and Total
Maximum Daily Load programs have developed largely independent
of each other. The Unified Watershed Assessment effort is
beginning to make some headway in integrating these diverse
programs, but a more aggressive effort would be helpful.
Meaningful Source Water Protection Authority. Public water
systems, states, EPA, and the public need to have the ability
to protect, through regulatory mechanisms or other mechanisms
as necessary, source waters. The 1996 SDWA Amendments largely
punted on this issue, but creeping development and pollution
are contaminating many source waters; strong legal authorities
to prevent such contamination are needed.
Better Leveraging of Other Federal Agency Resources. The
federal government has a wealth of expertise and resources
directly relevant to EPA's drinking water program that should
be better integrated into EPA's efforts. For example, the
Centers for Disease Control, Agency for Toxic Substances
Disease Registry, and many of the institutes at the National
Institutes of Health, including the National Cancer Institute,
the National Institute of Environmental Health Sciences, the
National Institute of Allergy and Infectious Disease, National
Institute of Child Health and Human Development, National
Heart, Lung, and Blood Institute, National Institute of
Neurological Disorders and Stroke, and many other institutes
and agencies conduct research of which EPA often is unaware. A
better program is urgently needed to assure more information
sharing and collaboration among the federal agencies. Some
successful examples of such collaboration can be noted--such as
the waterborne disease estimation research being jointly
spearheaded by EPA and CDC, and the joint work on disinfection
byproducts by EPA, ATSDR, and NTP. Perhaps more often, however,
there is little or no collaboration among many of the agencies
in priority setting and in conducting research. The lack of
coordination can result in serious lost opportunities, and
potentially in duplication of effort.
Programs to Protect Consumers of Small Systems and Private
Wells. The United States may be moving towards a two-tiered
water supply: higher quality water for consumers in larger
cities, and lower quality water in small town and rural
America. America's small water systems are often having
significant difficulty complying with EPA's basic health
standards, and as additional rules (such as arsenic and the
groundwater rules) are issued, these difficulties will only
increase. There is a need to develop a stronger program to
assist and fund the restructuring, technical assistance,
regionalization, consolidation, package treatment technology,
and other approaches that will have to be adopted to assure
that small water system customers receive safe and affordable
drinking water. There also are 30 to 40 million Americans who
get their water primarily from private wells not covered by the
SDWA at all. Monitoring and protection of the quality of water
in these wells is often spotty to nonexistent. A national
dialogue is needed to discuss how these tens of millions of
Americans' health can be better protected from contamination of
these often highly vulnerable supplies.
CONCLUSION
In conclusion, NRDC strongly believes that there is an urgent need
for additional federal funding for drinking water infrastructure to
assure water system upgrades needed to protect public health. This
process will not be simple, nor will it be cheap. But this effort is
necessary to protect the health and well being of all Americans for
generations to come, and to achieve public demands for a reliable
supply of safe, good-tasting tap water. Only a long-term stable source
of adequate funding will assure that this is achieved.
Mr. Gillmor. Let me say that the subcommittee commends you.
Let me ask Mr. Neukrug a couple of questions. Mr. Neukrug, can
you tell us the impact on public health of deteriorating, and
breaking pipes, and the type of contamination that can occur?
Mr. Neukrug. Well, everything that we are talking about
here in terms of the infrastructure issue deals with public
health, and whether the source water protection, or the
treatment process, or the distribution process itself will
involve public health.
Mr. Gillmor. We are once again facing a vote. So let me
defer any questions and I will go to Mr. Pallone, but I might
ask that we may want to submit some questions to the members of
the panel in writing, and hopefully if you could respond to
some of those we would appreciate it. Mr. Pallone.
Mr. Pallone. Thank you, Mr. Chairman. I know that we are
running out of time. I wanted to ask each of the panel the same
questions and I guess we could try to run through it faster,
and if not, you can do a written response. And that is with
respect to drinking water only, and not waste water.
If each of you would indicate first the total current
funding needs for drinking water infrastructure; and, second,
the total drinking water infrastructure needs over the next 20
years; and third, the total annualized funding need for
drinking water infrastructure. If you can do that quickly,
fine, and if not, you can submit it to me in writing with the
permission of the Chair.
But the other thing overlying that is that I obviously feel
very strongly that we have a great need, and I know that some
have suggested that maybe the need isn't as great as we think,
but that there is a great need for increased Federal funding
here.
