[Senate Hearing 112-980]
[From the U.S. Government Publishing Office]
S. Hrg. 112-980
OUR NATION'S WATER INFRASTRUCTURE: CHALLENGES AND OPPORTUNITIES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON WATER AND WILDLIFE
OF THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
----------
DECEMBER 13, 2011
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Printed for the use of the Committee on Environment and Public Works
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
FRANK R. LAUTENBERG, New Jersey JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico MIKE JOHANNS, Nebraska
JEFF MERKLEY, Oregon JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York
Bettina Poirier, Majority Staff Director
Ruth Van Mark, Minority Staff Director
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Subcommittee on Water and Wildlife
BENJAMIN L. CARDIN, Maryland, Chairman
MAX BAUCUS, Montana JEFF SESSIONS, Alabama
FRANK R. LAUTENBERG, New Jersey JOHN BARRASSO, Wyoming
SHELDON WHITEHOUSE, Rhode Island DAVID VITTER, Louisiana
TOM UDALL, New Mexico MIKE CRAPO, Idaho
KIRSTEN GILLIBRAND, New York LAMAR ALEXANDER, Tennessee
BARBARA BOXER, California (ex JAMES M. INHOFE, Oklahoma (ex
officio) officio)
C O N T E N T S
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Page
DECEMBER 13, 2011
OPENING STATEMENTS
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland 1
Sessions, Hon. Jeff, U.S. Senator from the State of Alabama...... 2
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 3
Barrasso, Hon. John, U.S. Senator from the State of Wyoming...... 4
Gillibrand, Hon. Kirsten, U.S. Senator from the State of New
York, prepared statement....................................... 33
WITNESSES
Hanlon, James A., Director, Office of Wastewater Management,
Office of Water, U.S. Environmental Protection Agency.......... 5
Prepared statement........................................... 8
Responses to additional questions from:
Senator Boxer............................................ 18
Senator Cardin........................................... 20
Senator Inhofe........................................... 21
DiLoreto, Gregory E., President-Elect, American Society of Civil
Engineers...................................................... 51
Prepared statement........................................... 54
Responses to additional questions from:
Senator Boxer............................................ 62
Senator Inhofe........................................... 64
Freeman, Joe, Chief, Financial Assistance Division, Oklahoma
Water Resources Board.......................................... 70
Prepared statement........................................... 73
Responses to additional questions from Senator Inhofe........ 81
Scott, Theodore E., Executive Vice President and Founder,
Stormwater Maintenance......................................... 84
Prepared statement........................................... 86
Responses to additional questions from Senator Boxer......... 97
Richey, Van L., President and Chief Executive Officer, American
Cast Iron Pipe Company......................................... 99
Prepared statement........................................... 101
Responses to additional questions from Senator Inhofe........ 481
ADDITIONAL MATERIAL
Statements from:.................................................
American Public Works Association............................ 522
Associated General Contractors of America.................... 526
Clean Water Council.......................................... 532
Construction Management Association of America............... 536
PVC Pipe Association......................................... 539
The Vinyl Institute.......................................... 541
U.S. Mayor, March 28, 2011....................................... 545
The Bond Buyer: A Better Path for Infrastructure, October 28,
2011........................................................... 547
Rhode Island Department of Environmental Management, Office of
Water Resources, Fiscal Year 2012 Project Priority List........ 548
OUR NATION'S WATER INFRASTRUCTURE: CHALLENGES AND OPPORTUNITIES
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TUESDAY, DECEMBER 13, 2011
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Water and Wildlife,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m. in
room 406, Dirksen Senate Office Building, Hon. Benjamin L.
Cardin (Chairman of the Subcommittee), presiding.
Present: Senators Cardin, Sessions, Barrasso, Gillibrand,
Inhofe, Merkley, Udall, and Whitehouse.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
U.S. SENATOR FROM THE STATE OF MARYLAND
Senator Cardin. I want to welcome you all to the
Subcommittee on Water and Wildlife of the Environment and
Public Works Committee. Today's hearing is involving our
nation's water infrastructure challenges and opportunities.
I first want to acknowledge and thank Senator Sessions and
Senator Inhofe and Senator Boxer. The panels that we brought
together for today's hearings were mutually agreed panels.
