[Senate Hearing 112-980]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-980

    OUR NATION'S WATER INFRASTRUCTURE: CHALLENGES AND OPPORTUNITIES

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON WATER AND WILDLIFE

                                 OF THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           DECEMBER 13, 2011

                               ----------                              

  Printed for the use of the Committee on Environment and Public Works
  
  

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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      ONE HUNDRED TWELFTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland         JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico                MIKE JOHANNS, Nebraska
JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York

                Bettina Poirier, Majority Staff Director
                 Ruth Van Mark, Minority Staff Director
                              ----------                              

                   Subcommittee on Water and Wildlife

                 BENJAMIN L. CARDIN, Maryland, Chairman
MAX BAUCUS, Montana                  JEFF SESSIONS, Alabama
FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
SHELDON WHITEHOUSE, Rhode Island     DAVID VITTER, Louisiana
TOM UDALL, New Mexico                MIKE CRAPO, Idaho
KIRSTEN GILLIBRAND, New York         LAMAR ALEXANDER, Tennessee
BARBARA BOXER, California (ex        JAMES M. INHOFE, Oklahoma (ex 
    officio)                             officio)
                           
                           
                           C O N T E N T S

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                                                                   Page

                           DECEMBER 13, 2011
                           OPENING STATEMENTS

Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland     1
Sessions, Hon. Jeff, U.S. Senator from the State of Alabama......     2
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     3
Barrasso, Hon. John, U.S. Senator from the State of Wyoming......     4
Gillibrand, Hon. Kirsten, U.S. Senator from the State of New 
  York, prepared statement.......................................    33

                               WITNESSES

Hanlon, James A., Director, Office of Wastewater Management, 
  Office of Water, U.S. Environmental Protection Agency..........     5
    Prepared statement...........................................     8
    Responses to additional questions from:
        Senator Boxer............................................    18
        Senator Cardin...........................................    20
        Senator Inhofe...........................................    21
DiLoreto, Gregory E., President-Elect, American Society of Civil 
  Engineers......................................................    51
    Prepared statement...........................................    54
    Responses to additional questions from:
        Senator Boxer............................................    62
        Senator Inhofe...........................................    64
Freeman, Joe, Chief, Financial Assistance Division, Oklahoma 
  Water Resources Board..........................................    70
    Prepared statement...........................................    73
    Responses to additional questions from Senator Inhofe........    81
Scott, Theodore E., Executive Vice President and Founder, 
  Stormwater Maintenance.........................................    84
    Prepared statement...........................................    86
    Responses to additional questions from Senator Boxer.........    97
Richey, Van L., President and Chief Executive Officer, American 
  Cast Iron Pipe Company.........................................    99
    Prepared statement...........................................   101
    Responses to additional questions from Senator Inhofe........   481

                          ADDITIONAL MATERIAL

Statements from:.................................................
    American Public Works Association............................   522
    Associated General Contractors of America....................   526
    Clean Water Council..........................................   532
    Construction Management Association of America...............   536
    PVC Pipe Association.........................................   539
    The Vinyl Institute..........................................   541
U.S. Mayor, March 28, 2011.......................................   545
The Bond Buyer: A Better Path for Infrastructure, October 28, 
  2011...........................................................   547
Rhode Island Department of Environmental Management, Office of 
  Water Resources, Fiscal Year 2012 Project Priority List........   548

 
    OUR NATION'S WATER INFRASTRUCTURE: CHALLENGES AND OPPORTUNITIES

                              ----------                              


                       TUESDAY, DECEMBER 13, 2011

                               U.S. Senate,
         Committee on Environment and Public Works,
                        Subcommittee on Water and Wildlife,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Benjamin L. 
Cardin (Chairman of the Subcommittee), presiding.
    Present: Senators Cardin, Sessions, Barrasso, Gillibrand, 
Inhofe, Merkley, Udall, and Whitehouse.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
            U.S. SENATOR FROM THE STATE OF MARYLAND

    Senator Cardin. I want to welcome you all to the 
Subcommittee on Water and Wildlife of the Environment and 
Public Works Committee. Today's hearing is involving our 
nation's water infrastructure challenges and opportunities.
    I first want to acknowledge and thank Senator Sessions and 
Senator Inhofe and Senator Boxer. The panels that we brought 
together for today's hearings were mutually agreed panels. 
Normally you have the Democrats will select some witnesses, the 
Republicans will select some witnesses. But we did it 
differently for this hearing. In true bipartisan cooperation, 
we came together as to what witnesses we thought collectively 
would be the best to point out the importance of this subject, 
which is that Americans' depending upon turning on their 
faucets and getting clean water. They almost take that for 
granted today. We are concerned as to whether the status of our 
water infrastructure in this country is one that will guarantee 
in the future that that in fact will be the case.
    We know that those who have rated our nation's water 
infrastructure have determined that it is sub-par and that it 
is in need of significant attention. We know that in my own 
State of Maryland, how many times we have had episodes of water 
main breaks, where River Road in Montgomery County literally 
became a river, where people had to be rescued by helicopter, 
where in Baltimore we found in Dundalk thousands of homes were 
flooded because of a water main break. And then most recently 
in Prince Georges County where we had a water main break that 
closed the beltway for a period of time.
    So we need to pay attention to our nation's water 
infrastructure for the sake of preserving the confidence of the 
American people that in fact, when they do turn their faucets 
on, that they will get clean, safe drinking water, and that we 
are taking care of our wastewater in an appropriate manner.
    The good news here is that in doing that, we also can 
create jobs. I think we will find during the course of this 
hearing how investment in water infrastructure will return big 
dividends to our economy as far as job growth is concerned. I 
am very pleased, again, at the witnesses that we have that 
will, I think, add to this debate. And without objection, I 
will put my entire opening statement into the record and turn 
to the Ranking Republican on the Subcommittee, Senator 
Sessions.
    [The prepared statement of Senator Cardin was not received 
at time of print.]

           OPENING STATEMENT OF HON. JEFF SESSIONS, 
             U.S. SENATOR FROM THE STATE OF ALABAMA

    Senator Sessions. Thank you, Mr. Chairman, for your 
leadership. Whatever you do has always been the most fair and 
courteous that I could ever ask for, and it is a pleasure to 
work for you on this Committee. I think working for you is a 
good way to say it.
    [Laughter.]
    Senator Sessions. We do have great needs on our water and 
sewer infrastructure. There is no doubt about that. I agree 
with you, we have an excellent panel to discuss those issues. I 
am especially pleased to have Mr. Van Richey of the Alabama 
Cast Iron Pipe Company. They have plants in Oklahoma, 
Minnesota, Texas, and around the country.
    But typical of the good companies that provide good jobs, 
Mr. Chairman, when we were able to utilize them, and I know the 
commercial work that these companies have been doing is way 
down, commercial construction is way down. So it is a fact that 
well constructed governmental expansions of our water and sewer 
systems can help keep good companies busy and good workers 
busy.
    So we will be looking for ways to do this more smartly to 
try to see how the Federal Government, which is not the primary 
responsible entity for water and sewer systems throughout the 
country, but how it can use its resources effectively. And I am 
of the view that if we are going to attempt to stimulate the 
economy it is better to do it in ways that create real jobs in 
the United States, producing something that provides a long-
term infrastructure benefit to America. I really do feel 
strongly about that.
    I remember President Bush sent out the checks. That was 
sending out $600 checks or whatever. And it didn't, history 
showed, do a lot to stimulate the economy. Likewise, I am a bit 
uneasy with this holiday, withholding tax holiday. But I guess 
I am more intrigued in creating jobs, in a program that would 
be infrastructure improving over a long period of time.
    So we also maybe can look at the way, Mr. Chairman, to 
ensure that our American manufacturers have a fair chance and 
are not unfairly competed against by foreign manufacturers in 
the course of trying to create jobs in America. Those are some 
issues that will come up.
    Thank you for your leadership, and I look forward to the 
fine panel, and thank you for what you have done.
    Senator Cardin. Thank you, Senator Sessions, very much.
    The Ranking Republican on the full Committee, Senator 
Inhofe.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman. Let me first say, 
remind my colleagues here that the Chairman and I were both of 
the same class in the House of Representatives. And I have 
never had an occasion to, while we have had disagreements on 
policy issues, he has always kept his word, and I really 
appreciate the work he is doing on this water issue. Nationwide 
investment in water infrastructure projects will increase jobs, 
repairs to crumbling infrastructure, and protect public health 
and the environment.
    I can remember when they used to consider us, out in 
Oklahoma and some of the newer States, as not having the 
problems with infrastructure that the more mature States like 
Maryland had. But that is not true anymore. We have gone beyond 
a time where it is necessary to start working on our 
infrastructure. I are pleased that we have our chief, Joe 
Freeman, from the Oklahoma Water Resources Board. I will not 
comment on him now, because I will do that before the second 
panel so I can introduce him.
    I also want to mention to my friend from Alabama that yes, 
I am very thankful for Mr. Richey. He and I have had a chance 
to talk. His operation actually is in Pryor, Oklahoma, which is 
kind of the gateway to our lake area. Not many people realize 
that the State of Oklahoma has more miles of freshwater 
shoreline than any of the 50 States. In Pryor is where it all 
starts. So I appreciate the contribution he had made.
    In fact, he has been the salvation of that town. We have 
lost--he and I have talked about this--a lot of the industries 
from there. I appreciate his involvement there.
    The U.S. Conference of Mayors notes that the public dollar 
invested in water infrastructure increases private long-term 
GDP output by $6.35; the National Association of Utility 
Contractors estimates that $1 billion invested in water 
infrastructure can create over 26,000 jobs. I only wish that 
back when we opposed it, several of us did, but they passed it, 
the $800 billion stimulus, that we had had more stimulus for 
things we are talking about here today and roads and highways. 
So I am looking forward to this hearing, and I appreciate our 
witnesses being here.
    [The prepared statement of Senator Inhofe follows:]

                  Statement of Hon. James M. Inhofe, 
                U.S. Senator from the State of Oklahoma

    I would like to make a note about EPA's recent study of 
groundwater in Pavillion, Wyoming. I continue to have many 
questions and concerns about this study and its implications 
for the natural gas industry in America, but I believe those 
questions are best addressed by those who are involved, and I 
will be withholding any questions on that today to Mr. Hanlon.
    I first want to state for the record how tirelessly Senator 
Cardin has worked to continue the Federal investment in water 
infrastructure. I have appreciated working with him, and 
although we have not always agreed, there is no doubt in my 
mind that we share the same goal of maintaining clean water and 
safe drinking water. I look forward to continuing to work with 
him and other members of the Subcommittee next year. As this 
Committee is well aware, a nationwide investment in water 
infrastructure projects creates jobs, repairs crumbling 
infrastructure, and protects public health and the environment. 
I am grateful that the Water and Wildlife Subcommittee is 
tackling this issue which is so important to Maryland, Alabama, 
California, Oklahoma, and to the rest of the U.S. I am 
especially pleased that we can hear a State perspective on 
water infrastructure needs today from Joe Freeman, Chief of the 
Oklahoma Water Resources Board's Financial Assistance Division.
    Joe has worked on water infrastructure financing issues 
both in Oklahoma and at a national level, and will be able to 
provide us with a valuable perspective today. I would like to 
mention that Oklahoma is nearing completion of a State water 
plan. I know the Oklahoma Water Resources Board has done 
tremendous work in putting this 50 year plan for water use in 
Oklahoma in place. While the decisions have been challenging 
and sometimes painful, I know that there is one thing 
Oklahomans agree on: we need to invest in our water 
infrastructure.
    I am also looking forward to hearing more about the jobs 
that are created as a result of water infrastructure 
investments from Mr. Richey. I understand that the American 
Cast Iron Pipe Company has a presence in Oklahoma and that they 
employ approximately 215 people at their American Castings 
plant in Pryor, Oklahoma.
    Funding for water infrastructure is greatly needed. Each 
day, the condition of our water infrastructure results in 
significant losses and damages from broken water and sewer 
mains, sewage overflows, and other symptoms of water 
infrastructure that is reaching the end of its useful life 
cycle.
    Investments in water infrastructure provide significant 
economic benefits as well. The U.S. Conference of Mayors notes 
that each public dollar invested in water infrastructure 
increases private long-term GDP output by $6.35. The National 
Association of Utility Contractors estimates that $1 billion 
invested in water infrastructure can create over 26,000 jobs. 
In addition, the Department of Commerce estimates that each job 
created in the local water and sewer industry creates 3.68 jobs 
in the national economy, and each public dollar spent yields 
$2.62 in economic output in other industries.
    Considering the importance of water infrastructure to the 
well-being of the American people and to our economy, I will 
continue to support investment in water infrastructure and am 
looking forward to hearing the testimony of all of our 
witnesses on this important topic.
    Thank you.

