[Senate Report 108-386]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 772
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-386
======================================================================


                          WATER INFRASTRUCTURE

                             FINANCING ACT

                               __________

                              R E P O R T

                                 of the

                              COMMITTEE ON

                      ENVIRONMENT AND PUBLIC WORKS

                          UNITED STATES SENATE

                              to accompany

                                S. 2550

                             together with

                            ADDITIONAL VIEWS

      [Including cost estimate of the Congressional Budget Office]

                                     


                                     

                October 7, 2004.--Ordered to be printed

                                _____ 

For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001




               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      one hundred eighth congress

                  JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia             JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri        MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio            HARRY REID, Nevada
MICHAEL D. CRAPO, Idaho              BOB GRAHAM, Florida
LINCOLN CHAFEE, Rhode Island         JOSEPH I. LIEBERMAN, Connecticut
JOHN CORNYN, Texas                   BARBARA BOXER, California
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
CRAIG THOMAS, Wyoming                THOMAS R. CARPER, Delaware
WAYNE ALLARD, Colorado               HILLARY RODHAM CLINTON, New York
                 Andrew Wheeler Majority Staff Director
                 Ken Connolly, Minority Staff Director

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page
General Statement................................................     1
Background.......................................................     2
    Clean Water Act Program......................................     2
    Safe Drinking Water Act Program..............................     3
    Need for legislation.........................................     4
Objectives of the Legislation....................................     5
Section-by-Section Analysis......................................     5
    Section 1. Short title; table of contents....................     5

                TITLE I--WATER POLLUTION INFRASTRUCTURE

    Sec. 101. Technical assistance for rural and small treatment 
      works......................................................     6
    Sec. 102. Projects eligible for assistance...................     7
    Sec. 103. Water pollution control revolving loan funds.......     9
    Sec. 104. Affordability......................................     9
    Sec. 105. Water pollution control revolving loan funds.......    10
    Sec. 106. Transferability of funds...........................    12
    Sec. 107. Grants program.....................................    13
    Sec. 108. Costs of administering water pollution control 
      revolving loan funds.......................................    14
    Sec. 109. Allocation formula.................................    14
    Sec. 110. Authorization of appropriations....................    17
    Sec. 111. Reports............................................    17
    Sec. 112. Pilot program for alternative water source 
      projects...................................................    17
    Sec. 113. Wet weather grants.................................    18
    Sec. 114. Technical correction...............................    18

              TITLE II--SAFE DRINKING WATER INFRASTRUCTURE

    Sec. 201. Technical assistance for small centers.............    18
    Sec. 202. Labor standards....................................    19
    Sec. 203. Preconstruction work...............................    19
    Sec. 204. Affordability......................................    20
    Sec. 205. Safe drinking water revolving loan funds...........    20
    Sec. 206. Grants program.....................................    22
    Sec. 207. Other authorized activities........................    23
    Sec. 208. Small system revolving loan funds..................    23
    Sec. 209. Authorization of appropriations....................    24
    Sec. 210. Removal of lead from drinking water in schools and 
      in the District of Columbia................................    24
    Sec. 211. Small public water system assistance program.......    28
    Sec. 212. Small public water system assistance program.......    30

                        TITLE III--MISCELLANEOUS

    Sec. 301. Definition of Administrator........................    31
    Sec. 302. Demonstration grant program for water quality 
      enhancement and management.................................    31
    Sec. 303. Cost of service study..............................    33
    Sec. 304. State revolving fund review process................    34
    Sec. 305. Southeast Colorado safe drinking water supply......    34
    Sec. 306. Assessment of perchlorate contamination............    35
    Sec. 307. National estuary program...........................    35
    Sec. 308. Sewage control technology grant program............    36
    Sec. 309. Special water resources study......................    36
Legislative History..............................................    38
Hearings.........................................................    38
Rollcall Votes...................................................    40
Regulatory Impact Statement......................................    42
Mandates Assessment..............................................    42
Appendix.........................................................    43
    Letter, Association of State Drinking Water Administrators...    43
    Letter, Rural Community Assistance Program...................    46
    Memorandum, United States Environmental Protection Agency....    52
Cost of Legislation..............................................    54
Additional Views of Senators Jeffords, Baucus, Reid, Graham, 
  Lieberman, Wyden, Carper, and Clinton..........................    58
    General Statement............................................    58
    Background...................................................    58
    Discussion...................................................    59
    Summary of Issues............................................    61
    Davis Bacon..................................................    62
        Clean Water Act..........................................    62
        Safe Drinking Water Act..................................    63
    Lead in Drinking Water.......................................    64
        EPA Regulations on Lead in Drinking Water................    64
        Washington D.C. Experience...............................    66
        Committee Action.........................................    66
        Committee Mark-Up of S. 2550, June 23, 2004..............    68
    Deference to Local Governments...............................    72
    Incentives for Compliance....................................    74
    Grants.......................................................    75
    CWA Funding Formula..........................................    76
    Project Authorizations.......................................    76
Additional Views of Senator Jeffords.............................    79
    Letter, from Hon. Jon Kyl, U.S. Senator from the State of 
      Arizona....................................................    79
Changes in Existing Law..........................................    80



                                                       Calendar No. 772
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-386
======================================================================

 
                   WATER INFRASTRUCTURE FINANCING ACT

                                _______
                                

                October 7, 2004.--Ordered to be printed

                                _______
                                

    Mr. Inhofe, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                         [to accompany S. 2550]

                             together with


                            ADDITIONAL VIEWS

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred a bill (S. 2550) to amend the Federal Water Pollution 
Control Act and the Safe Drinking Water Act to improve water 
and wastewater infrastructure in the United States, having 
considered the same reports favorably thereon with amendment 
and recommends that the bill, as amended, do pass.

                           General Statement

    S. 2550 is a bill which amends the Federal Water Pollution 
Control Act (CWA) and Title XIV of the Public Health Service 
Act (Safe Drinking Water Act) to reauthorize the State 
Revolving Loan Funds (SRF) in each Act. The bill also creates a 
research and demonstration program to develop new water and 
wastewater treatment approaches and technologies; authorizes a 
study of the nation's water resources and creates several 
targeted grant programs to address specific water and 
wastewater problems.

                               Background

Clean Water Act Program
    Enacted in 1948 and comprehensively amended in 1972, 1977, 
1981 and 1987, the CWA governs the discharge of pollution into 
the nation's navigable waters. The 1972 amendments strengthened 
the Federal construction grants program (Title II) through 
which the Federal Government provided grants to municipalities 
to construct publicly owned wastewater treatment plants 
(POTWs). The Federal share of the projects was increased from 
55 percent to 75 percent of the total project cost. Five years 
later, in 1977, Congress increased the role of States in 
managing the construction grants program and provided new 
incentives to address wastewater needs with innovative or 
alternative treatment technologies. Congress continued to 
transition the program to the States by returning the Federal 
cost share to 55 percent in its 1981 amendments to the Act.
    However, by 1987 concerns remained about how best to fully 
transition the program to one primarily funded by the States 
and local governments. As such the 1987 amendments further 
reformed the way the Federal Government assisted local 
governments in meeting the costs of water infrastructure 
projects. Recognizing a need to extend the life of each dollar 
in the system, Congress adapted an innovative approach, called 
the State Revolving Loan Fund (SRF) through which States would 
receive an annual grant with which they would capitalize 
revolving loan funds. Once a town repaid a loan, the money 
could then be loaned again to another community. The 
construction grants program was phased-out over the next 5 
years giving States ample time to get their SRFs fully 
operational. The authorization for the construction grants 
program ended in 1990. The authorization for the SRF ended in 
1994, after a sharp decline in its authorization level from 
$1.2 billion in 1993 and $600 million in 1994. This decline and 
eventual elimination of the authorization level is a clear 
signal that Congress intended for the Federal contribution to 
end and for the States and localities to assume full 
responsibility for the cost of building their treatment works.
    The 1987 amendments also created an allocation formula 
according to which States would receive their annual share of 
the Federal appropriation. The formula gave each State a 
prescribed percentage that except for a few minor adjustments 
in the 1990's to account for the end of financing to three of 
the U.S. territories has remained the same for the past 17 
years. There is growing concern that the current formula is no 
longer reflective of which States have the greatest need for 
infrastructure funds.
    In order to receive their share of the Federal pot of 
money, each State signs a capitalization agreement with the 
Environmental Protection Agency (EPA) which includes a 
commitment to match 20 percent of the Federal grant. States are 
further required to create a priority list of projects that are 
eligible for funding using criteria chosen by the State. The 
State is not required to fund according to the order projects 
appear on the list largely because at any one time a 
particularly large project may not have the local funds in 
place. Further, a State may place those projects along a 
particular water body highest on its priority list but would 
still need to provide funds to projects with perhaps great 
local importance, but less statewide significance. The loans 
are available at market rates or below and must be repaid 
within 20 years, the typical life of a treatment works. 
Congress envisioned States providing loans expeditiously but 
also leveraging some of money to gain interest and grow their 
individual funds.
    Currently, POTWs, projects contained in a State's nonpoint 
source pollution plan (section 319) and projects contained in a 
State's estuary comprehensive, conservation and management plan 
(section 320) are eligible for funding. States have provided 
$1.7 billion for nonpoint source projects and estuary-related 
projects. The Clean Water Act and some State laws do not allow 
privately owned treatment works to access the SRF.
Safe Drinking Water Act Program
    In 1974, Safe Drinking Water Act (SDWA) was first enacted 
as an amendment to the Public Health Services Act through which 
the EPA had previously regulated contaminants in drinking 
water. The Act was substantially amended in both 1986 and 1996. 
The 1974 law provided the EPA with authority to regulate 
drinking water contaminants while providing the States with 
authority over the implementation and enforcement of the EPA 
established standards. The Public Health Service Act required 
the regulation of 22 contaminants. In 1986, Congress amended 
SDWA to require the EPA to issue regulations for 83 other 
contaminants by June 1989 and 25 others every 3 years 
thereafter. The EPA was also required to publish regulations 
for the disinfection and filtration of public water supplies.
    Because the EPA, the States and public water systems had 
difficulty with the requirements of the 1986 amendments, 
Congress again amended SDWA in 1996.\1\ Congress replaced the 
requirement that the EPA regulate 25 contaminants every 3 years 
with a requirement that beginning in 1998 and each 5 years 
thereafter, the EPA publish a list of contaminants that may 
need to be regulated and beginning in 2000 and each 5 years 
thereafter determine whether or not to regulate five of those 
contaminants. Concern over how communities, particularly small 
systems, would pay to meet these requirements and upgrade their 
systems lead Congress to duplicate the Clean Water SRF with the 
Drinking Water SRF.\2\ Similar in many ways to the Clean Water 
SRF, the Drinking Water SRF provides communities with access to 
a State managed loan program. However, Congress took this 
opportunity to improve upon the SRF structure with many changes 
not included in the Clean Water program that were designed to 
increase State flexibility. To begin, to address the needs of 
disadvantaged communities, the SDWA provides States with 
authority to provide negative interest loans and principal 
forgiveness for disadvantaged communities through the Drinking 
Water SRF and give these disadvantaged communities 30 years to 
repay the loan. The Drinking Water SRF's authorization of $1 
billion expired in 2003.
---------------------------------------------------------------------------
     \1\Senate Report 104-169 accompanying Safe Drinking Water 
Amendments Act of 1995. Page 10.
     \2\Ibid, pages 11-12.
---------------------------------------------------------------------------
    Similar to the clean water program, States must also create 
a priority list but are required to fund in order with a 
``ready-to-proceed'' exception so that State programs do not 
sit idle if the project at the top of its list is delayed in 
getting the local share of financing in order. States are 
required to give first priority to those projects which address 
the most serious risk to human health, are necessary to ensure 
compliance, and assist systems most in need on a per household 
basis. The States are required to match 20 percent of the 
annual Federal capitalization grant. Private utilities are 
eligible for the Drinking Water SRF.
    The SDWA also distributes money to the States based on a 
formula. However, unlike the clean water formula, the drinking 
water formula changes every 4 years with the publication of 
EPA's drinking water needs assessment, mandated by the Safe 
Drinking Water Act. States are required to document and submit 
to EPA the funding requirements for their communities to meet 
the costs of the Act. EPA then determines what percent of the 
nationwide need each State has. The formula for the 
distribution of Federal funds is the State's percent of the 
nationwide need adjusted to ensure that those States with less 
than 1 percent of the nationwide need, receive 1 percent of the 
funding. This amount would assist small States, which otherwise 
might not receive enough funds to provide adequate assistance 
to their communities, in maintaining viable programs.
Need for legislation
    The SRFs have been very successful in dispersing assistance 
to POTWs and PWSs throughout the country. The State Clean Water 
SRFs have funded $43.5 billion since their creation providing 
more than 14,000 loans to communities across the country. It is 
important to note that some of these projects are initiated and 
implemented by nongovernmental entities that may experience 
difficulty in some States in applying for and receiving SRF 
funds. The Drinking Water SRF has provided 1,776 loans totaling 
over $3.8 billion. Of this amount, $1.5 billion went to assist 
systems that serve fewer than 10,000 households. However, the 
need for infrastructure dollars continues to grow and according 
to several studies, outpaces what the Nation as a whole spends.
    The Environmental Protection Agency (EPA) conducts two 
surveys, every 4 years, of the States' water and wastewater 
needs. According to the two most recent needs surveys for water 
(2001) and wastewater (2002), EPA estimates the nationwide need 
to be $331 billion over 20 years. There are also several 
independent analyses of the ``gap'' between what the Nation as 
a whole currently spends on infrastructure and what the Nation 
needs to spend. In 1999, the Water Infrastructure Network, a 
consortium of water and wastewater providers, researchers, 
environmentalists, engineers and product manufacturers, 
released a study claiming the annual need is $23 billion.\3\ 
The Congressional Budget Office released a gap analysis in 
which it concluded the gap for wastewater ranges, depending on 
various financial and accounting variables, from $23 billion to 
$37 billion per year and the gap for drinking water ranges from 
$25.5 billion to $39.3 billion per year.\4\ The EPA also 
conducted a gap analysis, separate from the various needs 
surveys, in which it said the gap ranged from $3 billion to 
$26.7 billion a year.\5\ It is important to note that these 
numbers reflect the gap in both capital construction costs and 
operations and maintenance costs, the latter of which the 
Federal Government does not fund. Operations and maintenance 
are the responsibility of the local utility.
---------------------------------------------------------------------------
     \3\Clean and Safe Water for the 21st Century; Water Infrastructure 
Network. 2000. page ES-1.
     \4\U.S. Congressional Budget Office. ``Future Investment in 
Drinking Water and Wastewater Infrastructure.'' 2002. page x and 11.
     \5\The U.S. Environmental Protection Agency. ``The Clean Water and 
Drinking Water Gap Analysis.'' 2002. page 43.
---------------------------------------------------------------------------
    While it remains the committee's intent to fulfill 
Congress' 1987 CWA goal and turn this program entirely over to 
the States, the committee, for the second consecutive Congress, 
has acknowledged that the nationwide need continues to far 
outpace the amount of funding that is available from all levels 
of government. Therefore, the committee and the Congress has 
maintained a commitment to fund the programs until the SRFs 
revolve at levels sufficient to meet the needs of local 
communities. For instance, in 1995, when appropriations were 
supposed to cease, the Clean Water SRF received $1.2 billion, 
double the previously authorized level. The lowest amount of 
funding it received was $625 million in 1997. Since the 
expiration of the Act's authorization in 1994, annual 
appropriations have fluctuated. In the past several years, 
annual appropriations have stayed around $1.35 billion. 
However, this amount and the $850 million annually provided to 
the Drinking Water SRF are not sufficient. Each level of 
government--local, State and Federal--must assess what it is 
currently contributing, add to the available funds, and 
determine how to increase efficiencies in their systems to make 
the most of the funds in the system.

                     Objectives of the Legislation

    S. 2550 seeks to update the two State Revolving Loan Funds 
(SRF), which are the primary Federal funding mechanisms for 
clean water and drinking water. Both SRFs are expired and in 
need of moderate updating. The Clean Water SRF lacks many of 
the flexibility mechanisms that are currently a part of the 
drinking water program. The bill also seeks to promote the 
research and development of new ways of meeting water quality 
goals through a research and demonstration pilot program. 
Finally, the bill would help communities meet the costs 
associated with many regulatory requirements by providing 
limited and directed grant assistance.

                      Section-by-Section Analysis

Section 1. Short Title; Table Of Contents.
    This section designates the title of the bill as ``Water 
Infrastructure Financing Act'' and lists the table of contents.

                Title I--Water Pollution Infrastructure

Sec. 101. Technical assistance for rural and small treatment works.
Summary
    This section adds Section 222 to the Clean Water Act in 
which it defines ``Qualified Nonprofit Technical Assistance 
Provider'' as a qualified nonprofit technical assistance 
provider of water and wastewater services to rural communities 
of 10,000 users and fewer.
    Section 222(b) will create a grant program through which 
the Administrator may make grants to qualified nonprofit 
technical assistant providers to:
    (A) Assist small POTWs in planning, developing and 
obtaining financing for eligible projects, defined in section 
603(c) of the Clean Water Act;
    (B) To capitalize revolving loan funds, in consultation 
with the State, to rural and small municipalities for 
predevelopment costs, including costs for planning, design, 
associated preconstruction, and necessary activities for citing 
the facility and related elements, or short-term costs incurred 
for equipment replacement that is not part of a regular 
operation and maintenance activities. Loan terms cannot exceed 
10 years and loans cannot exceed $100,000. Loan repayments will 
be credited to the fund maintained by the qualified nonprofit;
    (C) Provide technical assistance and training for rural and 
small POTWs and decentralized wastewater treatment systems to 
enable them to protect water quality and achieve and maintain 
compliance with the Act; and
    (D) To disseminate information to rural and small 
municipalities with respect to planning, design, construction 
and operation of POTWs and decentralized wastewater treatment 
systems. The Administrator shall to the maximum extent 
practicable ensure that grants are made available in each 
State. The nonprofit provider will submit a report to the 
Administrator detailing the number of communities served, the 
sizes of those communities and the types of financing provided 
by the nonprofit provider.
    Section 222(c) will authorize $25 million for each fiscal 
year 2005 through 2009.
Discussion
    According to EPA, more than 70 percent of the nation's 
housing units with inadequate plumbing are in small 
communities. More than 19 million households in small 
communities are on septic systems or cesspools as their primary 
source of treatment.\6\ The 2000 EPA Clean Watersheds Needs 
Survey indicates that small systems, those serving fewer than 
10,000 households, represent about 10 percent of the nationwide 
funding need, or $16 billion. 74 percent of wastewater 
treatment systems serve small communities which accounts for 
only 12 percent of the nation's population. While the needs of 
these communities are great, the ability of their ratepayers to 
pay the costs of those needs is limited.
---------------------------------------------------------------------------
     \6\The U.S Environmental Protection Agency, ``Wastewater Treatment 
Programs Serving Small Communities.'' (EPA 832-R-02-004.) December 
2002. Page 1.
---------------------------------------------------------------------------
    The Environmental Protection Agency has several existing 
programs aimed at helping small systems and unsewered 
communities maintain and upgrade their systems. The National 
Environmental Training Center for Small Communities develops 
and delivers training courses for both POTWs and drinking water 
systems operators. The National Small Flows Clearinghouse 
provides information about treatment options and the Operator 
On-Site Technical Assistance Program (section 104(g) of the 
Clean Water Act) provides compliance assistance to small POTW 
operators as well as help with maintenance and financing.
    The committee however continues to hear of a need for 
additional assistance for these small systems. In a letter to 
the committee on February 5, 2004, the Rural Community 
Assistance Program cited the need for assistance with 
predevelopment costs. Many small POTWs cannot afford the costs 
associated with planning a project, including the engineering 
costs. Without these initial steps completed, the POTW often 
has difficulty applying for an SRF loan to begin construction. 
The Rural Community Advancement Program, for example, runs 
several small SRFs in States to assist small POTWs with these 
startup costs, enabling them to then apply for funds through 
the State-run SRF for construction costs. Section 101 enables 
the Administrator to provide money to nonprofit technical 
assistance providers to create and run these smaller SRFs. This 
section also provides nonprofit technical assistance providers 
with funds to assist treatment works in identifying and 
securing financing for projects; provide technical assistance 
to operators of systems on how to best manage their POTW and 
meet regulatory requirements. It also authorizes funds for the 
dissemination of information on financing, system management 
and water quality for small systems.
Sec. 102. Projects eligible for assistance.
Summary
    This section amends Section 603(c) of CWA by modifying the 
project eligibility list with several changes. 102(c)(1) 
mandates projects comply with Section 513, which requires 
payment of a prevailing wage to all workers on a Federal 
construction project.
     Section 102(c)(2) establishes that funds can be used only 
to provide assistance to a municipality, intermunicipal, 
interstate or State agency, or private utility that principally 
treats municipal wastewater or domestic sewage for 
construction, including costs of planning, design, associated 
preconstruction and necessary activities for citing the 
facility and related elements of a treatment works; 
implementation of management program under Section 319; 
development and implementation of a management plan under 
section 320; water conservation projects, the primary purpose 
of which is to protect, preserve or enhance water quality, 
including piping and lining of irrigation canals, recovery or 
recycling of wastewater or runoff from irrigation, irrigation 
scheduling, measurement or metering of water use; or 
improvement of on-field irrigation efficiency; projects by a 
municipality intermunicipal, interstate or State agency to 
increase security at a POTW, excluding operation and 
maintenance costs; to control municipal stormwater runoff; and 
reuse, reclamation or recycling projects the primary purpose of 
which is the preservation, protection or enhancement of water 
quality.
Discussion
    Section 513 of the Clean Water Act applies Davis Bacon 
prevailing wage standard to all federally funded grant programs 
created within the Clean Water Act. Section 602 of the Act 
defines the terms under which the SRFs will function. As stated 
in 602(b)(6), Davis Bacon applies to those projects funded in 
whole or in part by ``funds directly made available by Federal 
capitalization grants.'' The statute clearly required Davis-
Bacon to apply only to the first distribution of funds because 
the first loan is the only one made directly available from the 
capitalization grants. State law would guide subsequent 
``revolutions'' of the money - loans made from repaid loan 
funds. As Senator George Mitchell, the bill manager, stated on 
the floor during consideration of the 1987 amendments, ``This 
restriction [meaning Davis Bacon and others] on the use of 
Federal capitalization grant funds does not apply to funds 
contributed by the State . . . moneys repaid to the fund or 
other money.''\7\
---------------------------------------------------------------------------
     \7\U.S. Congress. Committee on Environment and Public Works. ``A 
Legislative History of the Water Quality Act of 1987 (Public Law 100-4) 
Including Public Law 97-440; Public Law 97-117; Public Law 46-483; and 
Public Law 96-148.'' Senate Report 100-414. Page 375.
---------------------------------------------------------------------------
    Section 602 also states that Davis Bacon and several other 
provisions of the law apply only to those treatment works 
constructed prior to September 30, 1994. Along with Davis 
Bacon, 15 other provisions of the old Title II construction 
grants program were applied to the SRF until September 30, 
1994. When the program's authorization expired, so did EPA's 
authority to continue to require States to apply any of these 
provisions to their programs. Section 102(c)(1) of S. 2550 for 
the first time imposes Davis Bacon on every project funded 
through the SRF regardless of whether it is from the initial 
capitalization grant or subsequent rounds of loans.
    By clarifying that preconstruction activities are eligible 
for funding, Section 102(c)(2) ensures treatment works are able 
to receive financing for engineering costs and other planning 
costs that precede actual construction. This provision will 
ensure that small communities with few resources available to 
develop a project in its early stages can receive assistance 
for pre-construction activities.
    This provision maintains current law eligibility of both 
section 319 and section 320 projects.
    It would extend eligibility to privately owned treatment 
works. These systems are currently not eligible for assistance 
through the SRF.
    It also would extend eligibility to water conservation 
projects, the primary purpose of which is the protection, 
preservation or enhancement of water quality. While typically 
seen as a problem for western States, water supply has become a 
nation-wide concern. One aspect of the problem is the lack of a 
clean water supply not just the lack of water in general. This 
provision envisions enabling States and localities to fund 
water conservation, reuse, recycling and reclamation projects 
that will enhance the supply of clean, safe water.
    After the terrorist attacks of September 11, much attention 
is being paid to security at the nation's treatment works. 
While EPA currently allows POTWs to use the SRFs for security-
related costs, this provision would state the eligibility in 
statute, clarifying that in fact capital costs are eligible. 
Security costs associated with operations, maintenance and 
personnel are not eligible for the SRF.
    Finally, with finalization of the stormwater Phase II 
regulations (64 FR 68721), municipalities across the country 
face additional expenses trying to reduce and mitigate 
contaminated stormwater. Because there has been some confusion 
over whether these projects are eligible for SRF funding, this 
provision clarifies that these costs are in fact eligible for 
SRF loans.
Sec. 103. Water pollution control revolving loan funds.
Summary
    This section amends the types of assistance that can be 
offered through the SRF to include a revolving loan fund 
operated by a municipal, intermunicipal or interstate entity, 
State, public or private utility, corporation, partnership, 
association, or nonprofit agency to fund projects that are part 
of a 319 or 320 implementation. The loans must be fully paid 
within 30 years of their issuance.
Discussion
    Projects included in a State's estuary and nonpoint source 
implementation plans can often most effectively be implemented 
by small, nonprofit organizations which traditionally have had 
difficulty accessing State SRFs. The loan process is often 
better suited for governmental entities than small, local, 
watershed organizations. By allowing an entity to operate a 
smaller SRF, this provision seeks to make it easier for locally 
based watershed organizations to receive funding to fulfill the 
objectives of a State approved 319 or 320 project.
Sec. 104. Affordability.
Summary
    This section amends Section 603 by adding a subsection (e) 
which includes a series of flexibility mechanisms designed to 
improve assistance provided to disadvantaged communities and 
increase the flexibility offered to States. These provisions 
are similar to provisions already in existing law in the SDWA.
    Section (e)(1) defines ``disadvantaged community'' as a 
service area, or portion of a service area that meets State 
affordability criteria,
    Section (e)(2) provides the State with authority to provide 
additional subsidization, including principal forgiveness, to a 
disadvantaged community or one the State expects to become 
disadvantaged as a result of a project.
    Section (e)(3) limits the total loan subsidy to no more 
than 30 percent of the State's annual capitalization grant.
    Section (e)(4) allows the State to extend the life a loan 
from the current statutory limit of 20 years to 30 years but 
not to exceed the expected design life of the facility.
    Section (e)(5) authorizes the Administrator to publish 
information to assist States in establishing affordability 
criteria.
Discussion
    Tom Morrissey, President of the Association of State and 
Interstate Water Pollution Agencies testified on February 28, 
2002, ``States strongly support principal forgiveness.'' This 
section takes principal forgiveness and other flexibility 
mechanisms proposed from the Safe Drinking Water Act and 
applies them to the Clean Water program. These flexibility 
mechanisms provide the State with the ability to provide 
additional assistance to disadvantaged communities, such as 
forgiveness of their loans or zero-interest loans. It also 
allows the State to provide a 30-year loan instead of the 
current 20-year loan, provided the loan does not exceed the 
life of the asset. New to both SRFs is the ability of the State 
to provide these additional benefits to communities that may 
not meet a State's criteria for a disadvantaged community as a 
whole, but may have a ``portion of a service area'' that does 
meet the criteria. Many large cities do not qualify as 
disadvantaged under their State's definition of the term 
because they have pockets of low-income ratepayers and industry 
and pockets of affluent ratepayers. Under Section 204(b) of the 
CWA, POTWs are prohibited from raising rates on one sector of 
ratepayers, i.e. industry, in order to offset a cut in rates to 
another sector, i.e. residential if the facility has ever 
received Federal grant money. Most of today's treatment works 
were funded at least in part with Title II construction grant 
dollars. Further, it is often politically difficult to raise 
rates only on those people with a proven ability to pay. In 
order to assist cities struggling to pay for infrastructure 
upgrades without imposing too high a burden on their low-income 
ratepayers, this provision makes them eligible for 
disadvantaged assistance.
Sec. 105. Water pollution control revolving loan funds.
Summary
    This section amends section 603(h) of the Clean Water Act.
    Section (h)(1) adds several definitions including: 
``Restructuring'' as the consolidation of management functions 
or ownership with another facility or the formation of 
cooperative partnerships; and ``Traditional Wastewater 
Approach'' as a managed system used to collect and treat 
wastewater from an entire service area consisting of collection 
sewers, a centralized plant using physical or chemical 
treatment processes, and a direct point of discharge to surface 
water.
    Section h(2)(A) requires States to amend their existing 
priority system so that projects would be more likely to 
receive assistance by submitting such other information as 
determined by the State, and:
    (i) An inventory of assets, including a description of 
those assets
    (ii) A schedule for replacement of those assets
    (iii)A financing plan indicating sources of revenue
    (iv)A review of options for restructuring the treatment 
works
    (v) A review of options for approaches other than 
traditional wastewater approach that may include actions or 
projects that treat or minimize sewer or urban storm water 
discharges including decentralized or distributed storm water 
controls, decentralized wastewater treatment, low impact 
development technologies, stream buffers, wetland restoration 
and actions to minimize the amount of and direct connections to 
impervious surfaces.
     Section h(2)(B) requires States to, in the development of 
the priority system, take into consideration appropriate 
chemical, physical and biological data that the State considers 
reasonably available and of sufficient quality
    Section h(2)(C) requires the States to provide for public 
notice and opportunity to comment on the priority system and 
list
    Section h(2)(D) requires the State to publish, not less 
than biennially, a description of the projects in the State 
that are eligible for assistance including each project's 
priority ranking and the funding schedule; and
    Section h(2)(E) requires the State to ensure that projects 
are designed to achieve the optimum water quality management, 
consistent with the public health and the requirements of the 
Act.
Discussion
    Current law requires States to establish a list of projects 
that are eligible for, and have submitted applications for, 
funding. The State then provides SRF funds to as many projects 
on the list as it can with the available funds. As a State puts 
together its priority list, it can assign priority based on 
whatever system the State develops to meet its needs. Section 
105 of S. 2550 would require the States to add other factors to 
their system for determining priority. The decision on how much 
weight to give each of these additional factors is left to the 
State. A State may choose, for example, to give the most 
priority points to systems that serve under 10,000 households 
or who have a median income below the poverty level even though 
S. 2550 does not refer to these criteria. However, the factors 
listed in this section must be used to give a project higher 
priority when determine which projects to fund in a given year 
from a State's priority list.
    The factors to which a State must give additional weight 
include an inventory of assets, including a description of the 
condition of those assets and a schedule for replacing those 
assets. Aging systems are significant contributors to the 
infrastructure-financing gap. 27 percent of drinking water 
utilities and 31 percent of wastewater utilities did not have 
plans for managing their existing capital assets.\8\ According 
to a 2002 General Accounting Office (GAO) report, GAO found 
that ``roughly half of the utilities actually rehabilitated or 
replaced 1 percent or less of their pipelines annually'' even 
though 89 percent of drinking water utilities and 76 percent of 
wastewater utilities believed a higher level was necessary to 
maintain their systems.\9\ In order to fully understand the 
scope of the problem the Nation faces, there must be an 
accounting of the health of our utilities. Further, if 
utilities are to make maximum use of the funds available, it 
makes good business sense to have a full understanding of the 
condition of one's assets and how much capital will need to be 
raised to replace those assets and over what amount of time.
---------------------------------------------------------------------------
     \8\U.S. General Accounting Office. Water Utility Financing and 
Planning. (GAO-02-764). August 2002. Page 7.
     \9\Ibid, page 42.
---------------------------------------------------------------------------
    Additional factors include a financing plan indicating how 
that capital will be raised including rate increases, grant 
assistance, bonds, loans or other sources. In its 2002 report, 
of the utilities surveyed, GAO found that 85 percent of 
drinking water utilities and 82 percent of wastewater utilities 
were able to cover operations and maintenance costs through 
local user fees. However, an estimated 29 percent of the 
utilities had to defer maintenance because of insufficient 
funding.\10\ Providing additional weight to projects that have 
these elements in place will encourage those utilities that 
don't have them, to create asset management and financing 
plans. The committee hopes giving these elements additional 
weight will also result in those utilities that already have 
them in place to review their plans and take whatever steps 
necessary to update them and if necessary, seek additional 
funding to properly maintain their systems.
---------------------------------------------------------------------------
     \10\Ibid, page 6.
---------------------------------------------------------------------------
    POTWs will also receive additional credit if they have 
reviewed options for restructuring their treatment works. It 
some cases, it may be more efficient and cost effective for a 
utility to consolidate with a neighboring one, develop a 
partnership with the local energy provider, or consider other 
cooperative partnerships like public-private partnerships or 
privatization. These are all encompassed in the term 
restructuring, the goal of which is to improve upon the 
management and financial structure of a utility to ensure it is 
operating as efficiently and cost-effectively as possible.
    POTWs are also encouraged to look at nontraditional 
approaches, including decentralized or distributed storm water 
controls, decentralized wastewater treatment, low impact 
development technologies and stream buffers. Communities are 
experimenting with approaches other than traditional treatment 
and constructed conveyances to reduce contaminated runoff, 
reducing the amount of water entering a treatment works or 
adjoining waterways. These approaches may, in addition to 
possibly being more environmentally friendly than concrete and 
pipes, be more affordable. Particularly in small, rural 
communities, properly maintained decentralized wastewater 
treatment systems may also be an affordable alternative to a 
treatment works.
Sec. 106. Transferability of funds.
Summary
    Each year the Committee on Appropriations in the 
appropriations bill for Veterans' Affairs, Housing and Urban 
Development and Independent Agencies includes a provision 
allowing States to transfer portions of a State's 
capitalization grant from one SRF to the other and back again. 
Section 106 permanently extends the authority to transfer no 
more than 33 percent of a State's Clean Water capitalization 
grant into the Drinking Water SRF. It clarifies that the funds 
transferred cannot be considered by a State to meet its SDWA 
requirement to match the Federal capitalization grant for the 
Drinking Water SRF by 20 percent.
Discussion
    This section provides the States with much needed 
flexibility to manage their water programs holistically. In any 
one year, a State may have a particularly large drinking water 
or clean water project for which it needs additional funds. 
This provision allows them to transfer some money from one 
account to the other while protecting the corpus of the funds.
Sec. 107. Grants program.
Summary
    This section creates a new provision in the CWA, 603(k) 
that directs a State to set aside a portion of its SRF for 
grants to eligible projects under the following conditions:
    (k)(1) Requires States, in any year in which appropriations 
do not exceed $3 billion, to set aside 10 percent of its 
capitalization grant. The grants cannot exceed 55 percent of 
the project cost. This section allows the State to waive this 
set-aside if the average time for processing loan applications 
during the preceding 12 months does not exceed 90 days.
    (k)(2) Requires the States, in any year in which 
appropriations exceed $3 billion, to set aside not more than 10 
percent nor less than 5 percent of its revolving loan fund
Discussion
    By including a grant component within the SRF, this section 
seeks to keep the Nation focused on the SRFs as the primary 
funding mechanism for clean water. The bill acknowledges there 
is a growing interest in providing POTWs with grant funds to 
help meet those costs associated with Federal regulatory 
mandates. The daily costs associated with operations and 
maintenance continue to be a local responsibility with the 
Federal assistance available for capital improvements through 
the SRF program.
    This section would require the States to provide a portion 
of their SRFs as a grant to local communities. By maintaining a 
single funding source, rather than creating a new, competing 
program, the focus remains on the SRF and the need to ensure it 
receives adequate funding to meet the needs of local 
communities. The small amount of the set-aside, ensures that 
the corpus of the fund is protected well into the future by 
devoting the vast majority of funds to the loan program. 
Further, by incorporating the grant into the SRF, funding for 
the grant portion is more likely to be appropriated as the 
Clean Water SRF is a program that regularly receives annual 
appropriations. Whereas Congress has authorized grant programs 
that have not received actual appropriations, the SRF annually 
receives funding and the linkage to the grant program ensures 
that the grants too will receive funding.
    Another goal of this section is to provide a quick infusion 
of grant funds to communities. The bill allows States to waive 
the requirement to set-aside 10 percent of the capitalization 
grant if appropriations do not exceed $3 billion if the State 
improves the time it takes to process the loan applications. 
The time it takes to receive funding through the SRF is a 
prominent complaint by municipal recipients and one the 
committee was urged to address by the Paul Pinault, President 
of the Association of Metropolitan Sewerage Agencies on 
February 28, 2002 during his testimony before the Fisheries, 
Wildlife and Water Subcommittee. This too would ensure that 
funds become available more quickly than under the current 
system. With the incentive of avoiding a Federal mandate on the 
use of their SRF funds, the committee believes States will have 
an incentive to increase the speed of their loan application 
process.
Sec. 108. Costs of administering water pollution control revolving loan 
        funds.
Summary
    This section increases the percentage of funds a State is 
authorized to set-aside for program administration from 4 
percent to 6 percent.
Discussion
    States incur significant costs administering the SRFs, a 
responsibility given them by Congress in the 1987 amendments to 
the CWA. While the committee does not anticipate that the 
requirements in this bill will result in new administrative 
burdens to the States, with the intended increase in 
appropriations authorized by this bill to the program, it is 
reasonable to allow States to reserve a larger, but still 
small, percentage of the SRF to pay their administrative costs.
Sec. 109. Allocation formula.
Summary
    This section creates a new allocation formula. It creates 
several definitions.
    (1) Defines the base formula as the current formula 
outlined in section 205(c)(3) of the CWA.
    (2) Defines the needs survey as that conducted by EPA under 
section 516(2).
    (3) Defines the ``needs survey percentage'' as what percent 
of the nationwide need for Categories I through VII of the most 
recent needs survey an individual State's need is.
    (4) Defines the ``next needs survey'' as that occurring 
after the 2000 needs survey, the most recently completed 
survey.
    (5) Defines a ``State'' as a State, the District of 
Columbia and the Commonwealth of Puerto Rico.
    Section 109(b) lays out the new formula first by requiring 
the Administrator, before dispersing funds to the States, to 
set-aside 1.5 percent of the annual appropriation for Indian 
tribes, as defined in section 518(c) of the CWA. The 
Administrator is also required to take 0.25 percent of the 
annual appropriation for the territories of the United States.
    Section 109(b)(4)(A) establishes a target allocation for 
all States. The target for those States for which the needs 
survey percentage is less than 1 percent, shall be 1 percent. 
The target for those States for which the needs survey 
percentage is greater than 1 percent, shall be the needs survey 
percentage.
    Section 109(b)(4)(B)-(D) Sections 109(b)(4)(B)-(D) 
establish a transition period during which the allocation to 
each State (which is a percentage of the whole) begins moving 
from its current level to its target allocation. During this 
transition, States fall in three groups as follows. First, 
States with a target allocation of 1 percent receive 
successively higher amounts each year from fiscal year 2005 to 
2009 and then remain flat (provided in subparagraph (B)). 
Second, States with larger target allocations that meet 
criteria for large, continuing needs (provided in subparagraph 
(C)) maintain their allocation and, in cases of large growth in 
needs, receive additional money described in subparagraph (D). 
Third, States with target percentages higher than 1 percent but 
that do not meet the criteria for large, continuing need 
receive immediately their needs survey percentage, and in cases 
of large growth in needs, receive additional money as described 
in subparagraph (D).
    Specifics of the transition follow. Section 109(b)(4)(B) 
provides that each State with a target percentage of 1 percent 
is limited in the growth of its allocation between its base 
formula and 1 percent as follows: in 2005, these States can 
rise only 12 percent; in 2006, 16 percent; in 2007, 20 percent; 
in 2008, 24 percent; and in 2009 and each year thereafter, 28 
percent above the base formula allocation. These limits on 
growth release once appropriations reach $3.15 billion because 
at that level all States receive a larger amount of money by 
their target allocations than current appropriations provide by 
their current allocation. For those States with a needs survey 
percentage of greater than 1 percent, the growth in allocation 
relative to the base formula is limited to zero during the 
transition, but some of these States receive additional funds 
as described in subparagraph (D).
    Section 109(b)(4)(C) provides that States will receive at 
least their current dollar amount allocation if their needs 
survey percentages are 1 percent or less or if they meet one of 
three criteria indicating large, continuing needs. The criteria 
indicating large, continuing needs are higher needs in both 
categories V and VII between the previous and current needs 
surveys, growth in population between the 1990 decennial census 
and the 2000 decennial census, or have a population equal to 4 
percent of the total national population as reported in the 
2000 decennial census.
    Section 109(b)(4)(D) provides additional funds to States 
reporting large growth in needs. Subparagraph (D) defines large 
growth in needs as a report of higher needs in both dollar 
terms and as a percentage of nationwide need. Such States 
receive extra funds when annual appropriations are less than 
$1.38 billion. When annual appropriations exceed $1.38 billion, 
subparagraph (D) extends provision of additional funds also to 
those States with large, continuing needs as described in 
subparagraph (C), regardless of whether those States also 
reported large growth in needs.
    Section 109(f) allows States to reserve the greater of 2 
percent of $100,000 for statewide water quality planning.
Discussion
    The formula recognizes that in order for the Nation to 
address the overall national need, each State will continue to 
need at least the amount of its current allocation. The formula 
also recognizes that some States receive allocations so small 
as to be negligible for developing new infrastructure. The 
underlying policy statement of the formula is that allocations 
should be determined by each State's percentage of need in the 
latest Needs Survey with no State receiving less than 1 percent 
of the total.
    To shift from the current allocation to the target 
allocation under the Needs Survey - while simultaneously 
continuing to address the overall national need - the 
allocation to small States must increase while larger 
allocations cannot shrink. The formula reconciles this dilemma 
by limiting the growth in allocation to all States first until 
small States begin to grow, and then until appropriations rise 
to a level at which all States grow.
    To limit growth of all States and limit losses rationally, 
the formula recognizes three special situations:
    1. States receiving allocations so small as to be 
negligible for developing infrastructure (defined as States 
whose reported needs are 1 percent or less of the national 
total). These States are the first to see their allocations 
grow, but by no more than 12 percent in 2005, 16 percent in 
2006, 20 percent in 2007, 24 percent in 2008, and 28 percent in 
2008 and thereafter.
    2. States that have been receiving larger allocations and 
whose reported needs continue to grow significantly (defined as 
having risen both in dollar terms and as a percentage of the 
total need of the nation). Allocations to these States rise by 
small amounts which will vary by State.
    3. Other States that have been receiving larger allocations 
and that, although not reporting significant growth in needs, 
are nevertheless large States or those with particular needs to 
correct combined sewer overflow problems and non-point source 
pollution (defined as States that either report higher needs in 
Categories V and VII, or whose population grew 10 percent or 
more in the last census, or whose population is at least 4 
percent of the national total). Allocations to these States do 
not shrink. If annual appropriations grow by $30 million, 
reaching $1,380,000,000, then States in situation 3 begin to 
share in the nominal growth previously provided only to States 
is situation 2.
    To resume growth in all allocations as soon as possible and 
to maintain the transition to the allocation targets, the 
formula changes over time as follows. First, upon publication 
of the next Needs Survey, the new needs numbers will become the 
basis for the formula - therefore, States that grow 
significantly will fare better under the formula. Second, the 
limits on growth and loss will fall away when appropriations 
reach $3,150,000,000. At this level, the remaining formula will 
allocate based entirely on the needs survey with a 1-percent 
floor.
    Consistent with annual appropriations language, the formula 
requires the Administrator to reserve 1.5 percent of the annual 
Federal appropriation for the nation's Indian tribes. It also 
sets aside 0.25 percent for water quality needs of the U.S. 
territories.
    Under Section 205(j) of the CWA, the Administrator could 
reserve up to 1 percent or $100,000, whichever was greater, of 
funds allocated to States under the construction grants program 
for water quality management planning. Projects could include 
identifying cost-effective and locally acceptable facility and 
nonpoint measures to meet water quality standards; developing 
an implementation plan for the measures described above; 
determining the cause of water quality problems and determining 
those POTWs which should be constructed with assistance through 
the grants program. This section of the S. 2550 allows the 
States to reserve up to 2 percent or $100,000, whichever is 
greater to meet the purposes of 205(j) and Section (303)e) of 
the CWA. 303(e) outlines the continuing planning process 
through which States develop plans for the management of all 
navigable waters within the State, including effluent 
limitations, Total Maximum Daily Loads, and the inventory and 
ranking of needs for construction of POTWs.
Sec. 110. Authorization of appropriations.
Summary
    This section authorizes funding of $ 3.2 billion in 2005 
and 2006, $3.6 billion in 2007, $4 billion in 2008, and $6 
billion in 2009. The EPA is authorized to reserve not more than 
$1 million per year to pay the costs of conducting the Clean 
Water Needs Survey required by CWA Section 516.
Sec. 111. Reports.
Summary
    This section revises the statutory requirement under CWA 
Section 516 for State needs surveys from odd-numbered years to 
every fourth year.
Discussion
    The Clean Water Act requires the EPA to complete the needs 
survey every 2 years. The Agency has been conducting the survey 
every 4 years.
Sec. 112. Pilot program for alternative water source projects.
Summary
    This section extends the authorization from 2005 through 
2007 at $25 million per year.
Discussion
    The program, created in 2000, authorizes the Administrator 
of the Environmental Protection Agency to provide grants to 
State, interstate and intrastate water resource development 
agencies, local governmental agencies, private utilities and 
nonprofit organizations for alternative water resource projects 
that address a critical water supply need. The pilot program 
was authorized for $75 million for fiscal years 2002 through 
2004. It has not received any appropriated funds.
Sec. 113. Wet weather grants.
Summary
    This section extends the eligibility for grants to projects 
to control stormwater runoff. It extends the authorization from 
2005 through 2009 at $250 million per year.
Discussion
    Enacted in 2000, CWA Section 221 authorized the Sewer 
Overflow Control Grants to assist municipalities meet the costs 
of combined (CSOs) and sanitary sewer overflows (SSOs). 
According to the 2000 EPA Clean Watersheds Needs Survey, CSOs 
and SSOs remain among the largest expenses faced by cities with 
costs to correct the overflow often in the billions of dollars. 
Funds could be used by a municipality for planning, design and 
construction of treatment works to intercept, transport, 
control or treat CSOs and SSOs. Section 113 extends eligibility 
to projects to comply with Phase I or Phase II of the storm 
water regulations (55FR47990 and 64FR235, respectively). The 
Federal cost share for eligible projects is limited to 55 
percent of the overall project cost.
    The program was authorized for $750 million for fiscal 
years 2003 and 2004. Funding for the program was contingent 
upon appropriations for the Clean Water SRF exceeding $1.35 
billion. Because appropriations have remained at this level, 
the grants program has not received any appropriated funds.
Sec. 114. Technical correction.
Summary
    Makes a technical correction to Section 121.
Discussion
    Current law has two sections 121--The Lake Ponchartrain 
Basin and the Wet Weather Watershed Pilot Projects. This 
section renumbers the Wet Weather section as 122.