Normally you have the Democrats will select some witnesses, the
Republicans will select some witnesses. But we did it
differently for this hearing. In true bipartisan cooperation,
we came together as to what witnesses we thought collectively
would be the best to point out the importance of this subject,
which is that Americans' depending upon turning on their
faucets and getting clean water. They almost take that for
granted today. We are concerned as to whether the status of our
water infrastructure in this country is one that will guarantee
in the future that that in fact will be the case.
We know that those who have rated our nation's water
infrastructure have determined that it is sub-par and that it
is in need of significant attention. We know that in my own
State of Maryland, how many times we have had episodes of water
main breaks, where River Road in Montgomery County literally
became a river, where people had to be rescued by helicopter,
where in Baltimore we found in Dundalk thousands of homes were
flooded because of a water main break. And then most recently
in Prince Georges County where we had a water main break that
closed the beltway for a period of time.
So we need to pay attention to our nation's water
infrastructure for the sake of preserving the confidence of the
American people that in fact, when they do turn their faucets
on, that they will get clean, safe drinking water, and that we
are taking care of our wastewater in an appropriate manner.
The good news here is that in doing that, we also can
create jobs. I think we will find during the course of this
hearing how investment in water infrastructure will return big
dividends to our economy as far as job growth is concerned. I
am very pleased, again, at the witnesses that we have that
will, I think, add to this debate. And without objection, I
will put my entire opening statement into the record and turn
to the Ranking Republican on the Subcommittee, Senator
Sessions.
[The prepared statement of Senator Cardin was not received
at time of print.]
OPENING STATEMENT OF HON. JEFF SESSIONS,
U.S. SENATOR FROM THE STATE OF ALABAMA
Senator Sessions. Thank you, Mr. Chairman, for your
leadership. Whatever you do has always been the most fair and
courteous that I could ever ask for, and it is a pleasure to
work for you on this Committee. I think working for you is a
good way to say it.
[Laughter.]
Senator Sessions. We do have great needs on our water and
sewer infrastructure. There is no doubt about that. I agree
with you, we have an excellent panel to discuss those issues. I
am especially pleased to have Mr. Van Richey of the Alabama
Cast Iron Pipe Company. They have plants in Oklahoma,
Minnesota, Texas, and around the country.
But typical of the good companies that provide good jobs,
Mr. Chairman, when we were able to utilize them, and I know the
commercial work that these companies have been doing is way
down, commercial construction is way down. So it is a fact that
well constructed governmental expansions of our water and sewer
systems can help keep good companies busy and good workers
busy.
So we will be looking for ways to do this more smartly to
try to see how the Federal Government, which is not the primary
responsible entity for water and sewer systems throughout the
country, but how it can use its resources effectively. And I am
of the view that if we are going to attempt to stimulate the
economy it is better to do it in ways that create real jobs in
the United States, producing something that provides a long-
term infrastructure benefit to America. I really do feel
strongly about that.
I remember President Bush sent out the checks. That was
sending out $600 checks or whatever. And it didn't, history
showed, do a lot to stimulate the economy. Likewise, I am a bit
uneasy with this holiday, withholding tax holiday. But I guess
I am more intrigued in creating jobs, in a program that would
be infrastructure improving over a long period of time.
So we also maybe can look at the way, Mr. Chairman, to
ensure that our American manufacturers have a fair chance and
are not unfairly competed against by foreign manufacturers in
the course of trying to create jobs in America. Those are some
issues that will come up.
Thank you for your leadership, and I look forward to the
fine panel, and thank you for what you have done.
Senator Cardin. Thank you, Senator Sessions, very much.
The Ranking Republican on the full Committee, Senator
Inhofe.
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. Thank you, Mr. Chairman. Let me first say,
remind my colleagues here that the Chairman and I were both of
the same class in the House of Representatives. And I have
never had an occasion to, while we have had disagreements on
policy issues, he has always kept his word, and I really
appreciate the work he is doing on this water issue. Nationwide
investment in water infrastructure projects will increase jobs,
repairs to crumbling infrastructure, and protect public health
and the environment.