    Senator Cardin. Thank you very much.
    Senator Barrasso.

           OPENING STATEMENT OF HON. JOHN BARRASSO, 
             U.S. SENATOR FROM THE STATE OF WYOMING

    Senator Barrasso. Thank you, Mr. Chairman.
    As everyone in this room knows, water is the most 
fundamental issue in my home State of Wyoming. The need to 
provide a clean, abundant supply of water is essential to the 
survival of the intermountain West.
    As I have stated before in this Committee, as well as the 
Senate Energy Committee, on which I serve, the infrastructure 
that we have today in our home State and across the nation is 
aging. For example, repairs that are needed to our irrigation 
districts include concrete structures, such as canals and sub-
canals, that divert needed water to farmers and ranchers. The 
price tag, Mr. Chairman, for these repairs, will only get 
higher. The longer we wait, the more irrigation districts will 
fall into disrepair. This will impact the economic livelihood 
of ranchers and farmers in Wyoming, and across the entire 
country.
    Funding for water infrastructure is essential. It is only a 
part of the solution. We must remove the regulatory red tape 
and give States the flexibility to provide a clean, abundant 
supply of water for the future.
    The EPA's one size fits all approach to water quality 
issues is not always in our State's best interest. Often, 
solutions that come out of Washington and are imposed upon 
rural communities that can't afford them end up providing very 
little benefit to the community, given their scarce resources. 
We all recognize the need to upgrade wastewater treatment 
facilities, sewer lines, wastewater collection systems, and 
public drinking water systems. However, bureaucrats in 
Washington need to know that a solution for a water quality 
problem in Chicago, Illinois, doesn't necessarily work for 
Sheridan, Cheyenne, or Casper, Wyoming.
    So let's work to ensure that the regulatory decisions that 
we make are based on sound science and that we achieve a 
balance with the community and environmental needs. Let's 
empower our States and our local communities and give them the 
tools and the flexibility that they need to provide clean 
water.
    With that, Mr. Chairman, thank you for holding the hearing, 
and I look forward to the testimony.
    Senator Cardin. Thank you, Senator Barrasso.
    Now I am pleased to call on Jim Hanlon, I welcome you to 
the Committee, the Director of the Office of Wastewater 
Management in EPA's Office of Water.
    Mr. Hanlon has served as the Office Director since April 
2002. The Office of Wastewater Management has oversight 
responsibility and provides technical assistance supporting 
EPA's regional water programs. The Office also administers 
Federal financial and technical assistance for publicly owned 
treatment works, including municipal sewage collection systems 
and treatment plans.
    Mr. Hanlon, we welcome you and would be glad to hear from 
you.

 STATEMENT OF JAMES A. HANLON, DIRECTOR, OFFICE OF WASTEWATER 
  MANAGEMENT, OFFICE OF WATER, U.S. ENVIRONMENTAL PROTECTION 
                             AGENCY