              Title II--Safe Drinking Water Infrastructure

Sec. 201. Technical assistance for small centers.
Summary
    This section reauthorizes $2 million each year for fiscal 
years 2005 through 2009 for the Environmental Finance Centers 
(SDWA Section 1420(g)).
Discussion
    This section provides resources to the Environmental 
Finance Centers located at nine universities throughout the 
country. The Centers provide financial and technical assistance 
to the regulated community. They assist the operators of PWSs 
with lowering the costs of compliance, increasing investment in 
their systems, encourage full cost pricing of services and 
identify financing options. The Centers also provide advice and 
recommendations to the EPA on environmental finance issues, 
trends and options.
Sec. 202. Labor standards.
Summary
    Applies Davis-Bacon Act requirements that laborers and 
mechanics be paid at wages not less than the prevailing wage to 
all projects financed by the Drinking Water SRF.
Discussion
    The Davis Bacon Act of 1931 requires all contracts to which 
the United States is a party to require the prevailing wage be 
paid to laborers on construction projects. The Act is limited 
to contracts directly involving the United States unless 
otherwise stipulated.
    Section 1450(e) of the Safe Drinking Water Act requires the 
Administrator to ``take such action as may be necessary to 
assure compliance with [Davis Bacon].'' As enacted, Davis Bacon 
applies only to those contracts to which the Administrator or 
Federal Government is a contractee. In the case of the SRF, the 
contracts are between the State and the municipality and 
therefore, Davis Bacon does not apply to the SRF. Section 1452 
of SDWA which authorizes the SRF does not include any language 
that would apply Davis Bacon to the loans. This section would 
expand Davis Bacon to the Drinking Water SRF for the first time 
since its creation in 1996.
Sec. 203. Preconstruction work.
Summary
    This section modifies the project eligibility list with 
several changes.
    Section 203(1) clarifies that planning, design, and 
associated preconstruction costs are eligible for funds under 
the Drinking Water SRF as standalone items.
    Section 203(2) states that replacement and rehabilitation 
of aging systems, including treatment, storage and distribution 
systems are eligible expenses for the fund. This section also 
ensures that projects to upgrade the security of a water system 
are eligible.
Discussion
    By clarifying that preconstruction activities are eligible 
for funding, Section 203(1) ensures treatment works are able to 
receive financing for engineering costs and other planning 
costs that precede actual construction. This provision will 
ensure that small communities with few resources available to 
develop a project in its early stages can receive assistance 
for pre-construction activities.
    The Safe Drinking Water Act establishes a priority for 
systems to receive funding under the Drinking Water SRF (SDWA 
Section 1452(b)(3)) to include projects that address the most 
serious risk to human health, are necessary to ensure 
compliance, and assist systems most in need on a per household 
basis. This section clarifies that replacement and 
rehabilitation are also eligible expenses under the Drinking 
Water SRF. As Jerry Johnson testified before the Fisheries, 
Wildlife and Water Subcommittee on behalf of the nation's 
largest water utilities on February 28, 2002, many large 
systems biggest expense is replacing old infrastructure and 
pipes. The committee, by reiterating their eligibility, seeks 
to ensure that once a State has addressed the compliance and 
public health threats and helped those systems that are 
disadvantaged, they give consideration to helping systems meet 
the cost of replacing their aging infrastructure.
    After the terrorist attacks of September 11, much attention 
is being paid to security at the Nation's water systems. The 
Public Health and Bioterrorism Response Act of 2001 (P.L.107-
188) required PWSs to assess their vulnerabilities. Systems are 
now in the process of determining what changes need to be made 
to their facilities and how to pay for those upgrades. While 
EPA currently allows PWSs to use the SRFs for security-related 
costs, this provision would state the eligibility in statute, 
clarifying that in fact capital costs for security are 
eligible. Security costs associated with operations, 
maintenance and personnel are not eligible for the SRF.
Sec. 204. Affordability.
Summary
    This section allows public water systems to receive funding 
assistance for portions of a service area served by the 
utility.
Discussion
    Many large cities do not qualify as disadvantaged under 
their State's definition of the term because they have both 
pockets of low-income ratepayers that meet the affordability 
criteria and industry and pockets of affluent ratepayers. These 
cities have difficulty raising rates because they have many 
ratepayers who simply cannot pay more and it is politically 
difficult to increase rates on only those with a proven ability 
to pay. In order to assist cities struggling to pay for 
infrastructure upgrades without imposing too high a burden on 
their low-income ratepayers, this provision allows a 
municipality to receive negative interest loans or principal 
forgiveness if a portion of their service area meets a State 
definition of disadvantaged.
Sec. 205. Safe drinking water revolving loan funds.
Summary
    Section 205(a) changes the amount of its capitalization 
grant a State can reserve for administration of the program 
from 4 to 6 percent. Further, under current law, States may set 
aside up to 10 percent of the SRF, if the State provides an 
equal dollar amount, for public water system supervision 
programs, to administer or provide technical assistance for 
source water protection programs, to develop and implement 
capacity development strategies, and to administer operator 
certification programs. This section waves the State match 
requirement. Finally, this section permanently extends the 
States' authority to transfer up to 33 percent of its Drinking 
Water SRF into the Clean Water SRF. The transferred cannot be 
used to meet the 20 percent match requirement.
    Section 205(b) amends the current requirement that States 
establish a priority system under which projects receive 
funding for the SRF. This section would require States to 
ensure that projects are progressively more likely to receive 
assistance by submitting, among other information requested by 
the State:
    (i) An inventory of assets, including a description of 
those assets
    (ii) A schedule for replacement of those assets
    (iii) A financing plan indicating sources of revenue
    (iv) A review of options for restructuring the public water 
system
    (v) A review of options for approaches other than 
traditional approach
    This section maintains the SDWA requirement that States 
give priority to projects that address the most serious risk to 
human health; that are necessary to ensure compliance with the 
Act and that assist systems most in need on a per-household 
basis according to State affordability criteria. It however 
modifies the requirement that States publish ``periodically'' a 
summary of the projects eligible for, and receiving, assistance 
by requiring the reports at least biennially.
Discussion
    Section 205(a) allows States to reserve up to 6 percent of 
the SRF for administrative costs. According to the State 
drinking water administrators, the cost to administer the 
program exceeds the current 4 percent allowable set-aside.\11\ 
In 1996, Congress created the SRF and gave States the authority 
to operate the program. With this new responsibility came new 
costs. While the committee does not anticipate that the 
requirements in this bill will result in new administrative 
burdens to the States, with the intended increase in 
appropriations authorized in the bill, it is reasonable to 
allow States to reserve a larger, but still small, percentage 
of the SRF to meet their administrative costs.
---------------------------------------------------------------------------
     \11\Association of State Drinking Water Administrators, letter to 
the Committee, November 6, 2003.
---------------------------------------------------------------------------
    Section 205(a) also provides States with more flexibility 
by changing one of the cost-share requirements in current law. 
States are currently permitted to use 10 percent of their SRFs 
for specific set-asides as long as they match that 10 percent. 
However, States are also required to first match 20 percent of 
the capitalization grant they receive each year from the 
Federal Government, essentially requiring a double-match on 
these funds from the States. Given the financial constraints 
many States are under, few have been able to match the full 10 
percent. From 1996 through 2003, States had reserved 4 percent 
of their grant with nine States reserving the full amount and 
seven reserving none. This section waives the matching 
requirement for the 10 percent set-aside.
    This section also would make permanent the ability of 
States to transfer up to 33 percent of the Drinking Water SRF 
into their Clean Water SRF. During a funding cycle, a State may 
have a particularly large drinking water or clean water project 
for which it needs additional funds. This provision allows them 
to transfer some money from one account to the other while 
protecting the corpus of the funds. The transferred funds 
cannot count toward the State's required 20 percent match of 
the Federal grant.
    Section 205(b) adds the definition of restructuring and 
traditional approach to the statute. As part of its 
capitalization agreement with the EPA, each State is required 
to develop a priority system which determines the projects a 
State will fund each year with its available funds. States must 
give priority to those projects which address the most serious 
risk to human health, are necessary to ensure compliance, and 
assist systems most in need on a per household basis. This 
section leaves that requirement in place while also requiring 
that States give additional priority points to those projects 
who have in place an asset management plan, a capital 
replacement plan, a financing plan or have reviewed their 
restructuring options and nontraditional approaches.
    While many PWSs have a long-term plan for replacement of 
their aging assets, many do not. Yet in order to fully 
understand the scope of the problem the Nation faces, there 
must be an accounting of the health of our utilities. Further, 
it makes good business sense to have a full understanding of 
the condition of one's assets and how much capital will need to 
raised to replace those assets and over what amount of time.
    Additional factors States must include in their priority 
list include a financing plan indicating how that capital will 
be raised including rate increases, grant assistance, bonds or 
other loans. PWSs will also receive additional credit if they 
have reviewed options for restructuring their water systems. In 
some cases, it may be better for a utility to consolidate with 
a neighboring one, develop a partnership with the local energy 
provider, or consider other cooperative partnerships like 
public-private partnerships or privatization. These are all 
encompassed in the term restructuring, the goal of which is to 
improve upon the management and financial structure of a 
utility to ensure it is operating as efficiently and cost-
effectively as possible. PWSs that explore nontraditional 
approaches to treatment and source water protection will also 
be given additional priority points. These new technologies may 
prove to be less expensive than traditional approaches.
Sec. 206. Grants program.
Summary
    This section establishes a new provision, 1452(s), that 
directs a State to set aside a portion of its SRF for grants to 
eligible projects as follows:
    (s)(1) Requires a State, in any year in which 
appropriations do not exceed $2.5 billion, to set aside 10 
percent of its capitalization grant. This provision can be 
waived by a State if the average time for processing loan 
applications during the last 12 months does not exceed 90 days
    (s)(2) Requires a State, in any year in which 
appropriations exceed $2.5 billion, to set aside not more than 
5 percent nor less than 2.5 percent of its revolving loan fund.
Discussion
    By including a grant component within the SRF, this section 
seeks to keep the Nation focused on the SRF's as the primary 
funding mechanism for drinking water. The committee 
acknowledges there is a growing interest in providing PWSs with 
grant funds to help meet those costs associated with Federal 
regulatory mandates. The daily costs associated with 
operations, maintenance and capital improvements due to age 
continue to be a local responsibility which the Federal 
Government can assist with through the SRF program.
    This section would require the States to provide a portion 
of their SRFs as a grant to local communities. By maintaining a 
single funding source, rather than creating a new, competing 
program, the focus remains on the SRF and the need to ensure it 
receives adequate funding to meet the needs of local 
communities. The small amount of the set-aside, ensures that 
the corpus of the fund is protected well into the future by 
devoting the vast majority of funds to the loan program. 
Further, by incorporating the grant into the SRF, funding for 
the grant portion is more likely to be appropriated as the 
Drinking Water SRF is a program that regularly receives annual 
appropriations. Whereas Congress authorizes grant programs that 
do not receive actual appropriations, the SRF annually receives 
funding and the linkage to the grant program ensures that the 
grants too will receive funding.
    Another goal of this section is to provide a quick infusion 
of grant funds to communities. The bill allows States to waive 
this requirement in (s)(1) if they improve the time it takes 
them to process the loan applications, a leading criticism 
among applicants for assistance. With the incentive of avoiding 
a Federal mandate on the use of their SRF funds, the committee 
believes States will have an incentive to increase the speed of 
their loan application process.
Sec. 207. Other authorized activities.
Summary
    This section permits use of the Drinking Water SRF for 
implementation of source water protection plans.
Discussion
    The SDWA required States to develop source water protection 
plans by May 2003. States were allowed to use up to 15 percent 
of their SRF for the development of these plans, as well as 
conservation easements, wellhead protection programs, capacity 
development programs and implementation of voluntary, 
incentive-based source water protection projects. However, no 
more than 10 percent of these funds could be used for any one 
of the categories listed above. With many State plans 
completed, funds are now needed to implement the plans. This 
section will allow States to use their SRF funds to implement 
their source water protection plans.
Sec. 208. Small system revolving loan funds.
Summary
    This section would establish a loan fund to be operated by 
a qualified private, nonprofit entity for the purposes of 
helping small water systems with predevelopment costs and 
short-term costs. This program, in addition to those technical 
assistance programs already statutorily provided in the Safe 
Drinking Water Act, are authorized at $25 million per year for 
fiscal years 2005 to 2009. States shall provide to the EPA an 
annual report on the activities supported by this program. Loan 
terms cannot exceed 10 years and loans cannot exceed $100,000. 
Loan repayments will be credited to the fund maintained by the 
qualified nonprofit.
Discussion
    The EPA has several existing programs to assist small PWSs, 
including an information clearinghouse for technical assistance 
providers called Simple Tools for Effective Planning. The 
Agency also runs the Small System Technical Assistance Center 
Network, a series of technical assistance centers at 
universities throughout the Country. The Agency partners with 
the National Rural Water Association and the Rural Community 
Assistance Partnership to provide technical assistance to PWSs 
including how to locate financing for projects and how to run a 
water system. Further, the States may reserve up to 2 percent 
of their SRF to provide technical assistance to small systems. 
Between 1996 and 2003, States had reserved 1.5 percent of their 
grants. Twenty-three States reserved the full 2 percent while 
two States did not reserve any funds.
    The committee however continues to hear of a need for 
additional assistance for these small systems.\12\ Many small 
PWSs cannot afford the costs associated with planning a 
project, including the engineering costs. Without these initial 
steps completed, the PWS often has difficulty applying for an 
SRF loan to begin construction. The Rural Community Advancement 
Program, for example, runs several small SRFs in States to 
assist small PWSs with these startup costs, enabling them to 
then apply for funds through the State-run SRF for construction 
costs. This provision enables the Administrator, with the 
Agency's technical assistance funds, to provide money to 
nonprofit technical assistance providers to create and run 
these smaller SRFs.
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     \12\Rural Community Advancement Program, letter to the Committee.
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Sec. 209. Authorization of appropriations.
Summary
    This section authorizes funding of $1.5 billion for 2005, 
$2 billion for 2006 and 2007, $3.5 billion for 2008, and $6 
billion for 2009. The EPA is authorized to withhold not more 
than $1 million per year to conduct the drinking water needs 
survey required by SDWA Section 1452(h).
Sec. 210. Removal of lead from drinking water in schools and in the 
        District of Columbia.
Summary
    Section 210(a) requires the Administrator to establish a 
program to provide grants to States to assist in paying or 
reimbursing, costs to local education agencies for remediation 
lead contamination in drinking water in schools and informing 
parents, students and teachers about lead contamination in 
drinking water. It authorizes $40 million each year for fiscal 
years 2005 through 2008 and permits the Administrator to 
reserve 5 percent to meet administrative expenses. This is 
similar to current law Section 1465 which authorized a similar 
program that did not receive Federal appropriation funds.
    Section 1465 in current law provided funds to assist States 
in meeting the requirements of Section 1464 which required 
States to establish an assistance program for local education 
agencies to test and remediate lead contamination in drinking 
water from coolers and other sources in schools. This section 
also required that results of testing be available to the 
public and that remediation of non lead-free drinking water 
coolers in schools within 15 months of October 31, 1998.
    However, in Acorn v. Edwards (U.S. 5th Circuit, 1996), the 
Court struck down as unconstitutional Sections 1464(d)(1) and 
(d)(3) because they violated the 10th Amendment of the 
Constitution. The Court ruled ``that section 300j-24(d) [SDWA 
Section 1464(d)] is an unconstitutional intrusion upon the 
States' sovereign prerogative to legislate as it sees fit.'' 
While the Court left in tact SDWA Section 1464(d)(2) which 
requires that the test results in Section 1464(d)(1) be made 
publicly available, because the requirement to test was struck 
down, Section 1464(d)(1) was essentially rendered meaningless. 
The Court's decision technically applied only to the 5th 
Circuit however, it established a precedent that would likely 
have been upheld in other circuits. This view was recently 
upheld by EPA in a memo to its Regional offices. Therefore, the 
committee struck the entire section and instead proceeded with 
a voluntary program that protects State sovereignty and 
encourages communities to test their schools and make the 
results public.
    Section 210(b) provides the District of Columbia with $20 
million to address lead contamination in its water supply; 
activities may include assessment of infrastructure; testing of 
water supplies; distribution of filters; evaluation of chemical 
additives; pipe replacement and evaluation and improvement of 
communication with the public. This section also provides $2 
million to the National Academy of Sciences to conduct a phased 
study of the lead contamination in drinking water. Phase I will 
evaluate compliance of the District of Columbia Water and Sewer 
Authority with regulations pertaining to lead and copper in 
drinking water and the potential causes of the contamination. 
Phase II will assess from a cross-section of cities of varying 
population sizes across the country with lead service lines the 
extent to which water levels in those cities have exceeded the 
action level for lead and the potential causes of the 
exceedences.
Discussion
    Lead, a known toxin, is used in plumbing fixtures and had 
been a primary ingredient in paint and automobile fuel until it 
was phased out beginning in the 1970's (The Elimination of Lead 
in Gasoline v. M. Thomas).\13\ Great progress has been made in 
reducing exposure to lead by phasing out leaded gasoline and 
slowly rehabilitating lead-painted homes. However, swallowing 
or breathing dust from paint chips is still the leading cause 
of lead exposure. Lead water lines still exist in many cities, 
including the District of Columbia.
---------------------------------------------------------------------------
     \13\ Annual Review of Energy and the Environment. 20:301-324, 
1995.
---------------------------------------------------------------------------
    In 1991, the EPA finalized the lead and copper rule (56 FR 
26460), which would minimize lead and copper in drinking water 
by reducing corrosivity. Under the rule, the goal for lead in 
drinking water is zero parts per billion (ppb). The rule also 
established an Action Level, which is a combined measurement of 
lead amounts and prevalence at which the PWS is required to act 
to reduce the lead. The Action Level is defined as 10 percent 
of homes tested exceeding 15 ppb. At this level, the system is 
required to increase monitoring and testing, optimize corrosion 
control treatment and inform the public about the exceedances. 
If the corrosion control treatment does not result in a 
decrease in households that exceed the action level, the system 
is required to begin replacing lead service lines at a rate of 
7 percent per year.
    Unlike other contaminants regulated under the Safe Drinking 
Water Act, lead is measured inside the residence or business, 
not at the treatment plant, because it leaches into the water 
from the service lines.
    In accordance with the rule, the Washington Aqueduct, owned 
and operated by the U.S. Corps of Engineers, installed the 
corrosion control treatment in 2000. During the monitoring 
period July 2000-June 2001, WASA reported sampling 50 homes. 
However in its compliance order, docket No. SDWA-03-2004-0259 
DS, EPA found that of those 50 samples, 2 were taken from a 
previously sampled location. WASA was required to sample from 
50 unique locations during this time. Five of these samples 
were taken outside of the required sampling period. EPA also 
found that WASA failed to report six samples that were taken. 
EPA found that if WASA had included these unreported samples, 
WASA would have exceeded the action level of lead in 90th 
percentile during July 2000 - June 2001 timeframe.
    In August 2002, WASA reported that during the compliance 
period July 1,2001 - June 30, 2002, it exceeded the action 
level for lead. The lead level in first draw water samples from 
the 90th percentile of 53 residences tested was 75 ppb, well 
above the action level of 15 ppb. WASA was required to 
implement a lead in drinking water public education program, 
and to initiate lead service line replacement at a rate of 7 
percent per year.
    From January 2003 through December 2003, WASA continued to 
test homes and continued to exceed the action level. As such, 
the Agency was required to continue it public education program 
and its lead service line replacement efforts.
    EPA included several categories of findings regarding 
WASA's compliance with the lead and copper rule in their 
consent order which include a failure to take samples within 
the monitoring period, a failure to conduct follow-up 
monitoring of partially replaced lead service lines and a 
failure to comply with requirements for public service 
announcements and to use required language in written materials 
provided to the public as well as a failure to perform 
corrective action. It should be noted that EPA was informed by 
WASA of these events and the data and signed off on the public 
service announcements.
    The EPA consent order requires WASA to take several 
corrective actions including:
      Plans for updating its lead service line 
inventory and reporting to EPA.
      Requirement for WASA to strongly encourage full 
replacement of lead service lines with owners paying for their 
portion, including submission of a plan to EPA for encouraging 
homeowners to agree to full replacement.
      Requirement for WASA to develop and submit a 
public education plan including public health issues, steps to 
reduce health risks and steps to address EPA recommendations on 
effectiveness of prior public education.
      Requirement for WASA to document to EPA that they 
have provided water filers to all customers suspected or known 
to have lead contamination at no charge as well as those with 
unknown service line materials.
      Requirement for WASA to submit detailed sampling 
plans to EPA.
    On August 23, 2004, WASA began adding orthopohsophate to 
the drinking water supply through the city to reduce the 
corrosivity of the water supply in an effort to reduce lead 
levels. EPA estimates that it will take 6 months to detect a 
reduction in lead levels.
    One of the leading complaints against WASA throughout this 
period is that the agency failed to communicate effectively 
with the public about how many homes had exceeded the action 
level (and by how much) and what residents should do to protect 
themselves. On February 27, 2004, D.C. Mayor Anthony Williams 
and Councilmember Carol Schwartz notified Chairman Inhofe by 
letter that they had ``established the Interagency Task Force 
on Lead in Drinking Water [which] has been meeting weekly to 
look into ways [to, in addition to other actions,] identify 
funding sources to help pay for [lead pipe] replacements and 
make certain [the District of Columbia Water and Sewer 
Authority] and the D.C. Department of Health communicate 
critical information to citizens promptly and clearly.'' In 
testimony before the Subcommittee on Fisheries, Wildlife and 
Water subcommittee on April 7, 2004, the Director of EPA's 
Region III, Donald Walsh, stated, ``public education efforts 
were ineffective, and we believe, not fully compliant in all 
instances with EPA rules.'' Additional testimony from a risk 
management expert and D.C. residents corroborated the view that 
public notification and education efforts were ineffective.
    To speed the corrective efforts of EPA, Mayor Williams, the 
Council of the District of Columbia, and the D.C. Water and 
Sewer Authority, the committee believes additional assistance 
and scrutiny must be provided to the city as well as nation's 
schools. Therefore, this section would authorize the National 
Academy of Sciences to conduct a study, first of the situation 
in D.C. to determine the exact cause of the problem. The 
Academy is then to assess the situation in other cities with 
lead service lines to determine if they too have encountered 
elevated lead levels in their drinking water. Congress and the 
EPA must fully understand the scope and the cost of the problem 
before proposing changes that will affect all cities and that - 
though well-intentioned - may fail to address the problems in 
D.C.
    The outrage of residents in D.C. about inadequate and 
misleading information about a known risk in their drinking 
water has motivated the committee to authorize a $20 million 
grant to the District of Columbia to take whatever actions are 
needed to mitigate the problem, including assess its 
infrastructure, test water supplies, distribute filters, 
evaluate chemical additives, replace pipes and evaluate and 
improve communication with the public.
    Finally, concerns remain about the safety of drinking water 
in D.C. schools. Similarly, there may be lead service lines and 
lead in drinking water coolers in other schools throughout the 
country. EPA recommends that school districts test for lead in 
their drinking water to ensure that it is safe for consumption. 
The individual school buildings may still have too much lead in 
the drinking water because of lead water fixtures. As such, the 
bill would provide funds to schools to reimburse them for costs 
associated with testing their water, removing water coolers and 
disseminating information, including test results, to the 
school community.
Sec. 211. Small public water system assistance program.
Summary
    This section establishes a new program under the Safe 
Drinking Water Act to assist PWSs and Indian Tribes with 
meeting the costs of drinking water regulations.
    Section 1471 establishes a definition for an eligible 
activity as an activity, including source water protection 
projects, carried out by an eligible entity to ensure 
compliance with a national primary drinking water regulation. 
It cannot include any activity to increase the population 
served by a public water system unless the project is necessary 
to achieve compliance or provide an unserved population with a 
safe water supply.
    Section 1471 also defines an eligible entity as a small 
public water system or Tribe that serves a community that is 
disadvantaged, as determined by the State, or may become 
disadvantaged as a result of a project; or a public water 
system that will incur $3 million or more in compliance costs. 
It also defines a small public water system as one serving less 
than 15,000.
    Section 1472(a) establishes a program within EPA to assist 
small public water systems in carrying out eligible activities.
    Section 1472(b) requires that priority be given to those 
projects that address the most serious risks to human health 
from lack of compliance with national primary drinking water 
regulations; are necessary to ensure compliance with national 
primary drinking water regulations or assist systems serving 
communities that are most in need based on affordability 
criteria established by the State.
    Section 1472(c) also authorizes the Administrator to use 
not less than 1.5 percent of the funds made available under 
this Title for grants to technical assistance providers to help 
eligible entities assess their needs, identify additional 
funding sources and plan, implement and maintain and eligible 
activity. Eligible entities are limited to using not more than 
5 percent of the funds received under this Title for technical 
assistance.
    Section 1472(d) further requires the Administrator to 
reserve not less than 3 percent of funds for projects by Indian 
Tribes. The same eligibilities and limitations apply to 
projects carried out by Tribes. Specific program priority 
requirements are provided for Tribes.
    Section 1472(e) limits funds to those projects which will 
aid in compliance with the Act, those that restructure or 
consolidate facilities to achieve compliance or in cases where 
restructuring and consolidation are not practicable, if the 
Administrator determines that the system has made a good faith 
effort to comply with and will adhere to an enforceable 
schedule to comply; or if the Administrator determines that the 
system lacks the technical, financial and managerial capacity 
to ensure compliance.
    Section 1472(f) limits the Federal share of any project to 
80 percent of the cost of the project. The Administrator may 
waive the cost-share in some circumstances.
    Section 1472(g) requires that one year after disbursement, 
any unused grants be returned to the Administrator for 
distribution to other recipients.
    Section 1473 requires the Administrator to submit a report 
to the Committee on Environment and Public Works and the 
Committee on Energy and Commerce that lists the activities 
being carried out with the grants; the number of grants and the 
location of the recipient; each eligible entity that receives a 
grant; the amount of each grant and description of activity 
funded.
    Section 1474 authorizes $200 million per year for fiscal 
years 2005 through 2008.
Discussion
    While the infrastructure gap is affecting communities of 
all sizes in all parts of the country, the struggle to meet 
rising costs is particularly difficult for small communities. 
As Elmer Ronnebaum, the General Manager of Kansas Rural Water, 
testified on February 26, 2002 before the Committee on 
Environment and Public Works,