I can remember when they used to consider us, out in
Oklahoma and some of the newer States, as not having the
problems with infrastructure that the more mature States like
Maryland had. But that is not true anymore. We have gone beyond
a time where it is necessary to start working on our
infrastructure. I are pleased that we have our chief, Joe
Freeman, from the Oklahoma Water Resources Board. I will not
comment on him now, because I will do that before the second
panel so I can introduce him.
I also want to mention to my friend from Alabama that yes,
I am very thankful for Mr. Richey. He and I have had a chance
to talk. His operation actually is in Pryor, Oklahoma, which is
kind of the gateway to our lake area. Not many people realize
that the State of Oklahoma has more miles of freshwater
shoreline than any of the 50 States. In Pryor is where it all
starts. So I appreciate the contribution he had made.
In fact, he has been the salvation of that town. We have
lost--he and I have talked about this--a lot of the industries
from there. I appreciate his involvement there.
The U.S. Conference of Mayors notes that the public dollar
invested in water infrastructure increases private long-term
GDP output by $6.35; the National Association of Utility
Contractors estimates that $1 billion invested in water
infrastructure can create over 26,000 jobs. I only wish that
back when we opposed it, several of us did, but they passed it,
the $800 billion stimulus, that we had had more stimulus for
things we are talking about here today and roads and highways.
So I am looking forward to this hearing, and I appreciate our
witnesses being here.
[The prepared statement of Senator Inhofe follows:]
Statement of Hon. James M. Inhofe,
U.S. Senator from the State of Oklahoma
I would like to make a note about EPA's recent study of
groundwater in Pavillion, Wyoming. I continue to have many
questions and concerns about this study and its implications
for the natural gas industry in America, but I believe those
questions are best addressed by those who are involved, and I
will be withholding any questions on that today to Mr. Hanlon.
I first want to state for the record how tirelessly Senator
Cardin has worked to continue the Federal investment in water
infrastructure. I have appreciated working with him, and
although we have not always agreed, there is no doubt in my
mind that we share the same goal of maintaining clean water and
safe drinking water. I look forward to continuing to work with
him and other members of the Subcommittee next year. As this
Committee is well aware, a nationwide investment in water
infrastructure projects creates jobs, repairs crumbling
infrastructure, and protects public health and the environment.
I am grateful that the Water and Wildlife Subcommittee is
tackling this issue which is so important to Maryland, Alabama,
California, Oklahoma, and to the rest of the U.S. I am
especially pleased that we can hear a State perspective on
water infrastructure needs today from Joe Freeman, Chief of the
Oklahoma Water Resources Board's Financial Assistance Division.
Joe has worked on water infrastructure financing issues
both in Oklahoma and at a national level, and will be able to
provide us with a valuable perspective today. I would like to
mention that Oklahoma is nearing completion of a State water
plan. I know the Oklahoma Water Resources Board has done
tremendous work in putting this 50 year plan for water use in
Oklahoma in place. While the decisions have been challenging
and sometimes painful, I know that there is one thing
Oklahomans agree on: we need to invest in our water
infrastructure.
I am also looking forward to hearing more about the jobs
that are created as a result of water infrastructure
investments from Mr. Richey. I understand that the American
Cast Iron Pipe Company has a presence in Oklahoma and that they
employ approximately 215 people at their American Castings
plant in Pryor, Oklahoma.
Funding for water infrastructure is greatly needed. Each
day, the condition of our water infrastructure results in
significant losses and damages from broken water and sewer
mains, sewage overflows, and other symptoms of water
infrastructure that is reaching the end of its useful life
cycle.
Investments in water infrastructure provide significant
economic benefits as well. The U.S. Conference of Mayors notes
that each public dollar invested in water infrastructure
increases private long-term GDP output by $6.35. The National
Association of Utility Contractors estimates that $1 billion
invested in water infrastructure can create over 26,000 jobs.
In addition, the Department of Commerce estimates that each job
created in the local water and sewer industry creates 3.68 jobs
in the national economy, and each public dollar spent yields
$2.62 in economic output in other industries.
Considering the importance of water infrastructure to the
well-being of the American people and to our economy, I will
continue to support investment in water infrastructure and am
looking forward to hearing the testimony of all of our
witnesses on this important topic.
Thank you.
Senator Cardin. Thank you very much.
Senator Barrasso.
OPENING STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM THE STATE OF WYOMING
Senator Barrasso. Thank you, Mr. Chairman.