    Mr. Hanlon. Senator Cardin, Ranking Member Sessions, and 
members of the Subcommittee, thank you for the opportunity to 
appear before you today to discuss the state of our nation's 
water infrastructure and the progress that EPA has made in the 
implementation of the Clean Water Act and Safe Drinking Water 
Act and new opportunities that we believe will help bridge the 
divide between our nation's water infrastructure needs and the 
ability to pay.
    We have come a long way in improving the protection of 
public health, water quality, and the environment over the last 
40 years. Our nation's drinking water meets standards as 
protective as any in the world, and we have improved water 
quality in streams, rivers, lakes, and bays nationwide.
    However, significant challenges remain. To tackle these 
challenges, we believe that new tools and techniques will be 
necessary to continue to meet America's water infrastructure 
needs, needs that are critical for protecting the nation's 
communities, creating jobs and strengthening our economy.
    Based on our most recent water infrastructure needs 
surveys, communities across the country identify the need for 
$300 billion in wastewater and $335 billion in drinking water 
capital expenditures over the next 20 years. Recognizing these 
needs and sustaining our nation's water infrastructure will 
remain a significant challenge in the years ahead.
    Despite the progress made since the passage of the Clean 
Water Act in constructing and operating wastewater treatment 
facilities, the nation will continue to face water pollution 
challenges related to water infrastructure. The Census Bureau 
tells us that there will be a 35 percent increase in the U.S. 
population by 2050. By 2025 this increasing trend in population 
growth, combined with other factors, will result in a projected 
rate of biochemical oxygen demand, or BOD, being discharged by 
publicly owned treatment works at a level about equal to the 
rate experienced in 1968, the year when the discharge of oxygen 
demanding material from POTWs had reached its historical peak. 
This projection underscores the importance of investing in 
wastewater infrastructure, treatment infrastructure to maintain 
and improve pollutant removal efficiencies.
    These trends also have implications for drinking water 
utilities with respect to the quality of their source waters. 
In addition to the population growth challenge noted above, 
demographic trends will further impact infrastructure decisions 
affecting our large and growing urban centers as well as rural 
America.
    The complexity of the challenges facing water utilities 
also continues to increase. Advancements in measurement and 
toxicological capability are producing questions concerning 
pharmaceuticals, personal care products, and other contaminants 
that were not previously part of the national conversation.
    Two of the nation's most important sources of water 
infrastructure financing are the Clean Water and Drinking Water 
State Revolving Funds. These two programs have provided 
financing of over $111 billion to 39,000 projects since their 
beginnings in 1987 and 1996, respectively. The State Revolving 
Funds have been widely recognized as technically and 
financially sound designs that have resulted in a return on the 
Federal investment of more than 2 and a half to 1.
    As the nation's largest water quality financing program, 
the Clean Water Fund supports the overarching goal of 
protecting public health and aquatic systems throughout the 
country. The Drinking Water Fund helps ensure that the nation's 
drinking water remains safe. At their discretion, States may 
also use a portion of their capitalization grants to fund a 
range of programs designed in part to help small systems in 
disadvantaged communities.
    One of the keys to the success of the SRFs is the 
flexibility that States have to decide how funds are used under 
varying State-specific circumstances. This flexibility allows 
States to provide financial assistance to local governments in 
a timely manner, allowing funds to benefit local economies 
quickly.
    EPA is working with partners across the water sector and 
beyond to provide the knowledge and tools to ensure that the 
investments we make in our water infrastructure move us toward 
a more sustainable footing. We are targeting our efforts toward 
assisting systems to achieve results by promoting the use of 
asset management frameworks, water and energy efficiency 
improvements, and innovation through the use of alternative 
technologies. We are committed to promoting sustainable 
practices that will help assure that communities continue to 
enjoy the benefits of clean and safe water.
    In October of last year we issued a Clean and Safe Drinking 
Water Infrastructure Sustainability Policy. The policy 
represents the next step in our efforts to increase the 
sustainability of water infrastructure. We will also continue 
to work with utilities to ensure they have the technical, 
financial, and managerial capacity to effectively manage all 
aspects of their operations.
    In conclusion, our nation is confronted with significant 
water infrastructure challenges. Addressing these challenges 
will require the participation of EPA, the States, communities, 
and other partners, and will require us to leverage more 
innovative and sustainable tools. We look forward to working 
with the Subcommittee and our many partners and stakeholders to 
continue our progress toward protecting and providing clean 
water to all Americans.
    Thank you again for inviting me to testify, and I would be 
happy to respond to any questions you have.
    [The prepared statement of Mr. Hanlon follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Cardin. Mr. Hanlon, thank you for your testimony.
    I want to talk a little bit more about the potential risks 
to health in regard to the status of our water infrastructure. 
The Baltimore Sun recently ran an article--and without 
objection I will include it in the record--pointing out that 
sewer lines are leaking that go into the Inner Harbor of 
Baltimore. But they are directly next to leaking drinking water 
lines, and raising the question as to whether there is 
potential risk to the public health as a result of the leakage, 
not only directly because of the quality of the Bay, but also 
as it relates to the safe drinking water.
    [The referenced information was not received at time of 
print.]
    Senator Cardin. Can you just comment as to the risk factors 
related to the infrastructure needs on public health?
    Mr. Hanlon. The exposure routes for leaking stormwater or 
wastewater collection lines or through normal leaks on a day to 
day basis, as was pointed out in that Baltimore Sun article, or 
overflows during wet weather episodes, either from separate 
sewers or combined sewers like Baltimore has, the typical route 
of exposure would be to individuals either entering the Inner 
Harbor or local creeks or waterways where recreation occurs.
    Because drinking water lines are under pressure, it is not 
likely that that sort of an underground water leak from a sewer 
would enter a drinking water line. Because basically the 
drinking water lines are under pressure, and the water sort of 
leaks out under pressure at that point.
    But the other sort of potential, as I had mentioned in my 
statement, is that where there are overflows or combination of 
source waters, where the drinking water intakes are, especially 
if there are substantial peaks, that could very much complicate 
the drinking water treatment process on a site by site basis.
    Senator Cardin. Of course, the fact that it is under 
pressure is one of the reasons why we have so much leakage, 
which adds to the efficiency issues of our systems.
    Mr. Hanlon. Yes.
    Senator Cardin. So there are tradeoffs, I guess, in all the 
issues. If we have more modern water infrastructure, we 
wouldn't have the leaks, we wouldn't have these problems to 
start off with.
    And of course, we have had major breaks in our drinking 
water lines that have caused us to have to boil water or issues 
like that, because the pressure has been compromised. So there 
have been times that we have seen major concerns about public 
health related to the leakages.
    You mentioned a number, $300 billion in our needs for the 
wastewater, $335 billion in drinking water infrastructure. 
Those are staggering numbers, $635 billion of infrastructure 
needs. Can you give us a little more detail as to what that 
entails, how those numbers were arrived at?
    Mr. Hanlon. Both the Clean Water Act and the Safe Drinking 
Water Act require EPA on an every 4-year basis to report to 
Congress in terms of water infrastructure needs. We work with 
the States cooperatively and they with local governments to 
document what their infrastructure needs are. And in order to 
have a need that would be reported in the survey, there has to 
be some baseline information, a capital improvement plan, a 
facilities plan where the local utility has sort of done out-
year planning, and basically the window for the needs surveys 
are 20 years, to identify their required capital improvements 
for drinking water and wastewater infrastructure. Those are 
then compiled, we do quality assurance checks. If they have 
confidence in the numbers, those are sent up to Congress on an 
every 4-year basis.
    The most recent surveys summarize those $300 billion and 
$335 billion plus needs respectively.
    Senator Cardin. So this is based upon the local plans as to 
what they would want to see done?
    Mr. Hanlon. Yes.
    Senator Cardin. And of course, under the current financing, 
there is nowhere near that type of capacity to get those types 
of projects moving?
    Mr. Hanlon. That is correct.
    Senator Cardin. Water infrastructure, unlike harbor 
maintenance or unlike our transportation program, does not have 
the dedicated revenue source. Is that an area that you have 
looked at at all as to whether there should be a more reliable, 
longer-term commitment to meeting these demands?
    Mr. Hanlon. We have, within the Office of Water at EPA, 
worked very closely with the States to manage the State 
Revolving Funds. Those are the capital improvement programs 
that we have in place. And there is some baseline level of 
funding there, because as the design of the State Revolving 
Funds have played out, the Federal grants, the required State 
match, along with the repaid loans and the interest earnings 
over time have created sort of viable funds, or banks, that 
revolve over time, so that there is capacity in place in those 
51 clean water banks and the 51 drinking water banks to provide 
infrastructure funding.
    For example, in the 12 months that ended last June 30th, 
the Clean Water SRF provided $5.3 billion in assistance to 
local governments, yes, SRF revolving funds. And the drinking 
water revolving fund provided $1.6 billion in assistance. So 
that is a total of $6.9 billion. Again, not near sort of what 
the national needs are, but that's the capital financing 
program that EPA manages under the two statutes.
    Senator Cardin. Senator Sessions.
    Senator Sessions. Thank you, Mr. Chairman.
    Mr. Hanlon, in the course of EPA's work with sewer and 
water systems, have you developed and have there been developed 
techniques for making those systems longer lasting, more 
efficient, and less subject to defect and leaks?
    Mr. Hanlon. I think the challenges that local water 
utilities face, and Baltimore is an example, as was mentioned 
earlier, or sort of any community across the landscape, that 
the preponderance of the water infrastructure is out of sight. 
If there is a pothole in the road that you drive to every day 
to work, you know about it, and you avoid it. If there is a 
leak in a water line, if there is a leak in an underground 
sewage collection line, it is very difficult, it is out of 
sight, and for a long time it has been out of mind.
    EPA has been working with the professional associations, 
the American Water Works Association, the Water Environment 
Federation, and others, the American Society of Civil 
Engineers, to sort of deploy better practices to account for 
in-place infrastructure. The use of asset management 
techniques, environmental management systems are tools that 
allow local governments to better inventory their assets, do 
condition assessments, and identify what the needs are. And it 
is those needs in part that are reflected in the needs surveys 
that we spoke about earlier.
    Senator Sessions. Our country is facing the most severe 
debt crisis we have ever faced. It is systemic, it is long-
term, it is not going to go away when the economy bounces back. 
And so we are having to see, how can we enhance critical 
matters like our water and sewer infrastructure at the lowest 
possible cost. I guess it is not EPA's primary responsibility. 
But do you think that the country has sufficiently analyzed the 
techniques that help keep costs down and problems down? Do you 
have any suggestions how we could do better?
    Mr. Hanlon. I think the challenge of the water 
infrastructure is a very sort of retail undertaking. There are 
16,000 publicly owned wastewater treatment plants in the 
country, over 50,000 community water systems under the 
jurisdiction of those local water infrastructure managers. And 
so I think the full continuum is out there.
    Senator Sessions. We support many of those through loans 
and other programs. I guess I am saying they go to a local 
contractor who may not be the most sophisticated contractor in 
the latest techniques to be more effective. Do you think that 
some of our moneys are spent in ways that could be better 
spent?
    Mr. Hanlon. I think the design of local infrastructure 
improvement projects is left to the local governments and their 
design engineers, primarily members of the American Society of 
Civil Engineers and others, who basically are the experts in 
designing either new systems or repairs to existing systems.
    Senator Sessions. Mr. Hanlon, the EPA has a serious 
responsibility enforcing water pollution laws. And there are 
city and rural and municipal sewer systems that leak and that 
impact adversely the environment. And you have responsibilities 
in that regard.
    One of the things I have seen both when I was United States 
Attorney and then as Attorney General is that some areas really 
have a difficult time having the funds necessary to meet what 
the EPA demands that they meet oftentimes right there. I don't 
want to raise a complex subject, and it is an embarrassment to 
Alabama, but the largest municipal bankruptcy in the history of 
the country was the water-sewer system in Jefferson County, our 
largest county. I remember when I was Attorney General, EPA had 
demanded what was then estimated to be $1 billion in sewer 
upgrades. Well, it sounded like a good idea, I suppose. It took 
my breath away, knowing how that was probably a third of the 
State's budget that this one county was going to have to fund.
    And then it went forward, and there were negotiations, and 
lawsuits I guess were maintained, and the threats continued. So 
the county ended up spending $4 billion. They borrowed the 
money unwisely from people who have gone to jail as a result of 
all of that. But the county went into bankruptcy, and it was 
driven primarily by the expenditures to improve the water-sewer 
system in the county.
    What kind of policies do you have? I know one poor city in 
the State that EPA worked with in my experience to try to get 
the system improved and deal with the worst problems first. Do 
you have any kind of policies that allow you to develop a plan 
in these areas?
    Mr. Hanlon. That subject has been one that we have had a 
fair amount of discussions on with a variety of stakeholders, 
including the Conference of Mayors and others over the last 
year or so. It had led to the issuance of a memo by my boss, 
Nancy Stoner, who is the Acting Assistant Administrator for the 
Office of Water, her counterpart, Cynthia Giles, who heads up 
EPA's Compliance Enforcement Office on October 27th, that laid 
out an integrated planning framework for municipalities. Again, 
it is not a requirement, but it is an option.
    If the utility has basically a more cost effective way of 
sort of aligning their local needs in terms of these projects 
have the most potential to either provide protection for public 
health or reduction of overflows on a sort of pound per dollar 
basis, what the memo lays out is a process that EPA, working 
with the States, is willing to entertain those proposals by 
local governments to sequence their projects. It doesn't lower 
the bar or sort of put off or absolve anyone from public health 
or water quality protections. But basically it is an effort to 