    ``Many of the regulations will force small towns to come up 
with millions in financing - many systems will be stressed to 
comply. I think it is significant to observe a new dynamic in 
EPA regulations: the regulation of naturally occurring 
contaminants and the regulations of operations and maintenance 
in utilities. The result of this new effort by EPA will be to 
greatly expand the number of systems forced into costly 
compliance with EPA rules. For example, very few systems were 
required to treat for EPA's previous rules on organic 
contaminants, many with anthropogenic origins. However, the 
forthcoming arsenic rule could capture as many as 4,000 
communities; this will greatly drive the demand for additional 
funding resources. Upcoming EPA rules that may be expensive in 
thousands of rural communities include: standards for 
certification of operators, filter backwash, radon, surface 
water treatment rules, arsenic, disinfection byproducts, ground 
water disinfection, etc.''

    This section of S. 2550 seeks to help communities address 
costs due to compliance with the Safe Drinking Water Act. 
Systems are faced with complying with several rules over the 
next few years, including the new standard for arsenic (66 FR 
6975). According to EPA's cost estimate, small systems could 
see an increase of up to $327 per year. If the city is one like 
Wewoka, Oklahoma that is home to 3,700 residents, 20 percent of 
whom are unemployed, a $327 increase in water fees is 
exorbitant.\14\ Communities are also struggling to comply with 
the Long Term 1 Enhanced Surface Water Treatment Rule (67 FR 
1811) and for those systems that chemically treat their water, 
the Stage 1 Disinfectants and Disinfection Byproducts Rule (63 
FR 69389).
---------------------------------------------------------------------------
     \14\U.S. Congress. Committee on Environment and Public Works. The 
Cost to Local Governments to Implement the Clean Water Act and the Safe 
Drinking Water Act. Hearing. 108th Congress, 2nd session, July 26, 
2002. Rick Bourgue, City Manager, City of Wewoka, OK.
---------------------------------------------------------------------------
    This section of the bill seeks to help these systems meet 
the costs associated with these and other drinking water 
regulations. It would provide grants to small systems and 
Tribes to assist them in coming into compliance with the 
statute. Those systems who are not in compliance, face a public 
health threat or are disadvantaged are to receive priority 
consideration. Funds are limited to those projects which will 
aid in compliance with the Act. It is unlikely that sufficient 
funding will be provided to this program to give every system 
eligible for funds enough money to fully comply with the Act. 
However, funds may be made available that will move some 
systems much closer to compliance than if they had not received 
any Federal funding.
    The system should consider restructuring and consolidation 
to come into compliance. If these options are not practicable, 
and the system is not in compliance with the Act, the system 
must have made a good faith effort to comply and will adhere to 
an enforceable schedule to comply. Funds can also be used to 
assist those systems that lack the technical, financial and 
managerial capacity to ensure compliance.
Sec. 212. Small public water system assistance program.
Summary
    This section establishes a new program under the Safe 
Drinking Water Act to assist PWSs and Indian Tribes with 
meeting the costs of drinking water regulations.
    Section 1471 establishes a definition for an eligible 
activity as an activity, including source water protection 
projects, carried out by an eligible entity to ensure 
compliance with a national primary drinking water regulation. 
It cannot include any activity to increase the population 
served by a public water system unless the project is necessary 
to achieve compliance or provide an unserved population with a 
water supply.
    Section 1471 also defines an eligible entity as a small 
public water system or Tribe that serves a community that is 
disadvantaged, as determined by the State, or may become 
disadvantaged as a result of a project; or a public water 
system that will incur $3 million or more in compliance costs. 
It also defines a small public water system as one serving less 
than 15,000.
    Section 1472(a) establishes a program within EPA to assist 
small public water systems in carrying out eligible activities.
    Section 1472(b) requires that priority be given to those 
projects that address the most serious risks to human health 
from lack of compliance with national primary drinking water 
regulations; are necessary to ensure compliance with national 
primary drinking water regulations or assist systems serving 
communities that are most in need based on affordability 
criteria established by the State.
    Section 1472(c) also authorizes the Administrator to use 
not less than 1.5 percent of the funds made available under 
this Title for grants to technical assistance providers to help 
eligible entities assess their needs, to identify additional 
funding sources and plan, implement and maintain and eligible 
activity. Eligible entities are limited to using not more than 
5 percent of the funds received under this Title for technical 
assistance.
    Section 1472(d) further requires the Administrator to 
reserve not less than 3 percent of funds for projects by Indian 
Tribes. The same eligibilities and limitations apply to 
projects carried out by Tribes. Specific program priority 
requirements are provide for the tribes.
    Section 1472(e) limits funds to those projects which will 
ensure compliance with the Act, those to restructure or 
consolidate facilities to achieve compliance or in cases where 
restructuring and consolidation are not practicable, if the 
Administrator determines that the system has made a good faith 
effort to comply and will adhere to an enforceable schedule to 
comply; or if the Administrator determines that the system 
lacks the technical, financial and managerial capacity to 
ensure compliance.
    Section 1472(f) limits the Federal share of any project to 
80 percent of the cost of the project. The Administrator may 
waive the cost-share in some circumstances.
    Section 1472(g) requires that one year after disbursement, 
any unused grants be returned to the Administrator for 
distribution to other recipients.
    Section 1473 requires the Administrator to submit a report 
to the Committee on Environment and Public Works and the 
Committee on Energy and Commerce that lists the activities 
being carried out with the grants; the number of grants and the 
location of the recipient; each eligible entity that receives a 
grant; the amount of each grant and describes the activity 
funded.
    Section 1474 authorizes $1 billion per year for 2005 
through 2008.
Discussion
    This section is fundamentally the same as the preceding 
section with two exceptions. This section limits funding to 
those systems for whom the money will ensure, instead of aid, 
compliance. It further authorizes $1 billion a year instead of 
$200 million a year.

                        Title III--Miscellaneous

Sec. 301. Definition of Administrator.
Summary
    This section clarifies that references to the 
``Administrator'' are to the Administrator of the Environmental 
Protection Agency.
Sec. 302. Demonstration grant program for water quality enhancement and 
        management.
Summary
    Section 302(a) establishes a nationwide demonstration grant 
program within EPA to promote innovations in technology and 
alternative approaches to water quality management as well as 
reduce costs to municipalities incurred in complying with the 
CWA and the SDWA.
    Section 302(b) requires municipal applicants to submit to 
the Administrator a plan that is developed in coordination with 
the State in which the municipality is located and interested 
stakeholders. It further requires the applicant to describe the 
water impacts it seeks to address, include a strategy to 
address the water quality program and achieve the same goals 
that could be achieved using more traditional methods or those 
required by the CWA and the SDWA and include a schedule for 
achieving the goals.
    Section 302(b) further defines the types of projects that 
are eligible to include those that address excessive nutrient 
growth; urban or rural population pressures; lack of an 
alternative water supply; difficulty in water conservation and 
efficiency; lack of support tools and technologies; lack of 
monitoring or data analysis; nonpoint source water pollution; 
sanitary and combined sewer overflows; problems with naturally 
occurring constituents of concern; problems with erosion or 
excess sediment; new approaches to water treatment, 
distribution and collection and new methods for collecting and 
treating wastewater.
    The Administrator much ensure, to the maximum extent 
practicable, that the projects are diverse geographically, in 
terms of the technologies tested and the nontraditional 
approaches used and that each category of projects described 
above is adequately represented. Higher priority should be 
given to projects that address multiple problems and are 
regionally applicable.
    The Administrator must ensure, to the maximum extent 
practicable, that at least one community serving less than 
10,000 receives a grant each year and that no municipality 
receives more than 25 percent of the funds.
    This section also limits the Federal cost share to 80 
percent which the Administrator may waive for affordability 
reasons.
    Section 302(c) requires each grant recipient to report to 
the Administrator on the progress of the project after one, two 
and 3 years. The Administrator must report to Congress 2 years 
after enactment on the results of the demonstration program.
    Section 302(d) requires the Administrator, to the maximum 
extent practicable, to incorporate the results of the projects 
into programs administered by the Administrator.
    Section 302(e) authorizes the Administrator to award grants 
and enter into cooperative agreements with research 
institutions, educational institutions and other appropriate 
entities for research and development on the use of innovative 
and alternative technologies to improve water quality or 
drinking water supply. Eligible projects include those to 
increase the effectiveness and efficiency of public water 
supply systems; to encourage the use of innovative or 
alternative technologies or approaches related to water supply 
or availability; and to increase the effectiveness and 
efficiency of treatment works.
    This section authorizes $20 million per year from fiscal 
year 2005 through fiscal year 2009 to carry out this Title.
    Section 302(f) authorizes $20 million for each year from 
fiscal year 2005 through fiscal year 2009 to carry out Section 
302 except (e).
Discussion
    One important aspect of reducing the infrastructure 
financing gap is finding more affordable alternatives for POTWs 
and PWSs. As the Deputy Assistant Administrator from EPA's 
Office of Water testified before the committee on February 26, 
2002:

    ``This strategy to renew our water and wastewater 
infrastructure . . . puts a high premium on optimizing the 
efficient use of our current capital assets and the new 
investments we must make. That will require the use of 
innovative technologies for improved services at lower life-
cycle costs, which in turn means supporting research and 
development on these innovative technologies.''

    To further encourage research into innovative technologies, 
Section 302 establishes in the EPA both a research and 
development program and a demonstration grant program. The 
research program is aimed at increasing the effectiveness and 
efficiency of public water supply systems, encouraging the use 
of innovative or alternative approaches to water supply or 
availability and increasing the effectiveness of the treatment 
works. It is authorized at $20 million per year from fiscal 
year 2005 through fiscal year 2009.
    The demonstration grant program targets water quality 
management and enhancement. It requires at least a 20 percent 
non-Federal cost share for projects. The program will promote 
innovations in technology and alternative approaches to water 
quality management and supply, with the goal of reducing 
municipal costs of complying with the Clean Water Act and the 
Safe Drinking Water Act. Municipalities selected for programs 
must describe a strategy by which the demonstration grants 
could achieve similar results as those mandated by the two 
statutes or those that could be achieved by traditional water 
quality methods. Grant recipients must submit annual reports to 
EPA which must submit a report to Congress. The Administrator 
must ensure to the maximum extent practicable that innovative 
technologies, geographic distribution, and non-traditional 
approaches are represented.
    The National League of Cities, the Conference of Mayors, 
and the American Metropolitan Sewerage Association (AMSA) 
testified in favor of demonstration grant program at a February 
2002 hearing. AMSA testified that such a program is ``vitally 
important.''
Sec. 303. Cost of service study.
Summary
    This section requires the National Academy of Sciences 
(NAS) to identify existing standards for affordability; 
determine the manner in which those standards are determined; 
determine how affordability differs depending on community size 
and location and study the extent to which affordability 
affects the decision of a utility to increase rates. This 
section also requires the NAS to evaluate the factors and 
characteristics that are required for a community to be 
considered disadvantaged.
Discussion
    Small and disadvantaged communities often struggle to meet 
regulatory costs as well as to maintain their POTWs and PWSs. 
Whether a community receives additional financial assistance in 
meeting their obligations often depends on how States define 
disadvantaged. Further, how the EPA, the States and the 
communities themselves define affordable has a direct impact on 
whether the community as a whole and individual ratepayers 
receive additional financial assistance.
Sec. 304. State revolving fund review process.
Summary
    This section requires the Administrator to consult with 
States, other Federal agencies, and utilities to identify ways 
to expedite and improve the application and review process for 
the SRFs and take such administrative action as authorized 
under existing law to achieve that goal. The Administrator 
shall provide to Congress a report that contains 
recommendations for legislation to further improve the 
processes.
Discussion
    While each State is required to comply with several Federal 
requirements, each also imposes many of its own. This provision 
requires the Administrator to work with States and other 
agencies to develop recommendations for streamlining the 
application process and lessening the amount of time it takes 
to receive funds. One of the goals of the Water Infrastructure 
Financing Act is make the SRF more user-friendly. This study is 
one step in that effort.
Sec. 305. Southeast Colorado safe drinking water supply.
Summary
    Section 305 authorizes $85 million for the Southeast 
Colorado Water Activity Enterprise to assist communities in 
Pueblo and Prowers Counties, Colorado to construct a water 
transmission line from the Pueblo Reservoir to the city of 
Lamar, Colorado.
Discussion
    The Arkansas Valley Conduit originally received 
congressional authorization in the 1960's as part of the 
Fryingpan-Arkansas Project to provide abundant, clean water to 
the people of Southeast Colorado. At the time of authorization, 
the Federal Government had already deemed the Arkansas River as 
unacceptable for drinking water purposes, yet forty years have 
passed without construction. Recent drought conditions have 
worsened the quality and created water shortages along the 
river. Selenium and other contaminants coupled with the drought 
have seriously imperiled Southeast Colorado's drinking water 
supplies, leaving expensive and inefficient treatment processes 
as the only option. Feasibility reports have shown that 
Southeast Colorado lacks the ability to pay for such treatment 
facilities and therefore must rely on Federal assistance. The 
studies have shown that the Conduit is a viable solution to the 
drinking water situation. This section provides funding to the 
communities to construct the conduit. The committee expects 
other funding sources will be needed to complete the project. 
While the committee historically does not fund individual water 
projects, because the Department of Interior failed to follow 
through on construction of the project, already authorized by 
Congress, the committee believes this is an appropriate project 
to reiterate congressional support for by providing an 
additional authorization.
Sec. 306. Assessment of perchlorate contamination.
Summary
    Requires the U.S. Geological Survey to conduct a nationwide 
assessment of sites contaminated with perchlorate and the 
geological conditions of those sites.
Discussion
    Perchlorate is both naturally occurring and man made. While 
the majority of perchlorate manufactured in the U.S. is used as 
solid rocket fuel, perchlorate is also used in such widely 
distributed consumer products as fireworks, road flares, and 
automobile airbags. In addition, prior to the development of 
more modern drugs, perchlorate was used as a drug to treat 
thyroid disorders such as Graves disease. Perchlorate is still 
approved by the FDA as a drug and is administered in 
conjunction with certain medical imaging techniques. Because of 
such widespread use perchlorate has been discovered in both 
soil and water samples. In 1998, perchlorate was placed on the 
EPA's Contaminant Candidate List. Those substances placed on 
the list are then considered for regulation. However, the EPA 
concluded that it could not regulate the contaminant at that 
time because the Agency lacked both a risk assessment and 
occurrence data.
    In 1999, as part of the Unregulated Contaminant Monitoring 
Rule, all large PWSs were to monitor for perchlorate over the 
subsequent 2-year period to determine if large amounts of the 
public were being exposed to perchlorate in their drinking 
water. The results of the monitoring of treated drinking water, 
not source water, found that 2 percent of the 26,000 results 
showed detectable levels of perchlorate.
    The EPA also initiated a risk assessment for perchlorate. 
Currently, there is not a scientific consensus on what level of 
perchlorate must be consumed to create an adverse health 
effect. Because of the lack of consensus, in March 2003, EPA 
and the Department of Defense requested the National Academy of 
Sciences advise EPA on questions related to its draft 
perchlorate risk assessment. The NAS' assessment of EPA's 
report is due in January 2005. The fiscal year 2004 Department 
of Defense Authorization Act required the Agency to have an 
independent epidemiological study and endocrinological review 
of human exposure to perchlorate in drinking water.
    Section 306 requires the U.S. Geological Survey to conduct 
an assessment of sites contaminated by perchlorate to provide 
data on the extent of water contamination.
Sec. 307. National estuary program.
Summary
    Reauthorizes the National Estuary Program at $35 million 
for an additional 5 years through 2010.
Discussion
    In 1987, Congress established the National Estuary Program 
(NEP) by adding Section 320 to the Clean Water Act. The goal of 
Section 320 is the promotion of comprehensive conservation and 
management plans (CCMPs) for estuaries of national significance 
through the collaborative voluntary efforts of Federal, State, 
local, non-profit and private interests. Today, the NEP 
includes 28 estuaries in 18 States and Puerto Rico. All 28 
estuary programs are in the process of implementing their 
CCMPs. The NEP is currently authorized at $35 million annually 
through fiscal year 2005. This legislation would reauthorize 
the NEP at $35 million annually through FY2010.
Sec. 308. Sewage control technology grant program.
Summary
    Adds a new section to the Federal Water Pollution Control 
Act in which $100 million is authorized for 2005 through 2009 
to provide grants to POTWs in the Chesapeake Bay Watershed that 
treat at least 500,000 gallons of wastewater per day and 
install technologies that are designed to reduce total nitrogen 
in discharged wastewater to an average annual concentration of 
5 milligrams per liter.
Discussion
    Excessive nutrients, including nitrogen, remain one of the 
most serious pollution problems facing the Chesapeake Bay. The 
overabundance of nitrogen and phosphorous deplete the oxygen 
levels in the Bay, causing a condition known as hypoxia. Sea 
life virtually disappears in hypoxic water. Recent modeling of 
EPA's Bay Program has found that nutrient discharges must be 
reduced by more than 35 percent in order to fully restore the 
Bay. Sources that must reduce their nitrogen outputs include 
municipal wastewater treatment plants.
    There are 304 major wastewater treatment plants in the 
Chesapeake Bay watershed: Pennsylvania, 123, Maryland, 65, 
Virginia, 86, New York, 18, Delaware, 3, Washington, DC, 1, and 
West Virginia, 8. These plants contribute about 60 million 
pounds of nitrogen per year - one-fifth - of the total load of 
nitrogen to the Bay. Given the large amount of nitrogen being 
released from POTWs, one way to effectively address this 
problem is to upgrade these plants to remove more nitrogen from 
their effluent. The average secondary treatment plant discharge 
contains 12-16 milligrams of nitrogen per liter; some 
techniques, such as biological nutrient removal can cut this 
nitrogen discharge level by over half. Upgrading these plants 
with nutrient removal technologies to achieve nitrogen 
reductions of 3 mg/liter would remove 46 million pounds of 
nitrogen in the Bay each year or 40 percent of the total 
nitrogen reductions needed.
Sec. 309. Special water resources study.
Summary
    Section 309(a) adds the Secretary of Homeland Security to 
the Water Resources Council.
    Section 309(b) authorizes the Water Resources Council to 
carry out a study of water management programs used by all 
levels of government and the private sector to increase water 
supplies and improve availability; consult with agencies and 
entities to develop recommendations for a comprehensive water 
strategy. The water strategy must:
    (i) Respect the primary role of States in regulating water 
rights and uses,
    (ii) Identify incentives to ensure an adequate and 
dependable supply of water through 2054,
    (iii) Suggest strategies to avoid increased mandates on 
State and local governments,
    (iv) Eliminate duplication and conflict among Federal 
programs,
    (v) Considers all available technologies and methods to 
optimize water supply reliability, availability, and quality,
    (vi) Recommends means of capturing excess water and flood 
water for conservation and use in drought,
    (vii) Suggests financing options for supply and public 
works projects,
    (viii) Suggests strategies to conserve existing water 
supplies, including repairing aging infrastructure,
    (ix) Includes other objectives relating to the effective 
management of water supply to ensure reliability, availability 
and quality.
    This section further requires the Council to evaluate 
Federal water programs in existence on the date of enactment 
and submit to Congress and the President recommendations to 
eliminate discrepancies and duplication and any other 
circumstances that interfere with the effective operation of 
the programs. The Council also must develop and make publicly 
available water planning models.
    The Council is required to develop and coordinate public 
awareness activities to provide the public with access to 
understandable information on water supply, reuse and 
conservation. The Council must consult with interested groups 
including those representing the agriculture, fisheries and 
forestry industries, fire management interests, rural and urban 
water associations, environmental interests, engineering and 
construction interests, the scientific community that is 
concerned with climatology and hydrology, resource dependent 
businesses and any other group the Council considers necessary.
    The Council is required to submit reports every 180 days 
after the Council's first meeting to the President and relevant 
congressional committees. A final report must be submitted no 
later than 3 years after the first meeting of the Council which 
details the Council's findings and conclusions, recommendations 
for legislation and other policies. Section 309(c) authorizes 
$9 million for 2005 to be used until expended.
Discussion
    Water supply is growing concern not only in the western 
United States, which is commonly associated with water 
shortages and fights, but also in the eastern United States 
which recently suffered from a long drought. While water supply 
is and should continue to be a State governed issue, there are 
several Federal programs that address the issue of supply. 
Better coordination of these programs may be necessary. 
Further, the Federal Government may be able to provide useful 
resources, information and tools to the States while respecting 
their primacy over the issue.
    The U.S. Water Resources Council, established by the Water 
Resources Planning Act of 1965, had been responsible for 
studying the nation's water and related land resources. It 
prepared periodic assessments to determine whether these 
resources were adequate to meet national water requirements and 
developed important economic and environmental criteria for 
water projects - known as the Principles and Guidelines - that 
are still used by Federal water resource planning agencies. 
Under President Carter, it was suggested that the WRC's role be 
expanded to include greater regulatory authority and stronger 
review of water projects. This proved very unpopular with many 
stakeholders and the Council was eliminated.
    This section would reauthorize the Council to develop 
recommendations for a comprehensive water strategy which must 
respect the rights of States, avoid mandates on local and State 
governments while suggesting options for addressing water 
shortages, means of capturing excess water and financing water 
projects. The Council is also charged with assessing current 
data and making recommendations about duplication among the 
Federal agencies with a role in water supply. The Council is 
charged with developing and making publicly available water 
planning models and initiating a public information campaign on 
water reuse and conservation.

                          Legislative History

    On June 21, 2004, Senator Crapo, for himself, Senator 
Inhofe and Senator Murkowski, introduced the Water 
Infrastructure Financing Act (S. 2550). The bill was read twice 
and referred to the Committee on Environment and Public Works. 
The committee met on June 23, 2004 to consider the bill. The 
bill, as amended, was ordered reported on June 23, 2004.