As everyone in this room knows, water is the most
fundamental issue in my home State of Wyoming. The need to
provide a clean, abundant supply of water is essential to the
survival of the intermountain West.
As I have stated before in this Committee, as well as the
Senate Energy Committee, on which I serve, the infrastructure
that we have today in our home State and across the nation is
aging. For example, repairs that are needed to our irrigation
districts include concrete structures, such as canals and sub-
canals, that divert needed water to farmers and ranchers. The
price tag, Mr. Chairman, for these repairs, will only get
higher. The longer we wait, the more irrigation districts will
fall into disrepair. This will impact the economic livelihood
of ranchers and farmers in Wyoming, and across the entire
country.
Funding for water infrastructure is essential. It is only a
part of the solution. We must remove the regulatory red tape
and give States the flexibility to provide a clean, abundant
supply of water for the future.
The EPA's one size fits all approach to water quality
issues is not always in our State's best interest. Often,
solutions that come out of Washington and are imposed upon
rural communities that can't afford them end up providing very
little benefit to the community, given their scarce resources.
We all recognize the need to upgrade wastewater treatment
facilities, sewer lines, wastewater collection systems, and
public drinking water systems. However, bureaucrats in
Washington need to know that a solution for a water quality
problem in Chicago, Illinois, doesn't necessarily work for
Sheridan, Cheyenne, or Casper, Wyoming.
So let's work to ensure that the regulatory decisions that
we make are based on sound science and that we achieve a
balance with the community and environmental needs. Let's
empower our States and our local communities and give them the
tools and the flexibility that they need to provide clean
water.
With that, Mr. Chairman, thank you for holding the hearing,
and I look forward to the testimony.
Senator Cardin. Thank you, Senator Barrasso.
Now I am pleased to call on Jim Hanlon, I welcome you to
the Committee, the Director of the Office of Wastewater
Management in EPA's Office of Water.
Mr. Hanlon has served as the Office Director since April
2002. The Office of Wastewater Management has oversight
responsibility and provides technical assistance supporting
EPA's regional water programs. The Office also administers
Federal financial and technical assistance for publicly owned
treatment works, including municipal sewage collection systems
and treatment plans.
Mr. Hanlon, we welcome you and would be glad to hear from
you.
STATEMENT OF JAMES A. HANLON, DIRECTOR, OFFICE OF WASTEWATER
MANAGEMENT, OFFICE OF WATER, U.S. ENVIRONMENTAL PROTECTION
AGENCY
Mr. Hanlon. Senator Cardin, Ranking Member Sessions, and
members of the Subcommittee, thank you for the opportunity to
appear before you today to discuss the state of our nation's
water infrastructure and the progress that EPA has made in the
implementation of the Clean Water Act and Safe Drinking Water
Act and new opportunities that we believe will help bridge the
divide between our nation's water infrastructure needs and the
ability to pay.
We have come a long way in improving the protection of
public health, water quality, and the environment over the last
40 years. Our nation's drinking water meets standards as
protective as any in the world, and we have improved water
quality in streams, rivers, lakes, and bays nationwide.
However, significant challenges remain. To tackle these
challenges, we believe that new tools and techniques will be
necessary to continue to meet America's water infrastructure
needs, needs that are critical for protecting the nation's
communities, creating jobs and strengthening our economy.
Based on our most recent water infrastructure needs
surveys, communities across the country identify the need for
$300 billion in wastewater and $335 billion in drinking water
capital expenditures over the next 20 years. Recognizing these
needs and sustaining our nation's water infrastructure will
remain a significant challenge in the years ahead.
Despite the progress made since the passage of the Clean
Water Act in constructing and operating wastewater treatment
facilities, the nation will continue to face water pollution
challenges related to water infrastructure. The Census Bureau
tells us that there will be a 35 percent increase in the U.S.
population by 2050. By 2025 this increasing trend in population
growth, combined with other factors, will result in a projected
rate of biochemical oxygen demand, or BOD, being discharged by
publicly owned treatment works at a level about equal to the
rate experienced in 1968, the year when the discharge of oxygen
demanding material from POTWs had reached its historical peak.
This projection underscores the importance of investing in
wastewater infrastructure, treatment infrastructure to maintain
and improve pollutant removal efficiencies.