better sequence projects to get the most important projects to 
the top of the list.
    Senator Sessions. Do you have engineers that are capable of 
negotiating that, or do you just compare reports and 
suggestions about how to go forward? My time is up, maybe we 
can follow up on that.
    Mr. Hanlon. Both EPA and the States have technical staff on 
board to entertain those discussions.
    Senator Sessions. It is important.
    Thank you, Mr. Chairman.
    Senator Cardin. I hope we would be able to follow up on 
that point, because I do think the cost effectiveness, 
particularly to governments of limited capacity, is an issue 
that we need to be very informed about, as to the best way to 
proceed to make sure we protect public health, but mindful of 
the capacity of the local governments.
    Senator Sessions. Mr. Hanlon, if a city is in serious 
violation, you require them to stop, isn't that right? It is 
not a question of, there are times when you just say, you have 
to fix this or shut the system down?
    Mr. Hanlon. I think the conversations that occur, both 
within the permitting context as well as the compliance and 
enforcement context, again, the standards don't change. Most of 
the water quality standards are established by the States. But 
what happens within the construct of those discussions is sort 
of how long it is going to take.
    We understand that the sewer systems across the United 
States we inherited from our grandparents, and they have been 
in the ground for a hundred or more years, the pipes out in 
front of this building. And we are not going to fix them in 3 
years, we are not going to fix them in 5 years. So as the 
compliance schedules are negotiated, basically the end point is 
clear in terms of where we want to get to protect public health 
and protect the environment. And it is the schedules that are 
most often negotiated in terms of is it 10 years, is it 20 
years. There are consent agreements that have been entered into 
within the last 6 months that go up to 25 years.
    Senator Cardin. Senator Inhofe.
    Senator Inhofe. Did you want to go back and forth? OK, 
thank you very much. Thank you, Mr. Chairman.
    First of all, I took a quote out of your written statement, 
and I want to repeat it here, because I think it is 
significant. It says, ``one of the keys to the success of the 
SRFs is the considerable flexibility that States have to decide 
how funds are used under the varying State-specific 
circumstances. This flexibility allows both programs to make 
these much needed funds available to local governments in a 
timely manner, allowing funds to enter local economies 
quickly.'' I strongly agree with that, and I am a believer that 
the States are best equipped to take care of these problems.
    So I would ask first, are EPA's current SRF policies 
continuing to provide the maximum flexibility to the States? 
And I would ask those who will be on the second panel to listen 
to your answers. I would also further request that you stay and 
listen to their testimony if you have time to do so.
    Mr. Hanlon. Yes. Basically the States, the statutory 
authorities are a little bit different between the Clean Water 
SRF and the Drinking Water SRF. On the Clean Water side, States 
are required to put together a project priority list, and then 
on an annual basis identify their list of projects they propose 
to fund through an intended use plan. And they can go anywhere 
on that list to select projects to fund. Generally basically 
the States go to the top of their priority list in terms of 
what are the most important public health or water quality 
projects that they have identified within the State. So that is 
the Clean Water Act.
    On the Safe Drinking Water Act, a very similar process, 
although the act encourages or requires States to have their 
most important public health needs at the top of the list and 
fund in accordance with those public health priorities as 
identified in the State.
    Within both funds, there have been some additional 
requirements, beginning with the Recovery Act. For example, 
green infrastructure, green project reserve, began with the 
Recovery Act and was included in both the fiscal year 2010 
appropriation and through the continuing resolution in the 
fiscal year 2011 appropriation, encouraging--not requiring but 
encouraging States to the extent projects were available to use 
20 percent of their capitalization grant for green 
infrastructure, water efficiency, or energy efficiency.
    So States have sort of worked within the project list to 
try to meet that congressional suggestion in terms of finding 
the 20 percent.
    Senator Inhofe. Congressional suggestion, that is a new 
term.
    [Laughter.]
    Mr. Hanlon. We take those seriously, sir.
    [Laughter.]
    Senator Inhofe. Let me just say this. First of all, I am an 
admirer of yours, Mr. Hanlon. You have had this job since, 
what, 2002?
    Mr. Hanlon. Yes, sir.
    Senator Inhofe. So you have gone through different 
Administrations. I don't think it is any real surprise that the 
SRF program, other clean water programs and air programs and 
others are normally--there is a propensity by any 
Administration to use these programs to advance another agenda. 
In this case, it could be the smart growth policies and this 
type of thing. I will be asking the same question of the next 
panel.
    The SRF program is designed to give communities access to 
low interest loans for infrastructure in order to meet the 
water quality and public health goals. That is what they are 
supposed to be doing. I complained last year that they are 
getting into extraneous issues. And I would just say--I would 
ask if you could explain how the EPA's sustainability policy is 
not interfering with the important need to provide States with 
the flexibility that you are going to hear about in the next 
panel.
    Mr. Hanlon. The October 2010 sustainability policy 
basically laid out a number of activities; first of all, it 
encouraged States to work with their local municipalities to 
identify projects and to plan projects that would provide over 
the long term, the sustainable provision of safe drinking water 
and the wastewater treatment that would serve the local 
municipality well over the long term. So that you don't only 
look within the fence line of the municipality, but sort of 
look beyond that in terms of what was going on within their 
watershed, et cetera.
    We have worked with the States and with the water utilities 
to develop a sustainability handbook. Again, it is a guidance 
document, not required for States and local governments to 
consider. We hope to have that out early next calendar year.
    Senator Inhofe. OK, that is fine, Mr. Hanlon. Did you say 
that you would be able--your schedule would allow you to stay 
to listen to the second panel?
    Mr. Hanlon. I have a commitment, the sustainable planning 
effort that we talked about, the integrated planning effort we 
talked about earlier, there is a meeting in town with a bunch 
of local governments to sort of talk about implementing it. My 
staff is here to hear the second panel.
    Senator Inhofe. Thank you, sir.
    Thank you, Mr. Chairman.
    Senator Cardin. Thank you.
    Senator Udall.
    Senator Udall. Thank you, Senator Cardin.
    We have been having a little bit of a discussion here back 
and forth about funding for these programs. One point I just 
want to make, and I am not asking for a comment on this, Mr. 
Hanlon, but isn't it clear that, or maybe I am--isn't it clear 
that folks that are hurt the most when you reduce the funding 
in the Clean Water and Drinking Water State Revolving Funds are 
rural communities and low income communities? Those are the 
ones that aren't able to afford it. That is basically the case, 
isn't it?
    Mr. Hanlon. The data shows that small, mid and small size 
communities have taken advantage of the State Revolving Funds, 
because the States are able, through their management of the 
fund, to first of all determine their creditworthiness; 
basically, they are not going to make loans that can't be 
repaid. But also, the State Revolving Fund programs tend to 
avoid many of the transaction costs, the bond councils and 
rating agencies and things that large municipalities do as a 
matter of course.
    So over time, the Clean Water State Revolving Fund has 
provided 23 percent of the dollars over the last 20 or more 
years to towns under 10,000 population, and the Drinking Water 
Fund 37 percent of the money goes to towns under 10,000. That 
is important as you look across the landscape. I was at a 
meeting a month ago with the public health officials from the 
State of Virginia, who document that--they believe that they 
have 30,000 residents in the State of Virginia that do not have 
access to basic sanitation. They either have outhouses or 
straight pipes, in Virginia, in 2011.
    Senator Udall. Shifting gears now, and I want to ask you 
about the non-structural approaches to stormwater, also known 
as green infrastructure. I have introduced legislation with 
Senators Whitehouse and Cardin. And it would encourage EPA to 
incorporate green infrastructure into its permitting actions 
and overall promote green infrastructure approaches. Can you 
give a quick explanation of what green infrastructure means in 
terms of water infrastructure and what its advantages are?
    Mr. Hanlon. Green infrastructure are techniques on the 
ground that basically, for wet weather, during wet weather 
events, either infiltrate, evapotranspirate, or store and re-
use rainwater. The benefit of those designs is first of all, it 
eliminates some of the peak flows from getting into either 
storm sewers, or into an area like this, combined sewers, that 
then have to be sort of collected and treated before they are 
discharged.
    Other benefits of green infrastructure are neighborhood 
impacts. You can put a lot of money in a tunnel or a pipe below 
the ground and not see any sort of surface impacts or benefits. 
Green infrastructure has the benefit of greening, if you will, 
neighborhoods. It also has the benefit, if done at a larger 
scale, to reduce the heat island effects of urban areas, has 
the potential to improve air quality in urban areas, and 
really, over the long term, has the potential of improving what 
urban America looks like, if you look out 20, 30 years.
    Senator Udall. What is EPA doing to incorporate green 
infrastructure into its permitting activities, and how are 
these actions reducing costs for local utilities?
    Mr. Hanlon. From the permit program standpoint, the Clean 
Water Act is a performance based statute. So its permits are 
written basically, it is sort of the performance of an 
individual project or an individual municipality that is the 
end point for the permit. How the municipality gets there, EPA 
typically doesn't get involved in the detailed designs, as we 
spoke earlier. The local consulting engineer is working with 
the public works department.
    Having said that, EPA has had a major investment, over the 
last 3 years, in green infrastructure. We have a green 
infrastructure partnership, we are doing research in our Office 
of Research and Development on green infrastructure techniques, 
to better understand the efficiencies and efficacies of green 
infrastructure techniques, not only in a parcel by parcel 
basis, but at scale, at a sewer shed basis, 10 square blocks, 
50 square blocks, how does green infrastructure work and what 
efficiencies can we expect.
    Senator Udall. Thank you very much.
    Thanks, Chairman Cardin.
    Senator Cardin. Senator Gillibrand.
    Senator Gillibrand. Thank you, Mr. Chairman.
    Thank you very much for coming to testify in front of this 
Committee. New York has substantial water and sewer 
infrastructure needs. I think the last estimate I saw was about 
$70 billion of need over the next 20 years. So we have very 
significant, grave concerns about how we can actually get that 
important work done.
    We also have many towns, particularly rural towns, that are 
under consent order because of their dilapidated or broken 
sewer systems. So one of the concerns that I have is that there 
is not enough attention being given to repairing and upgrading 
existing water infrastructure. The focus has been more often on 
new growth and development.
    To what extent is the EPA working with States to ensure 
that funding is being utilized to repair infrastructure?
    Mr. Hanlon. As I said earlier, under the Clean Water State 
Revolving Fund, basically the States decide sort of what 
projects go to the top of their list and which projects are 
funded. Having said that, certainly there is an encouragement 
from EPA, working with the States, to identify those existing 
needs from a documented need basis or from a compliance basis, 
and to use scarce SRF resources there first.
    Senator Gillibrand. Well, yes, have heard you say a couple 
of times that the success of the State Revolving Funds has been 
quite meaningful. But in our State, there is still a massive 
gap between the amount of funding that is needed and the amount 
that is available to meet the infrastructure needs that we 
have. What are the steps that need to be taken to ensure that 
we don't end up with the massive infrastructure failures that 
put health and safety at risk?
    Mr. Hanlon. Again, I would like to compliment New York 
State. They have been one of the leaders nationally in terms of 
their management of the State Revolving Fund. There is a 
technique called leveraging, where basically the State can go 
to the bond market and actually--through leveraging 
transactions, actually put multiples or two or three times the 
amount provided through the Federal grant into infrastructure. 
New York has done that annually since the late 1980s.
    Having said that, again, I believe that the efforts at the 
local level to identify what their critical infrastructure 
needs are, through techniques like asset management, to 
document their assets in place, what the condition of those 
assets are. And then from a criticality standpoint do 
assessments in terms of what the immediate needs are on a local 
basis that should be queued up for consideration earlier, what 
are the most critical projects locally. It is very difficult 
for the people in Albany or impossible for EPA from the 
distance we are to determine sort of what the relative 
priorities are of projects within a local drinking water or 
wastewater jurisdiction.
    Senator Gillibrand. Well, one of the problems is, there is 
just too much demand. You have a certain budget, so you have to 
structure projects based on the budget need. But that doesn't 
mean that that small town that is under consent order doesn't 
have still an urgent need that is not being met. It just might 
not have made that list.
    So what I am really worried about is, if we agree that this 
need of $70 billion investment over 20 years is legitimate, are 
there any other ideas that you have besides getting local 
communities to leverage money beyond the State Revolving Fund 
models that you think we should begin to employ in different 
parts of the country to make more resources available? Are all 
States, for example, using these leveraging models to make more 
Federal money available for more at-risk cities, States, and 
communities that are already doing things well?
    New York is just unique. We are an older State; our 
infrastructure was built between 50 and 100 years ago. It is 
now deteriorating significantly. We have 20 million people. So 
it is not the same as every other State. So the needs are very 
significant.
    So are there things we should be doing on a national level 
to make more Federal money available for the more urgent needs 
around the country?
    Mr. Hanlon. The issue of making more Federal money 
available I will leave to the Subcommittee. With respect to 
leveraging, there are somewhere between 25 and 30 States who 
have leveraged their State Revolving Funds over time. We at EPA 
have worked with our environmental finance advisory board. They 
have produced a report that sort of demonstrates the benefits 
of leveraging that we have made available to the States.
    And at the end of that conversation, though, the critical 
decisionmaking point for a State is they have to have projects 
that are absolutely ready to go, ready to go to bid, ready to 
go to construction before they can leverage their fund. 
Otherwise, they are borrowing money, basically, to do the 
leveraging transaction. If they can't turn that around in terms 
of loans to local projects, basically they are not going to go 
through a leveraging transaction.
    So like New York has done, you have to have a full pipeline 
that then can support a leveraging transaction.
    Senator Gillibrand. Thank you.
    [The prepared statement of Senator Gillibrand follows:]