                                Hearings

    The committee has been working on legislation to 
reauthorize the two SRFs and provide additional resources to 
communities throughout the 107th and 108th Congresses. The 
Subcommittee on Fisheries, Wildlife, and Water held four 
hearings related to clean water and drinking water programs and 
one legislative hearing on S. 1961. The full committee held one 
legislative hearing on S. 1961.
    On March 27, 2001, The Subcommittee on Fisheries, Wildlife, 
and Water held a hearing on water and wastewater infrastructure 
needs. Testimony was received from Hon. Christine Todd Whitman, 
Administrator, Environmental Protection Agency; Mr. Jon 
Sandoval, Chief of Staff, Idaho Department of Environmental 
Quality, Boise, ID; Mr. David Struhs, Secretary, Florida 
Department of Environmental Protection, Tallahassee, FL; Mr. 
Harry Stewart, Director, Water Division, New Hampshire 
Department of Environmental Services, Concord, NH; and Mr. 
Allen Biaggi, Administrator, Nevada Department of Conservation 
and Natural Resources, Division of Environmental Protection, 
Carson City, NV.
    On April 30, 2001 in Columbus, Ohio, the Subcommittee 
Fisheries, Wildlife, and Water held a field hearing, focusing 
on the types of water infrastructure challenges facing local 
communities in that region. Testimony was received from Hon. 
Lydia Reid, Mayor of Mansfield, OH; Hon. Robert Vicenzo, Mayor 
of St. Clairsville, OH; Mr. Christopher Jones, Director, Ohio 
Environmental Protection Agency; Columbus, OH; Mr. Erwin Odeal, 
Executive Director, Northeast Ohio Regional Sewer District, 
Cleveland, OH; Mr. Robert Stevenson, Commissioner, Department 
of Public Utilities, Division of Water/Wastewater, Toledo, OH; 
Mr. Patrick T. Karney, P.E., Director, Metropolitan Sewer 
District of Greater Cincinnati, Cincinnati, OH; and Mr. Patrick 
Gsellman, Environmental Supervisor, Bureau of Engineering, 
Akron, OH.
    On October 31, 2001, the Subcommittee on Fisheries, 
Wildlife, and Water held an oversight hearing on innovative 
financing techniques for water infrastructure improvements. 
Testimony was received by Mr. G. Tracy Mehan III, Assistant 
Administrator, Office of Water, Environmental Protection 
Agency; Mr. Stephen E. Howard, Senior Vice President, Lehman 
Brothers; Mr. Rick Farrell, Executive Director, Council of 
Infrastructure Financing Authorities; Mr. Peter L. Cook, 
Executive Director, National Association of Water Companies; 
Mr. Harold J. Gorman, Executive Director, New Orleans Sewage 
and Water Board, on behalf of the Association of Metropolitan 
Water Agencies; and Mr. Paul Pinault, Executive Director, 
Narragansett Bay Commission, on behalf of the Association of 
Metropolitan Sewerage Agencies.
    On November 14, 2001, the Subcommittee on Fisheries, 
Wildlife, and Water held a hearing on water supply. Testimony 
was received from Hon. Mike Parker, Assistant Secretary of the 
Army for Civil Works; Mr. John Keys, Commissioner for the 
Bureau of Reclamation, Department of the Interior; Mr. Tom 
Weber, Deputy Chief of Programs, Resources Conservation 
Service, Department of Agriculture; Ms. Ane Diester, Associate 
Vice President, Metropolitan Water District of Southern 
California, testifying as the non-Federal Chair of the National 
Drought Council; Mr. Jay Rutherford, Director, Water Supply 
Division, Vermont Department of Environmental Conservation, on 
behalf of the Association of State Drinking Water 
Administrators; Mr. Ken Frederick, Senior Fellow, Resources for 
the Future; and Mr. Leland `Roy' Mink, Director, Idaho Water 
Resources Research Institute.
    On February 26, 2002, the Committee on Environment and 
Public Works held the first legislative hearing on S. 1961 and 
other water infrastructure related bills. Testimony was 
received from Senator Jon Kyl; Mr. Ben Grumbles, Deputy 
Assistant Administrator for Water, Environmental Protection 
Agency; Hon. Douglas H. Palmer, Mayor of Trenton, NJ and 
chairman of the Urban Water Council of the Conference of 
Mayors; Hon. Joseph A. Moore, Alderman of the city of Chicago, 
on behalf of the League of Cities; Ms. Nancy Stoner, Director, 
Clean Water Project, Natural Resources Defense Council; Mr. 
Paul Schwartz, National Policy Director, Clean Water Action; 
Mr. Bill Kukurin Associated Builders and Contractors; Mr. Jim 
Barron, President, Ronkin Construction, on behalf of the 
National Utility Contractors Association; Mr. Terry Yellig, 
Building Trades Attorney, Sherman, Dunn, Cohen, Leifer & 
Yellig, on behalf of the International Union of Operating 
Engineers.
    On February 28, 2002, the Subcommittee on Fisheries, 
Wildlife, and Water held the second legislative hearing on S. 
1961 and other water infrastructure related bills. Testimony 
was received from Senator Paul S. Sarbanes; Mr. Robert Hirsch, 
Associate Director of Water, U.S. Geological Survey; Mr. Andrew 
M. Chapman, President, Elizabethtown Water Company, on behalf 
of the National Association of Water Companies; Mr. Ed 
Archuleta, General Manager, El Paso Water Utilities, on behalf 
of the Association of the Metropolitan Water Agencies; Mr. Paul 
Pinault, Executive Director, Narragansett Bay Commission on 
behalf of the Association of Metropolitan Sewerage Agencies; 
Mr. Elmer Ronnebaum, General Manager, Kansas Rural Water 
Association, on behalf of the National Rural Water Association; 
Mr. Howard Neukrug, Director, Office of Watershed of the 
Philadelphia Water Department, on behalf of the American Water 
Works Association; Mr. Tom Morrissey, President, Association of 
State and Interstate Water Pollution Control Administrators; 
and Mr. Jay L. Rutherford, P.E., Director, Water Supply 
Division for the Vermont Department of Environmental 
Conservation, on behalf of the Association of State Drinking 
Water Administrators.
    On February 15, 2002, Senators Graham, Crapo, Jeffords and 
Smith introduced S. 1961, the Water Investment Act of 2002. The 
committee reported the bill on May 17, 2002 by a vote of 13 to 
6.
    On June 21, 2004, Senators Crapo, Inhofe and Murkowski 
introduced S. 2550, the Water Infrastructure Investment Act of 
2004.

                            Roll Call Votes

    The Committee on Environment and Public Works met to 
consider S. 2550 on June 23, 2004. A manager's amendment 
offered by Senators Inhofe and Crapo was agreed to by voice 
vote.
    An amendment filed by Senator Jeffords was accepted by 
unanimous consent. The Amendment makes technical changes to the 
projects eligible for assistance.
    An amendment filed by Senator Voinovich was accepted by 
unanimous consent. The amendment requires the States to use 2 
percent of their Clean Water SRF for water quality management 
planning.
    An amendment filed by Senator Jeffords was accepted by 
unanimous consent. The amendment allows States to use SRF funds 
to provide grants to local watershed groups to capitalize local 
revolving loan funds to provide resources to nontraditional 
projects.
    A substitute amendment offered by Senator Jeffords was 
defeated by rollcall with 9 ayes and 10 nays. Senators 
Jeffords, Baucus, Reid, Graham, Leiberman, Boxer, Wyden, Carper 
and Clinton voted for the amendment. Senators Inhofe, Warner, 
Bond, Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas and 
Allard voted against the amendment.
    An amendment offered by Senator Jeffords to authorize a 
program to address lead in drinking water was defeated by roll 
call vote with 9 ayes and 10 nays. Senators Jeffords, Baucus, 
Reid, Graham, Leiberman, Boxer, Wyden, Carper and Clinton voted 
for the amendment. Senators Inhofe, Warner, Bond, Voinovich, 
Crapo, Chafee, Cornyn, Murkowski, Thomas and Allard voted 
against the amendment.
    A Bond second degree amendment to the Jeffords amendment 
which would have required EPA, before reducing the acceptable 
level of lead in fixtures to .2 percent as directed in the 
Jeffords' amendment to ensure there would not be a loss of jobs 
in the brass and cooper fixture industry was defeated by voice 
vote.
    An amendment offered by Senator Crapo to authorize funds 
for the District of Columbia to address lead in its drinking 
water; authorize a study by the National Academy of Sciences 
into the D.C. lead situation and to determine if a nationwide 
problem exists and to provide funds to mitigate lead in 
drinking water in the nation's schools passed by roll call with 
13 ayes and 6 nays. Senators Allard, Bond, Carper, Chafee, 
Cornyn, Crapo, Graham, Murkowski, Reid, Thomas, Voinovich, 
Warner and Inhofe voted for the amendment. Senators Baucus, 
Boxer, Clinton Lieberman, Wyden, and Jeffords voted against the 
amendment.
    An amendment offered by Senator Jeffords to require States 
to look at local development plans as part of their continuing 
planning process outlined section 303(e) of the CWA was 
defeated by roll call vote with 9 ayes and 10 nays. Senators 
Jeffords, Baucus, Reid, Graham, Leiberman, Boxer, Wyden, Carper 
and Clinton voted for the amendment. Senators Inhofe, Warner, 
Bond, Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas and 
Allard voted against the amendment.
    An amendment offered by Senator Boxer to require the United 
States Geological Survey to conduct an assessment of sites 
contaminated by perchlorate was agreed to by rollcall with 10 
ayes and 9 nays. Senators Jeffords, Baucus, Reid, Graham, 
Leiberman, Boxer, Bond, Wyden, Carper and Clinton voted for the 
amendment. Senators Inhofe, Warner, Voinovich, Crapo, Chafee, 
Cornyn, Murkowski, Thomas and Allard voted against the 
amendment.
    An amendment by Senator Voinovich to reauthorize the sewer 
overflow control grants, clarifying that storm water is an 
eligible expense, was accepted by voice vote as amended by a 
second degree amendment by Senator Crapo to reauthorize the 
National Estuary Program, the sewer overflow control grants, 
create a Sewer Control Technology grant program and Small 
Public Water System Assistance Program. Senator Voinovich 
accepted the Crapo second degree amendment.
    An amendment by Senator Reid to impose Davis Bacon 
prevailing wage requirements on both the Clean Water SRFs and 
Drinking Water SRFs was agreed to by roll call vote with 12 
ayes and 7 nays. Senators Baucus, Boxer, Carper, Chafee, 
Clinton, Graham, Lieberman, Murkowski, Reid, Voinovich, Wyden 
and Jeffords voted for the amendment. Senators Allard, Bond, 
Cornyn, Crapo, Thomas, Warner and Inhofe voted against the 
amendment.
    An amendment by Senator Reid to create a small system 
assistance grant program was agreed to by roll call with 10 
ayes and 9 nays. Senators Baucus, Bond, Boxer, Carper, Clinton, 
Graham, Lieberman, Reid, Wyden, and Jeffords voted for the 
amendment. Senators Allard, Chafee, Cornyn, Crapo, Murkowski, 
Thomas, Voinovich, Warner and Inhofe voted against the 
amendment.
    An amendment by Senator Graham to create a water resources 
research program was agreed to by a vote of 13 ayes and 6 nays. 
Senators Baucus, Bond, Boxer, Carper, Chafee, Clinton, Graham, 
Lieberman, Murkowski, Reid, Voinovich, Wyden and Jeffords voted 
for the amendment. Senators Allard, Cornyn, Crapo, Thomas, 
Warner and Inhofe voted against the amendment.
    The committee passed the bill by voice vote with Senator 
Jeffords recorded as voting nay.

                      Regulatory Impact Statement

    In compliance with Section 11(b) of rule XXVI of the 
Standing Rules of the Senate, the committee makes evaluation of 
the regulatory impact of the reported bill. The bill does not 
create any additional regulatory burdens, nor will it cause any 
adverse impact on the personal privacy of individuals.

                          Mandates Assessment

    In compliance with the Unfunded Mandates Reform Act of 1995 
(Public Law 104-4), the committee finds that S. 1961 would not 
impose unfunded mandates on local, State or tribal governments.

                                Appendix


                          Cost of Legislation

    Section 403 of the Congressional Budget and Impoundment 
Control Act requires that a statement of the cost of the 
reported bill, prepared by the Congressional Budget Office, be 
included in the report. That statement follows:
                              ----------                              


               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 2550, a bill to amend the Federal Water Pollution Control Act and 
        the Safe Drinking Water Act to improve water and wastewater 
        infrastructure in the United States, as ordered reported by the 
        Senate Committee on Environment and Public Works on June 23, 
        2004, and revised by the committee staff on August 18, 2004.
Summary
    CBO estimates that implementing this legislation would cost 
about $20 billion over the next 5 years, assuming the 
appropriation of the authorized amounts. The funds would be 
used by the Environmental Protection Agency (EPA) to provide 
grants to States and nonprofit organizations to support a wide 
range of water quality projects and programs. The Joint 
Committee on Taxation (JCT) estimates that enacting S. 2550 
would reduce revenues by $222 million over the 2005-2009 period 
and by $1.14 billion over the next 10 years. Enacting the bill 
would not affect direct spending.
    S. 2550 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
Estimated Cost to the Federal Government
    The estimated budgetary impact of S. 2550 is shown in Table 
1. The costs of this legislation fall within budget function 
300 (natural resources and environment).
Basis of Estimate
    For this estimate, CBO assumes that S. 2550 will be enacted 
in the fall of 2004, that the full amounts authorized will be 
appropriated for each year, and that outlays will follow the 
historical pattern of spending for EPA programs. Components of 
the estimated costs are described below.

             TABLE 1. ESTIMATED BUDGETARY EFFECTS OF S. 2550, THE WATER INFRASTRUCTURE FINANCING ACT
                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                        2004      2005      2006      2007      2008      2009
----------------------------------------------------------------------------------------------------------------
                 CHANGES IN REVENUES
Estimated Revenues\1\...............................         0        -1        -7       -26       -64      -124
          SPENDING SUBJECT TO APPROPRIATION
EPA's Spending for Water Infrastructure and Grants
 Under Current Law..................................
    Authorization Level\2\..........................     2,214        35         0         0         0         0
    Estimated Outlays...............................     2,172     1,908     1,648     1,050       363        16
Proposed Changes....................................
    Authorization Level.............................         0     6,524     6,943     7,342     9,217    12,677
    Estimated Outlays...............................         0     1,141     2,366     4,127     5,914     6,871
EPA's Spending for Water Infrastructure and Grants
 Under S. 2550......................................
    Authorization Level\2\..........................     2,214     6,559     6,943     7,342     9,217    12,677
    Estimated Outlays...............................     2,172     3,049     4,014     5,177     6,277     6,887
----------------------------------------------------------------------------------------------------------------
\1\Estimate provided by JCT.
\2\The 2004 level is the amount appropriated for that year to EPA for the following programs: clean water State
  revolving fund, safe drinking water State revolving fund, the national estuary program, and environmental
  finance centers. The 2005 level includes the amount authorized under current law for the national estuary
  program.

Revenues
    This bill would increase the funds available under the 
clean water State revolving fund (SRF) and the safe Drinking 
Water SRF, which could result in some States leveraging their 
funds by issuing additional tax-exempt bonds. The JCT estimates 
that the consequent reductions in revenue would total $222 
million over the 2005-2009 period and $1.14 billion over the 
next 10 years.

                   Spending Subject to Appropriation

    S. 2550 would authorize appropriations totaling about $43 
billion over the next 5 years for EPA's water infrastructure 
and grant programs (see Table 2).

                                  TABLE 2. SPECIFIED AUTHORIZATIONS IN S. 2550
                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                                  2005      2006      2007      2008      2009
----------------------------------------------------------------------------------------------------------------
Clean Water SRF Grants\1\.....................................     3,200     3,200     3,600     4,000     6,000
Safe Drinking Water SRF Grants\1\.............................     1,500     2,000     2,000     3,500     6,000
Small System Revolving Fund...................................        25        25        25        25        25
Wet Weather Grants............................................       250       250       250       250       250
Alternative Water Source Projects.............................        25        25        25         0         0
Grants for Lead Removal in Schools and in the District of             60        40        40        40         0
 Columbia.....................................................
Environmental Finance Centers.................................         2         2         2         2         2
Technical Assistance for Nonprofits...........................        25        25        25        25        25
Small Public Water Assistance Grants..........................     1,200     1,200     1,200     1,200       200
Research and Demonstration Grant Programs.....................        40        40        40        40        40
Sewage Control Technology Grant Program.......................       100       100       100       100       100
Southeast Colorado Safe Drinking Water Grant..................        85         0         0         0         0
EPA Rate Study................................................         1         1         0         0         0
National Estuary Program......................................         0        35        35        35        35
Special Water Resources Study.................................         9         0         0         0         0
National Academy of Sciences Study............................         2         0         0         0       0 ,
        Total Authorization Level.............................     6,524     6,943     7,342     9,217    12,677
----------------------------------------------------------------------------------------------------------------
\1\SRF = State revolving fund.

    The bill would authorize the appropriation of $35 billion 
over the 2005-2009 period for EPA to provide capitalization 
grants for the SRF program ($20 billion for the clean water SRF 
program and $15 billion for the safe Drinking Water SRF 
program). States would use such grants along with their own 
funds to make low-interest loans to communities and grants to 
Indian tribes to construct wastewater treatment facilities and 
to fund other projects that would improve the quality of 
drinking water. This bill would make several revisions to those 
grant programs, including expanding the types of projects 
eligible for assistance, changing the formulas used to allocate 
grant money among the States, and extending the repayment terms 
for loans made by States.
    This legislation also would authorize the appropriation of 
$1.25 billion over the 2005-2009 period for EPA to make grants 
to States to remedy sewage overflows (that is, the discharge of 
untreated wastewater) and stormwater runoff (that is, water 
from rain or snow that doesn't infiltrate the ground). S. 2550 
also would authorize the appropriation of $5 billion over the 
same period for EPA to make grants to small public water 
systems to address the cost of complying with drinking water 
regulations. In addition, the bill would authorize about $1.5 
billion over the next 5 years for various other purposes, 
including establishing a small system revolving fund, several 
grant programs aimed at promoting innovations in technology and 
alternative approaches to water quality management, a grant 
program to address the removal of lead from schools and in the 
District of Columbia, a grant program for Southeast Colorado to 
support the construction of a water transmission line, and an 
EPA study of the rate structure of public water systems and 
treatment works.
Intergovernmental and Private-Sector Impact
    S. 2550 contains no intergovernmental or private-sector 
mandates as defined in UMRA. The bill would benefit State, 
local, and tribal governments by reauthorizing and expanding 
grants to administer the revolving funds for the Clean Water 
and Safe Drinking Water programs. In addition, it would provide 
specific financial assistance to rural communities, school 
systems (through the States), and the District of Columbia.
    Estimate Prepared By: Federal Spending: Susanne S. Mehlman; 
Federal Revenues: Annabelle Bartsch; Impact on State, Local, 
and Tribal Governments: Gregory Waring; Impact on the Private 
Sector: Karen Raupp.
    Estimate Approved By: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

Additional Views of Senators Jeffords, Baucus, Reid, Graham, Lieberman, 
                       Wyden, Carper, and Clinton

                           GENERAL STATEMENT

    S. 2550, the Water Infrastructure Financing Act, 
reauthorizes the Clean Water State Revolving Fund (CWSRF) and 
the Drinking Water State Revolving Fund (DWSRF) in an attempt 
to increase funding available for critical water infrastructure 
investments. However, this bill fails in several respects to 
modernize the State Revolving Funds and to truly meet the water 
infrastructure needs of our nation's communities.

                               BACKGROUND

    S. 2550 amends two major statutes - the Federal Water 
Pollution Control Act (Clean Water Act) and Title XIV of the 
Public Health Service Act (Safe Drinking Water Act) to increase 
authorized funding levels for each of the State Revolving Funds 
(SRFs). The CWSRF was created in 1987 and the DWSRF was created 
in 1996. S. 2550 focuses on modernizing the CWSRF.
    Each time the Clean Water Act was substantially amended, 
funding was a major issue. In 1972, 1987, and today, Congress 
struggled to identify the appropriate level of the Federal 
financial commitment to clean water. In testimony before the 
Senate Committee on Environment and Public Works in October 
2002, marking the 30th anniversary of the Clean Water Act, 
former Senator George Mitchell (D-ME) outlined the history of 
the struggle to provide clean water funding.

            ``In 1972, Congress chose to significantly increase 
        Federal participation in clean water programs. It 
        peaked at $5 billion in 1979 and 1980.
            In 1981, President Reagan proposed the elimination 
        of all funding for clean water unless Congress reduced 
        the size and scope of the program. The Congress 
        attempted to respond to the President's demand. Clean 
        water funding was reduced from $5 billion a year to 
        $2.4 billion a year. We reduced the types and numbers 
        of projects that were eligible for Federal funding, and 
        we reduced the Federal share of the cost for 
        construction projects from 75 percent to 55 percent.
            A further step to reform Federal involvement was 
        the adoption of a transition strategy to move the 
        country away from construction grants toward what was 
        then seen as an innovative mechanism called the State 
        Revolving Fund. The 1987 amendments authorized almost 
        $10 billion over 5 years for the phase-out of the 
        construction grants program and $8.4 billion over 5 
        years for the SRF. We knew at that time that this level 
        of funding was inadequate to fully meet our Nation's 
        clean water needs, which then were estimated at between 
        $75 billion and $100 billion. But this was a compromise 
        struck between those who favored and those who opposed 
        any Federal investment in clean water.
            Regrettably, despite our efforts, President Reagan 
        vetoed the bill in 1986. In 1987, the Congress 
        reenacted the bill. The President vetoed it again, but 
        this time Congress overrode the veto and the Water 
        Quality Act became law.
            In 1987, we envisioned a situation where after the 
        initial 5-year period of Federal investment, the SRF 
        would begin to revolve on its own and the Federal 
        investment in clean water programs would no longer be 
        necessary. That was not the first choice of many of us, 
        but it was necessary to get some legislation enacted to 
        keep the process moving. Mr. Chairman, as you and the 
        members of the committee know, Federal funding has 
        continued, now at an annual rate of about $1.3 billion 
        a year. I understand that the debate continues over the 
        level of and the mechanism and the formula for 
        distribution of the Federal investment in clean water . 
        . .''

    Clean water funding is not a new issue. In fact, it has 
been a focal point of debate surrounding clean water policy for 
decades.

                               DISCUSSION

    Today, the need for additional investment in both water and 
drinking water infrastructure remains clear. There are three 
major estimates of the spending gap for water infrastructure, 
which range from $200 billion to $500 billion over 20 years. It 
is imperative that we take care of this looming problem.

            In April 2000, the Water Infrastructure Network 
        (WIN) released its first report, Clean and Safe Water 
        for the 21st Century, which identified a clean water 
        spending gap of $380 billion over 20 years and a 
        drinking water spending gap of $300 billion over 20 
        years.
            On September 30, 2002, EPA released The Clean Water 
        and Drinking Water Infrastructure Gap Analysis which 
        estimates the spending gap for clean water needs at 
        $270 billion over 20 years. The Gap Analysis estimates 
        the spending gap for drinking water needs at $265 
        billion over 20 years.
            In May 2002, the Congressional Budget Office (CBO) 
        released a report that estimated capital needs for 
        clean water and drinking water infrastructure. 
        Additional analysis by CBO estimated the spending gap 
        for clean water needs between $132 billion and $388 
        billion over 20 years and the spending gap for drinking 
        water needs at between $70 billion and $362 billion 
        over 20 years.

    Over the last several years, a large, bi-partisan coalition 
of Senators have sent letters requesting additional funds to 
the President, the Budget Committee, and the appropriators.
            On April 18, 2002, Senators Sarbanes, Jeffords, and 
        others joined colleagues in requesting $5.2B for 
        appropriations in fiscal year 2003.
            On June 20, 2002, Senators Jeffords, Smith, Graham, 
        and Crapo also sent a letter to the Chairman and 
        Ranking Member of the VA, HUD and Independent Agencies 
        Subcommittee on the Appropriations Committee to request 
        additional resources to the Clean Water and Drinking 
        Water State Revolving Loan Funds.
            On December 10, 2002, Senators Sarbanes and 
        Jeffords along with thirty-one colleagues sent a letter 
        to the President requesting his Fiscal 2004 budget 
        provide $5.2 billion for SRFs.
            On March 7, 2003, Senators Sarbanes, Jeffords, and 
        Crapo sent a letter to the Senate Budget Committee 
        requesting $5.2B for SRFs.
            On April 2, 2003, Senators Jeffords and Sarbanes 
        sent a letter to the Chairman and Ranking Member of the 
        Budget Committee to insist that the Senate-approved 
        funding levels for the Clean Water and Safe Water State 
        Revolving Loan Funds be approved in conference.
            On May 9, 2003, twenty-nine senators signed a 
        bipartisan letter to the Chairman and Ranking Member of 
        the Appropriations Committee to ask them to provide an 
        allocation for the Subcommittee on VA, HUD, and 
        independent Agencies that will provide $5.2 billion for 
        the Clean Water and Safe Drinking Water Revolving Funds 
        (SRF). This letter was circulated by Senators Jeffords, 
        Crapo, and Sarbanes.
            On March 2, 2004, thirty-one senators sent a 
        bipartisan letter to the Chairman and Ranking Member of 
        the Budget Committee to urge them to make clean water 
        and drinking water infrastructure a priority and 
        provide an allocation of $5.2 billion for the Clean 
        Water and Safe Drinking Water Revolving Funds (SRF). 
        This letter was circulated by Senators Sarbanes, Snowe, 
        and Jeffords.
            Senators Sarbanes, Crapo, and Jeffords offered an 
        amendment to the Budget resolution in March 2004 to 
        provide an allocation of $5.2 billion for the CWSRF and 
        DWSRF. This amendment was accepted by voice vote.
            On March 30, 2004, thirty-seven senators sent a bi-
        partisan letter to the Chairman and Ranking Member of 
        the Budget Committee to urge the acceptance in 
        conference of the Senate-approved funding levels for 
        the Clean Water and Safe Drinking Water State Revolving 
        Fund (SRF), which provides $3.2 billion for the Clean 
        Water SRF and $2 billion for the Safe Drinking Water 
        SRF. This letter was circulated by Senators Carpo, 
        Sarbanes, and Jeffords.
            On May 11, 2004, fifty-three senators sent a 
        bipartisan letter to the Chairman and Ranking Member of 
        the VA, HUD, and Independent Agencies Subcommittee on 
        the Appropriations Committee asking that they provide 
        $3.2 billion for the Clean Water Revolving Fund and $2 
        billion for the Safe Drinking Water Revolving Fund in 
        the FY05 appropriations bill. This letter was 
        circulated by Senators Jeffords, Sarbanes, and 
        Voinovich.

    In the past two fiscal years, the Administration has sought 
a 37 percent cut in clean water infrastructure spending, 
proposing only $850 million for the CWSRF. For the past 2 
years, Senators Crapo, Sarbanes, and Jeffords have offered an 
amendment to the budget resolution to increase funding for 
water infrastructure. Each year, the amendment was accepted by 
the Senate, but failed to emerge from conference.
    In the 107th Congress, the Committee on Environment and 
Public Works passed S. 1961, the Water Investment Act, which 
increased funding levels for the CWSRF and DWSRF to a total of 
$35 billion over 5 years. This bill both increased the 
authorized funding levels and took key steps to modernize the 
SRFs. S. 2550 as reported by the committee does not achieve the 
same result and does not represent a bi-partisan consensus on 
the best approach to increase water infrastructure funding.

                           SUMMARY OF ISSUES

    First, although the underlying bill was successfully 
amended in committee to apply Davis-Bacon labor standards to 
the CWSRF and the DWSRF, the report inaccurately describes the 
evolution of these labor standards and their applicability to 
the SRFs.
    Second, despite the recent revelations regarding the 
inadequacy of our current regulatory structure for lead in 
drinking water, the provision related to lead in drinking water 
that is included in this bill actually weakens rather than 
strengthens existing statutory requirements. In addition, it 
fails to take any action to address the No. 1 lesson learned 
from the Washington, D.C. lead in drinking water incidents - 
improving communication of health risks with the public. In 
fact, this section actually eliminates existing statutory 
requirements for the communication of the results of lead in 
drinking water tests conducted in schools with parents.
    Third, this bill takes no action to ensure that Federal 
funds do not create an incentive for water infrastructure 
investments that conflict with local development plans. It 
fails to recognize and respond to the fact that by providing 
funds for water infrastructure investments, the Federal 
Government is, whether intentionally or unintentionally, 
providing incentives for particular types of development.
    Fourth, this bill fails to even attempt to enhance 
compliance with the Clean Water Act by omitting a key provision 
included in S. 1961, the Water Investment Act, during the 107th 
Congress.
    Fifth, the bill, after being successfully amended in 
committee, takes into account the special circumstances 
surrounding a series of specific water infrastructure needs, 
and it authorizes a series of grant programs. However, the bill 
also dictates spending decisions to States by creating a 
mandatory set-aside for water infrastructure grants, reducing 
the flexibility of States, reducing the funds available for 
water infrastructure projects, and duplicating the program-
specific grants included in the bill.
    Sixth, the formula replacing the existing Clean Water Act 
distribution formula does not allow for adequate transition 
time for States to adjust to revised allocations and unevenly 
distributes the burden of the re-allocation of funds to a small 
number of States.
    Finally, the bill includes a project authorization for the 
Southeast Colorado Water Activity Enterprise at a cost of $85 
million with no explanation for its selection for earmarking in 
the bill in lieu of many other similar projects.

                              DAVIS BACON

    S. 2550 includes two provisions, sections 102 and 202, 
which assure that Davis-Bacon prevailing wage requirements will 
apply to all projects financed by federally capitalized State 
revolving funds under both the Clean Water Act (CWA) and the 
Safe Drinking Water Act (SDWA) for as long as these programs 
continue to be federally funded.
Davis Bacon: Clean Water Act
    Section 102 of this bill applies the Davis Bacon prevailing 
wage standard to all funds distributed through the CWSRF. The 
majority report includes a skewed interpretation of existing 
law and the applicability of Davis Bacon to the CWSRF. Section 
102 of S. 2550 clarifies that the prevailing wage requirements 
of the Davis-Bacon Act incorporated in the Clean Water Act 
(CWA) apply to construction of all projects financed with the 
assistance of State revolving funds.
    Section 513 of the CWA provides that ``all laborers and 
mechanics employed by contractors or subcontractors on 
treatment works for which grants are made under this Act shall 
be paid wages at rates not less than those prevailing for the 
same type of work on similar construction in the immediate 
locality.'' The 1987 Water Quality Act shifted Federal support 
for construction of treatment works under the CWA from a 
program of direct Federal grants to a program of Federal 
capitalization grants to support State revolving loan funds 
(SRF) with the intention of phasing out the Federal 
capitalization grant program by the end of fiscal year 1994. As 
a result, section 602(b)(6) of the new Title VI of the CWA that 
created the SRF program provided that the Davis-Bacon 
prevailing wage requirements in section 513 of the Act would 
continue to apply to all projects constructed ``before fiscal 
year 1995 with funds directly made available'' by Federal 
capitalization grants. Notwithstanding the expectation that 
SRFs would become completely self-sufficient by fiscal year 
1995, Congress has continued to appropriate funds for new 
Federal capitalization grants to the States' SRFs every year 
since.
    Moreover, after enactment of the 1987 Water Quality Act, 
the Administrator of the Department of Labor's Wage and Hour 
Division concluded that, under newly enacted section 602(b)(6) 
of the CWA, the Davis-Bacon prevailing wage requirements in 
section 513 of the Act did not apply to ``State matching funds 
required to be contributed into the SRF, moneys repaid to the 
SRF, or other moneys.'' Under this interpretation, Davis-Bacon 
prevailing wage requirements were applied the first time SRF 
funds supported by Federal capitalization grants were used to 
financially assist construction of a water treatment project; 
however, when funds repaid back to the SRF were ``recycled'' 
and used again to support construction of additional water 
treatment projects, Davis-Bacon would not apply. Furthermore, 
EPA determined that, after the end of fiscal year 1994, the 
Davis-Bacon prevailing wage requirements in section 513 of the 
CWA no longer applied even to the construction of treatment 
works financed by SRFs with funds made directly available by 
Federal capitalization grants.
    The combined effect of these interpretations has undermined 
the longstanding policy of assuring that all construction 
workers employed on projects supported by CWA grants should not 
be paid less than locally prevailing wage rates. Accordingly, 
in order to correct the evaporation of Davis-Bacon prevailing 
wage protection for workers employed on construction projects 
that continue to be financially assisted by EPA notwithstanding 
Congress' expectation in 1987 that Federal support for this 
activity would cease at the end of fiscal year 1994, section 
102 of S. 2550 would amend section 603(c) of the CWA to provide 
that the Davis-Bacon prevailing wage requirements in the Act 
will once again apply to construction of all projects assisted 
in whole or in part by SRFs with Federal funds, including those 
supported by funds directly made available through Federal 
capitalization grants and those supported by ``recycled'' 
Federal funds.
Davis Bacon: Safe Drinking Water Act
    Section 202 of S. 2550 clarifies that the prevailing wage 
requirements of the Davis-Bacon Act incorporated in the Safe 
Drinking Water Act (SDWA) apply to construction of all projects 
financed with the assistance of State revolving funds.
    The SDWA was originally enacted in 1974. The Act authorized 
EPA to make grants to assist in the development and 
demonstration (including construction) of projects that exhibit 
new or improved methods, approaches or technology for providing 
a safe supply of drinking water to the public. Section 1450(e) 
of the SDWA includes a broadly worded provision that directs 
the EPA Administrator to ``take such action as may be necessary 
to assure compliance with provisions of the [Davis-Bacon 
Act].'' This provision not only obligates the EPA Administrator 
to include Davis-Bacon prevailing wage requirements in 
contracts for the construction projects to which EPA or the 
Federal Government is a direct party, but also obligates the 
Administrator to insure that such requirements are applied to 
construction projects supported by grants and other forms of 
assistance provided by EPA pursuant to authorization under the 
SDWA. Any other interpretation of Section 1450(e) would render 
it redundant inasmuch as the Davis-Bacon Act, itself, is 
automatically applicable by operation of law to all contracts 
in excess of $2,000 to which an agency of the federal 
government is a party for construction of public buildings and 
public works.
    Thus, when Congress enacted the Safe Drinking Water Act 
Amendments of 1996, which created the State Revolving Fund 
(SRF) program that provides annual capitalization grants to 
each State in order to fund an SRF that provides financial 
assistance to local agencies to facilitate compliance with 
EPA's national primary drinking water standards, it was 
unnecessary to include a separate Davis-Bacon provision. 
Nevertheless, EPA administratively determined that the Davis-
Bacon prevailing wage requirement in the SDWA does not apply to 
construction projects assisted by the SRFs.
    In order to clarify Congress' original intent, section 202 
of S. 2550 would amend section 1450(e) of the SDWA to make it 
clear that Davis-Bacon requirements apply to all construction 
projects assisted in whole or in part by grants, loans, loan 
guarantees, refinancing, or any other form of assistance 
provided under the SDWA, including assistance provided by SRFs 
with funds directly made available from Federal capitalization 
grants or with ``recycled'' funds made available by repayment 
of Federal capitalization grant funds. As such, section 202 of 
S. 2550 would not expand application of Davis-Bacon prevailing 
wage requirements to the SRFs authorized under the Safe 
Drinking Water Act Amendments of 1996, but rather make clear 
Congress' original intent that those requirements apply to all 
construction projects assisted under the SDWA.