These trends also have implications for drinking water
utilities with respect to the quality of their source waters.
In addition to the population growth challenge noted above,
demographic trends will further impact infrastructure decisions
affecting our large and growing urban centers as well as rural
America.
The complexity of the challenges facing water utilities
also continues to increase. Advancements in measurement and
toxicological capability are producing questions concerning
pharmaceuticals, personal care products, and other contaminants
that were not previously part of the national conversation.
Two of the nation's most important sources of water
infrastructure financing are the Clean Water and Drinking Water
State Revolving Funds. These two programs have provided
financing of over $111 billion to 39,000 projects since their
beginnings in 1987 and 1996, respectively. The State Revolving
Funds have been widely recognized as technically and
financially sound designs that have resulted in a return on the
Federal investment of more than 2 and a half to 1.
As the nation's largest water quality financing program,
the Clean Water Fund supports the overarching goal of
protecting public health and aquatic systems throughout the
country. The Drinking Water Fund helps ensure that the nation's
drinking water remains safe. At their discretion, States may
also use a portion of their capitalization grants to fund a
range of programs designed in part to help small systems in
disadvantaged communities.
One of the keys to the success of the SRFs is the
flexibility that States have to decide how funds are used under
varying State-specific circumstances. This flexibility allows
States to provide financial assistance to local governments in
a timely manner, allowing funds to benefit local economies
quickly.
EPA is working with partners across the water sector and
beyond to provide the knowledge and tools to ensure that the
investments we make in our water infrastructure move us toward
a more sustainable footing. We are targeting our efforts toward
assisting systems to achieve results by promoting the use of
asset management frameworks, water and energy efficiency
improvements, and innovation through the use of alternative
technologies. We are committed to promoting sustainable
practices that will help assure that communities continue to
enjoy the benefits of clean and safe water.
In October of last year we issued a Clean and Safe Drinking
Water Infrastructure Sustainability Policy. The policy
represents the next step in our efforts to increase the
sustainability of water infrastructure. We will also continue
to work with utilities to ensure they have the technical,
financial, and managerial capacity to effectively manage all
aspects of their operations.
In conclusion, our nation is confronted with significant
water infrastructure challenges. Addressing these challenges
will require the participation of EPA, the States, communities,
and other partners, and will require us to leverage more
innovative and sustainable tools. We look forward to working
with the Subcommittee and our many partners and stakeholders to
continue our progress toward protecting and providing clean
water to all Americans.
Thank you again for inviting me to testify, and I would be
happy to respond to any questions you have.
[The prepared statement of Mr. Hanlon follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Cardin. Mr. Hanlon, thank you for your testimony.
I want to talk a little bit more about the potential risks
to health in regard to the status of our water infrastructure.
The Baltimore Sun recently ran an article--and without
objection I will include it in the record--pointing out that
sewer lines are leaking that go into the Inner Harbor of
Baltimore. But they are directly next to leaking drinking water
lines, and raising the question as to whether there is
potential risk to the public health as a result of the leakage,
not only directly because of the quality of the Bay, but also
as it relates to the safe drinking water.
[The referenced information was not received at time of
print.]
Senator Cardin. Can you just comment as to the risk factors
related to the infrastructure needs on public health?
Mr. Hanlon. The exposure routes for leaking stormwater or
wastewater collection lines or through normal leaks on a day to
day basis, as was pointed out in that Baltimore Sun article, or
overflows during wet weather episodes, either from separate
sewers or combined sewers like Baltimore has, the typical route
of exposure would be to individuals either entering the Inner
Harbor or local creeks or waterways where recreation occurs.
Because drinking water lines are under pressure, it is not
likely that that sort of an underground water leak from a sewer
would enter a drinking water line. Because basically the
drinking water lines are under pressure, and the water sort of
leaks out under pressure at that point.
But the other sort of potential, as I had mentioned in my
statement, is that where there are overflows or combination of
source waters, where the drinking water intakes are, especially
if there are substantial peaks, that could very much complicate
the drinking water treatment process on a site by site basis.
Senator Cardin. Of course, the fact that it is under
pressure is one of the reasons why we have so much leakage,
which adds to the efficiency issues of our systems.