And obviously based on what Governor Whitman said, the
budget that the President is going to submit is I guess level
funding. That is what she clearly indicated, and I kind of
wanted to find out what is going to happen.
In other words, if there isn't a major increase in Federal
funding, what is that going to mean. Is it going to mean that
these projects don't get done? Does it mean that they will be
done, but that the ratepayer is going to pay for it? Do the
best that you can, and we will go through the panel here.
And if you can't answer now quickly, then you can also send
me something in writing.
Mr. Beider. My quick answer to the question of how big the
needs are is that it is very uncertain, and I will elaborate on
that in writing.
[The following was received for the record:]
CBO does not have an estimate of total national needs for
investment in drinking water infrastructure over the next 20 years.
Indeed, as indicated in my statement, CBO does not believe that the
information currently available allows a reliable point estimate of
those needs. In light of current uncertainties about the necessary
rates for replacing pipes and equipment, possible efficiency gains in
construction and rehabilitation methods, future standards for the
quality of drinking water, and other important factors, 20-year needs
would be more appropriately estimated by a wide interval. The
difference between the low end and high end of such an interval could
be $10 billion or more per year.
Current needs should be more readily measurable, by the kinds of
bottom-up survey methods EPA uses in its Drinking Water Infrastructure
Needs Survey. The results of the second such survey, recently released,
estimate current needs to be $102.5 billion (measured in January 1999
dollars). However, because CBO's study does not focus on current needs,
my colleagues and I have not investigated the details of EPA's survey
and cannot assess that estimate.
In the absence of a major increase in federal funding, drinking
water systems would manage their investment needs using a combination
of three approaches: raising funds from nonfederal sources--principally
ratepayers; deferring some investments; and finding additional ways to
reduce the costs of investment projects, operations, and maintenance.
How much of each approach would be used is unknown at this point, but
the mix would undoubtedly vary from one system to another. CBO
understands that the American Water Works Association will soon issue a
report that summarizes detailed analyses of the investment needs of 20
systems around the country and identifies how much rates would have to
rise to meet those needs. That report could make a significant
contribution to our understanding of the possible implications of level
federal funding.
Mr. Pallone. Thank you.
Mr. Neukrug. I will go further and say it is enormous, and
I will follow that up in writing.
Ms Ingram. We will respond in writing.
Ms. Beecher. I think again the need is substantial, and the
gap is a separate issue, but I am optimistic though, and I
think actually the benefit we have had by bringing this issue
to light is that I think we have got now great minds and great
energy working on it.
And it will take multiple approaches to deal with it,
particularly when it comes to the most disadvantaged customers
and systems, and obviously there needs to be particular
attention there, and that should be the priority for funding.
But there are going to be choices here, and I think
communities are going to have to think about those seriously,
and I think we need to devote the resources toward need though,
and be careful not to subsidize activities that frankly the
market will take care of, or that we don't need to subsidize.
For example, lawn watering, versus basic human needs, and I
think we need to pay attention to those priorities.
Mr. Pallone. Okay.
Mr. Hamill. The current needs are well represented we feel
by the EPA needs assessment survey, and we think that does a
good job. Future needs are much harder, and I think we will
respond separately to that, but I think for a number of
reasons, probably as much as anything with future rules that
will come out, are not as well represented by that process.
Mr. Pallone. I think I would like for maybe one of you, and
maybe Mr. Olson, just the whole question of if there isn't a
significant increase in Federal funds, which I guess you are
not going to get from this administration, what does that mean?
Does that mean that these things don't get done?
Mr. Olson. Well, we are certainly very concerned about the
possibility that if there isn't increased Federal funding that
some projects will not get done, particularly in communities
that have high affordability problems. Often there are going to
be small communities. So we certainly would like to see
increased Federal funding, and particularly funding targeted at
communities that especially need it.
And in terms of your first questions about current, and
over the next 20 years in annualized funding, we would just
rely on the studies that have been done by others. So we don't
have an independent analysis of that.
Mr. Pallone. Okay. I think we only have about 4 minutes
before the vote.
Mr. Gillmor. I want to thank all of you for testifying, and
you have been very helpful, and we appreciate it. Thank you.
[Whereupon, at 5 p.m., the subcommittee adjourned.]
[Additional material submitted for the record follows:]
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