                         LEAD IN DRINKING WATER

    Lead occurs naturally in the environment. However, during 
the industrial revolution and subsequent years, lead became a 
commonly used product in solder, paint, and other industrial 
processes. Today, lead is commonly used in ammunition, solder 
and lead pipes, ceramic glazes, computer monitors, and medical, 
scientific and military equipment.
    Lead exposure occurs today from a variety of sources 
including air (burning fuel, lead smelters, burning solid 
wastes), drinking water (lead pipes and solder), bodies of 
water (contaminated by industrial waste or air deposition), 
dust and soil around landfills and in old urban areas with lead 
paint, food (accumulates in food chain/food storage), and paint 
(banned in 1978.)
    Health effects of lead depend on the extent of the 
exposure. The target system for chronic exposure is the nervous 
system. Hearing loss, high blood pressure, and anemia can 
result. High levels damage the brain and kidneys and cause 
miscarriage.
    Lead exposure is particularly dangerous for children who 
retain about 68 percent of the lead that enters their bodies 
while adults retain about 1 percent, according to the 
Environmental Health Education Center, University of Maryland 
School of Nursing. Children exposed to lead may experience low 
birth weight, growth retardation, mental retardation, learning 
disabilities, muscle cramps, stomach cramps, anemia, and kidney 
and brain damage. Lead is also particularly harmful during 
pregnancy, affecting the unborn child or leading to 
miscarriages and stillbirths.
    The current blood lead level standard, set by the Centers 
for Disease Control (CDC), is 10 parts per billion. The CDC 
Advisory Committee for Blood Lead Levels is currently 
undertaking a review to determine if this number should be 
reduced. This review is in part spurred by a major study 
published in the New England Journal of Medicine on April 17, 
2003 which found that even blood lead level concentrations 
below 10 micrograms per liter (or 10 parts per billion) are 
harmful to children. A working group of the CDC Advisory 
Committee completed a report in February 2004 indicating that 
there are adverse effects of blood lead levels below 10 parts 
per billion.
EPA Regulations on Lead in Drinking Water
    Before 1991, EPA regulations included a Maximum Contaminant 
Load of 50 parts per billion for lead in drinking water. In 
June 1991, the EPA issued the lead and copper rule (56 FR 
26460), which eliminated the MCL and established a new 
framework for dealing with lead in drinking water. The Maximum 
Contaminant Level Goal (MCLG) was set at zero. As described in 
the report for S. 2550, in lieu of an enforceable standard for 
lead content in drinking water, the rule establishes a sampling 
program with a trigger threshold above which public water 
systems have to take steps to change corrosion control, treat 
source water, replace lead service lines, and conduct public 
education.
    In general, public water systems are required to sample 
homes in areas where lead could be expected to be present in 
drinking water (due to lead service lines, date of construction 
of the homes, or other factors). If the 90th percentile of the 
samples taken exceeds 15 parts per billion, the requirements of 
the rule are triggered. If a system has extremely low lead 
levels for two consecutive 6-month monitoring periods, it can 
move to monitoring once every 3 years.
    Once the 90th percentile requirement is triggered, the 
public water system must take the following actions:
        1. Water quality parameter monitoring used to determine 
        water corrosivity.
        2. Public Education: specific requirements in 
        regulations regarding text of announcements. Billing 
        inserts must be sent directly to customers, newspaper 
        notices and public service announcements required. 
        There are no public education requirements if the 90th 
        percentile threshold is not triggered.
        3. Source Water Monitoring and Treatment: sampling and 
        treatment changes to reduce lead concentration. State 
        involvement in establishing maximum permissible lead 
        levels in source water. In Washington, D.C., that 
        function would be performed by EPA Region III because 
        Washington, D.C. does not have primacy over the 
        administration of the Safe Drinking Water Act.
        4. Corrosion Control Treatment: Study required to 
        identify changes in corrosion control required, follow-
        up monitoring required. Study is allowed to take 18 
        months and systems have 24 months to install the 
        revised corrosion control treatment. This process could 
        take over 3 years, during which time a public water 
        system would remain in compliance with the lead and 
        copper rule.
    If a system completes these actions and continues to exceed 
the 90th percentile requirements, they are required to monitor 
and/or replace lead service lines. The public water system must 
replace 7 percent of their lead service lines per year OR they 
may test the water in the service line and if all samples are 
less than 15 parts per billion the system may ``count'' the 
service line as replaced. This type of sampling is conducted in 
the home, where residents run their faucet for a longer period 
of time to get to the water in the pipe.
    In summary, the effectiveness of the lead and copper rule 
to reduce lead exposure through drinking water depends heavily 
on public education. The extended time periods during which 
corrosion control procedures can be modified while the water 
system remains in compliance make it imperative that adequate 
public education occurs to ensure that people take 
precautionary steps to reduce lead exposure while water 
chemistry is being modified.
    In addition, because public water systems with extremely 
low lead levels can move to a monitoring program that requires 
testing only every 3 years, it is conceivable that public water 
systems that have switched to chloramines to comply with the 
disinfection by-product rule or for other reasons have not 
tested their systems for lead contamination for a 3-year 
period, raising concern about the degree to which the 
experience of Washington, D.C. could be a national problem.
    It is worth noting that under the Safe Drinking Water Act, 
leaded solder in homes was banned as of 1987. However, ``lead-
free'' faucets are defined as containing 8 percent lead. The 
industry has developed voluntary leaching standards for those 
components that typically dispense water for human consumption. 
Based on the information available to date, these voluntary 
standards do not apply to bathtub faucets.
Washington, D.C. Experience
    Earlier this year it was first reported that lead levels in 
the D.C. public water system were significantly higher than 
Federal guidelines, and had been so for more than 2 years. The 
report for S. 2550 provides a detailed summary of the events in 
Washington, D.C. with regard to lead in drinking water.
Committee Action
    In response to the public health risk and the public 
outrage at the handling of the Washington, D.C. situation, 
Senator Jeffords and the democratic members of the Senate 
Committee on Environment and Public Works requested a hearing 
of the full committee on this issue. On April 7, 2004, the 
Fisheries, Wildlife, and Water Subcommittee held a hearing 
entitled, ``Detection of Lead in the D.C. Drinking Water 
System.'' Testimony was received from Benjamin Grumbles, Acting 
Assistant Administrator of the Office of Water at EPA, Donald 
Welsh, Director, Region III, EPA, Jerry Johnson, General 
Manager, District of Columbia Water and Sewer Authority, Dr. 
Daniel Lucey, Interim Chief Health Officer, District of 
Columbia Department of Health, Thomas Jacobus, General Manager, 
Washington, Aqueduct, Baltimore District, U.S. Army Corps of 
Engineer's Gloria Borland, Dupont Circle Parents, Dr. Jody 
Lanard, M.D., Risk Communication Consultant, and Dr. Dana Best, 
M.D., Children's National Medical Center.
    On May 4, 2004, Senator Jeffords introduced the ``Lead-Free 
Drinking Water Act of 2004'' with Senator Sarbanes and Delegate 
Holmes-Norton, and Congressman Waxman introduced the House 
companion bill. This legislation included a comprehensive 
approach to improving the current regulatory structure for lead 
in drinking water, based on the lessons learned from the 
Washington, D.C. incident. The bill was referred to the Senate 
Committee on Environment and Public Works, and no action has 
been taken. A short summary of the bill follows:

                  Lead-Free Drinking Water Act of 2004

    To amend the Safe Drinking Water Act to ensure that the 
District of Columbia and States are provided a safe, lead-free 
supply of drinking water.
      Requires the Environmental Protection Agency 
(EPA) to review and revise the national primary drinking water 
regulation for lead within 18 months after the date of 
enactment. The revised regulation shall establish a maximum 
contaminant level (MCL) for lead in drinking water as measured 
at the tap, or, if EPA determines that it is not practicable to 
establish such a level, the Agency shall establish a treatment 
technique to prevent adverse health effects. Requires that any 
new standard be at least as protective as the current 
regulations.
      Accelerates and ensures complete replacement of 
lead service lines in systems that exceed the MCL or action 
level for lead in national primary drinking water regulations:
        -  Upon exceeding the MCL or action level for lead 
        under the national primary drinking water regulations, 
        a water system must replace at least 10 percent of its 
        lead service lines annually until they are gone.
        -  Priority is given to those homes with high lead test 
        results and those that provide drinking water to 
        infants, children, and pregnant and lactating women.
        -  Eliminate the existing loophole allowing systems to 
        avoid replacing lead service lines by conducting water 
        tests.
        -  Establishes community water systems or nontransient 
        noncommunity water systems as the responsible entity to 
        replace lead service lines, including those owned by 
        homeowners. Gives homeowners the final authority to 
        determine if their lead service line is replaced.
      Revamps public notice requirements.
        -  Upon exceeding the MCL or action level for lead, 
        community water systems or nontransient noncommunity 
        water systems will, within 30 days, deliver notice to 
        all customers of the scope of the testing, the results, 
        and corrective actions to be taken. A warning will be 
        provided on all water bills regarding the presence of a 
        public health risk from high lead levels in the 
        drinking water. Repeat notice will be provided every 90 
        days as long as the exceedance continues.
        -  Community water systems or nontransient noncommunity 
        water systems will provide, within 14 days of the 
        receipt of results, notification to each home tested of 
        their own results, the scope of the testing conducted 
        and the results, and referrals for any required medical 
        intervention.
        -  Requires special emphasis on alerting parents, 
        caregivers, and other individuals and entities of the 
        significantly greater risks to infants, children and 
        pregnant and lactating women posed by lead 
        contamination of drinking water; and encouraging 
        individuals and entities when appropriate to 
        immediately modify behavior to minimize exposure to 
        lead in drinking water.
        -  Requires the EPA to establish verification 
        procedures to determine the effectiveness of public 
        notification within 6 months.
      Establishes routine public education on lead in 
drinking water.
        -  Requires routine public education programs at 
        community water systems or nontransient noncommunity 
        water systems that is designed to improve the general 
        level of public understanding of the risks posed by 
        lead contamination and protective actions that can be 
        taken. EPA may waive this requirement for systems that 
        have not exceeded the action level for lead since June 
        7, 1991.
      Requires that, upon exceeding the MCL or action 
level for lead, community water systems or nontransient 
noncommunity water systems provide on-location filters 
certified for lead removal to each residence, school, and day 
care facility in the service area of the community water system 
or nontransient noncommunity water system that could reasonably 
be expected to experience lead contamination of drinking water 
in excess of the MCL or action level for lead at any time after 
the date of exceedance.
        -  Priority is given to vulnerable populations, such as 
        infants, children, and pregnant and lactating women, 
        and to residences, schools, and day care facilities 
        that should have priority based on testing results. 
        Filters are to be explicitly made available regardless 
        of whether individual residences are known to have lead 
        service lines.
      Establishes testing requirements and corrective 
actions for Federal buildings.
      Requires one-time nationwide testing for lead in 
drinking water at all community water systems or nontransient 
noncommunity water systems to be completed within 18 months of 
enactment.
      Modifies monitoring protocols to ensure that 
tests conducted under the national primary drinking water 
regulations for lead are conducted at 6 month intervals, that a 
statistically relevant sample is used that is fully 
representative of all types of residential dwellings and 
commercial establishments, and that increased testing is 
conducted after any substantial modification in the treatment 
of drinking water or during any period in which the drinking 
water exceeds the MCL or action level for lead.
      Requires that community water systems and 
nontransient noncommunity water systems re-evaluate and 
optimize corrosion control plans within 1 year of a change in 
water treatment or an exceedance of the MCL or action level for 
lead.
      Establishes a lead service line replacement fund 
that authorizes $200 million per year for 2005 through 2009. 
Provides $40 million per year to the District of Columbia.
      Revises current Safe Drinking Water Act 
definition of ``lead-free'' as 8 percent lead to 0.2 percent 
lead and makes it unlawful to import, manufacture, process, 
distribute in commerce, or install in any residence anything 
but lead-free plumbing fixtures and components as of January 1, 
2005.
      Establishes requirements for testing and removal 
of lead in schools. Authorizes $30 million per year for this 
purpose.
Committee Mark-Up of S. 2550, June 23, 2004
            Amendment Offered by Senator Jeffords
    During the mark-up of S. 2550 on June 23, 2004, Senator 
Jeffords offered an amendment based on the Lead-Free Drinking 
Water Act of 2004 to take the first critical steps to address 
the most egregious issues that were highlighted by the 
Washington, D.C. lead in drinking water crisis. This amendment 
was endorsed by Consumer Federation of America, Clean Water 
Network, Children's Defense Fund, and representatives of the 
Washington, D.C. parents group involved in this issue. The 
residents of DC wrote: ``It is our hope that other mothers in 
this country will not have to experience the frustration, 
anger, and fear that we have during the many months that this 
crisis has dragged without resolution.''
    First, the amendment strengthened existing public notice 
requirements in several key ways. As described in the report to 
S. 2550, one the leading complaints against WASA throughout 
this period is that the agency failed to communicate 
effectively with the public about how many homes had exceeded 
the action level (and by how much) and what residents should do 
to protect themselves. The effectiveness of the public 
notification of the presence of lead in drinking water is the 
crux of the Lead and Copper Rule. In testimony before the 
Subcommittee on Fisheries, Wildlife and Water on April 7, 2004, 
the Director of EPA's Region III, Donald Walsh, stated, 
``public education efforts were ineffective, and we believe, 
not fully compliant in all instances with EPA rules.'' 
Additional testimony from a risk management expert and D.C. 
residents corroborated the view that public notification and 
education efforts were ineffective.
    Specifically, the Jeffords amendment took the following 
steps to revamp public notice requirements:
      Upon exceedance of the MCL or action level for 
lead, community water systems or nontransient noncommunity 
water systems, within 30 days, must deliver notice to all 
customers of the scope of the testing, the results, and 
corrective actions to be taken. A warning will be provided on 
all water bills regarding the presence of a public health risk 
from high lead levels in the drinking water. Repeat notice will 
be provided every 90 days as long as the exceedance continues.
      Community water systems or nontransient 
noncommunity water systems will provide, within 14 days of the 
receipt of results, notification to each home tested of their 
own results, the scope of the testing conducted and the 
results, and referrals for any required medical intervention.
      Requires special emphasis on alerting parents, 
caregivers, and other individuals and entities of the 
significantly greater risks to infants, children and pregnant 
and lactating women posed by lead contamination of drinking 
water; and encouraging individuals and entities when 
appropriate to immediately modify behavior to minimize exposure 
to lead in drinking water.
      Requires the EPA to establish verification 
procedures to determine the effectiveness of public 
notification within 6 months.
    Despite the fact that the failure of the public 
notification system is recognized as one of the most prominent 
concerns heard from Washington, D.C. residents, S. 2550 as 
amended by the Crapo amendment on lead takes no action to 
reform or improve the public notification system associated 
with the Lead and Copper Rule.
    Second, the amendment required the removal of 10 percent of 
all lead service lines per year until they are gone, once a 
public water system exceeded the action level for lead. It is 
commonly believed that the major cause of the Washington, D.C. 
lead in drinking water incident was caused by increasing 
corrosivity of the water supply, leading to leaching of lead 
from lead service lines and plumbing components. The solution 
selected by the EPA and WASA suggests that controlling the 
corrosivity of the water supply will reduce lead content in the 
water system. On August 23, 2004, WASA began adding 
orthophosphate to the drinking water supply through the city to 
reduce the corrosivity of the water supply in an effort to 
reduce lead levels. EPA estimates that it will take 6 months to 
detect a reduction in lead levels.
    The current regulation requires replacement of 7 percent of 
lead service lines per year only until a system no longer 
exceeds the action level. In addition, the current rules allow 
a public water system to ``test'' the water in the service line 
and if all samples are less than 15 parts per billion the 
system, to ``count'' the service line as replaced. The current 
regulations ensure only one thing - that public water systems 
that have lead service lines will never actually replace all of 
them. As described in the report to S. 2550, there is a general 
consensus that the cause of the lead problems in Washington, 
D.C. was corrosive water causing lead to leach from lead 
service lines. The Jeffords amendment closed the loophole 
allowing public water systems to ``test out'' of lead service 
line replacement requirements. It required the removal of lead 
service lines from public water systems with lead contamination 
problems, ensuring that the main source of that lead would be 
eliminated. It authorized $200 million per year for the 
replacement of lead service lines and earkmarked $40 million 
per year for this purpose. Section 210 of S. 2550 takes no 
action to eliminate lead service lines.
    Third, the Jeffords amendment revised the current Safe 
Drinking Water Act definition of ``lead-free'' from 8 percent 
lead to 0.2 percent lead and made it unlawful to import, 
manufacture, process, distribute in commerce, or install in any 
residence anything but lead-free plumbing fixtures and 
components as of January 1, 2005. The fact that a Federal 
statute permits the advertisement of products as ``lead-free'' 
when they actually contain 8 percent lead is an egregious 
violation of the public trust. In addition, since the adoption 
of this definition, much progress has been made in the 
development of lead-free alternatives, which are currently sold 
on the open market by companies such as Cambridge Brass. 
Phasing out lead in plumbing components, coupled with the 
replacement of lead service lines, would have ensured that lead 
is absent from our drinking water. S. 2550 as amended by the 
Crapo amendment takes no action to modify this definition. 
Finally, the Jeffords amendment required the testing and 
remediation of lead contamination in schools and authorized $30 
million annually for this purpose. This amendment made several 
changes to existing law. The main improvements this amendment 
makes over current law, section 1464 of the SDWA, are:
      it increases funds available to States to 
reimburse local educational agencies for costs incurred as they 
conduct the testing and remediation of lead in schools;
      it provides for the Administrator of the EPA to 
carry out a program for the testing and remediation of lead 
contamination in schools if States fail to do so;
      it extended the expired authorization for $30 
million per year for these purposes.
    Section 1464 of the SDWA also requires that test results 
for lead in drinking water in schools be made available to the 
public and that parents, teachers, and employee organizations 
are notified of the availability of those test results. The 
Jeffords amendment required that testing and remediation occur, 
that funds were available to States for this program, that 
people were notified of the results, and that, if States failed 
to execute a program, the EPA would execute a program to ensure 
that testing and remediation of lead in schools would actually 
occur.
    The Jeffords amendment would have helped to restore public 
confidence in a system that is broken and to ensure that lead 
in our water is a thing of our past. This amendment would have 
ensured that our children's schools will be lead-free, that 
citizens will know when their water systems test high for lead, 
that the words ``lead-free'' will actually mean ``lead-free'', 
and that lead service lines will not be allowed to sit leaching 
lead for decades in public water systems.
    The Jeffords amendment was defeated by a vote of 10-9. 
Voting for the amendment were Senators Jeffords, Baucus, Reid, 
Graham, Lieberman, Boxer, Wyden, Carper, and Clinton. Voting 
against the amendment were Senators Inhofe, Warner, Bond, 
Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas, and 
Allard.
            Amendment Offered by Senator Crapo
    Instead of adopting the Jeffords amendment which would have 
taken substantive action to reduce lead in drinking water, the 
committee adopted the Crapo amendment regarding lead which, 
instead of enhancing public health protection as a result of 
the Washington, D.C. lead in drinking water crisis, actually 
rolls back existing requirements. Section 210 of S. 2550 
establishes as similar reimbursement program to that in 
existing law, section 1465 of the SDWA, and that established by 
Senator Jeffords' amendment. Section 1465 in current law 
provided funds to assist States in meeting the requirements of 
section 1464 which required that States establish an assistance 
program for local educational agencies to test and remediate 
lead contamination in drinking water from coolers and other 
sources in schools. This section also required that results of 
testing be available to the public, including teachers, other 
school personnel, and parents. It also required remediation of 
non lead-free drinking water coolers in schools within 15 
months of October 31, 1988. The Jeffords amendment mirrored 
these provisions.
    The majority report describes the results of the court 
case, Acorn v. Edwards (U.S. 5th Circuit, 1996), in which the 
Court struck down as unconstitutional Sections 1464(d)(1) and 
(d)(3) because they violated the 10th Amendment of the 
Constitution. The report quotes a portion of the Court's 
decision which stated, ``that section 300j-24(d) [SDWA Section 
1464(d)] is an unconstitutional intrusion upon the States' 
sovereign prerogative to legislate as it sees fit.'' The report 
cites this Court decision as justification for the deletion of 
the testing and remediation program and the public notification 
requirements of Section 1464.
    However, the majority report excludes the first half of 
this sentence in Acorn v. Edwards, which explained that the 
reason for the Court's finding was because States did not have 
the option to decline regulation. ``Because Sec. 300j-24(d) 
deprives States of the option to decline regulating non-lead 
free drinking water coolers, we likewise find no merit to this 
argument and conclude that Sec. 300j-24(d) is an 
unconstitutional intrusion upon the States' sovereign 
prerogative to legislate as it sees fit.'' Acorn v. Edwards, 81 
F. 3d 1387 at 1394 (1996). The Jeffords amendment solved this 
problem by requiring that, if a State did not execute the 
testing, remediation, and public notification requirements, the 
EPA would be required to perform this function. Thus, the 
Jeffords amendment established a program to test and remediate 
lead in drinking water in schools, provided funds for States to 
implement the program, ensured that this program would actually 
occur by requiring EPA to perform these functions if States did 
not - thereby resolving the concerns of the Court with regard 
to the 10th Amendment, and retained existing public 
notification requirements for test results.
    Section 210 of S. 2550, as offered by Senator Crapo, 
strikes all of the testing and remediation requirements of 
section 1464 and, in lieu of those requirements, authorized a 
voluntary reimbursement program for States who choose to take 
action to address lead in schools. Section 210 of S. 2550 
specifically excluded provisions making test results available 
to the public. Instead of responding to the public outrage over 
the lack of information provided about the Washington, D.C. 
lead incident, section 210 of S. 2550 amendment actually 
removes existing public notification requirements in current 
law. Instead of responding to the public concern regarding lead 
in schools, section 210 of S. 2550 actually rolls back existing 
requirements for testing and remediation of lead in schools by 
turning mandatory requirements into voluntary requirements. 
Overall, section 210 of S. 2550 fails to take meaningful action 
to enhance protections from lead in drinking water provided by 
our current statutes and regulations and, instead, rolls back 
existing protections designed to protect children from exposure 
to lead in schools.

                     DEFERENCE TO LOCAL GOVERNMENTS

    The Water Infrastructure Financing Act fails to take action 
to ensure that Federal funds do not create an incentive for 
water infrastructure investments that conflict with local 
development plans. It fails to recognize and respond to the 
fact that by providing funds for water infrastructure 
investments, the Federal Government can often drive local 
decisions about development and growth.
    Commercial and residential development requires substantial 
infrastructure to support it. It requires investment from the 
public sector for roads, water lines, and school and public 
safety resources, as well as private infrastructure such as 
power and telephone lines. Public officials have developed 
infrastructure-related tools for managing growth. For example, 
local officials may establish urban service areas, adopt 
adequate public facilities ordinances, levy impact taxes or 
fees, or use similar mechanisms to internalize the true 
economic costs of new development. In addition, an increasing 
number of States have recently enabled or required local 
jurisdictions to manage land more efficiently through the 
designation of growth areas or application of State criteria 
for funding infrastructure.
    Usually costing of millions of dollars per mile, capital 
investments in new water infrastructure are among the most 
expensive forms of public infrastructure needed to support 
development. Sewage treatment plants often cost millions of 
dollars each, and water lines cost several hundred thousand 
dollars per mile, costs that are not insignificant. Moreover 
the costs of operation and maintenance of infrastructure are 
substantial and continuing.
    Infrastructure construction is not only capital intensive; 
it has a significant effect on the environment. In a report 
from the Open Lands Project, a Chicago-based urban conservation 
group, the group found that water infrastructure plans which 
are not coordinated with development plans such as land use 
plans, watershed plans, and transportation plans may cause 
environmental problems. The report states, ``the effect of 
urbanization on water quality may be the most important 
`environmental impact' of the entire [planning] process, and 
yet it remains unexamined and unaddressed.'' The report also 
found that because infrastructure plans were not sufficiently 
coordinated with development plans, ``the State has allowed 
communities to extend sewer lines into areas that include 
wetlands, flood plains and other environmentally sensitive 
property.''
    State and local officials bear the responsibility of making 
choices about their own approaches to development. Because the 
Federal Government plays a prominent role in the financing of 
water infrastructure, Congress is also partly responsible to 
ensure that funding for water infrastructure through the SRF 
solves existing water quality problems and complements, rather 
than conflicts with, ongoing State or local initiatives to 
manage growth and development.
    Senator Jeffords offered an amendment during the business 
meeting on June 23, 2004 to address this issue. The amendment 
would have taken four specific actions:
      Similar to the priority system amendments in 
section 105 of S. 2550, States would give additional priority 
in distributing funds from SRFs to projects that are consistent 
with existing local land use, transportation, and watershed 
plans, and to those projects that review options for urban 
waterfront development or brownfields revitalization that may 
be conducted in conjunction with the project. This section 
would not require that any new plans be created. Instead, it 
depends on existing plans created by local governments as the 
guide. If water infrastructure projects are consistent with 
these guides, they would receive additional priority. If not, 
they would remain eligible, but would simply not receive 
additional priority for this particular factor;
      The existing continuous planning process required 
by section 303(e) of the CWA would be revised to incorporate 
applicable regional or local land use plans. This section does 
not add any new planning requirements. It requires only that 
regional or local land use plans be reviewed as part of the 
existing continuous planning process;
      A National Academy of Sciences study would be 
authorized on the impact of water and wastewater investments on 
local land use development patterns; and
      Extra priority would be given to States when 
distributing SRF funds to an explicit list of waterfront 
redevelopment projects. Projects included in this list are:
        Windsor, Vermont, Riverside Redevelopment.
        St. Louis, Missouri, Brownfield Pilot Program.
        Hudson River Park, New York.
        Fields Point, Rhode Island.
        Milwaukee, Wisconsin, Riverfront Development.
        Lawrence Gateway Environmental Restoration Project.
        Detroit River, Michigan, Master Plan.
        Ohio Riverfront Sturdy, Cincinnati, Ohio.
        Montgomery, Alabama, Riverfront Development.
        Wabash Riverfront Development, Indiana.
        Mississippi Riverfront, Tennessee.
    The Jeffords amendment failed in committee by a vote of 10-
9 with Senators Jeffords, Baucus, Reid, Graham, Lieberman, 
Boxer, Wyden, Carper, and Clinton supporting the amendment and 
Senators Inhofe, Warner, Bond, Voinovich, Crapo, Chafee, 
Cornyn, Murkowski, Thomas, and Allard voting against the 
amendment.

                       INCENTIVES FOR COMPLIANCE

    S. 1961, the Water Investment Act, passed by the Committee 
on Environment and Public Works in the 107th Congress included 
a provision that treatment works found to be in significant 
noncompliance with the Clean Water Act are prohibited from 
receiving assistance other than those funds that would be 
needed to bring a system into compliance in accordance with an 
enforceable administrative or judicial order or other than 
those funds for planning, design, or security. The exceptions 
in that bill ensured that utilities that are seeking to return 
to compliance are still eligible, that planning and design 
functions are still eligible, and that security improvements 
are still eligible.
    This provision would provide an added incentive for 
utilities to maintain compliance with the CWA. It targets the 
worst offenders-the primary criteria for significant non-
compliance are:
      exceed specific conventional pollutant limits by 
40 percent or specific toxic pollutantlimits by 20 percent at a 
given discharge point for two or more months during the two 
consecutive quarters;
      violate any monthly effluent limit at a given 
point by any amount for any four or more months during the two 
consecutive quarters.
    A recent EPA report by the Office of Enforcement and 
Compliance Assistance documented extensive non-compliance with 
the CWA. In 2002, 83 percent of facilities in SNC were repeat 
SNCs. In 2001, 25 percent of major facilities were in SNC. 
Sixteen percent-29 percent remained in that status for 2 years 
or longer. Of those that returned to compliance, there is a 50/
50 probability that they will return to SNC again within 2 
years.
    Given the large number of facilities in SNC and the 
apparent frequency with which they return to SNC, it is clear 
that incentives to encourage compliance are required. However, 
S. 2550, the Water Infrastructure Financing Act, includes no 
provisions to provide an incentive for compliance or to ensure 
that Federal funds are spent in a manner that leads to 
compliance. A provision similar to that included in section 103 
of S. 1961, the Water Investment Act, in the 107th Congress was 
included in the substitute amendment offered by Senator 
Jeffords which failed by a vote of 10-9. Voting in support of 
the amendment were Senators Jeffords, Baucus, Reid, Graham, 
Lieberman, Boxer, Wyden, Carper, and Clinton. Senators Inhofe, 
Warner, Bond, Voinovich, Crapo, Chafee, Cornyn, Murkowski, 
Thomas, and Allard voted against the amendment.

                                 GRANTS

    S. 2550, as amended, recognizes that there are some needs 
that should be met above and beyond the funding levels 
authorized in the Clean Water State Revolving Fund. In 
particular, wet weather, stormwater, and small community needs 
are some of the most pressing water quality problems facing 
municipalities today. The second degree amendment offered by 
Senator Crapo to the Voinovich amendment on this topic included 
amendments filed by Senators Jeffords (wet weather and 
stormwater), Warner (Chesapeake Bay), Chafee (National 
Estuaries), Graham (alternative water source development) and 
Reid (small systems).
    However, the bill also dictates spending decisions to 
States by creating a mandatory set-aside for water 
infrastructure grants, reducing the flexibility of States, 
reducing the funds available for water infrastructure projects, 
and duplicating the program-specific grants included in the 
bill. On September 14, 2004, the Council of Infrastructure 
Financing Authorities (CIFA) wrote to the committee stating, 
``This provision is troubling in several respects. Initially, 
it seems at odds with the goal you support of allowing States 
maximum flexibility in determining how best to meet their 
individual water quality priorities. An arbitrary set aside 
runs counter to the primary role provided to the States in 
managing the SRFs.'' CIFA goes on to say:

            ``The legislation specifies no basis for the grant 
        set aside. The requirement is not directed toward 
        addressing hardship situations nor is any financing 
        need identified that would require a grant in lieu of a 
        loan. Further, the language permitting a waiver of the 
        grant requirement if loan applications are processed 
        timely leaves in even greater doubt the possible 
        rationale for the set aside requirement.
            While there is no apparent benefit deriving from 
        the set aside, there are a number of potential adverse 
        impacts. A set aside to provide grants is contrary to 
        the underlying purpose of the revolving fund to 
        continually maximize available resources, derived from 
        Federal capital grants, State matching dollars and the 
        loan repayment stream, to finance water infrastructure. 
        The cumulative effect of a 10 percent set aside, not 
        subject to repayment to the SRF, would be a significant 
        diminishing in funds revolving and thus less financing 
        ultimately available to communities.
            In the case of States that leverage SRF funds, the 
        negative impact of the set aside is multiplied. States 
        have discretion to use the Federal capitalization 
        grants as collateral to borrow in the public bond 
        market to increase the pool of available funds for 
        project lending. Assuming a leveraging factor ranging 
        from 2:1 to 3:1, States could experience as much as a 
        30 percent reduction in project funding initially as a 
        result of the grant set aside requirement. Over time 
        this reduction will increase exponentially.''