                 Statement of Hon. Kirsten Gillibrand, 
                U.S. Senator from the State of New York

    Chairman Cardin, thank you for holding this important 
hearing today to highlight the challenges and the opportunities 
that we face in maintaining our nation's water infrastructure. 
This is one of the most important issues that this Committee is 
responsible for, and it is one that affects the lives of 
virtually every American--across every region of the country.
    In each of our States, communities are grappling with the 
challenge of maintaining safe and reliable water infrastructure 
during a time when Federal, State, and local budgets are 
stretched to their limits. In my State of New York, these 
significant challenges were made even more urgent in the 
aftermath of severe flooding caused by Hurricane Irene and 
Tropical Storm Lee. These storms devastated communities across 
eastern New York State and will have long-term impacts on the 
region's infrastructure.
    New York's water needs have been well documented in reports 
by the New York State Department of Environmental Conservation 
and the New York State Department of Health. The most recent 
estimates project that it will cost over $70 billion to repair, 
replace, and upgrade New York's wastewater and drinking water 
infrastructure over the next 20 years.
    New York has already made significant investments in 
protecting our water infrastructure, but State and local 
governments cannot meet this challenge alone. It is critical 
that Congress and the Administration make a strong commitment 
to ensuring that families across New York and the United States 
have access to safe and reliable water. We can do this by 
addressing the continued funding shortfall, investing in 
``green'' infrastructure to provide long-term cost savings, and 
ensuring that rural and disadvantaged communities have access 
to Federal funding.
    Mr. Chairman, thank you again for this hearing and for your 
leadership on this important issue. I look forward to 
continuing to work with you and with my colleagues on this 
Committee to strengthen and improve the Federal response to our 
nation's water infrastructure needs.

