On Thursday, March 12, the House of Representatives passed by a vote of 312-101, H.R. 1262, the "Water Quality Investment Act of 2009" ("the Act"). The Reed Smith Public Policy & Infrastructure Practice has been monitoring developments related to this legislation and wanted to present this update on the funding provided under the Act, and the likelihood of its enactment into law.

The Act authorizes $19.4 billion over the next five years for wastewater infrastructure and other efforts to improve water quality, including:

  • $13.8 billion over five years for the Clean Water State Revolving Loan Fund. The largest piece of authorized funding under the Act is $13.8 billion over Fiscal Years ("FY") 2011-2014 for the Clean Water State Revolving Fund program, which provides low-interest loans and grants to local communities for construction of wastewater treatment facilities and other facilities to reduce water pollution. The Fund has not been re-authorized since 1994 and, as a result, the annual amounts provided have been subject to the uncertainties of the appropriations process. If enacted into law, the Act would provide a target for funding for each year for Congress to appropriate, which, while not a guarantee, greatly increases the chances of appropriating that actual amount.
  • $250 million in funding over five years for pilot programs testing alternative methods for enhancing water supplies. Section 2001 of the Act authorizes the Environmental Protection Agency ("EPA") to provide direct grants for pilot programs for alternative methods for enhancing water supplies, such as wastewater reclamation and reuse, and provides $50 million annually over FY 2011-2014 for this purpose. Congress had previously created a pilot program for alternative water source projects for FY 2002-2004, and authorized $75 million for it (33 U.S.C. Sec. 1300). Eligible entities under the program are "State, interstate, and intrastate water resource development agencies (including water management districts and water supply authorities), local government agencies, private utilities, and nonprofit entities" (33 U.S.C. Sec. 1301(b)). Funds, however, were never appropriated. Section 2001 re-authorizes this program and provides an increased funding level of $250 million. Nothing else under the previously authorized program is amended including provisions requiring: 1) the federal/state cost share to be remains 50/50 (33 U.S.C. Sec. 1301(b)(2)); and 2) grants are to be used for "engineering, design, construction, and final testing of alternative water source projects designed to meet critical water supply needs" (33 U.S.C. Sec. 1301(f)).
  • $2.5 billion in funding over five years for projects in "financially distressed" municipalities that prevent sanitary and combined sewer overflow. Section 3001 of the Act authorizes the EPA to provide funding to "financially distressed" municipalities for projects designed to prevent sanitary and combined sewer overflow (CSO), and provides $500 million annually over FY 2011-2014 for this purpose. Congress had previously created a sanitary and CSO grant program for FY 2002 and FY 2003, and authorized $750 million in funding for it (33 U.S.C. Sec. 1301). Funds, however, were never appropriated. Section 3001 re-authorizes this program and provides an increased funding level of $2.5 billion, as well as new criteria for allocating funds. For FY 2011, Section 3001(c)(1) of the Act requires the EPA to allocate the funds directly to municipalities, as mandated by the previous program (33 U.S.C. Sec. 1301(a)(2)). However, for FY 2012-14, Section 3001(c)(2) of the Act requires the EPA to establish a new formula that "allocates to each State a proportional share of such amounts based on the total needs of the State for municipal [CSOs] and sanitary sewer overflow controls." States would then make the grants to municipalities. However, whether it is the EPA or the state providing the grant funds, the eligibility requirements previously established by Congress remain the same, namely: the municipality must be considered "financially distressed" by the state and must be either (1) implementing the nine minimum controls required by the EPA for these projects, as well as a "long-term municipal CSO control plan or a separate sanitary sewer overflow control plan"; (2) "requesting a grant for a project that is on the State's intended use plan"; or (3) "is an Alaska Native Village" (33 U.S.C. Sec. 1301(b)). Also, the Act does not amend the 55/45 federal/state cost share previously authorized by Congress under 33 U.S.C. Section 1301(d). However, Section 3001(b)(2) of the Act does require states to set aside at least 20 percent of grants for sanitary and CSO projects that use "green infrastructure, water and energy efficiency improvements and other environmentally innovative activities."
  • $500 million in funding to nonprofit organizations to provide technical and management assistance in improving wastewater treatment systems in rural areas, small municipalities, and tribal communities (Section 1101).

Buy American Provision. The Act includes a number of policy provisions that will affect how the funds are spent. Section 1307(a) of the Act ensures that there is a preference for American steel, iron, and manufactured goods in the construction and repair of wastewater treatment systems with a "Buy American" provision. Under the provision, "none of the funds may be used for the construction of treatment works unless the steel, iron, and manufactured goods used in such treatment works are produced in the United States." Section 1307(b) of the Act provides three exceptions:

  • Where the EPA, in consultation with the governor of the state, finds the Buy American provision would be "inconsistent with the public interest"
  • When "steel, iron, and manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality"
  • When "inclusion of steel, iron, and manufactured goods produced in the United States will increase the cost of the overall project by more than 25 percent"

In addition, the House approved an amendment that prohibits funds in the Act from being earmarked.

Next Steps. The Act now heads to the Senate for its consideration. The committee of jurisdiction there is the Senate Environment and Public Works Committee, chaired by Sen. Barbara Boxer (D-Calif.). Sen. Boxer has not indicated if and when she would consider this legislation before her committee or whether she would introduce her own separate bill entirely. Also, if any action by the Senate, either on the committee or Senate floor, changes this legislation in any way from the House version, there would have to be additional efforts to reconcile the differences between the House of Representatives and the Senate. As a result, it is likely that there will be a considerable amount of time before the Act or any version thereof is close to reaching the President's desk.