                          CWA FUNDING FORMULA

    The revisions to the Clean Water Act SRF distribution 
formula included in the Water Infrastructure Financing Act are 
flawed in two important ways. First, the formula places unfair 
burdens on three States-Iowa, Michigan, and West Virginia-to 
the benefit of the others. To illustrate, if the Majority 
formula proposal were adopted, Michigan would see its 
allocation over 5 years cut by more than half, or over $166 
million. Iowa and West Virginia would also see substantial cuts 
over the same 5-year period. All together, these three States 
would see $215 million less over the life of the formula. The 
majority of States would see only very modest gains in 
allocations over 5 years; Florida, a State with burgeoning 
water infrastructure funding needs, would see barely an 
increase of $5 million over 5 years. More damaging than the 
inequitable distribution of losses under the formula in the 
Water Infrastructure Financing Act, is the formula's lack of a 
period of time to transition from a States' current allocation 
to the proposed allocation. The immediacy of the adoption of 
what is in some cases major change in a States' allocation 
using the formula in the Water Infrastructure Financing Act is 
likely to compromise the ability of the water authorities in 
those States to carry out their mission.
    In contrast, the substitute amendment offered by Senator 
Jeffords at the mark-up on June 23, 2004 included a revised 
formula that would spread losses more thinly across States and 
allow time for the losses to take effect. Using a ``transition 
period'' over the 5-year lifespan of the formula, States that 
experience losses in water infrastructure funding are protected 
from significant cuts in the first year, and are allowed to 
absorb those cuts over time.

                         PROJECT AUTHORIZATIONS

    Finally, the bill includes a project authorization for the 
Southeast Colorado Water Activity Enterprise at a cost of $85 
million with no explanation for its selection for earmarking in 
the bill in lieu of many other similar projects. The report 
accompanying the reported bill includes no explanation as to 
why this project was selected as the nation's highest priority 
for water projects in the Safe Drinking Water Act program. In 
addition, the substitute amendment offered by Senator Jeffords 
included project authorizations for multiple water 
infrastructure projects. This amendment failed by a vote of 10-
9 with Senators Jeffords, Baucus, Reid, Graham, Lieberman, 
Boxer, Wyden, Carper, and Clinton voting for the amendment and 
Senators Inhofe, Warner, Bond, Voinovich, Crapo, Chafee, 
Cornyn, Murkowski, Thomas, and Allard voting against the 
amendment. The projects which failed to receive support in this 
amendment and therefore, are not authorized in this bill, 
include:

  Memphis Metropolitan Area Groundwater Study, Arkansas, 
        Tennessee;
  Old Nogales Highway, Colonia, Arizona;
  Big Creek Watershed Restoration through Stormwater Control, 
        Georgia;
  White River Environmental Restoration through CSO 
        Replacement, Indiana;
  Bastrop Morehouse Parish Water Supply, Louisiana;
  Fall River and New Bedford Environmental Infrastructure 
        Project, Massachusetts;
  Statewide Combined Sewer Overflow Upgrades, Michigan;
  Northeastern Minnesota water infrastructure, Minnesota;
  DeSoto County Environmental Infrastructure, Mississippi;
  Lower Platte River Drinking Water, Nebraska;
  Central New Mexico Environmental Infrastructure, New Mexico;
  Parshall Drinking Water Supply, North Dakota;
  Southeastern Pennsylvania Water Infrastructure, Pennsylvania;
  Lake Marion and Lake Moultrie drinking water and wastewater 
        collection, South Carolina;
  Cheyenne River Sioux Tribe Water System, South Dakota;
  Colonias environmental infrastructure, Texas;
  Park City Water infrastructure, Utah;
  Chittenden County Storm Water Improvement, Chittenden County, 
        Vermont;
  Town of Waitsfield--Wastewater Treatment Facilities/Water 
        relocation;
  Town of Colchester Airport Parkway;
  Wastewater Treatment Plant, South Burlington, Vermont;

    The following California Affordable Quantity and Quality 
Water Act (CAL-AQQWA) Feasibility Studies:

  A conjunctive use project, in cooperation with the Calaveras 
        County Water District;
  A water reclamation project, in cooperation with the city of 
        Carson;
  A water reclamation project, in cooperation with the 
        Coastside County Water District;
  A water supply project at Pacheco Creek, Los Viboras Creek, 
        and Dos Picachos Creek, in cooperation with the San 
        Benito County Water District;
  A wetland restoration project, in cooperation with the city 
        of San Diego;
  A sediment management project at the Twitchell Reservoir, in 
        cooperation with the Santa Maria Valley Water 
        Conservation District;
  A groundwater assessment project at the North River, in 
        cooperation with the Tia Juana Valley County Water 
        District;
  Regional Seawater Desalination Program-San Diego County Water 
        Authority;
  Mission Springs Water District Water and Water 
        Infrastructure-Desert Hot Springs;
  Eastern Santa Clara River Subbasin (Perchlorate) Remediation 
        Initiative-Castaic Lake Water Agency;
  Bay Area Regional Desalination Project;
  Calexico New River Public Health Protection Project;
  South Montebello Water Infrastructure Improvement-Montebello;
  Big Bear Lake Environmental Restoration project, San 
        Bernardino Mountains;
  Recycled Water Transmission Pipelines/pipeline construction, 
        Eastern Municipal Water district;
  Raymond Basin Groundwater Restoration Project-Raymond Basin 
        Management Board;
  Groundwater Recovery Enhancement and Treatment (GREAT) 
        Program, city of Oxnard;
  Beach Septic System Improvements, Los Angeles County;
  San Diego Region Three Reservoir Intertie Project, San Diego 
        County;
  Port of Stockton, Port of Stockton (Rough and Ready Island);
  Amador Regional Wastewater Collection and Treatment project, 
        Amador Water Agency;
  Canal Point Wastewater System, city of Pahokee, Florida;
  City of Marathon Wastewater Improvement, city of Marathon, 
        Florida;
  Cypress Creek Restoration, Florida;
  Key West Stormwater Improvements, Florida;
  Lake Region Water Treatment Plan, Florida;
  Lower West Coast Regional Irrigation Distribution System, 
        Florida;
  Miami Dade NW Wellfield-UV Disinfection of Raw Water, 
        Florida;
  Tri-County Biosolids Pelletization Facility, Florida;
  East-Central Florida Integrated Water Resources Project, 
        Florida;
  Arkansas Valley Conduit, Colorado;
  Southeast Colorado publicly owned water related environmental 
        infrastructure, Colorado;
  Anacostia River Ecosystem Restoration and Combined Sewer 
        Overflow, Washington, D.C.;
  Baltimore Metropolitan/Gwynns Falls project, Maryland;
  St. Louis Environmental Infrastructure, Missouri;
  Lake Tahoe Restoration, Nevada;
  Henderson Watershed Assistance, Nevada;
  Ohio Environmental Infrastructure Program, Ohio;
  Rural Washington wastewater treatment and water supply, 
        Washington;
  Milwaukee Metropolitan Sewer District, Wisconsin; and
  Wind River Irrigation Project, Wyoming.

                  Additional Views of Senator Jeffords

                                                      July 11, 2004
James Inhofe
Chairman, Senate Environment and Public Works Committee
Washington, DC
James Jeffords
Ranking Member, Senate Environment and Public Works Committee
Washington, DC
Michael Crapo
Chairman, Subcommittee on Fisheries, Wildlife and Water
Senate Environment and Public Works Committee
Washington, DC
Dear Senators Inhofe, Jeffords and Crapo:
    I write to you today to express our concerns regarding S. 2550, the 
Water Infrastructure Financing Act. I believe that the changes to the 
Clean Water Act State Revolving Fund allocation formula proposed in 
this bill would continue the tremendous funding disparity in clean 
water funds that leaves many States, including my own, with 
insufficient resources to even come close to meeting their water 
infrastructure needs. That is wrong and it has to change. Let me tell 
you why this bill does not address the problem.
    The proposed formula in S. 2550 is not a true needs-based 
allocation. Instead, the bill uses needs as a target for future 
allocations, tying consideration of need to future appropriations 
levels for the entire fund. To shift from the current allocation to the 
target allocation under the needs survey, the appropriation level of 
the fund must reach $3.15 billion. That appropriation level, however, 
has only averaged $1.35 billion a year, which is a far cry from the 
trigger. Consequently, under the proposed formula, there is a real 
possibility that States, like my home State of Arizona, will never 
receive their fair share of the funds authorized and appropriated for 
the State Revolving Fund.
    In those years that we do not appropriate $3.15 billion, which I 
predict will be every year, the bill's transition formula would apply. 
The transition formula protects small states--which, under this 
formula, grow first--and permits large States to keep their current 
large allocation despite lack of need. These limits on growth and loss 
are nothing more than a recipe for choosing winners and losers. In 
effect, the Committee is asking States with exploding populations and 
growing needs, like my own, to subsidize the water infrastructure in 
these other States and pay more for the same infrastructure within 
their own States. This is not sound Federal policy. For those States 
that would receive less funding under a needs-based formula, the burden 
should be on them to explain why their States should receive more than 
they need while other States receive dramatically less.
    I have consistently advocated a formula that is based on need as 
documented in the EPA Clean Water Act Watershed Needs Survey. In August 
2001, I offered an amendment to the VA-HUD appropriations bill that 
would have changed the allocation formula to a needs-based formula with 
a 1-percent floor. I withdrew the amendment, but only after securing a 
commitment from this Committee and a Senate Resolution, to work 
together to fix this problem and report out a needs-based allocation 
formula. I have worked closely with you and your Committee since then, 
including testifying on this issue. I had high hopes that we would make 
progress this year to get a bill that was fair and equitable for all of 
the States. Thus, I was surprised and disappointed to hear that you are 
moving forward with S. 2550, the Water Infrastructure Financing Act.
    Moving to a needs-based formula would eliminate unfunded mandates 
in a manner that is fair and equitable. There is a precedent here in 
the Safe Drinking Water Act, which allocations funds on the basis of 
drinking water need. In the time since the markup, you once again 
indicated your willingness and pledged your support to work with us to 
address this issue. I am ready to work with you and look forward to 
getting this issue resolved this time.
            Sincerely,
                                                    Jon Kyl
                                              United States Senator

                        Changes in Existing Law

    In compliance with section 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill 
as reported are shown as follows: Existing law proposed to be 
omitted is enclosed in [black brackets], new matter is printed 
in italic, existing law in which no change is proposed is shown 
in roman:




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                              ----------                              


                [33 U.S.C. 1251 ET SEQ.--JUN. 30, 1948]

                  FEDERAL WATER POLLUTION CONTROL ACT




           *       *       *       *       *       *       *
SEC. 220. PILOT PROGRAM FOR ALTERNATIVE WATER SOURCE PROJECTS.

    (a) * * *




           *       *       *       *       *       *       *
    (j) Authorization of Appropriations.--There is authorized 
to be appropriated to carry out this section [a total of 
$75,000,000 for fiscal years 2002 through 2004] $25,000,000 for 
each of fiscal years 2005 through 2007. Such sums shall remain 
available until expended.




           *       *       *       *       *       *       *
[SEC. 221. SEWER OVERFLOW CONTROL GRANTS.]

SEC. 221. WET WEATHER GRANTS.

    (a) In General.--In any fiscal year in which the 
Administrator has available for obligation at least 
$1,350,000,000 for the purposes of section 601--
            (1) the Administrator may make grants to States for 
        the purpose of providing grants to a municipality or 
        municipal entity for planning, design, and construction 
        of treatment works to intercept, transport, control, or 
        treat municipal combined sewer overflows [and sanitary 
        sewer overflows] , sanitary sewer overflows, and 
        stormwater runoff; and
            (2) subject to subsection (g), the Administrator 
        may make a direct grant to a municipality or municipal 
        entity for the purposes described in paragraph (1).
    (b) Prioritization.--In selecting from among municipalities 
applying for grants under subsection (a), a State or the 
Administrator shall give priority to an applicant that--
            (1) is a municipality that is a financially 
        distressed community under subsection (c);
            (2) has implemented or is complying with an 
        implementation schedule for the nine minimum controls 
        specified in the CSO control policy referred to in 
        section 402(q)(1) and has begun implementing a long-
        term municipal combined sewer overflow control plan [or 
        a separate sanitary sewer overflow control plan];
            (3) is a municipality that is subject to the Phase 
        I or Phase II stormwater regulations;
            [(3)] (4) is requesting a grant for a project that 
        is on a State's intended use plan pursuant to section 
        606(c); or
            [(4)] (5) is an Alaska Native Village.
    (c) Financially Distressed Community.--
            (1) Definition.--In subsection (b), the term 
        ``financially distressed community'' means a community 
        that meets affordability criteria established by the 
        State in which the community is located, if such 
        criteria are developed after public review and comment.
            (2) Consideration of impact on water and sewer 
        rates.--In determining if a community is a distressed 
        community for the purposes of subsection (b), the State 
        shall consider, among other factors, the extent to 
        which the rate of growth of a community's tax base has 
        been historically slow such that implementing a plan 
        described in subsection (b)(2) would result in a 
        significant increase in any water or sewer rate charged 
        by the community's publicly owned wastewater treatment 
        facility.
            (3) Information to assist states.--The 
        Administrator may publish information to assist States 
        in establishing affordability criteria under paragraph 
        (1).
    (d) Cost-Sharing.--The Federal share of the cost of 
activities carried out using amounts from a grant made under 
subsection (a) shall be not less than 55 percent of the cost. 
The non-Federal share of the cost may include, in any amount, 
public and private funds and in-kind services, and may include, 
notwithstanding section [603(h)] 603(i), financial assistance, 
including loans, from a State water pollution control revolving 
fund.
    (e) Administrative Reporting Requirements.--If a project 
receives grant assistance under subsection (a) and loan 
assistance from a State water pollution control revolving fund 
and the loan assistance is for 15 percent or more of the cost 
of the project, the project may be administered in accordance 
with State water pollution control revolving fund 
administrative reporting requirements for the purposes of 
streamlining such requirements.
    (f) Authorization of Appropriations.--There is authorized 
to be appropriated to carry out this [section $750,000,000 for 
each of fiscal years 2002 and 2003. Such sums shall remain 
available until expended.] section $250,000,000 for each of 
fiscal years 2005 through 2009, to remain available until 
expended.
    (g) Allocation of Funds.--
            (1) Fiscal year 2002.--Subject to subsection (h), 
        the Administrator shall use the amounts appropriated to 
        carry out this section for fiscal year 2002 for making 
        grants to municipalities and municipal entities under 
        subsection (a)(2), in accordance with the criteria set 
        forth in subsection (b).
            (2) Fiscal year 2003.--Subject to subsection (h), 
        the Administrator shall use the amounts appropriated to 
        carry out this section for fiscal year 2003 as follows:
                    (A) Not to exceed $250,000,000 for making 
                grants to municipalities and municipal entities 
                under subsection (a)(2), in accordance with the 
                criteria set forth in subsection (b).
                    (B) All remaining amounts for making grants 
                to States under subsection (a)(1), in 
                accordance with a formula to be established by 
                the Administrator, after providing notice and 
                an opportunity for public comment, that 
                allocates to each State a proportional share of 
                such amounts based on the total needs of the 
                State for municipal combined sewer overflow 
                controls [and sanitary sewer overflow controls] 
                , sanitary sewer overflow controls, and 
                stormwater runoff controls identified in the 
                most recent survey conducted pursuant to 
                section 516(b)(1).
    (h) Administrative Expenses.--Of the amounts appropriated 
to carry out this section for each fiscal year--
            (1) the Administrator may retain an amount not to 
        exceed 1 percent for the reasonable and necessary costs 
        of administering this section; and
            (2) the Administrator, or a State, may retain an 
        amount not to exceed 4 percent of any grant made to a 
        municipality or municipal entity under subsection (a), 
        for the reasonable and necessary costs of administering 
        the grant.
    (i) Reports.--Not later than December 31, 2003, and 
periodically thereafter, the Administrator shall transmit to 
Congress a report containing recommended funding levels for 
grants under this section. The recommended funding levels shall 
be sufficient to ensure the continued expeditious 
implementation of municipal combined sewer overflow [and 
sanitary sewer overflow controls] , sanitary sewer overflow, 
and stormwater runoff nationwide.




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SEC. 320. NATIONAL ESTUARY PROGRAM.




           *       *       *       *       *       *       *
    (i) Authorization of Appropriations.--There are authorized 
to be appropriated to the Administrator not to exceed 
[$35,000,000 for each of fiscal years 2001 through 2005] 
$35,000,000 for each of fiscal years 2005 through 2010 for--
            (1) expenses related to the administration of 
        management conferences under this section, not to 
        exceed 10 percent of the amount appropriated under this 
        subsection;
            (2) making grants under subsection (g); and
            (3) monitoring the implementation of a conservation 
        and management plan by the management conference or by 
        the Administrator, in any case in which the conference 
        has been terminated.
The Administrator shall provide up to $5,000,000 per fiscal 
year of the sums authorized to be appropriated under this 
subsection to the Administrator of the National Oceanic and 
Atmospheric Administration to carry out subsection (j).




           *       *       *       *       *       *       *
                          REPORTS TO CONGRESS

    Sec. 516. The Administrator, in cooperation with the 
States, including water pollution control agencies and other 
water pollution control planning agencies, shall make (1) a 
detailed estimate of the cost of carrying out the provisions of 
this Act; (2) a detailed estimate, biennially revised, of the 
cost of construction of all needed publicly owned treatment 
works in all of the States and of the cost of construction of 
all needed publicly owned treatment works in each of the 
States; (3) a comprehensive study of the economic impact on 
affected units of government of the cost of installation of 
treatment facilities; and (4) a comprehensive analysis of the 
national requirements for and the cost of treating municipal, 
industrial, and other effluent to attain the water quality 
objectives as established by this Act or applicable State law. 
The Administrator shall submit such detailed estimate and such 
comprehensive study of such cost to the Congress no later than 
February 10 of each [odd-numbered] fourth year. Whenever the 
Administrator, pursuant to this subsection, requests and 
receives an estimate of cost from a State, he shall furnish 
copies of such estimate together with such detailed estimate to 
Congress.




           *       *       *       *       *       *       *
SEC. 603. WATER POLLUTION CONTROL REVOLVING LOAN FUNDS.

    (a) Requirements for Obligation of Grant Funds.--Before a 
State may receive a capitalization grant with funds made 
available under this title and section 205(m) of this Act, the 
State shall first establish a water pollution control revolving 
fund which complies with the requirements of this section.
    (b) Administrator.--Each State water pollution control 
revolving fund shall be administered by an instrumentality of 
the State with such powers and limitations as may be required 
to operate such fund in accordance with the requirements and 
objectives of this Act.
    [(c) Projects Eligible for Assistance.--The amounts of 
funds available to each State water pollution control revolving 
fund shall be used only for providing financial assistance (1) 
to any municipality, intermunicipal, interstate, or State 
agency for construction of publicly owned treatment works (as 
defined in section 212 of this Act), (2) for the implementation 
of a management program established under section 319 of this 
Act, and (3) for development and implementation of a 
conservation and management plan under section 320 of this Act. 
The fund shall be established, maintained, and credited with 
repayments, and the fund balance shall be available in 
perpetuity for providing such financial assistance.]
    (c) Projects Eligible for Assistance.--
            (1) Requirements.--A project shall be eligible to 
        receive funding, in whole or in part, from a State 
        water pollution control revolving fund under this 
        section only if the project meets the requirements of 
        section 513.
            (2) Use of funds.--Funds in each State water 
        pollution control revolving fund shall be used only 
        for--
                    (A) providing financial assistance to a 
                municipality, intermunicipal, interstate, or 
                State agency, or private utility that 
                principally treats municipal wastewater or 
                domestic sewage, for construction (including 
                costs for planning, design, associated 
                preconstruction, and necessary activities for 
                siting the facility and related elements) of 
                treatment works (as defined in section 212);
                    (B) implementation of a management program 
                established under section 319;
                    (C) development and implementation of a 
                conservation and management plan under section 
                320;
                    (D) water conservation projects or 
                activities the primary purpose of which is the 
                protection, preservation, or enhancement of 
                water quality, including through--
                            (i) piping or lining of an 
                        irrigation canal;
                            (ii) recovery or recycling of 
                        wastewater or runoff from irrigation;
                            (iii) irrigation scheduling;
                            (iv) measurement or metering of 
                        water use; or
                            (v) improvement of on-field 
                        irrigation efficiency;
                    (E) providing financial assistance to a 
                municipality or an intermunicipal, interstate, 
                or State agency for reuse, reclamation, or 
                recycling projects the primary purpose of which 
                is the protection, preservation, or enhancement 
                of water quality;
                    (F) providing financial assistance to a 
                municipality or an intermunicipal, interstate, 
                or State agency for projects to increase the 
                security of wastewater treatment works 
                (excluding any expenditure for operations or 
                maintenance); or
                    (G) providing financial assistance to a 
                municipality or an intermunicipal, interstate, 
                or State agency for measures to control 
                municipal stormwater, the primary purpose of 
                which is the preservation, protection, or 
                enhancement of water quality.
    (d) Types of Assistance.--Except as otherwise limited by 
State law, a water pollution control revolving fund of a State 
under this section may be used only--
            (1) to make loans, on the condition that--
                    (A) such loans are made at or below market 
                interest rates, including interest free loans, 
                at terms not to exceed 20 years;
                    (B) annual principal and interest payments 
                will commence not later than 1 year after 
                completion of any project and all loans will be 
                fully amortized not later than 20 years after 
                project completion;
                    (C) the recipient of a loan will establish 
                a dedicated source of revenue for repayment of 
                loans; and
                    (D) the fund will be credited with all 
                payments of principal and interest on all 
                loans;
            (2) to buy or refinance the debt obligation of 
        municipalities and intermunicipal and interstate 
        agencies within the State at or below market rates, 
        where such debt obligations were incurred after March 
        7, 1985;
            (3) to guarantee, or purchase insurance for, local 
        obligations where such action would improve credit 
        market access or reduce interest rates;
            (4) as a source of revenue or security for the 
        payment of principal and interest on revenue or general 
        obligation bonds issued by the State if the proceeds of 
        the sale of such bonds will be deposited in the fund;
            (5) to provide loan guarantees for similar 
        revolving funds established by municipalities or 
        intermunicipal agencies;
            (6) to earn interest on fund accounts; [and]
            (7) for the reasonable costs of administering the 
        fund and conducting activities under this title, except 
        that such amounts shall not exceed [4 percent] 6 
        percent of all grant awards to such fund under this 
        title[.] ; and
            (8) to carry out a project under paragraph (2) or 
        (3) of section 601(a), which may be--
                    (A) operated by a municipal, 
                intermunicipal, or interstate entity, State, 
                public or private utility, corporation, 
                partnership, association, or nonprofit agency; 
                and
                    (B) used to make loans that will be fully 
                amortized not later than 30 years after the 
                date of the completion of the project.
    (e) Types of Assistance for Disadvantaged Communities.--
            (1) Definition of disadvantaged community.--In this 
        subsection, the term `disadvantaged community' means 
        the service area, or portion of a service area, of a 
        treatment works that meets affordability criteria 
        established after public review and comment by the 
        State in which the treatment works is located.
            (2) Loan subsidy.--Notwithstanding any other 
        provision of this section, in a case in which the State 
        makes a loan from the water pollution control revolving 
        loan fund in accordance with subsection (c) to a 
        disadvantaged community or a community that the State 
        expects to become a disadvantaged community as the 
        result of a proposed project, the State may provide 
        additional subsidization, including the forgiveness of 
        the principal of the loan.
            (3) Total amount of subsidies.--For each fiscal 
        year, the total amount of loan subsidies made by the 
        State pursuant to this subsection may not exceed 30 
        percent of the amount of the capitalization grant 
        received by the State for the fiscal year.
            (4) Extended term.--A State may provide an extended 
        term for a loan if the extended term--
                    (A) terminates not later than the date that 
                is 30 years after the date of completion of the 
                project; and
                    (B) does not exceed the expected design 
                life of the project.
            (5) Information.--The Administrator may publish 
        information to assist States in establishing 
        affordability criteria described in paragraph (1).
    [(e)] (f) Limitation To Prevent Double Benefits.--If a 
State makes, from its water pollution revolving fund, a loan 
which will finance the cost of facility planning and the 
preparation of plans, specifications, and estimates for 
construction of publicly owned treatment works, the State shall 
ensure that if the recipient of such loan receives a grant 
under section 201(g) of this Act for construction of such 
treatment works and an allowance under section 201(l)(1) of 
this Act for non-federal funds expended for such planning and 
preparation, such recipient will promptly repay such loan to 
the extent of such allowance.
    [(f)] (g) Consistency With Planning Requirements.--A State 
may provide financial assistance from its water pollution 
control revolving fund only with respect to a project which is 
consistent with plans, if any, developed under sections 205(j), 
208, 303(e), 319, and 320 of this Act.
    [(g)] [(h) Priority List Requirement.--The State may 
provide financial assistance from its water pollution control 
revolving fund only with respect to a project for construction 
of a treatment works described in subsection (c)(1) if such 
project is on the State's priority list under section 216 of 
this Act. Such assistance may be provided regardless of the 
rank of such project on such list.]
    (h) Priority System Requirement.--
            (1) Definitions.--In this subsection:
                    (A) Restructuring.--The term 
                `restructuring' means--
                            (i) the consolidation of management 
                        functions or ownership with another 
                        facility; or
                            (ii) the formation of cooperative 
                        partnerships.
                    (B) Traditional wastewater approach.--The 
                term `traditional wastewater approach' means a 
                managed system used to collect and treat 
                wastewater from an entire service area 
                consisting of--
                            (i) collection sewers;
                            (ii) a centralized treatment plant 
                        using biological, physical, or chemical 
                        treatment processes; and
                            (iii) a direct point source 
                        discharge to surface water.
            (2) Priority system.--A State shall establish a 
        system for providing financial assistance from the 
        water pollution control revolving fund of the State 
        under which the State--
                    (A) gives more weight to an application for 
                assistance by a treatment works if the 
                application includes such other information as 
                the State determines to be appropriate and--
                            (i) an inventory of assets, 
                        including a description of the 
                        condition of those assets;
                            (ii) a schedule for replacement of 
                        assets;
                            (iii) a financing plan indicating 
                        sources of revenue from rate payers, 
                        grants, bonds, other loans, and other 
                        sources;
                            (iv) a review of options for 
                        restructuring the treatment works; or
                            (v) a review of options for 
                        approaches other than a traditional 
                        wastewater approach that may include 
                        actions or projects that treat or 
                        minimize sewage or urban stormwater 
                        discharges using--
                                    (I) decentralized or 
                                distributed stormwater 
                                controls;
                                    (II) decentralized 
                                wastewater treatment;
                                    (III) low impact 
                                development technologies;
                                    (IV) stream buffers;
                                    (V) wetland restoration; or
                                    (VI) actions to minimize 
                                the amount of and direct 
                                connections to impervious 
                                surfaces;
                    (B) takes into consideration appropriate 
                chemical, physical, and biological data that 
                the State considers reasonably available and of 
                sufficient quality;
                    (C) provides for public notice and 
                opportunity to comment on establishment of the 
                system and the summary under subparagraph (D);
                    (D) publishes not less than biennially in 
                summary form a description of projects in the 
                State that are eligible for assistance under 
                this title that indicates--
                            (i) the priority assigned to each 
                        project under the priority system of 
                        the State; and
                            (ii) the funding schedule for each 
                        project, to that extent the such 
                        information is available; and
                    (E) ensures that projects undertaken with 
                assistance under this title are designed to 
                achieve, in the estimation of the State, the 
                optimum water quality management, consistent 
                with the public health and water quality goals 
                and requirements of this title.
    [(h)] (i) Eligibility of Non-Federal Share of Construction 
Grant Projects.--A State water pollution control revolving fund 
may provide assistance (other than under subsection (d)(1) of 
this section) to a municipality or intermunicipal or interstate 
agency with respect to the non-Federal share of the costs of a 
treatment works project for which such municipality or agency 
is receiving assistance from the Administrator under any other 
authority only if such assistance is necessary to allow such 
project to proceed.
    (j) Transfer of Funds.--
            (1) In general.--The Governor of a State may--
                    (A)(i) reserve not more than 33 percent of 
                a capitalization grant made under this title; 
                and
                    (ii) add the funds reserved to any funds 
                provided to the State under section 1452 of the 
                Safe Drinking Water Act (42 U.S.C. 300j-12); 
                and
                    (B)(i) reserve for any year an amount that 
                does not exceed the amount that may be reserved 
                under subparagraph (A) for that year from 
                capitalization grants made under section 1452 
                of that Act (42 U.S.C. 300j-12); and
                    (ii) add the reserved funds to any funds 
                provided to the State under this title.
            (2) State match.--Funds reserved under this 
        subsection shall not be considered to be a State 
        contribution for a capitalization grant required under 
        this title or section 1452(b) of the Safe Drinking 
        Water Act (42 U.S.C. 300j-12(b)).
    (k) Set-aside.--
            (1) $3,000,000,000 or less made available.--
                    (A) In general.--In the case of a fiscal 
                year for which appropriations for State 
                revolving loan funds do not exceed 
                $3,000,000,000, a State shall set aside 10 
                percent of the capitalization grant of the 
                State under section 601(a) to provide grants to 
                eligible users described in subsection (c) in 
                the amount of not more than 55 percent of the 
                total cost of a project for which a grant is 
                made.
                    (B) Waiver.--A State may waive the 
                requirement of subparagraph (A) if the average 
                time for processing loan applications during 
                the preceding 12 months did not exceed 90 days.
            (2) More than $3,000,000,000 made available.--In 
        the case of a fiscal year for which appropriations for 
        State revolving loan funds exceed $3,000,000,000, a 
        State shall set aside not more than 10 nor less than 5 
        percent of the State revolving loan fund of the State.


        

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SEC. 604. ALLOTMENT OF FUNDS.