    Senator Cardin. Senator Merkley.
    Senator Merkley. Thank you, Mr. Chairman. I am going to 
pass on my questions in order to bring up the next panel.
    Senator Cardin. Thank you.
    Senator Whitehouse.
    Senator Whitehouse. Thank you, Chairman.
    I would like to ask unanimous consent that a letter from 
the National Utility Contractors Association of Rhode Island in 
support of additional funding be part of the record.
    Senator Cardin. Without objection, so ordered.
    [The referenced information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Whitehouse. I would like to also ask that a letter 
from the Warwick Sewer Authority in Rhode Island be put into 
the record. And I would just like to read from it one short 
passage: ``In addition to directly creating jobs, water 
infrastructure projects stimulate other economic activity. 
These projects depend on American-made pipes, fittings, cement, 
aggregates and other products. The United States Conference of 
Mayors estimates every job created through rebuilding our water 
systems creates over 3.6 jobs elsewhere, and every dollar 
invested in water infrastructure adds $6.35 to the national 
economy.''
    So I would like to ask that that also be put in the record.
    Senator Cardin. Without objection, it will be included in 
the record.
    [The referenced information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Whitehouse. Finally, I would like to ask unanimous 
consent that a letter from the Kingston Water District be 
included in the record.
    Senator Cardin. Without objection.
    [The referenced information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Whitehouse. The Kingston Water District has sent a 
few samples in of piping that they have removed. This is piping 
taken from the Kingston City Center, and as you can see, it is 
filled in and corroded a lot. This was installed in 1920. So 
the city has been around since the 17th century, the late 17th 
century or early 18th century. But these aren't pipes that are 
that old, these are newer. And you can see how much of it has 
been lost.
    So that is the status quo out there. And we have a chance 
to fix that. It is not just the big pipes as well, and it is 
not just the old iron ones. This is a piece of plastic pipe. 
And despite the fact that it is plastic, if you try to look 
through it, the hole, I can barely get my finger through and 
the pipe is 2 inches or so across. And because the plastic 
piping is attached to the regular cast iron piping, it 
tuberculates just as much as the others do.
    So this is the status quo out there. I think this is a call 
to action from the U.S. Congress to make sure that Americans 
have the water quality infrastructure that they deserve, and we 
are going to have to do this sooner or later. Why not do it 
now, while we so urgently need the jobs?
    So I want to congratulate Chairman Cardin for holding this 
hearing. I thank Ranking Member Sessions for his support of 
this hearing, and urge that we work our way forward, so that 
America's drinking water no longer has to go through piping 
that looks like this, while we have the ability to upgrade it.
    Thank you very much.
    [The referenced information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Cardin. Thank you, Senator Whitehouse. I appreciate 
that. It will be difficult to figure out how we are going to 
get that into the record, but we will do the best we can.
    [Laughter.]
    Senator Cardin. Let me thank Mr. Hanlon very much for your 
testimony.
    We will now turn to the second panel. And for that, let me 
first turn to Senator Sessions, who I believe wants to 
introduce one of the panelists.
    Senator Sessions. I would be honored to introduce Van 
Richey, who served as President and CEO of American Cast Iron 
Pipe Company, or CIPCO, since 1989. Founded in Birmingham in 
1905, CIPCO is a global manufacturer of industrial and capital 
goods. CIPCO's founder, John Eagen, actually gave the company 
to the employees in 1922. Since then, they have been frequently 
recognized as one of the ``best companies to work for in 
America.''
    Mr. Richey was born in Cullman, Alabama, not too far north 
of Birmingham; a pretty good town, Cullman is. Served in the 
United States Army, received his BS and MBA degrees from the 
University of Alabama, and completed Harvard's advanced 
management program. An outstanding citizen, he served as 
Chairman of the Business Council of Alabama, several boards, 
including the President's Cabinet at the University of 
Alabama--roll, Tide. Our Chairman, Senator Boxer, put on an 
Oklahoma shirt with No. 1 on it. That faded fast, didn't it, 
Senator Inhofe?
    Senator Inhofe. Indeed it did.
    [Laughter.]
    Senator Sessions. So maybe she would be willing to put on 
an Alabama one if your team wins.
    He is active in the Boy Scouts, Alabama Health Services, 
and University of Alabama Birmingham Health System and the 
Salvation Army.
    Thank you, Mr. Chairman. Mr. Richey will be an excellent 
witness, and I appreciate his ability to come.
    Senator Cardin. We will next turn to the Oklahoma Senator 
for a response.
    Senator Inhofe, do you want to make an introduction?
    Senator Inhofe. Yes, I do. I am real pleased to have Joe 
Freeman here. He has served as the Chief of the Oklahoma Water 
Board since 1993. So he has been around for a long time. He 
joined that board actually in 1990, to supervise financial 
analysts in technical and credit reviews and served on the 
water and wastewater facility loans.
    Prior to joining the board, he was a banker, 13 years in 
Oklahoma. He has deep roots there. He is a past president and 
member of the board of directors of the Council of 
Infrastructure Financing Authorities. He also serves on the 
Oklahoma Funding Agency's coordinating team.
    In 2010 he was named to the Oklahoma Rural Water Hall of 
Fame. And there is somebody else who is in the Oklahoma Rural 
Water Hall of Fame, who had the same job as Mr. Freeman many 
years ago, and that was my father-in-law, Glade Kirkpatrick. He 
was kind of Mr. Water at the time. And all the way back to when 
we had the McClellan-Kerr navigation way going in, he was very 
much involved in that. So we have that bias also.
    I don't think there is anyone who could do a better job on 
this panel, and I hope that you will be very straightforward on 
some of the problems and lack of flexibility. That is what this 
hearing is for, and we appreciate your being here, Mr. Freeman.
    Senator Cardin. And Senator Merkley, for an introduction.
    Senator Merkley. Thank you very much, Mr. Chairman. It is 
my pleasure today to introduce one of our distinguished 
witnesses, Mr. Gregory DiLoreto, of Portland, Oregon. Mr. 
DiLoreto holds degrees in civil engineering and public 
administration from Oregon State and Portland State University. 
He has applied his expertise in these two areas to serving the 
public, and has become one of the most highly respected water 
administrators in the country.
    Under his leadership, the Tualatin Valley Water District 
has been a leader in the field of sustainability, receiving two 
awards from the American Public Works Association, and recently 
doubling their renewable energy generation, all while serving 
more than 200,000 customers in the Portland metro area.
    Mr. DiLoreto has been a leader in the field of civil 
engineering as well, and is here today to represent the 
American Society of Civil Engineers as their new president-
elect. Congratulations.
    Water infrastructure is extremely important to Oregon, as 
it is to States throughout our nation. The next generation of 
projects will be critical for the maintenance and improvement 
of that infrastructure. Oregon is looking to the Federal 
Government to partner in these efforts.
    With his dual expertise in water administration and civil 
engineering, Mr. DiLoreto is exceptionally qualified to testify 
to the state of our nation's water infrastructure and potential 
consequences of inaction or under-action. Mr. Chairman, I am 
very pleased to introduce to the Subcommittee Mr. Gregory 
DiLoreto.
    Senator Cardin. Thank you very much.
    Let me now welcome the Marylander that is on the panel, Ted 
Scott, a Maryland small business owner with expertise in green 
infrastructure for stormwater management and design. Mr. Scott 
is a practicing professional civil engineer, certified 
professional in erosion and sediment control, LEED 
accreditation professional, and master stormwater practitioner 
with over 25 years of experience. Mr. Scott's firm provides 
design and maintenance for stormwater systems as well as 
environmental restoration consultation.
    Mr. Scott also serves on the board of directors of Blue 
Water Baltimore, a group that uses community-based restoration 
to achieve clean, healthy water in Baltimore Harbor and the 
Chesapeake Bay. Mr. Scott, we welcome you also to our 
Committee.
    We will start with Mr. DiLoreto and then work our way 
across.

  STATEMENT OF GREGORY E. DILORETO, PRESIDENT-ELECT, AMERICAN 
                   SOCIETY OF CIVIL ENGINEERS

    Mr. DiLoreto. Mr. Chairman, Senator Sessions and members of 
the Subcommittee, again, my name is Gregory E. DiLoreto, and I 
am the President-Elect of the American Society of Civil 
Engineers.
    I am also the Chief Executive Officer for the publicly 
owned Tualatin Valley Water District in the Portland, Oregon, 
metropolitan area. The district is the second largest water 
utility in Oregon, serving over 200,000 customers in the 
Portland area. I am also a licensed professional engineer in 
Oregon.
    As a public official, I am honored to be here today to 
testify on behalf of ASCE on the state of America's drinking 
water and wastewater infrastructure as the Subcommittee 
examines our nation's water infrastructure challenges and 
opportunities.
    Every 4 years ASCE publishes the Report Card for America's 
Infrastructure which grades the current state of 15 national 
infrastructure categories on a scale of A through F. In 2009 
our most recent report card gave the nation's wastewater and 
drinking water infrastructure systems a grade of D^.
    As a snapshot at a moment in time, the Report Card 
identifies 20-year funding needs. It does not answer critical 
questions about the impact of delayed or reduced investments in 
key infrastructure systems as the nation grapples with its 
aging public works. That is why ASCE has undertaken a series of 
four economic studies to identify the long-term consequences to 
the nation's economy due to our deteriorating infrastructure.
    In July of this year we issued the first report on the 
under-investment in the nation's surface transportation system. 
Our second report, which we will issue Thursday, answers the 
questions of how the condition of the nation's deteriorating 
wastewater and drinking water infrastructure impinges on our 
economic performance. In other words, how does that D^ for 
water treatment and transmission affect America's economic 
future?
    The answer is sobering. Our report, the Economic Impact of 
Current Investment Trends in Water and Wastewater Treatment 
Infrastructure, concludes that the nation's wastewater and 
drinking water infrastructure is under great strain. By now, I 
am sure every member of this Subcommittee is aware of the 
funding needs for drinking water and wastewater systems. 
According to our report, if current investment trends persist, 
by 2020, just 8 years from now, the anticipated capital funding 
gap will be $84 billion. This funding gap will lead to $147 
billion in increased costs for businesses and a further cost of 
$59 billion for households.
    In the worst case, by 2020 the U.S. could lose almost 
700,000 jobs. By 2020 the average annual effect on the U.S. 
economy is expected to be $416 billion in lost GDP. Putting the 
problem in terms that all of us can understand, the average 
family household budget will increase by about $900 per year 
due to increased water rates and lost income.
    Our key solutions are ambitious and will not be achieved 
overnight. But Americans are capable of real and positive 
change. In the short term, we believe that Congress must act 
quickly to address the under-investments in drinking water and 
wastewater infrastructure. Congress needs to first reinvigorate 
the State Revolving Loan Fund programs under the Clean Water 
Act and the Safe Drinking Water Act by reauthorizing Federal 
funding of $13.8 billion over 5 years. Second, explore the 
potential for a water infrastructure finance innovations 
authority that would access funds from the U.S. Treasury at 
their rates and use those to support loans and credit 
mechanisms for water projects. Those loans would be repaid with 
interest back to the Treasury.
    Three, eliminate the State cap on private activity bonds 
for water infrastructure projects that could bring $6 billion 
to $7 billion annually in new private financing to bear on the 
problem. Fourth, allow public-private partnerships as one of 
the many methods of financing infrastructure improvements. ASCE 
supports the use of PPPs, but only when the public interest is 
protected. And we believe any public revenue derived from PPPs 
should be and must be dedicated exclusively to comparable 
infrastructure facilities in the State or locality where the 
project is based.
    Fifth, establish a national infrastructure bank. Such a 
bank would leverage public funds with private dollars to invest 
in the infrastructure. And sixth, investigate legislation to 
establish a dedicated source of revenue for wastewater and 
drinking water projects that would provide a stable, long-term 
basis for financing these critical systems.
    Now, finally, the Federal Government cannot be the bank of 
last resort. Individual water utilities must consider the 
possibility of increasing the price of water to local 
ratepayers. Water must be appropriately priced to ensure 
improvements can rebuild the infrastructure.
    All these solutions involve costs, separately or in 
combination. These solutions will require action at the 
national, regional, local, private levels and will not occur 
automatically.
    I want to thank you, Mr. Chairman, for the opportunity to 
testify, and I would be pleased to answer your questions.
    [The prepared statement of Mr. DiLoreto follows:]
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    Senator Cardin. Thank you for your testimony.
    Mr. Freeman.