    [(a) Formula.--Sums authorized to be appropriated to carry 
out this section for each of fiscal years 1989 and 1990 shall 
be allotted by the Administrator in accordance with section 
205(c) of this Act.]
    (a) Definitions.--In this subsection:
            (1) Base formula.--The term `base formula' means 
        the formula for the allotment of funds made available 
        to carry out this section for a fiscal year to States 
        in accordance with section 205(c)(3).
            (2) Needs survey.--The term `needs survey' means a 
        needs survey conducted under section 516(2).
            (3) Needs survey percentage.--The term `needs 
        survey percentage', with respect to a State, means the 
        percentage applicable to the State under a formula for 
        the allotment of funds made available to carry out this 
        section for a fiscal year to States in amounts 
        determined by the Administrator based on the ratio 
        that--
                    (A) the needs of a State described in 
                categories I through VII of the most recent 
                needs survey; bears to
                    (B) the needs of all States described in 
                categories I through VII of the most recent 
                needs survey.
            (4) Next needs survey.--The term `next needs 
        survey' means the first needs survey that is completed 
        after the 2000 needs survey.
            (5) State.--The term `State' means a State, the 
        District of Columbia, and the Commonwealth of Puerto 
        Rico.
    (b) Allocation of Funds.--
            (1) In general.--Funds made available to carry out 
        this section for a fiscal year shall be allocated by 
        the Administrator in accordance with this subsection.
            (2) Indian tribes.--Of the total amount of funds 
        available, 1.5 percent shall be allocated to Indian 
        tribes (within the meaning of section 518(c)).
            (3) Certain territories and freely associated 
        states.--Of the total amount of funds made available, 
        0.25 percent shall be allocated to Guam, the United 
        States Virgin Islands, American Samoa, the Commonwealth 
        of the Northern Mariana Islands, the Federated States 
        of Micronesia, the Republic of the Marshall Islands, 
        and the Republic of Palau to be allocated among those 
        territories and freely associated states, as determined 
        by the Administrator.
            (4) States.--
                    (A) Target allocation.--Each State shall 
                have a target allocation that--
                            (i) in the case of a State for 
                        which the needs survey percentage is 
                        less than 1.0 percent, shall be 1.0 
                        percent; and
                            (ii) in the case of any other 
                        State, shall be the needs survey 
                        percentage.
                    (B) Limitation on growth.--
                            (i) Applicability.--This 
                        subparagraph applies with respect to 
                        any fiscal year for which the amount of 
                        funds made available to carry out this 
                        section is $3,150,000,000 or less.
                            (ii) States with a needs survey 
                        percentage of 1.0 percent or less.--In 
                        the case of a State for which the needs 
                        survey percentage is 1.0 percent or 
                        less, the growth in allocation in 
                        dollar terms relative to the base 
                        formula shall be limited to--
                                    (I) 12 percent for fiscal 
                                year 2005;
                                    (II) 16 percent for fiscal 
                                year 2006;
                                    (III) 20 percent for fiscal 
                                year 2007;
                                    (IV) 24 percent for fiscal 
                                year 2008; and
                                    (V) 28 percent for fiscal 
                                year 2009 and each fiscal year 
                                thereafter.
                            (iii) States with a needs survey 
                        percentage of greater than 1.0 
                        percent.--In the case of a State for 
                        which the needs survey percentage is 
                        greater than 1.0 percent, the growth in 
                        allocation in dollar terms relative to 
                        the base formula shall be limited to 
                        0.0 percent (before an allocation, if 
                        any, is made under subparagraph (D)).
                    (C) Limitation on loss.--
                            (i) States with a needs survey 
                        percentage of 1.0 percent or less.--A 
                        dollar amount that is not less than the 
                        dollar amount under the base formula 
                        shall be allocated to States described 
                        in subparagraph (A)(i).
                            (ii) States for which the needs 
                        survey percentage is greater than 1.0 
                        percent.--A dollar amount that is equal 
                        to the dollar amount under the base 
                        formula shall be allocated to States 
                        described in subparagraph (A)(ii) 
                        (before an allocation, if any, is made 
                        under subparagraph (D)) that--
                                    (I) in the most recent 
                                needs survey, reported higher 
                                needs in both categories V and 
                                VII than the State reported in 
                                the previous needs survey;
                                    (II) grew in population by 
                                more than 10 percent between 
                                the 1990 decenniel census and 
                                the 2000 decenniel census; or
                                    (III) has a population 
                                equal to 4 percent or more of 
                                the total population of the 
                                United States, as reported in 
                                the 2000 decenniel census.
                    (D) Unallocated balance.--
                            (i) Less than $1,380,000,000 made 
                        available.--For a fiscal year for which 
                        less than $1,380,000,000 is made 
                        available to carry out this section, 
                        the unallocated balance of available 
                        funds shall be allocated in equal 
                        amounts to all States that, in the most 
                        recent needs survey, report higher 
                        total needs both in absolute dollar 
                        terms and as a percentage of the total 
                        United States needs.
                            (ii) $1,380,000,000 or more made 
                        available.--For a fiscal year for which 
                        $1,380,000,000 or more is made 
                        available to carry out this section, 
                        the unallocated balance of available 
                        funds shall be allocated in equal 
                        amounts to all States that--
                                    (I) are described in clause 
                                (i); or
                                    (II) are described in 
                                subparagraph (C).
    [(b)] (c) Reservation of Funds for Planning.--Each State 
shall reserve each fiscal year 1 percent of the sums allotted 
to such State under this section for such fiscal year, or 
$100,000, whichever amount is greater, to carry out planning 
under sections 205(j) and 303(e) of this Act.
    [(c)] (d) Allotment Period.--
            (1) Period of availability for grant award.--Sums 
        allotted to a State under this section for a fiscal 
        year shall be available for obligation by the State 
        during the fiscal year for which sums are authorized 
        and during the following fiscal year.
            (2) Reallotment of unobligated funds.--The amount 
        of any allotment not obligated by the State by the last 
        day of the 2-year period of availability established by 
        paragraph (1) shall be immediately reallotted by the 
        Administrator on the basis of the same ratio as is 
        applicable to sums allotted under title II of this Act 
        for the second fiscal year of such 2-year period. None 
        of the funds reallotted by the Administrator shall be 
        reallotted to any State which has not obligated all 
        sums allotted to such State in the first fiscal year of 
        such 2-year period.
    (f) Reservation of Funds for Planning.--A State shall 
reserve to carry out planning under sections 205(j) and 303(e) 
for each fiscal year the greater of--
            (1) 2 percent of the amount allocated to the State 
        under this section for the fiscal year; or
            (2) $100,000.


        

           *       *       *       *       *       *       *
[SEC. 607. AUTHORIZATION OF APPROPRIATIONS.

    [There is authorized to be appropriated to carry out the 
purposes of this title the following sums:
            [(1) $1,200,000,000 per fiscal year for each of 
        fiscal year 1989 and 1990;
            [(2) $2,400,000,000 for fiscal year 1991;
            [(3) $1,800,000,000 for fiscal year 1992;
            [(4) $1,200,000,000 for fiscal year 1993; and
            [(5) $600,000,000 for fiscal year 1994.]

SEC. 607. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There are authorized to be appropriated to 
carry out this title--
            (1) $3,200,000,000 for each of fiscal years 2005 
        and 2006;
            (2) $3,600,000,000 for fiscal year 2007;
            (3) $4,000,000,000 for fiscal year 2008; and
            (4) $6,000,000,000 for fiscal year 2009.
    (b) Availability.--Amounts made available under this 
section shall remain available until expended.
    (c) Reservation for Needs Surveys.--Of the amount made 
available under subsection (a) to carry out this title for a 
fiscal year, the Administrator may reserve not more than 
$1,000,000 per year to pay the costs of conducting needs 
surveys under section 516(2).




           *       *       *       *       *       *       *
                        TITLE VII--MISCELLANEOUS

SEC. 701. SEWAGE CONTROL TECHNOLOGY GRANT PROGRAM.

    (a) Definition of Eligible Facility.--In this section, the 
term `eligible facility' means a municipal wastewater treatment 
plant that--
            (1) as of the date of enactment of this title, has 
        a permitted design capacity to treat an annual average 
        of at least 500,000 gallons of wastewater per day; and
            (2) is located within the Chesapeake Bay watershed 
        in any of the States of Delaware, Maryland, New York, 
        Pennsylvania, Virginia, or West Virginia or in the 
        District of Columbia.
    (b) Grant Program.--
            (1) Establishment.--Not later than 1 year after the 
        date of enactment of this title, the Administrator 
        shall establish a program within the Environmental 
        Protection Agency to provide grants to States and 
        municipalities to upgrade eligible facilities with 
        nutrient removal technologies.
            (2) Priority.--In providing a grant under paragraph 
        (1), the Administrator shall--
                    (A) consult with the Chesapeake Bay Program 
                Office;
                    (B) give priority to eligible facilities at 
                which nutrient removal upgrades would--
                            (i) produce the greatest nutrient 
                        load reductions at points of discharge; 
                        or
                            (ii) result in the greatest 
                        environmental benefits to local bodies 
                        of water surrounding, and the main stem 
                        of, the Chesapeake Bay; and
                    (C) take into consideration the geographic 
                distribution of the grants.
            (3) Application.--
                    (A) In general.--On receipt of an 
                application from a State or municipality for a 
                grant under this section, if the Administrator 
                approves the request, the Administrator shall 
                transfer to the State or municipality the 
                amount of assistance requested.
                    (B) Form.--An application submitted by a 
                State or municipality under subparagraph (A) 
                shall be in such form and shall include such 
                information as the Administrator may prescribe.
            (4) Use of funds.--A State or municipality that 
        receives a grant under this section shall use the grant 
        to upgrade eligible facilities with nutrient removal 
        technologies that are designed to reduce total nitrogen 
        in discharged wastewater to an average annual 
        concentration of 4 milligrams per liter.
            (5) Cost sharing.--
                    (A) Federal share.--The Federal share of 
                the cost of upgrading any eligible facility 
                described in paragraph (1) using funds provided 
                under this section shall not exceed 55 percent.
                    (B) Non-federal share.--The non-Federal 
                share of the costs of upgrading any eligible 
                facility described in paragraph (1) using funds 
                provided under this section may be provided in 
                the form of funds made available to a State or 
                municipality under--
                            (i) any provision of this Act other 
                        than this section (including funds made 
                        available from a State revolving fund 
                        established under title VI); or
                            (ii) any other Federal or State 
                        law.
    (c) Authorization of Appropriations.--
            (1) In general.--There is authorized to be 
        appropriated to carry out this section $100,000,000 for 
        each of fiscal years 2005 through 2009, to remain 
        available until expended.
            (2) Administrative costs.--The Administrator may 
        use not to exceed 4 percent of any amount made 
        available under paragraph (1) for a fiscal year to pay 
        administrative costs incurred in carrying out this 
        section.


        

           *       *       *       *       *       *       *
                              ----------                              


                     [42 U.S.C. 300F--JUL. 1, 1944]

                        SAFE DRINKING WATER ACT




           *       *       *       *       *       *       *
                              SHORT TITLE

    Sec. 1400. This title may be cited as the ``Safe Drinking 
Water Act''.




           *       *       *       *       *       *       *
                          Part A--Definitions

                              definitions

    Sec. 1401. * * *
            (14) The term ``Indian Tribe'' means any Indian 
        tribe having a Federally recognized governing body 
        carrying out substantial governmental duties and powers 
        over any area. For purposes of section [1452,] 1452 and 
        part G, the term includes any Native village (as 
        defined in section 3(c) of the Alaska Native Claims 
        Settlement Act (43 U.S.C. 1602(c))).


        

           *       *       *       *       *       *       *
    Sec. 1420. * * *




           *       *       *       *       *       *       *
    (g) Environmental Finance Centers.--
            (1) In general.--The Administrator shall provide 
        initial funding for one or more university-based 
        environmental finance centers for activities that 
        provide technical assistance to State and local 
        officials in developing the capacity of public water 
        systems. Any such funds shall be used only for 
        activities that are directly related to this title.
            (2) National capacity development clearinghouse.--
        The Administrator shall establish a national public 
        water system capacity development clearinghouse to 
        receive and disseminate information with respect to 
        developing, improving, and maintaining financial and 
        managerial capacity at public water systems. The 
        Administrator shall ensure that the clearinghouse does 
        not duplicate other federally supported clearinghouse 
        activities.
            (3) Capacity development techniques.--The 
        Administrator may request an environmental finance 
        center funded under paragraph (1) to develop and test 
        managerial, financial, and institutional techniques for 
        capacity development. The techniques may include 
        capacity assessment methodologies, manual and computer 
        based public water system rate models and capital 
        planning models, public water system consolidation 
        procedures, and regionalization models.
            [(4) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this 
        subsection $1,500,000 for each of the fiscal years 1997 
        through 2003.]
            (4) Authorization of appropriations.--There is 
        authorized to be appropriated to carry out this 
        subsection $2,000,000 for each of fiscal years 2005 
        through 2009.
            (5) Limitation.--No portion of any funds made 
        available under this subsection may be used for 
        lobbying expenses.


        

           *       *       *       *       *       *       *
   RESEARCH, TECHNICAL ASSISTANCE, INFORMATION, TRAINING OF PERSONNEL

    Sec. 1442. * * *




           *       *       *       *       *       *       *
    (e) Technical Assistance.--[The Administrator may provide]
            (1) In general.--The Administrator may provide 
        technical assistance to small public water systems to 
        enable such systems to achieve and maintain compliance 
        with applicable national primary drinking water 
        regulations. Such assistance may include circuit-rider 
        and multi-State regional technical assistance programs, 
        training, and preliminary engineering evaluations. The 
        Administrator shall ensure that technical assistance 
        pursuant to this subsection is available in each State. 
        Each nonprofit organization receiving assistance under 
        this subsection shall consult with the State in which 
        the assistance is to be expended or otherwise made 
        available before using assistance to undertake 
        activities to carry out this subsection. There are 
        authorized to be appropriated to the Administrator to 
        be used for such technical assistance $15,000,000 for 
        each of the fiscal years 1997 through 2003. No portion 
        of any State loan fund established under section 1452 
        (relating to State loan funds) and no portion of any 
        funds made available under this subsection may be used 
        for lobbying expenses. Of the total amount appropriated 
        under this subsection, 3 percent shall be used for 
        technical assistance to public water systems owned or 
        operated by Indian Tribes.
            (2) Small system revolving loan fund.--
                    (A) In general.--In addition to amounts 
                provided under this section, the Administrator 
                may provide grants to qualified private, 
                nonprofit entities to capitalize revolving 
                funds to provide financing to eligible entities 
                described in subparagraph (B) for--
                            (i) predevelopment costs (including 
                        costs for planning, design, associated 
                        preconstruction, and necessary 
                        activities for siting the facility and 
                        related elements) associated with 
                        proposed water projects or with 
                        existing water systems; and
                            (ii) short-term costs incurred for 
                        replacement equipment, small-scale 
                        extension services, or other small 
                        capital projects that are not part of 
                        the regular operations and maintenance 
                        activities of existing water systems.
                    (B) Eligible entities.--To be eligible for 
                assistance under this paragraph, an entity 
                shall be a small water system (as described in 
                section 1412(b)(4)(E)(ii)).
                    (C) Maximum amount of loans.--The amount of 
                financing made to an eligible entity under this 
                paragraph shall not exceed--
                            (i) $100,000 for costs described in 
                        subparagraph (A)(i); and
                            (ii) $100,000 for costs described 
                        in subparagraph (A)(ii).
                    (D) Term.--The term of a loan made to an 
                eligible entity under this paragraph shall not 
                exceed 10 years.
                    (E) Annual report.--For each fiscal year, a 
                qualified private, nonprofit entity that 
                receives a grant under subparagraph (A) shall 
                submit to the Administrator a report that--
                            (i) describes the activities of the 
                        qualified private, nonprofit entity 
                        under this paragraph for the fiscal 
                        year; and
                            (ii) specifies--
                                    (I) the number of 
                                communities served;
                                    (II) the sizes of those 
                                communities; and
                                    (III) the type of financing 
                                provided by the qualified 
                                private, nonprofit entity.
                    (F) Authorization of appropriations.--There 
                is authorized to be appropriated to carry out 
                this subsection $25,000,000 for each of fiscal 
                years 2005 through 2009.


                

           *       *       *       *       *       *       *
    [(m) Authorization of Appropriations.--There are authorized 
to be appropriated to carry out the purposes of this section 
$599,000,000 for the fiscal year 1994 and $1,000,000,000 for 
each of the fiscal years 1995 through 2003. To the extent 
amounts authorized to be appropriated under this subsection in 
any fiscal year are not appropriated in that fiscal year, such 
amounts are authorized to be appropriated in a subsequent 
fiscal year (prior to the fiscal year 2004). Such sums shall 
remain available until expended.]
    (m) Authorization of Appropriations.--
            (1) In general.--There are authorized to be 
        appropriated to carry out this section--
                    (A) $1,500,000,000 for fiscal year 2005;
                    (B) $2,000,000,000 for each of fiscal years 
                2006 and 2007;
                    (C) $3,500,000,000 for fiscal year 2008; 
                and
                    (D) $6,000,000,000 for fiscal year 2009.
            (2) Availability.--Amounts made available under 
        this subsection shall remain available until expended.
            (3) Reservation for needs surveys.--Of the amount 
        made available under paragraph (1) to carry out this 
        section for a fiscal year, the Administrator may 
        reserve not more than $1,000,000 for each fiscal year 
        to pay the costs of conducting needs surveys under 
        subsection (h).


        

           *       *       *       *       *       *       *
                           general provisions

    Sec. 1450. * * *




           *       *       *       *       *       *       *
    [(e) The Administrator shall take such action as may be 
necessary to assure compliance with provisions of the Act of 
March 3, 1931 (known as the Davis-Bacon Act; 40 U.S.C. 276a-
276a(5)). The Secretary of Labor]
    (e) Labor Standards.--
            (1) In general.--The Administrator shall take such 
        action as is necessary to ensure that all laborers and 
        mechanics employed by contractors and subcontractors on 
        construction projects financed, in whole or in part, by 
        a grant, loan, loan guarantee, refinancing, or any 
        other form of assistance provided under this title 
        (including assistance provided from the State drinking 
        water revolving fund under section 1452) are paid wages 
        at rates that are not less than the rates prevailing 
        for the same type of work for similar construction in 
        the immediate locality, as determined by the Secretary 
        of Labor in accordance with the Act of March 3, 1931 
        (40 U.S.C. 276a et seq.).
            (2) Authority and functions.--The Secretary of 
        Labor shall have, with respect to the labor standards 
        specified in this subsection, the authority and 
        functions set forth in Reorganization Plan Numbered 14 
        of 1950 (15 F.R. 3176; 64 Stat. 1267) and section 2 of 
        the Act of June 13, 1934 (40 U.S.C. 276c).


        

           *       *       *       *       *       *       *
                       STATE REVOLVING LOAN FUNDS

    Sec. 1452. (a) General Authority.--




           *       *       *       *       *       *       *
            (2) Use of funds.--Except as otherwise authorized 
        by this title, amounts deposited in a State loan fund, 
        including loan repayments and interest earned on such 
        amounts, shall be used only for providing loans or loan 
        guarantees, or as a source of reserve and security for 
        leveraged loans, the proceeds of which are deposited in 
        a State loan fund established under paragraph (1), or 
        other financial assistance authorized under this 
        section to community water systems and nonprofit 
        noncommunity water systems, other than systems owned by 
        Federal agencies. Financial assistance under this 
        section may be used by a public water system only for 
        expenditures [(not] (including expenditures for 
        planning, design, and associated preconstruction and 
        for recovery for siting of the facility and related 
        elements but not including monitoring, operation, and 
        maintenance expenditures) of a type or category which 
        the Administrator has determined, through guidance, 
        will facilitate compliance with national primary 
        drinking water regulations applicable to the system 
        under section 1412 or otherwise significantly further 
        the health protection objectives of this title. The 
        funds may also be used to provide loans to a system 
        referred to in section 1401(4)(B) for the purpose of 
        providing the treatment described in section 
        1401(4)(B)(i)(III). The funds shall not be used for the 
        acquisition of real property or interests therein, 
        unless the acquisition is integral to a project 
        authorized by this paragraph and the purchase is from a 
        willing seller. Of the amount credited to any State 
        loan fund established under this section in any fiscal 
        year, 15 percent shall be available solely for 
        providing loan assistance to public water systems which 
        regularly serve fewer than 10,000 persons to the extent 
        such funds can be obligated for eligible projects of 
        public water systems or to replace or rehabilitate 
        aging collection, treatment, storage (including 
        reservoirs), or distribution facilities of public water 
        systems or provide for capital projects to upgrade the 
        security of public water systems.


        

           *       *       *       *       *       *       *
    (b) Intended Use Plans.--
            (1) In general.--After providing for public review 
        and comment, each State that has entered into a 
        capitalization agreement pursuant to this section shall 
        annually prepare a plan that identifies the intended 
        uses of the amounts available to the State loan fund of 
        the State.
            (2) Contents.--An intended use plan shall include--
                    (A) a list of the projects to be assisted 
                in the first fiscal year that begins after the 
                date of the plan, including a description of 
                the project, the expected terms of financial 
                assistance, and the size of the community 
                served;
                    (B) the criteria and methods established 
                for the distribution of funds; and
                    (C) a description of the financial status 
                of the State loan fund and the short-term and 
                long-term goals of the State loan fund.
            (3) Use of funds.--
                    [(A) In general.--An intended use plan 
                shall provide, to the maximum extent 
                practicable, that priority for the use of funds 
                be given to projects that--
                            [(i) address the most serious risk 
                        to human health;
                            [(ii) are necessary to ensure 
                        compliance with the requirements of 
                        this title (including requirements for 
                        filtration); and
                            [(iii) assist systems most in need 
                        on a per household basis according to 
                        State affordability criteria.]
                    (A) Definitions.--In this paragraph:
                            (i) Restructuring.--The term 
                        `restructuring' means changes in 
                        operations (including ownership, 
                        accounting, rates, maintenance, 
                        consolidation, and alternative water 
                        supply).
                            (ii) Traditional approach.--The 
                        term `traditional approach' means a 
                        managed system used to treat and 
                        distribute drinking water to an entire 
                        service area consisting of a 
                        centralized water system using 
                        biological, physical, or chemical 
                        treatment processes.
                    (B) Priority system.--An intended use plan 
                shall provide, to the maximum extent 
                practicable, that--
                            (i) priority for the use of funds 
                        be given to projects--
                                    (I) that address the most 
                                serious risk to human health;
                                    (II) that are necessary to 
                                ensure compliance with the 
                                requirements of this title 
                                (including requirements for 
                                filtration); and
                                    (III) that assist systems 
                                most in need on a per-household 
                                basis according to State 
                                affordability criteria; and
                            (ii) the State shall give more 
                        weight to an application for assistance 
                        by a community water system if the 
                        application includes such other 
                        information as the State determines to 
                        be necessary and--
                                    (I) an inventory of assets, 
                                including a description of the 
                                condition of those assets;
                                    (II) a schedule for 
                                replacement of assets;
                                    (III) a financing plan 
                                indicating sources of revenue 
                                from rate payers, grants, 
                                bonds, other loans, and other 
                                sources;
                                    (IV) a review of options 
                                for restructuring the public 
                                water system; or
                                    (V) a review of options for 
                                approaches other than a 
                                traditional approach.
                    [(B)] (C) List of projects.--Each State 
                shall, after notice and opportunity for public 
                comment, publish and [periodically] at least 
                biennially update a list of projects in the 
                State that are eligible for assistance under 
                this section, including the priority assigned 
                to each project and, to the extent known, the 
                expected funding schedule for each project.


                

           *       *       *       *       *       *       *
    (d) Assistance for Disadvantaged Communities.--




           *       *       *       *       *       *       *
            (3) Definition of disadvantaged community.--In this 
        subsection, the term ``disadvantaged community'' means 
        the service area , or portion of a service area, of a 
        public water system that meets affordability criteria 
        established after public review and comment by the 
        State in which the public water system is located. The 
        Administrator may publish information to assist States 
        in establishing affordability criteria.


        

           *       *       *       *       *       *       *
    (g) Administration of State Loan Funds.--
            (1) Combined financial administration.--
        Notwithstanding subsection (c), a State may (as a 
        convenience and to avoid unnecessary administrative 
        costs) combine, in accordance with State law, the 
        financial administration of a State loan fund 
        established under this section with the financial 
        administration of any other revolving fund established 
        by the State if otherwise not prohibited by the law 
        under which the State loan fund was established and if 
        the Administrator determines that--
                    (A) the grants under this section, together 
                with loan repayments and interest, will be 
                separately accounted for and used solely for 
                the purposes specified in subsection (a); and
                    (B) the authority to establish assistance 
                priorities and carry out oversight and related 
                activities (other than financial 
                administration) with respect to assistance 
                remains with the State agency having primary 
                responsibility for administration of the State 
                program under section 1413, after consultation 
                with other appropriate State agencies (as 
                determined by the State): Provided, That in 
                nonprimacy States eligible to receive 
                assistance under this section, the Governor 
                shall determine which State agency will have 
                authority to establish priorities for financial 
                assistance from the State loan fund.
            (2) Cost of administering fund.--Each State may 
        annually use up to [4] 6 percent of the funds allotted 
        to the State under this section to cover the reasonable 
        costs of administration of the programs under this 
        section, including the recovery of reasonable costs 
        expended to establish a State loan fund which are 
        incurred after the date of enactment of this section, 
        and to provide technical assistance to public water 
        systems within the State. For fiscal year 1995 and each 
        fiscal year thereafter, each State may use up to an 
        additional 10 percent of the funds allotted to the 
        State under this section--
                    (A) for public water system supervision 
                programs under section 1443(a);
                    (B) to administer or provide technical 
                assistance through source water protection 
                programs;
                    (C) to develop and implement a capacity 
                development strategy under section 1420(c); and
                    (D) for an operator certification program 
                for purposes of meeting the requirements of 
                section [1419, if the State matches the 
                expenditures with at least an equal amount of 
                State funds. At least half of the match must be 
                additional to the amount expended by the State 
                for public water supervision in fiscal year 
                1993.] 1419. An additional 2 percent of the 
                funds annually allotted to each State under 
                this section may be used by the State to 
                provide technical assistance to public water 
                systems serving 10,000 or fewer persons in the 
                State. Funds utilized under subparagraph (B) 
                shall not be used for enforcement actions.
            (3) Guidance and regulations.--The Administrator 
        shall publish guidance and promulgate regulations as 
        may be necessary to carry out the provisions of this 
        section, including--
                    (A) provisions to ensure that each State 
                commits and expends funds allotted to the State 
                under this section as efficiently as possible 
                in accordance with this title and applicable 
                State laws;
                    (B) guidance to prevent waste, fraud, and 
                abuse; and
                    (C) guidance to avoid the use of funds made 
                available under this section to finance the 
                expansion of any public water system in 
                anticipation of future population growth.
        The guidance and regulations shall also ensure that the 
        States, and public water systems receiving assistance 
        under this section, use accounting, audit, and fiscal 
        procedures that conform to generally accepted 
        accounting standards.
            (4) State report.--Each State administering a loan 
        fund and assistance program under this subsection shall 
        publish and submit to the Administrator a report every 
        2 years on its activities under this section, including 
        the findings of the most recent audit of the fund and 
        the entire State allotment. The Administrator shall 
        periodically audit all State loan funds established by, 
        and all other amounts allotted to, the States pursuant 
        to this section in accordance with procedures 
        established by the Comptroller General.
            (5) Transfer of funds.--
                    (A) In general.--The Governor of a State 
                may--
                            (i)(I) reserve not more than 33 
                        percent of a capitalization grant made 
                        under this section; and
                            (II) add the funds reserved to any 
                        funds provided to the State under 
                        section 601 of the Federal Water 
                        Pollution Control Act (33 U.S.C. 1381); 
                        and
                            (ii)(I) reserve for any fiscal year 
                        an amount that does not exceed the 
                        amount that may be reserved under 
                        clause (i)(I) for that year from 
                        capitalization grants made under 
                        section 601 of that Act (33 U.S.C. 
                        1381); and
                            (II) add the reserved funds to any 
                        funds provided to the State under this 
                        section.
                    (B) State match.--Funds reserved under this 
                paragraph shall not be considered to be a State 
                match of a capitalization grant required under 
                this section or section 602(b) of the Federal 
                Water Pollution Control Act (33 U.S.C. 
                1382(b)).


                

           *       *       *       *       *       *       *
    (k) Other Authorized Activities.--
            (2) Limitation.--For each fiscal year, the total 
        amount of assistance provided and expenditures made by 
        a State under this subsection may not exceed 15 percent 
        of the amount of the capitalization grant received by 
        the State for that year and may not exceed 10 percent 
        of that amount for any one of the following activities:
                    (A) To acquire land or conservation 
                easements pursuant to paragraph (1)(A)(i).
                    (B) To provide funding to implement 
                voluntary, incentive-based source water quality 
                protection measures pursuant to clauses (ii) 
                and (iii) of paragraph (1)(A).
                    (C) To provide assistance through a 
                capacity development strategy pursuant to 
                paragraph (1)(B).
                    (D) To make expenditures to delineate or 
                assess source water protection areas pursuant 
                to paragraph (1)(C) (including implementation 
                of source water protection plans).


                

           *       *       *       *       *       *       *
    (s) Set-Aside.--
            (1) $2,500,000,000 or less made available.--
                    (A) In general.--In the case of a fiscal 
                year for which appropriations for State 
                revolving loan funds do not exceed 
                $2,500,000,000, a State shall set aside 10 
                percent of the capitalization grant of the 
                State under subsection (a) to provide grants to 
                projects eligible for assistance under 
                subsection (a)(2) of not more than 55 percent 
                of the total cost of a project for which a 
                grant is made.
                    (B) Waiver.--A State may waive the 
                requirement of subparagraph (A) if the average 
                time for processing loan applications during 
                the preceding 12 months did not exceed 90 days.
            (2) More than $2,500,000,000 made available.--In 
        the case of a fiscal year for which appropriations for 
        State revolving loan funds exceed $2,500,000,000, a 
        State shall set aside not more than 5 nor less than 2.5 
        percent of the State revolving loan fund of the State.


        

           *       *       *       *       *       *       *
              LEAD CONTAMINATION IN SCHOOL DRINKING WATER

    Sec. 1464




           *       *       *       *       *       *       *
    [(d) Remedial Action Program.--
            [(1) Testing and remedying lead contamination.--
        Within 9 months after the enactment of this section, 
        each State shall establish a program, consistent with 
        this section, to assist local educational agencies in 
        testing for, and remedying, lead contamination in 
        drinking water from coolers and from other sources of 
        lead contamination at schools under the jurisdiction of 
        such agencies.
            [(2) Public availability.--A copy of the results of 
        any testing under paragraph (1) shall be available in 
        the administrative offices of the local educational 
        agency for inspection by the public, including 
        teachers, other school personnel, and parents. The 
        local educational agency shall notify parent, teacher, 
        and employee organizations of the availability of such 
        testing results.
            [(3) Coolers.--In the case of drinking water 
        coolers, such program shall include measures for the 
        reduction or elimination of lead contamination from 
        those water coolers which are not lead free and which 
        are located in schools. Such measures shall be adequate 
        to ensure that within 15 months after the enactment of 
        this subsection all such water coolers in schools under 
        the jurisdiction of such agencies are repaired, 
        replaced, permanently removed, or rendered inoperable 
        unless the cooler is tested and found (within the 
        limits of testing accuracy) not to contribute lead to 
        drinking water.]
    (d) Removal of Lead in Schools.--
            (1) In general.--Not later than 270 days after the 
        date of enactment of the Water Infrastructure Financing 
        Act, in consultation with each State, the Administrator 
        shall establish a program to provide grants to States 
        to assist in paying, or to provide reimbursement for, 
        costs incurred by local educational agencies in testing 
        for, remediating, and informing students, parents, 
        teachers, and employees about lead contamination in 
        drinking water from coolers and from other sources of 
        lead contamination at schools under the jurisdiction of 
        the local educational agencies.
            (2) Funding.--
                    (A) Authorization of appropriations.--There 
                is authorized to be appropriated to carry out 
                this subsection $40,000,000 for each of fiscal 
                years 2005 through 2008.
                    (B) Administrative expenses.--The 
                Administrator may use not more than 5 percent 
                of amounts made available under subparagraph 
                (A) for a fiscal year to pay administrative 
                expenses incurred in carrying out this 
                subsection.

[FEDERAL ASSISTANCE FOR STATE PROGRAMS REGARDING LEAD CONTAMINATION IN 
                         SCHOOL DRINKING WATER

    [Sec. 1465. (a) School Drinking Water Programs.--The 
Administrator shall make grants to States to establish and 
carry out State programs under section 1464 to assist local 
educational agencies in testing for, and remedying, lead 
contamination in drinking water from drinking water coolers and 
from other sources of lead contamination at schools under the 
jurisdiction of such agencies. Such grants may be used by 
States to reimburse local educational agencies for expenses 
incurred after the enactment of this section for such testing 
and remedial action.
    [(b) Limits.--Each grant under this section shall be used 
by the State for testing water coolers in accordance with 
section 1464, for testing for lead contamination in other 
drinking water supplies under section 1464, or for remedial 
action under State programs under section 1464. Not more than 5 
percent of the grant may be used for program administration.
    [(c) Authorization of Appropriations.--There are authorized 
to be appropriated to carry out this section not more than 
$30,000,000 for fiscal year 1989, $30,000,000 for fiscal year 
1990, and $30,000,000 for fiscal year 1991.]

SEC. 1465. LEAD CONTAMINATION IN DRINKING WATER IN THE DISTRICT OF 
                    COLUMBIA.