STATEMENT OF JOE FREEMAN, CHIEF, FINANCIAL ASSISTANCE DIVISION, 
                 OKLAHOMA WATER RESOURCES BOARD

    Mr. Freeman. Good morning, Mr. Chairman and members of the 
Committee. As Senator Inhofe said, my name is Joe Freeman, I am 
Chief of the Financial Assistance Division of the Oklahoma 
Water Resources Board.
    We administer the Clean Water State Revolving Fund in 
Oklahoma, along with the financial portion of the Drinking 
Water State Revolving Fund, and three other State water and 
wastewater funding programs. I am pleased to be with you today 
to share Oklahoma's views with the Committee on the challenges 
and opportunities that face us.
    Today I am not only representing the State of Oklahoma, but 
also the Council of Infrastructure Financing Authorities, the 
Association of Clean Water Administrators, and the Western 
States Water Council. We believe sustained Federal funding is 
essential to realizing our nation's water quality goals, and we 
hold strongly to the view that the State Revolving Fund loan 
program should remain a foundation for future projects in 
meeting water infrastructure needs.
    It is vital that the SRF partnership between Federal and 
State governments continue as the basic mechanism for 
assistance to communities in addressing water quality issues. 
In the past two decades few federally authorized programs have 
proven as effective in realizing their intended goals as the 
SRF programs. It is important to note that the assistance made 
available to communities is significantly greater than the 
initial Federal investment as a result of State match, loan 
repayments, issuance of bonds, and interest earnings. The State 
Revolving Funds nationwide have committed over $84 billion to 
projects for wastewater infrastructure and over $20 billion for 
drinking water infrastructure. The majority of funding goes to 
the highest priority projects that clean up polluted streams, 
rivers, and estuaries and ensure safe drinking water 
nationwide.
    Furthermore, public investment in water infrastructure 
yields significant economic benefits. The U.S. Department of 
Commerce estimates that $1 invested in water infrastructure 
generates $2.62 in economic output in other industries, and 
that each job created in the local water and sewer industry 
creates 3.68 jobs in the national economy. States, including 
Oklahoma, as the recipients of SRF capitalization grants, 
recognize that we incur a number of responsibilities. We must 
manage those funds in a fiscally responsible manner and be 
accountable. We must give priority in our funding decisions to 
the resulting water quality benefits and the urgency of 
environmental problems needing resolution. We need to pay 
particular attention to the challenges faced by small, rural, 
and disadvantaged communities.
    We see our mission as using all the possible tools and 
strategies to achieve the largest impact in terms of achieving 
the goals of the Clean Water Act and the Safe Drinking Water 
Act. As we look to the future, the ability of States to meet 
water and wastewater infrastructure needs is based on continued 
funding of the SRF programs at a sufficient level to ensure the 
full realization of the revolving nature of the funds and to 
maximize the utilization of leveraging by States such as 
Oklahoma that choose the leveraging option.
    We recognize the current budget realities and the fact that 
the annual capitalization grants represent a significant 
percentage of the overall EPA budget. We understand the need 
for budget restraint, but would hope that not too great a share 
of that restraint is at the expenses of the SRF programs.
    Through the Oklahoma Comprehensive Water Plan, the Oklahoma 
Water Resources Board and its many partners assessed the water 
and wastewater infrastructure needs over the next 50 years in 
Oklahoma. Detailed information was gathered from large and 
small urban and rural systems to complement the needs survey 
conducted through the Environmental Protection Agency. In 
Oklahoma, we have documented alone over the next 50 years $82 
billion in needs for water and wastewater infrastructure. In 
order to meet these needs, it is going to take continued 
partnership and innovative discussions between local and State 
governments and the Federal Government.
    As a proactive response to the findings of our intensive 
water planning efforts, we have compiled a committee of 
infrastructure financing professionals with the goal of 
investigating solutions to meeting Oklahoma's infrastructure 
needs. The group is evaluating a number of options, including 
restructuring our State infrastructure loan programs and 
creation of a credit reserve enhancement program.
    As this Committee weighs the future of SRF legislation, we 
would hope that you will keep the record of accomplishments by 
States and the perspective of State program managers uppermost 
in your considerations. After years of successful program 
operation, it is clearly the experience of Oklahoma that the 
more latitude and operating flexibility that States are 
allowed, the greater our ability is to accomplish our 
environmental and financial goals. Certainly, States need to 
continue to be fully accountable for their use of Federal 
dollars, but excessive oversight or administrative control by 
EPA stifles innovation and the ability of States to best 
respond to local needs.
    The success of the program derives from the flexibility of 
the SRF model, which allows each State to decide the best 
approach to meet its individual water quality needs. The SRF 
programs have historically allowed for individual water quality 
needs to be addressed using traditional construction methods or 
in many cases, more green methods. We believe that it is 
important to recognize that water quality needs vary from State 
to State and that States are in the best position to recognize 
the needed priorities for providing assistance.
    Oklahoma's needs are most likely not much different than 
the needs in other States, but we are confident that we if take 
intense planning and collaborative teamwork, Federal, State, 
and local partners coming together to find creative solutions 
to address infrastructures, we can succeed.
    In closing, I just want to remind you of the success that 
State-run SRF programs have had in addressing our nation's 
water quality and drinking water issues, and I hope that 
together we can work to protect water for future generations. 
Thank you.
    [The prepared statement of Mr. Freeman follows:]
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    Senator Cardin. Thank you, Mr. Freeman, for your comments.
    Mr. Scott.

 STATEMENT OF THEODORE E. SCOTT, EXECUTIVE VICE PRESIDENT AND 
                FOUNDER, STORMWATER MAINTENANCE

    Mr. Scott. Good morning, Mr. Chairman and members of the 
Committee. Thank you for the opportunity to be here today.
    I am going to lend a little bit of a different perspective, 
one of an on the ground small businessman that deals with these 
issues.
    I am a professional engineer, and I am co-owner of a civil 
engineering firm and a niche construction and maintenance 
company that specializes in stormwater related infrastructure. 
We work from Richmond, Virginia, to Connecticut. A critical 
part of our work is minimizing the impacts on the environment.
    Being involved in this field for 25 years, I have been part 
of a paradigm shift toward green infrastructure. I am also 
involved in work that addresses our aging stormwater 
infrastructure.
    Ever since people began converting land for their use, the 
changes to the physical characteristics of the land and 
resulting stormwater runoff have impacted the environment. 
Traditionally, engineers have designed storm drain systems that 
reduce water filtering into the ground, increased flows and 
downstream flooding, and eventually send the problem 
downstream. This results in impacts to what were natural 
filters, streams, bays, estuaries, and ultimately the oceans. 
Minuscule pieces of plastic, once thought too small to matter, 
are becoming great floating masses in our oceans. This all 
begins with how we treat our stormwater on the street.
    About 30 years ago, some parts of the country, including my 
home State of Maryland, began to regulate the treatment of 
stormwater. The first methods used were large basins and ponds 
that collected drainage and treated it in centralized ponds and 
basins. Several decades of research have indicated that these 
practices do not allow enough water to filter into the ground 
and convey a significant amount of pollutants downstream. The 
results were continued impacts.
    Since the 1990s alternative ways to treat stormwater have 
been researched and implemented. Referred to as green 
infrastructure, these practices are a different way of planning 
communities and urban areas. Alternative materials such as 
green roofs and permeable pavement are used for surfaces that 
absorb pollutants and allow stormwater to filter directly into 
the ground. Landscape practices use natural processes to slow 
flows, absorb water, and remove pollutants. With careful 
planning and engineering and landscape design, stormwater 
practices have become an integral part of the community and are 
considered amenities.
    As these practices represent a change in the way land is 
developed, adoption has taken some time. In Maryland, new 
regulations were suggested for the use of these practices 
starting in the year 2000. Because voluntary change was not 
embraced, the regulations were revised to mandate these 
practices on every project beginning in 2009. These practices 
are now becoming the status quo for stormwater design in 
Maryland.
    Green infrastructure differs in many other ways from 
traditional large engineered ponds. Being smaller, they require 
more hand labor and less heavy equipment. Maintenance changes 
requiring teams of laborers instead of large equipment with few 
operators. This generates permanent jobs, not one-time 
construction employment assignments.
    Because skill sets and equipment requirements are less with 
green infrastructure, a wide range of alternatives to 
traditional construction are available. Grass roots NGOs, such 
as Blue Water Baltimore, have initiated numerous community 
projects involving green infrastructure. Through efforts like 
these, clean water has become a meaningful vehicle to bring 
urban communities together.
    Many stormwater treatment facilities, such as ponds and 
basins, are nearing 30 years old. The materials in these 
systems have finite life systems. Failure of pipe systems leads 
to hazardous sinkholes and pollution from sediments. The 
failure of stormwater ponds can result in catastrophic floods 
that can damage property, cause injuries or even death. These 
situations can be easily avoided by requiring inspection and 
maintenance programs for aging stormwater infrastructure. Costs 
for maintaining stormwater facilities are usually borne by 
property owners, just like other expenses of maintaining a 
property, such as repairs to plumbing or heating systems.
    Many municipalities and large corporations understand the 
value of maintaining their infrastructure and have programs in 
place. These municipalities and landowners have found that 
ongoing inspection and routine maintenance involve budgeted 
costs that can be incidental to doing business. Others, 
including many Federal facilities, await specific mandates to 
begin maintaining their infrastructure. Meanwhile, many Federal 
and private stormwater facilities have become point sources for 
pollution and some on the verge of catastrophic failure.
    With the appropriate regulatory directives, the resources 
and jobs that were dedicated to constructing this 
infrastructure can be converted to maintaining and repairing 
it. Some have suggested environmental regulations and 
infrastructure maintenance mandates are bad for business. My 
personal experience is the opposite. Many business owners, like 
myself, have identified how regulations change the business 
environment and met the changing market's needs, resulting in 
success. Over the course of the worst economic environment 
since World War II for design and construction firms, we have 
quadrupled the size of our firm. Regulations involving green 
and existing infrastructure are the primary drivers for this 
growth.
    Thank you, Mr. Chairman and Committee members, for the 
opportunity to appear before you today. I appreciate it.
    [The prepared statement of Mr. Scott follows:]
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    Senator Cardin. Thank you, Mr. Scott.
    Mr. Richey.