    (a) Grant.--
            (1) In general.--The Administrator may provide to 
        the District of Columbia a grant of $20,000,000 to be 
        used to address lead contamination in the water supply 
        of the District of Columbia.
            (2) Use of grant funds.--Funds provided under 
        paragraph (1) may be used for activities such as--
                    (A) assessment of infrastructure (which may 
                include, on a voluntary basis, fixtures within 
                private residences, including replacement 
                faucet strainers);
                    (B) testing of water supplies throughout 
                the water system;
                    (C) distribution of filters to residences 
                with high lead levels;
                    (D) evaluation of chemical additives 
                (including zinc orthophosphate) to the water 
                supply;
                    (E) pipe replacement; and
                    (F) evaluation and improvement of 
                communication with the general public, 
                particularly households with water that tested 
                above the action level for lead.
            (3) Authorization of appropriations.--There is 
        authorized to be appropriated to carry out this 
        subsection $20,000,000.
    (b) Study by the National Academy of Sciences.--
            (1) In general.--The Administrator shall contract 
        with the National Academy of Sciences to conduct a 2-
        phase study in accordance with this subsection.
            (2) Phase i.--In phase I of the study, the National 
        Academy of Sciences shall conduct a comprehensive 
        evaluation of--
                    (A) compliance by the District of Columbia 
                Water and Sewer Authority with regulations 
                pertaining to lead and copper in drinking water 
                (including meeting the public notification 
                requirements of the regulations); and
                    (B) the potential causes of lead in the 
                water supply of the District of Columbia.
            (3) Phase ii.--In phase II of the study, the 
        National Academy of Sciences shall assess, from a 
        cross-section of cities of varying population sizes 
        across the United States with lead service lines--
                    (A) the extent to which water levels in 
                those cities have exceeded the action level for 
                lead; and
                    (B) the potential causes of the exceedences 
                (including service lines, chemical additives in 
                the water supply, equipment upgrades, and pipes 
                in residences).
            (4) Report.--Not later than 1 year after the date 
        of enactment of this paragraph, the National Academy of 
        Sciences shall submit to the Committee on Environment 
        and Public Works of the Senate and the Committee on 
        Energy and Commerce of the House of Representatives a 
        report describing the findings made in the study.
            (5) Authorization of appropriations.--There is 
        authorized to be appropriated to carry out this 
        subsection $2,000,000.


        

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            PART G--SMALL PUBLIC WATER SYSTEM ASSISTANCE\1\
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    \1\Note: This bill, as amended by the committee, includes different 
provisions for Sections 1471-1474.
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SEC. 1471. DEFINITIONS.

    In this part:
            (1) Eligible activity.--
                    (A) In general.--The term ``eligible 
                activity'' means an activity that is carried 
                out by an eligible entity to ensure compliance 
                with national primary drinking water 
                regulations applicable to the eligible entity 
                under section 1412.
                    (B) Inclusion.--The term ``eligible 
                activity'' includes source water protection.
                    (C) Exclusion.--The term ``eligible 
                activity'' does not include any activity to 
                increase the population served by a public 
                water system, except to the extent that the 
                Administrator determines an activity to be 
                necessary to--
                            (i) achieve compliance with a 
                        national primary drinking water 
                        regulation; and
                            (ii) provide a water supply to a 
                        population that, as of the date of 
                        enactment of this part, is not served 
                        by a safe public water system.
            (2) Eligible entity.--The term ``eligible entity'' 
        means--
                    (A) a small public water system that--
                            (i) if located in a State, serves a 
                        community that, under affordability 
                        criteria established by the State under 
                        section 1452(d), is determined by the 
                        State to be--
                                    (I) a disadvantaged 
                                community; or
                                    (II) a community that would 
                                otherwise become a 
                                disadvantaged community as a 
                                result of carrying out an 
                                eligible activity, as 
                                determined by the State; or
                            (ii) if located in an area governed 
                        by an Indian Tribe, serves a community 
                        that is determined by the 
                        Administrator, under criteria published 
                        by the Administrator under section 
                        1452(d) and in consultation with the 
                        Secretary, to be--
                                    (I) a disadvantaged 
                                community; or
                                    (II) a community that would 
                                otherwise become a 
                                disadvantaged community as a 
                                result of carrying out an 
                                eligible activity, as 
                                determined by the State; and
                    (B) a public water system that--
                            (i) would incur $3,000,000 or more 
                        in costs in complying with national 
                        primary drinking water regulations 
                        promulgated under this Act; and
                            (ii) is a disadvantaged community 
                        or a community may otherwise become 
                        disadvantaged as a result of carrying 
                        out an eligible activity, as determined 
                        by the State.
            (3) Program.--The term ``program'' means the small 
        public water system assistance program established 
        under section 1472(a).
            (4) Secretary.--The term ``Secretary'' means the 
        Secretary of Health and Human Services, acting through 
        the Director of the Indian Health Service.
            (5) Small public water system.--The term ``small 
        public water system'' means a public water system 
        (including a community water system and a noncommunity 
        water system) that serves a population of 15,000 or 
        fewer individuals.

SEC. 1472. SMALL PUBLIC WATER SYSTEM ASSISTANCE PROGRAM.

    (a) Establishment.--Not later than July 1, 2006, the 
Administrator shall establish within the Environmental 
Protection Agency a small public water system assistance 
program for, and provide grants to, eligible entities for use 
in carrying out eligible activities.
    (b) Priority.--
            (1) In general.--The Administrator shall provide 
        grants to eligible entities for eligible activities 
        that--
                    (A) address the most serious risks to human 
                health from lack of compliance with the 
                regulations specified in subparagraph (B);
                    (B) are necessary to ensure compliance with 
                national primary drinking water regulations 
                applicable to eligible entities under section 
                1412; and
                    (C) assist systems serving communities that 
                are most in need, as calculated on the basis of 
                median household income, under affordability 
                criteria established by the State under section 
                1452(d) (or, in the case of eligible entities 
                in an area governed by an Indian Tribe, under 
                affordability criteria established by the 
                Administrator, in consultation with the 
                Secretary).
            (2) Management cooperatives.--The Administrator 
        shall consider giving priority for grants under this 
        section to eligible activities that are carried out by 
        communities that form management cooperatives.
    (d) Technical Assistance.--In providing grants under this 
section, the Administrator shall--
            (1) use not less than 1.5 percent of funds made 
        available to carry out this section to provide grants 
        to nonprofit technical assistance organizations to be 
        used to assist eligible entities in--
                    (A) assessing needs relating to eligible 
                activities;
                    (B) identifying additional available 
                sources of funding to meet the cost-sharing 
                requirements under the program; and
                    (C) planning, implementing, and maintaining 
                any eligible activities of the eligible 
                entities that receive funding under this 
                section;
            (2) require that none of the funds provided under 
        paragraph (1) be used to pay for lobbying expenses; and
            (3) require that for each fiscal year, not more 
        than 5 percent of the funds received by an eligible 
        entity under this section may be used to obtain 
        technical assistance in planning, implementing, and 
        maintaining eligible activities for which funding is 
        provided under this section.
    (e) Indian Tribes.--
            (1) In general.--In providing grants under this 
        section, the Administrator shall use not less than 3 
        percent of funds made available to carry out this 
        section for each fiscal year to provide grants to 
        eligible entities that are located in areas governed by 
        Indian Tribes.
            (2) Program priority requirement.--
                    (A) List of eligible activities.--
                            (i) In general.--The Administrator, 
                        in consultation with the Secretary, 
                        shall, for each fiscal year, identify, 
                        and, consistent with subsection (b) and 
                        considering the criteria described in 
                        subparagraph (B), list in descending 
                        order of priority, eligible activities 
                        for eligible entities located in areas 
                        governed by Indian Tribes for which 
                        funds provided from a grant under this 
                        part may be used.
                            (ii) Coordination.--
                                    (I) In general.--To the 
                                maximum extent practicable, the 
                                Administrator shall ensure that 
                                the preparation of the list 
                                under clause (i) is coordinated 
                                with any needs assessment 
                                conducted under section 
                                1452(i)(4).
                                    (II) Additional 
                                consideration.--Any additional 
                                financial needs of small public 
                                water systems located in areas 
                                governed by Indian Tribes that 
                                are associated with the cost of 
                                complying with a national 
                                primary drinking water 
                                regulation (including a 
                                regulation concerning arsenic) 
                                that is promulgated after the 
                                then most recent needs survey 
                                conducted under section 
                                1452(i)(4) shall be factored 
                                into the determination of 
                                financial need for, and 
                                prioritization of, eligible 
                                activities under this section.
                    (B) Criteria.--The Administrator shall, in 
                preparing a list under subparagraph (A), 
                consider giving priority to any listed eligible 
                activities that are to be carried out by 
                communities that form management cooperatives 
                (including management cooperatives between 
                systems that do not have public water system 
                connections).
            (3) Allocation of grant funding.--For each fiscal 
        year, the Administrator, in consultation with the 
        Secretary, shall provide grants to eligible entities 
        located in an area governed by an Indian Tribe for the 
        maximum number of eligible activities for which the 
        funding allocation makes assistance available, based on 
        the priority assigned by the Administrator to eligible 
        activities under paragraph (2).
            (4) Limitation on Use of Funds.--For each fiscal 
        year, not more than 5 percent of the funds received by 
        an eligible entity located in an area governed by an 
        Indian Tribe under this section may be used to obtain 
        technical assistance in planning, implementing, and 
        maintaining eligible activities that are funded under 
        this section.
    (f) Limitation on Receipt of Funds.--An eligible entity may 
receive a grant under this section only--
            (1) if the Administrator determines that use of the 
        grant will aid compliance with national primary 
        drinking water regulations applicable to the eligible 
        entity under section 1412;
            (2)(A) to restructure or consolidate the facility 
        to achieve compliance with applicable national primary 
        drinking water regulations; or
            (B) in a case in which restructuring or 
        consolidation of the facility is not practicable, if 
        the Administrator determines that--
                    (i) the eligible entity has made a good 
                faith effort to achieve compliance with 
                applicable national primary drinking water 
                regulations; and
                    (ii) the eligible entity is adhering to an 
                enforceable schedule for complying with those 
                regulations; and
            (3) if--
                    (A) the Administrator determines that an 
                eligible entity may lack the technical, 
                managerial, operations, maintenance, or 
                financial capacity to ensure compliance with 
                national primary drinking water regulations 
                applicable to the eligible entity under section 
                1412, and the eligible entity agrees to 
                undertake feasible and appropriate changes in 
                operations (including changes in ownership, 
                management, accounting, rates, maintenance, 
                consolidation, provision of an alternative 
                water supply, or other procedures); and
                    (B) the Administrator determines that the 
                measures are necessary to ensure that the 
                eligible entity has the technical, managerial, 
                operational, maintenance, and financial 
                capacity to comply with applicable national 
                primary drinking water regulations over the 
                long term.
    (g) Cost Sharing.--
            (1) In general.--
                    (A) Limit.--Except as provided in paragraph 
                (2), the share of the total cost of an eligible 
                activity funded by a grant under this section 
                shall not exceed 80 percent.
                    (B) Use of other federal funds.--To pay the 
                portion of an eligible activity that is not 
                funded by a grant under this section, an 
                eligible entity located in an area governed by 
                an Indian Tribe may use Federal financial 
                assistance other than assistance received under 
                this section.
            (2) Waiver of cost-sharing requirement.--
                    (A) In general.--The Administrator may 
                waive the requirement of an eligible entity to 
                pay all or a portion of the share of an 
                eligible activity that is not funded by a grant 
                under this section, based on a determination by 
                the State that the eligible entity is unable to 
                pay any or all of the share.
                    (B) Limitation.--For each fiscal year, the 
                total amount of cost-share waivers provided by 
                the Administrator to eligible entities located 
                in an area governed by an Indian Tribe under 
                subparagraph (A) shall not exceed 30 percent of 
                the amount of funding used to provide grants to 
                Indian Tribes under this part.
    (h) Unobligated Funds.--Any funds not obligated by the 
small public water system assistance program established under 
subsection (a) for an eligible activity within 1 year after the 
date on which funds are made available to carry out this part 
shall be returned to the Administrator for use in providing new 
grants under this part.

SEC. 1473. REPORTS.

    Not later than January 1, 2006, and annually thereafter 
through January 1, 2010, the Administrator shall--
            (1) submit, to the Committee on Environment and 
        Public Works of the Senate and the Committee on Energy 
        and Commerce of the House of Representatives, a report 
        that, for the preceding fiscal year--
                    (A) lists the eligible activities for 
                eligible entities that receive funds under this 
                part for the preceding fiscal year;
                    (B) identifies the number of grants 
                provided under this part to eligible entities 
                located in areas governed by Indian Tribes, and 
                in each State;
                    (C) identifies each eligible entity that 
                receives a grant to carry out an eligible 
                activity;
                    (D) identifies the amount of each grant 
                provided to an eligible entity to carry out an 
                eligible activity; and
                    (E) describes each eligible activity funded 
                by such a grant (including the status of the 
                eligible activity); and
            (2) make the report under paragraph (1) available 
        to the public.

SEC. 1474. AUTHORIZATION OF APPROPRIATIONS.

    There is authorized to be appropriated to carry out this 
part $200,000,000 for each of fiscal years 2005 through 2009.




           *       *       *       *       *       *       *
            PART G--SMALL PUBLIC WATER SYSTEM ASSISTANCE\2\
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    \2\Note: This bill, as amended by the committee, includes different 
provisions for Sections 1471-1474.
---------------------------------------------------------------------------

SEC. 1471. DEFINITIONS.

    In this part:
            (1) Eligible activity.--
                    (A) In general.--The term ``eligible 
                activity'' means an activity that is carried 
                out by an eligible entity to ensure compliance 
                with national primary drinking water 
                regulations applicable to the eligible entity 
                under section 1412.
                    (B) Inclusion.--The term ``eligible 
                activity'' includes source water protection.
                    (C) Exclusion.--The term ``eligible 
                activity'' does not include any activity to 
                increase the population served by a public 
                water system, except to the extent that the 
                Administrator determines an activity to be 
                necessary to--
                            (i) achieve compliance with a 
                        national primary drinking water 
                        regulation; and
                            (ii) provide a water supply to a 
                        population that, as of the date of 
                        enactment of this part, is not served 
                        by a safe public water system.
            (2) Eligible entity.--The term ``eligible entity'' 
        means--
                    (A) a small public water system that--
                            (i) if located in a State, serves a 
                        community that, under affordability 
                        criteria established by the State under 
                        section 1452(d), is determined by the 
                        State to be--
                                    (I) a disadvantaged 
                                community; or
                                    (II) a community that would 
                                otherwise become a 
                                disadvantaged community as a 
                                result of carrying out an 
                                eligible activity, as 
                                determined by the State; or
                            (ii) if located in an area governed 
                        by an Indian Tribe, serves a community 
                        that is determined by the 
                        Administrator, under criteria published 
                        by the Administrator under section 
                        1452(d) and in consultation with the 
                        Secretary, to be--
                                    (I) a disadvantaged 
                                community; or
                                    (II) a community that would 
                                otherwise become a 
                                disadvantaged community as a 
                                result of carrying out an 
                                eligible activity, as 
                                determined by the State; and
                    (B) a public water system that--
                            (i) would incur $3,000,000 or more 
                        in costs in complying with national 
                        primary drinking water regulations 
                        promulgated under this Act; and
                            (ii) is a disadvantaged community 
                        or a community may otherwise become 
                        disadvantaged as a result of carrying 
                        out an eligible activity, as determined 
                        by the State.
            (3) Program.--The term ``program'' means the small 
        public water system assistance program established 
        under section 1472(a).
            (4) Secretary.--The term ``Secretary'' means the 
        Secretary of Health and Human Services, acting through 
        the Director of the Indian Health Service.
            (5) Small public water system.--The term ``small 
        public water system'' means a public water system 
        (including a community water system and a noncommunity 
        water system) that serves a population of 15,000 or 
        fewer individuals.

SEC. 1472. SMALL PUBLIC WATER SYSTEM ASSISTANCE PROGRAM.

    (a) Establishment.--Not later than July 1, 2006, the 
Administrator shall establish within the Environmental 
Protection Agency a small public water system assistance 
program for, and provide grants to, eligible entities for use 
in carrying out eligible activities.
    (b) Priority.--
            (1) In general.--The Administrator shall provide 
        grants to eligible entities for eligible activities 
        that--
                    (A) address the most serious risks to human 
                health from lack of compliance with the 
                regulations specified in subparagraph (B);
                    (B) are necessary to ensure compliance with 
                national primary drinking water regulations 
                applicable to eligible entities under section 
                1412; and
                    (C) assist systems serving communities that 
                are most in need, as calculated on the basis of 
                median household income, under affordability 
                criteria established by the State under section 
                1452(d) (or, in the case of eligible entities 
                in an area governed by an Indian Tribe, under 
                affordability criteria established by the 
                Administrator, in consultation with the 
                Secretary).
            (2) Management cooperatives.--The Administrator 
        shall consider giving priority for grants under this 
        section to eligible activities that are carried out by 
        communities that form management cooperatives.
    (d) Technical Assistance.--In providing grants under this 
section, the Administrator shall--
            (1) use not less than 1.5 percent of funds made 
        available to carry out this section to provide grants 
        to nonprofit technical assistance organizations to be 
        used to assist eligible entities in--
                    (A) assessing needs relating to eligible 
                activities;
                    (B) identifying additional available 
                sources of funding to meet the cost-sharing 
                requirements under the program; and
                    (C) planning, implementing, and maintaining 
                any eligible activities of the eligible 
                entities that receive funding under this 
                section;
            (2) require that none of the funds provided under 
        paragraph (1) be used to pay for lobbying expenses; and
            (3) require that for each fiscal year, not more 
        than 5 percent of the funds received by an eligible 
        entity under this section may be used to obtain 
        technical assistance in planning, implementing, and 
        maintaining eligible activities for which funding is 
        provided under this section.
    (e) Indian Tribes.--
            (1) In general.--In providing grants under this 
        section, the Administrator shall use not less than 3 
        percent of funds made available to carry out this 
        section for each fiscal year to provide grants to 
        eligible entities that are located in areas governed by 
        Indian Tribes.
            (2) Program priority requirement.--
                    (A) List of eligible activities.--
                            (i) In general.--The Administrator, 
                        in consultation with the Secretary, 
                        shall, for each fiscal year, identify, 
                        and, consistent with subsection (b) and 
                        considering the criteria described in 
                        subparagraph (B), list in descending 
                        order of priority, eligible activities 
                        for eligible entities located in areas 
                        governed by Indian Tribes for which 
                        funds provided from a grant under this 
                        part may be used.
                            (ii) Coordination.--
                                    (I) In general.--To the 
                                maximum extent practicable, the 
                                Administrator shall ensure that 
                                the preparation of the list 
                                under clause (i) is coordinated 
                                with any needs assessment 
                                conducted under section 
                                1452(i)(4).
                                    (II) Additional 
                                consideration.--Any additional 
                                financial needs of small public 
                                water systems located in areas 
                                governed by Indian Tribes that 
                                are associated with the cost of 
                                complying with a national 
                                primary drinking water 
                                regulation (including a 
                                regulation concerning arsenic) 
                                that is promulgated after the 
                                then most recent needs survey 
                                conducted under section 
                                1452(i)(4) shall be factored 
                                into the determination of 
                                financial need for, and 
                                prioritization of, eligible 
                                activities under this section.
                    (B) Criteria.--The Administrator shall, in 
                preparing a list under subparagraph (A), 
                consider giving priority to any listed eligible 
                activities that are to be carried out by 
                communities that form management cooperatives 
                (including management cooperatives between 
                systems that do not have public water system 
                connections).
            (3) Allocation of grant funding.--For each fiscal 
        year, the Administrator, in consultation with the 
        Secretary, shall provide grants to eligible entities 
        located in an area governed by an Indian Tribe for the 
        maximum number of eligible activities for which the 
        funding allocation makes assistance available, based on 
        the priority assigned by the Administrator to eligible 
        activities under paragraph (2).
            (4) Limitation on Use of Funds.--For each fiscal 
        year, not more than 5 percent of the funds received by 
        an eligible entity located in an area governed by an 
        Indian Tribe under this section may be used to obtain 
        technical assistance in planning, implementing, and 
        maintaining eligible activities that are funded under 
        this section.
    (f) Limitation on Receipt of Funds.--
            (1) In general.--Except as provided in paragraph 
        (2), a grant under this section shall not be provided 
        to an eligible entity that, as determined by the 
        Administrator--
                    (A) does not have the technical, 
                managerial, operations, maintenance, or 
                financial capacity to ensure compliance with 
                national primary drinking water regulations 
                applicable to the eligible entity under section 
                1412; or
                    (B) is in significant noncompliance with 
                any applicable national primary drinking water 
                regulation.
            (2) Exception for receipt of grant.--An eligible 
        entity described in paragraph (1) may receive a grant 
        under this section only--
                    (A) if the Administrator determines that 
                use of the grant will ensure compliance with 
                national primary drinking water regulations 
                applicable to the eligible entity under section 
                1412;
                    (B)(i) to restructure or consolidate the 
                facility to achieve compliance with applicable 
                national primary drinking water regulations; or
                    (ii) in a case in which restructuring or 
                consolidation of the facility is not 
                practicable, if the Administrator determines 
                that--
                            (I) the eligible entity has made a 
                        good faith effort to achieve compliance 
                        with applicable national primary 
                        drinking water regulations; and
                            (II) the eligible entity is 
                        adhering to an enforceable schedule for 
                        complying with those regulations; and
                    (C) in a case in which paragraph (1)(A) 
                applies to an eligible entity, and the eligible 
                entity if--
                            (i) the eligible entity agrees to 
                        undertake feasible and appropriate 
                        changes in operations (including 
                        changes in ownership, management, 
                        accounting, rates, maintenance, 
                        consolidation, provision of an 
                        alternative water supply, or other 
                        procedures); and
                            (ii) the Administrator determines 
                        that the measures are necessary to 
                        ensure that the eligible entity has the 
                        capacity described in paragraph (1)(A) 
                        to comply with applicable national 
                        primary drinking water regulations over 
                        the long term.
            (3) Review.--Before providing assistance under this 
        section to an eligible entity that is in significant 
        noncompliance with any national primary drinking water 
        regulation applicable to the eligible entity under 
        section 1412, the Administrator shall conduct a review 
        to determine whether paragraph (1)(A) applies to the 
        entity.
    (g) Cost Sharing.--
            (1) In general.--
                    (A) Limit.--Except as provided in paragraph 
                (2), the share of the total cost of an eligible 
                activity funded by a grant under this section 
                shall not exceed 80 percent.
                    (B) Use of other federal funds.--To pay the 
                portion of an eligible activity that is not 
                funded by a grant under this section, an 
                eligible entity located in an area governed by 
                an Indian Tribe may use Federal financial 
                assistance other than assistance received under 
                this section.
            (2) Waiver of cost-sharing requirement.--
                    (A) In general.--The Administrator may 
                waive the requirement of an eligible entity to 
                pay all or a portion of the share of an 
                eligible activity that is not funded by a grant 
                under this section, based on a determination by 
                the State that the eligible entity is unable to 
                pay any or all of the share.
                    (B) Limitation.--For each fiscal year, the 
                total amount of cost-share waivers provided by 
                the Administrator to eligible entities located 
                in an area governed by an Indian Tribe under 
                subparagraph (A) shall not exceed 30 percent of 
                the amount of funding used to provide grants to 
                Indian Tribes under this part.
    (h) Unobligated Funds.--Any funds not obligated by the 
small public water system assistance program established under 
subsection (a) for an eligible activity within 1 year after the 
date on which funds are made available to carry out this part 
shall be returned to the Administrator for use in providing new 
grants under this part.

SEC. 1473. REPORTS.

    Not later than January 1, 2006, and annually thereafter 
through January 1, 2010, the Administrator shall--
            (1) submit, to the Committee on Environment and 
        Public Works of the Senate and the Committee on Energy 
        and Commerce of the House of Representatives, a report 
        that, for the preceding fiscal year--
                    (A) lists the eligible activities for 
                eligible entities that receive funds under this 
                part for the preceding fiscal year;
                    (B) identifies the number of grants 
                provided under this part to eligible entities 
                located in areas governed by Indian Tribes, and 
                in each State;
                    (C) identifies each eligible entity that 
                receives a grant to carry out an eligible 
                activity;
                    (D) identifies the amount of each grant 
                provided to an eligible entity to carry out an 
                eligible activity; and
                    (E) describes each eligible activity funded 
                by such a grant (including the status of the 
                eligible activity); and
            (2) make the report under paragraph (1) available 
        to the public.

SEC. 1474. AUTHORIZATION OF APPROPRIATIONS.

    There is authorized to be appropriated to carry out this 
part $1,000,000,000 for each of fiscal years 2005 through 2008.




           *       *       *       *       *       *       *
                              ----------                              


                    [42 U.S.C. 1962)--JUL. 22, 1965]

                      WATER RESOURCES PLANNING ACT

                              Short title

    Section. 1. This Act may be cited as the ``Water Resources 
Planning Act''.




           *       *       *       *       *       *       *
    Sec. 101. There is hereby established a Water Resources 
Council (hereinafter referred to as the ``Council'') which 
shall be composed of the Secretary of the Interior, the 
Secretary of Agriculture, the Secretary of Homeland Security, 
the Secretary of the Army, the Secretary of Commerce, the 
Secretary of Housing and Urban Development, the Secretary of 
Transportation, the Administrator of the Environmental 
Protection Agency, and the Chairman of the Federal Power 
Commission. The Chairman of the Council shall request the heads 
of other Federal agencies to participate with the Council when 
matters affecting their responsibilities are considered by the 
Council. The Chairman of the Council shall be designated by the 
President.
    [Sec. 102. The Council shall--]

SEC. 102. DUTIES OF COUNCIL.

    (a) In General.--The Council shall--
            [(a)] (1) maintain a continuing study and prepare 
        an assessment biennially, or at such less frequent 
        intervals as the Council may determine, of the adequacy 
        of supplies of water necessary to meet the water 
        requirements in each water resource region in the 
        United States and the national interest therein; [and]
            [(b)] (2) maintain a continuing study of the 
        relation of regional or river basin plans and programs 
        to the requirements of larger regions of the Nation and 
        of the adequacy of administrative and statutory means 
        for the coordination of the water and related land 
        resources policies and programs of the several Federal 
        agencies; it shall appraise the adequacy of existing 
        and proposed policies and programs to meet such 
        requirements; and it shall make recommendations to the 
        President with respect to Federal policies and 
        programs[.] ; and
            (3) carry out a special water resources study in 
        accordance with subsection (b).
    (b) Special Water Resources Study.--
            (1) In general.--The Council shall carry out a 
        special water resources study to--
                    (A) use existing water assessments and 
                conduct such additional assessments as are 
                necessary to project future water supply and 
                demand;
                    (B) study water management programs used by 
                the Federal Government, State and local 
                governments, and private entities to increase 
                water supplies and improve the availability, 
                reliability, and quality of freshwater 
                resources;
                    (C) consult with agencies and entities to 
                develop recommendations consistent with laws 
                (including treaties, decrees, and compacts) for 
                a comprehensive water strategy that--
                            (i) respects the primary role of 
                        States in regulating water rights and 
                        uses;
                            (ii) identifies incentives to 
                        ensure an adequate and dependable 
                        supply of water through the year 2054;
                            (iii) suggests strategies to avoid 
                        increased mandates on State and local 
                        governments;
                            (iv) eliminates duplication and 
                        conflict among Federal programs;
                            (v) considers all available 
                        technologies and methods to optimize 
                        water supply reliability, availability, 
                        and quality, while safeguarding the 
                        environment;
                            (vi) recommends means of capturing 
                        excess water and flood water for 
                        conservation and use in a drought;
                            (vii) suggests financing options 
                        for--
                                    (I) water supply and water 
                                management projects; and
                                    (II) appropriate public 
                                works projects;
                            (viii) suggests strategies to 
                        conserve existing water supplies, 
                        including recommendations for repairing 
                        aging infrastructure; and
                            (ix) includes other objectives 
                        relating to the effective management of 
                        the water supply to ensure reliability, 
                        availability, and quality;
                    (D) evaluate Federal water programs in 
                existence on the date of enactment of this 
                paragraph and submit to Congress and the 
                President recommendations on--
                            (i) means of eliminating 
                        discrepancies between the goals of the 
                        programs and actual service delivery;
                            (ii) duplication among programs; 
                        and
                            (iii) any other circumstances that 
                        interfere with the effective operation 
                        of the programs;
                    (E) based on a review of water plans, 
                develop and make available to the public water 
                planning models to reduce water resource 
                conflicts; and
                    (F) develop and coordinate public awareness 
                activities to provide the public with access to 
                understandable informational material, 
                including, at a minimum--
                            (i) descriptions of the value and 
                        benefits of land stewardship to reduce 
                        the impact of water shortages; and
                            (ii) clear instructions for 
                        appropriate responses to water supply 
                        shortages, including--
                                    (I) water conservation;
                                    (II) water reuse; and
                                    (III) detection and 
                                elimination of water leaks.
            (2) Consultation.--In carrying out this subsection, 
        the Council shall consult with interested groups, 
        including groups that represent--
                    (A) agricultural production, wildlife, and 
                fishery interests;
                    (B) forestry and fire management interests;
                    (C) rural and urban water associations;
                    (D) environmental interests;
                    (E) engineering and construction interests;
                    (F) the portion of the scientific community 
                that is concerned with climatology and 
                hydrology;
                    (G) resource-dependent businesses and other 
                private entities (including the recreation and 
                tourism industries); and
                    (H) any other group, organization, or 
                entity that the Council considers necessary to 
                advance the work of the Council.
            (3) Reports.--
                    (A) Interim reports.--Not later than 180 
                days after the first meeting of the Council 
                following the date of enactment of this 
                paragraph, and every 180 days thereafter, the 
                Council shall submit to the President, the 
                Committee on Energy and Natural Resources and 
                the Committee on the Environment and Public 
                Works of the Senate, and the Committee on 
                Resources, the Committee on Transportation and 
                Infrastructure, and the Committee on Energy and 
                Commerce of the House of Representatives an 
                interim report that describes the progress made 
                by the Council in carrying out this subsection.
                    (B) Final report.--As soon as practicable, 
                but not later than 3 years, after the date of 
                the first meeting of the Council referred to in 
                subparagraph (A), the Council shall submit to 
                the President and the Committees referred to in 
                subparagraph (A) a final report that includes--
                            (i) a detailed statement of the 
                        findings and conclusions of the 
                        Council; and
                            (ii) recommendations for 
                        legislation and other policies to 
                        implement those findings and 
                        conclusions, including--
                                    (I) a list of 
                                recommendations that can be 
                                implemented immediately in 
                                accordance with existing law; 
                                and
                                    (II) a list of 
                                recommendations that require 
                                statutory changes prior to 
                                implementation.


                                

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    Sec. 401. There are authorized to be appropriated to the 
Water Resources [Council:] Council each of the following 
amounts:
            [(a)] (1) The sum of $2,886,000 for fiscal year 
        1979 for the Federal share of the expenses of 
        administration and operation of river basin 
        commissions, including salaries and expenses of the 
        chairmen, but not including funds authorized by 
        [subsection (c) below:] paragraph (3): Provided, That 
        not more than $750,000 annually shall be available 
        under this subsection for any single river basin 
        commission[;[ .
            [(b)] (2) [the sum] The sum of $2,668,000 for 
        fiscal year 1979 for the expenses of the Water 
        Resources Council in administering this Act, not 
        including funds authorized by [subsection (c) below[;] 
        paragraph (3).
            [(c)] (3) The sum of $3,179,900 for fiscal year 
        1979 for preparation of assessments, and for directing 
        and coordinating the preparatin of such river basin 
        plans as the Council determines are necessary and 
        desirable in carrying out the policy of this Act: 
        Provided, That $828,900 shall be available under this 
        subsection for preparation of the Columbia River 
        Estuary Special Study: Provided further, That $308,000 
        shall be available under this subsection for 
        preparation of the New England Port and Harbor Study 
        and $135,000 shall be available for completion of the 
        Hudson River Basin Level B Study: Provided further, 
        That $150,000 shall be available under this subsection 
        for completion of Case Studies of the Application of 
        Cost Sharing Policy Options for Flood Plain Management 
        in the Connecticut River Basin: Provided further, That 
        not more than $2,500,000 shall be available under this 
        subsection for the preparation of assessments: Provided 
        further, That the Council may transfer funds authorized 
        by this subsection to river basin commissions and to 
        Federal and State agencies upon such terms and 
        conditions as it determines are necessary and desirable 
        to carry out the above functions in an economical, 
        efficient, and timely manner, and that such commissions 
        and agencies are hereby authorized to receive and 
        expend such funds pursuant to this subsection.
            (4) The sum of $9,000,000 for fiscal year 2005 to 
        be used to carry out the special water resources study 
        under section 102(b), to remain available until 
        expended.


        

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