   STATEMENT OF VAN L. RICHEY, PRESIDENT AND CHIEF EXECUTIVE 
            OFFICER, AMERICAN CAST IRON PIPE COMPANY

    Mr. Richey. Thank you, Chairman Cardin and Ranking Member 
Sessions, for the opportunity to testify here today.
    I am Van Richey, President and CEO of American Cast Iron 
Pipe Company. American is a leading domestic manufacturer of 
waterworks products, with manufacturing plants in Alabama, 
Oklahoma, Arizona, Texas, Minnesota, and South Carolina.
    Our 2,600 employees proudly make the pipe, valves, 
hydrants, and other products that are vital to our nation's 
water distribution and wastewater collection systems. American 
was founded in 1905, and in 1922 the company's founder, John J. 
Eagan, left all the stock in the company in a trust for the 
benefit of the employees, who are still the beneficial owners 
today. Our structure philosophy led Fortune Magazine to include 
us as one of the 100 best companies to work for for 8 straight 
years.
    Today, however, I am speaking on behalf of both our 
company's employees and the other domestic manufacturers of 
ductile iron pipe. They are Griffin, McWane and Mueller/U.S. 
Pipe. Our industry employs approximately 16,000 people in 20 
States. Iron pipe has been the backbone of our country's water 
systems since the 1800s, and is still the preferred pipe used 
for drinking water systems.
    It is almost completely manufactured from recycled 
materials, removing hundreds of thousands of old cars from our 
nation's highways and junk yards every year. I want to thank 
the members of this Committee for all the support you have 
shown in maintaining and improving our water infrastructure. I 
know that you are keenly aware of the crisis that we all face.
    Past generations had the wisdom to invest in clean, safe 
drinking water and in treating wastewater. But today, the 
system is breaking down. Communities are facing major 
challenges to replace their water infrastructure, much of which 
was constructed 100 to 150 years ago. On average, 25 percent of 
treated water is lost. An investment funding gap of more than 
$500 billion exists.
    The recession has hit our industry especially hard. Almost 
50 percent of our business has evaporated with the lack of new 
housing starts. Our business with water utilities has also 
suffered because of their difficulty in raising capital for 
projects. As a result, our industry's employment is down almost 
30 percent and could decline further, a loss of approximately 
4,700 high paying manufacturing jobs along with tens of 
thousands of construction jobs.
    Once a foundry closes, it is usually gone forever, as are 
the jobs that it provides. Investment in water infrastructure 
creates new jobs and boosts our economy. Studies show that $1 
billion of investment creates or supports up to 27,000 jobs and 
adds $9 billion to our GDP. While funds are scarce, two proven 
policies will improve our water systems, foster economic growth 
in the manufacturing sector, and preserve and create jobs 
quickly. They are the State Revolving Funds and the private 
activity bonds.
    Let me thank the Committee for its support of the SRF 
programs. They have been crucial to help ensure the quality of 
America's drinking water and wastewater facilities. And there 
is a pressing need to reauthorize them. Although no program 
should be immune to budgetary review, we ask the Committee to 
continue to recognize the effectiveness of the SRF programs.
    We should also look to public-private partnerships for 
additional sources of investment. Lifting the State volume caps 
on PABs for water projects would inject billions of dollars 
into the infrastructure. PABs encourage State and local 
governments to collaborate with private capital to meet a 
public need without increasing the debt of governments. The 
debt is borne by the private sector, therefore benefiting users 
and customers.
    The revenue impact would be nominal relative to the 
significant benefits. Each year $35 million in lost tax revenue 
would leverage as much as $5 billion annually in private 
capital, creating more than 135,000 jobs and adding almost $45 
billion to the nation's GDP. This is a good investment under 
any circumstance and the perfect example of a public-private 
partnership.
    Senators Robert Menendez and Mike Crapo have introduced the 
Sustainable Water Infrastructure Investment Act. I would like 
to thank the Committee co-sponsors of this bill, Senators 
Cardin, Gillibrand, Inhofe, and Whitehouse. I also thank 
Senator Baucus for his support.
    Along with the companion bill in the House, both bills have 
bipartisan support, creating an opportunity for Congress to 
tackle a pressing public problem on a cooperative and cost 
effective basis.
    In summary, today we are facing crises of lost water, lost 
jobs, and the lost opportunity to address our country's needs. 
The reauthorization of the SRF programs is important for 
Congress to address as soon as possible to help provide the 
core Federal funding for State and local infrastructure. I 
believe domestic manufacturers and their employees can fairly 
compete for these projects.
    Lifting the volume cap on PABs would generate billions in 
annual investment at a minimal cost. By meeting the public need 
through these two measures, Congress could protect hundreds of 
thousands of domestic jobs. On behalf of our industry's 16,000 
employees, we respectfully ask Congress to enact both of these 
measures without delay, and thank you all for your service and 
opportunity.
    [The prepared statement of Mr. Richey follows:]
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    Senator Cardin. Let me thank all four of you for your 
testimony. I found it extremely helpful. We all understand that 
we need the resources to improve our water infrastructure.
    It would be, I think, extremely valuable on the 
reauthorization of the State Revolving Funds. I think that 
would be very helpful. This Committee has done that; we have 
gotten it out of the Committee. It is not an easy issue, 
because of regional differences and the politics of 
reauthorization of bills in this Congress. But to me, it not 
only gives you the legal authority of the reauthorization, but 
it gives you the predictability to know that the program will 
be there at a predictable level, so locals can do their 
planning. I agree with that. Mr. Richey and Mr. Freeman, I 
think both of you mentioned the private activity bond limits, 
the Menendez-Crapo legislation, which as you noted, I am a co-
sponsor. I think that could help. So we do need to get 
predictable funding.
    My first question, though, deals with some of you have 
pointed out that there are ways that the Federal Government 
could be more helpful in the way that the money gets out to the 
local governments. Can you give us any specific recommendations 
as to some of the concerns that you have on the requirements 
that the Federal Government has imposed that is restricting 
your ability to leverage or get money out quicker for water 
infrastructure? Any specific recommendations?
    Mr. Freeman. I would be happy to try to answer that 
question, Mr. Chairman. And I won't say it is Congress as much 
as possibly the EPA, it is duplicative administrative reporting 
requirements. Like I said in my testimony, I believe we should 
be totally held accountable for the use of the Federal money. 
No way am I saying we shouldn't be. But I believe there is 
duplication of reporting requirements that would help a great 
deal.
    I am also a little concerned on the additional 
subsidization level. In Oklahoma, the 30 percent suggested, it 
would reduce Oklahoma's ability to leverage by [unclear] 
percent. We are right now providing below market interest 
rates, 30 percent below market for a drinking water SRF loan 
and 40 percent below a AAA rate for the smallest of borrower in 
our State, and I think we are pretty well subsidizing. But I am 
worried about the ongoing revolving fund nature of the fund 
with required continued subsidization. I think that the 
reporting requirements is the main thing, and I would be happy 
to follow up on that.
    Senator Cardin. That would be helpful, if you could get us 
the specific concerns you have on the reporting requirements. 
That would be very helpful to this Committee. I appreciate 
that.
    [The referenced information follows:]
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    Senator Cardin. All of you have mentioned the economic 
impact here. Mr. Scott, I am very impressed that during this 
economic period you have quadrupled your company. That is 
certainly impressive. Mr. Richey, your comments about the 
economic impact.
    Explain to me how we can leverage that more effectively, 
particularly the green infrastructure, which is jobs that can't 
be exported overseas. What more do you want us to do that could 
help unleash economic activity, particularly in the green 
energy or the green sector?
    Mr. Scott. My suggestion, as I mentioned, our experience in 
Maryland is probably a good example. In the year 2000, green 
infrastructure was suggested in our stormwater design manual. 
The industry, the land development industry, land improvement 
industry, did not embrace it, mostly because it was a change in 
the way they had to do business. It is a change in the way we 
design sites; it is a change in the way we construct sites.
    Because of the resistance to change, the green 
infrastructure didn't happen as a suggestion in the Maryland 
State design manual. In 2009 the legislature then followed up I 
think with some pressure from the environmental community to 
actually mandate it. Now that it is mandated, it is happening.
    I heard earlier the EPA has taken a similar tack as far as 
suggesting approaches, or suggesting the use of green 
infrastructure. Because it is a significant change in the way 
the design and construction of new sites occurs, it is not 
likely that that is going to go very far, if it is just 
suggested. There have to be more teeth in it to actually make 
it happen. We watched it over 9 years in Maryland, and that was 
our experience.
    On the maintenance and inspection side of things, it is a 
similar situation. EPA is working on their stormwater rule, and 
if that rule has some teeth to it, some meat to it as far as 
requiring inspection and maintenance of existing stormwater 
management ponds and systems that have been in place for the 
past, in some areas 20 to 30 years, if they are not maintained, 
if they are not inspected, there is no pollutant removal. They 
are not performing.
    So suggestions to do this, and most stormwater management 
facilities that are constructed, there are suggestions on the 
plans, and the owners are suggested to inspect and maintain 
them. But until they actually have to do it, in many cases it 
just doesn't happen.
    Senator Cardin. Thank you.
    Mr. Richey, I just want to make one observation on one of 
the comments you made. It has to go, we have to highlight that. 
Twenty-five percent of the treated water is lost.
    Mr. Richey. Yes, sir, that is because of decaying 
pipelines. We know that that water has to be treated, it has to 
be pumped. So you have energy costs, you have precious water 
that is being lost. But back to the green infrastructure, 
almost all of our product in ductile iron pipe is made from 
recycled materials. So the way the Federal Government could 
help us is put a domestic preference in that the taxpayers are 
paying for anyway, in the SRFs and PABs, and help us use that 
recycled material here domestically.
    Senator Cardin. Excellent suggestion. But if we can reduce 
the leakage by 25 percent, think about the energy savings, 
think about the efficiency factors, think about the chemicals 
that don't need to be used. There is a lot of savings, a lot of 
loss here with that 25 percent. I just didn't want that to go 
without putting a spotlight on that.
    Mr. Richey. That is right, Senator, and we would like to 
see all pipeline replaced with our pipe. We could solve that 
problem overnight.
    [Laughter.]
    Senator Cardin. As long as we use your pipe.
    Mr. Richey. Yes. OK, any of our pipes, as long as it is 
ductile iron pipe.
    [Laughter.]
    Senator Cardin. Thank you very much.
    I will turn to Senator Sessions.
    Senator Sessions. Mr. Chairman, I will let Senator Inhofe, 
our Ranking Member, go ahead.
    Thank you, Jim, for coming and for your leadership over 
many years on these issues.
    Senator Inhofe. Thank you very much.
    On this 25 percent, I was going to ask about that, is that 
nationwide? I was gone during part of your testimony?
    Mr. Richey. Yes, Senator, that is an average of 25 percent.
    Senator Inhofe. It is an average.
    Mr. Richey. Some places are going to be worse than that.
    Senator Inhofe. Is it going to be worse in some of the more 
mature parts of the country? Do you have that broken down? Do 
you know what Oklahoma is, for example?
    Mr. Richey. I don't have that information, but I believe it 
would be, in the older, more mature areas where you have older 
pipelines, yes, some of our pipe has been in the ground for 
over 100 years and working great. But there are other areas 
where it just hasn't been maintained properly. Also you have 
seismic shifts in the soil and the things that destroy 
pipelines after a lot of use.
    Senator Inhofe. Your suggestion is that cast iron lasts 
quite a while?
    Mr. Richey. Yes, sir. In fact, we have a club called the 
Century Club and several communities are members of that, where 
you have to have your pipeline over 100 years, and you join 
this club.
    Senator Inhofe. Well, I have a request of you. First of 
all, on that line, I can remember when they would all look at 
the newer States, like Oklahoma's statehood in 1907, as not 
having the problems. However, it has turned around now, a lot 
of the more mature parts of the country have now had new 
infrastructure. So we don't want to be left out, and I would be 
interested in maybe, Mr. Freeman, if you can find out the 
specific information about Oklahoma.
    But the request I have of you, Mr. Richey, is that if you 
think of anything that would make it beneficial to the American 
Cast Iron Pipe Company to make your job easier in Oklahoma, 
will you call me personally?
    Mr. Richey. Thank you, sir.
    Senator Inhofe. Mr. Freeman, you mentioned the flexibility, 
you were here when Mr. Hanlon testified, and I know he is 
trying, I know where his real concern is in terms of giving 
flexibility, but you said increased flexibility is still 
desired. What type of flexibility do you want to recommend 
right now that needs to be improved?
    Mr. Freeman. As I previously mentioned, I think that 
flexibility on the additional subsidization to allow States to 
implement that as is more necessary from State to State. As I 
mentioned in my testimony, in Oklahoma through our 
comprehensive water plan that I know that you have been aware 
of, Senator Inhofe, we have identified $82 billion in need. 
What you just said is true, the more mature States, but now it 
is in Oklahoma.
    Senator Inhofe. That is right. And you talked about the 
small, rural, and disadvantaged communities. We have a lot of 
those.
    Mr. Freeman. Yes, sir.
    Senator Inhofe. And we have a program, the Credit Reserve 
Enhancement Program, that we are considering. Do you want to 
elaborate any more on that?
    Mr. Freeman. Yes, I would be pleased to. Through our 
comprehensive water plan, in identifying this large water and 
wastewater need over the next 50 years, we know that the State 
Revolving Fund alone, even at its current level of funding, let 
alone its being possibly reduced, and our State funding 
programs, are not going to be adequate to meet that $82 billion 
of need.
    And as you are aware, the economic realities nationally, 
but in Oklahoma I think we are doing a little better than most 
other States, but still, trying to go ask the legislature for 
additional moneys, come up with an idea that would require a 
vote of the people, and Representative Richardson of the 
Oklahoma House of Representatives is currently working on this 
with us, would be where instead of the State putting up $50 
million or $100 million in additional appropriation, what we 
would ask is that the State, if the water board ever defaulted 
on one of our bond issues, one of our State bond issues, that 
the State at that time would then issue general obligation 
bonds to meet those defaults.
    Statistically, since the water board has been in water and 
wastewater financing loan-wise since 1985, before the SRF 
programs were in existence, we have never had any default or 
any payment problem at all. So statistically, the State would 
never have to put up a penny of money by issuing those general 
obligation bonds. If the State would allow us to have, let's 
say, $100 million, we have already visited with Standard and 
Poors rating service, we could issue up to $1 billion in 
additional debt to provide funding for Oklahoma's communities 
throughout the State.
    Senator Inhofe. I appreciate that, and I have often said, 
one of the reasons I so appreciate this Committee, this 
Committee has the largest jurisdiction of any committee in the 
Senate, Environment and Public Works. Of course, you are right 
in the middle of both of those. One of my concerns, because I 
do have the background of being the mayor of a major city, is 
the biggest problems facing communities and counties and cities 
in Oklahoma is not crime on the streets, it is unfunded 
mandates.
    We are doing a very good job, and you are doing a very good 
job in Oklahoma. We just want to maximize that and be able to 
assist you all we can.
    Thank you, Mr. Chairman.
    Senator Cardin. Senator Sessions.
    Senator Sessions. Thank you.
    Mr. Richey, I show a map here that indicates the number of 
States in the United States that have companies that 
manufacturer cast iron pipe, ductile iron pipe. We have seen 
the ones in yellow, Mr. Chairman, where plants have closed in 
recent years.
    So just basically, I guess you and Mr. DiLoreto would say 
that subdivisions are down, very few subdivisions are being 
constructed, very few shopping centers are being constructed. 
Private developments are down, and cities have tight budgets, 
so they are down. Would you say this is putting an 
extraordinary stress on the people who make the items that 
compose our infrastructure, and Mr. DiLoreto, our engineering 
support teams, too?
    Mr. Richey, do you want to start?
    Mr. Richey. Yes, Senator. The jobs are lost; we have lost 
jobs. And some of those jobs, I am sad to say, may never come 
back. And now I am worried about the jobs that are still 
existing, how do we make it through to the recovery of the 
economy? That is what we are here for today. I think that these 
two funding mechanisms that we are talking about will allow--it 
just gives the communities another tool in the toolbox which 
they can use to raise funds to replace the infrastructure that 
does need replacing after all these years.
    Senator Sessions. Well, I tend to agree with that. It is a 
needed infrastructure item. We have a deep American industry 
and that industry definitely is in a crisis situation.
    Would you agree that from an engineering perspective, Mr. 
DiLoreto, that it is a tough time?
    Mr. DiLoreto. Absolutely. I commented that I was in a fast 
growing utility, we were putting in 200 to 300 meters a month 
in our utility. Last month we got a 27-lot subdivision, and we 
thought, oh, my gosh, this is the biggest thing we have seen in 
4 years. The civil engineers, their jobs are being lost in that 
manner. The industry is being lost in that manner. Even my own 
maintenance workers we have had to change jobs of what they 
have done. And when an opening comes for one of these 
positions, hundreds of applications we get.
    Senator Sessions. Mr. Richey, what would be the impacts on 
job creation in your sector if a bill like 939 that would lift 
the volume caps on private bonds became reality?
    Mr. Richey. Senator, we have estimated about 27,000 jobs 
would be added by if we could start tomorrow in increasing the 
private activity bond, taking the cap off of it.
    Senator Sessions. One of the things, Mr. Chairman and 
Ranking Member on the Budget Committee, and those red ink 
numbers just overwhelm you every day, but one way to strengthen 
the United States balance sheet is to take some of these costs 
off our balance sheet, so private activity bonds put the total 
risk on the private activity provider. And in a way it has some 
costs, and we need to be sure we pay for that cost. But in 
terms of adding to the debt of the United States, it is much 
smaller than if we loaned the money out ourselves.
    How would the cities utilize, Mr. Richey, the private 
activity bonds? As a practical matter, how would that work?
    Mr. Richey. I think what happens is the cities would 
determine, OK, do I need this funding, because I can't raise it 
through tax revenues, I can't raise taxes, I am not getting the 
ad valorem taxes on property. How do I get the funds that I 
need to replace infrastructure that needs to be replaced?
    So they advertise this, private activity bonds are issued. 
They are tax-exempt from Federal tax, and that encourages 
investors to take that risk that the local governments don't 
have to take any more.
    Senator Sessions. Mr. Freeman, do you have any comment on 
that from your perspective?
    Mr. Freeman. No, sir.
    Senator Sessions. Mr. DiLoreto.
    Mr. DiLoreto. No.
    Senator Sessions. Well, it is my understanding that many 
States are not currently using an entire volume cap. How does 
exempting water and wastewater plants and infrastructure deal 
with that problem?
    Mr. Richey. I think the difficulty there is that many of 
these projects we are talking about are multi-year projects. 
When they don't know or the locals don't know if the State 
Revolving Fund is going to have that funding every year, then 
there is a lack of funding, a lack of confidence about future 
projects. And if they had no cap, then they knew they could 
fund multi-year projects, we would start seeing the 
infrastructure being developed and being replaced where 
necessary.
    Senator Sessions. Let's talk, one moment, Mr. Chairman, you 
can interrupt me, I just went over my time limit. But the idea 
of Buy America is something that a lot of us look carefully at. 
But I have come to have a growing feeling that we need to be 
far more interested in how we can help our manufacturing that 
creates jobs in the United States. The Wall Street Journal just 
had a big article about plants closing and how much it costs 
the Government, unemployment insurance, food stamps, welfare, 
other problems that occur there, right out of the Treasury, 
direct expenditures out of the U.S. Treasury.
    But first, Mr. Richey, you are competitive, you are in the 
world market competition. Would you explain to us some of the 
things that provide what many would consider unfair advantages 
from our trading partners? I know China is a manufacturer of 
pipe and an exporter of pipe. What are some of the advantages 
countries like that might have that are really unfair in your 
view?
    Mr. Richey. Thank you for the question. I sort of divided 
the two areas. One is unfair practices and the other is 
societal needs in the United States. So unfair practices, we 
know that we are competing not with other companies, we are 
competing with other countries. And I can stand toe to toe with 
another company, but not another country. The countries I am 
talking about allow subsidies for their exporters, they 
manipulate the currency, they have unbelievable high tariffs if 
I try to ship anything to their country. Yet we have very low 
tariffs coming into this country.
    And we also know that they dump, we know that they sell in 
this country cheaper than the sell in their own country. So I 
have all that working against me. At the same time, we have 
things that we hold near and dear to our hearts here. We want 
to have a good environment, we want to have safety, we want to 
have pension plans, we want to have health care. So these 
taxpayers in this country are actually subsidizing not my 
business, they are subsidizing foreign competitors, foreign 
countries when we use taxpayer dollars to buy foreign products 
for these infrastructure projects and other things.
    Senator Sessions. If you took the currency manipulation, 
let's say at 25 percent, which we have estimated on China, that 
gives an advantage to the importer of that much. And the 
environmental regulations that you face are far more intense 
than most of your foreign competitors, is that not correct?
    Mr. Richey. Yes, sir, in fact, we estimated that 25 percent 
of the particulate matter in a smoggy day in Los Angeles comes 
directly from China. So it is not just what happens in this 
country. We are actually allowing them to pollute this country.
    Senator Sessions. Well, I think that is a justification 
for, as we craft this, to try to do it in a way that at least 
levels the playing field so our manufacturers have that 
ability.
    Now, on the Buy American language, it does not prohibit 
foreign competition. Can you share some of the things that 
would allow a foreign competitor to still participate under 
some of the language, the Buy American language that has been 
suggested?
    Mr. Richey. Yes, Senator, in fact, it is really ironic, 
because it is not just Buy American, it is to encourage foreign 
competition. Because we are saying, all right, we will compete 
with you. If you have the same rules, if you sign the 
international agreements, if you sign a WTO agreement, then 
come on. We welcome you.
    But don't compete against us when you don't allow us a fair 
shake to get in your country, but you want to come here. We are 
not asking to Buy American only, it is a Buy American 
preference unless you sign those international agreements. If 
you sign the international agreements, no problem. We welcome 
you and welcome to compete with you.
    Senator Sessions. Thank you.
    Senator Cardin. Mr. Richey, I think you said that just the 
way we have to get that message out to not only the American 
people but the international community. Because on a level 
playing field, we will do just fine.
    Mr. Richey. That is right.
    Senator Cardin. And we have allowed foreign countries to 
subsidize, to do illegal trading practices, including dumping, 
as you pointed out, and we have not taken appropriate steps to 
allow our manufacturers to compete on a level playing field.
    I just want to identify myself with the comments that you 
have made, and thank Senator Sessions for those comments. It is 
about jobs here in America and we can compete and we need to 
make sure we do everything we can to have a level playing 
field.
    Let me thank the panel again for your testimony. The 
Committee has received testimony from the American Water Works 
Association, Water Environmental Federation, Association of 
Metropolitan Water Agencies, The Clean Water Construction 
Coalition, the United Association of Journeymen and Apprentices 
of the Plumbing and Pipefitters Industry of the United States 
and Canada, and the Subsurface Technologies. Without objection, 
these statements will be made part of the Committee record.
    [The referenced information follows:]
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    Senator Sessions. Mr. Chairman, Mr. Richey has provided a 
series of reports and documents that would support the 
testimony he has given. I would like to make that part of the 
record and ask that the record be left open for additional 
statements or comments.
    Senator Cardin. Without objection, all that will be agreed 
to, and that will be included in the record.
    With that, the Committee will stand adjourned. Thank you 
all very much.
    [Whereupon, at 11:40 a.m., the Committee was adjourned.]
    [Additional material submitted for the record follows:]
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