Mr. Hanlon. Yes.
Senator Cardin. So there are tradeoffs, I guess, in all the
issues. If we have more modern water infrastructure, we
wouldn't have the leaks, we wouldn't have these problems to
start off with.
And of course, we have had major breaks in our drinking
water lines that have caused us to have to boil water or issues
like that, because the pressure has been compromised. So there
have been times that we have seen major concerns about public
health related to the leakages.
You mentioned a number, $300 billion in our needs for the
wastewater, $335 billion in drinking water infrastructure.
Those are staggering numbers, $635 billion of infrastructure
needs. Can you give us a little more detail as to what that
entails, how those numbers were arrived at?
Mr. Hanlon. Both the Clean Water Act and the Safe Drinking
Water Act require EPA on an every 4-year basis to report to
Congress in terms of water infrastructure needs. We work with
the States cooperatively and they with local governments to
document what their infrastructure needs are. And in order to
have a need that would be reported in the survey, there has to
be some baseline information, a capital improvement plan, a
facilities plan where the local utility has sort of done out-
year planning, and basically the window for the needs surveys
are 20 years, to identify their required capital improvements
for drinking water and wastewater infrastructure. Those are
then compiled, we do quality assurance checks. If they have
confidence in the numbers, those are sent up to Congress on an
every 4-year basis.
The most recent surveys summarize those $300 billion and
$335 billion plus needs respectively.
Senator Cardin. So this is based upon the local plans as to
what they would want to see done?
Mr. Hanlon. Yes.
Senator Cardin. And of course, under the current financing,
there is nowhere near that type of capacity to get those types
of projects moving?
Mr. Hanlon. That is correct.
Senator Cardin. Water infrastructure, unlike harbor
maintenance or unlike our transportation program, does not have
the dedicated revenue source. Is that an area that you have
looked at at all as to whether there should be a more reliable,
longer-term commitment to meeting these demands?
Mr. Hanlon. We have, within the Office of Water at EPA,
worked very closely with the States to manage the State
Revolving Funds. Those are the capital improvement programs
that we have in place. And there is some baseline level of
funding there, because as the design of the State Revolving
Funds have played out, the Federal grants, the required State
match, along with the repaid loans and the interest earnings
over time have created sort of viable funds, or banks, that
revolve over time, so that there is capacity in place in those
51 clean water banks and the 51 drinking water banks to provide
infrastructure funding.
For example, in the 12 months that ended last June 30th,
the Clean Water SRF provided $5.3 billion in assistance to
local governments, yes, SRF revolving funds. And the drinking
water revolving fund provided $1.6 billion in assistance. So
that is a total of $6.9 billion. Again, not near sort of what
the national needs are, but that's the capital financing
program that EPA manages under the two statutes.
Senator Cardin. Senator Sessions.
Senator Sessions. Thank you, Mr. Chairman.
Mr. Hanlon, in the course of EPA's work with sewer and
water systems, have you developed and have there been developed
techniques for making those systems longer lasting, more
efficient, and less subject to defect and leaks?
Mr. Hanlon. I think the challenges that local water
utilities face, and Baltimore is an example, as was mentioned
earlier, or sort of any community across the landscape, that
the preponderance of the water infrastructure is out of sight.
If there is a pothole in the road that you drive to every day
to work, you know about it, and you avoid it. If there is a
leak in a water line, if there is a leak in an underground
sewage collection line, it is very difficult, it is out of
sight, and for a long time it has been out of mind.
EPA has been working with the professional associations,
the American Water Works Association, the Water Environment
Federation, and others, the American Society of Civil
Engineers, to sort of deploy better practices to account for
in-place infrastructure. The use of asset management
techniques, environmental management systems are tools that
allow local governments to better inventory their assets, do
condition assessments, and identify what the needs are. And it
is those needs in part that are reflected in the needs surveys
that we spoke about earlier.
Senator Sessions. Our country is facing the most severe
debt crisis we have ever faced. It is systemic, it is long-
term, it is not going to go away when the economy bounces back.
And so we are having to see, how can we enhance critical
matters like our water and sewer infrastructure at the lowest
possible cost. I guess it is not EPA's primary responsibility.
But do you think that the country has sufficiently analyzed the
techniques that help keep costs down and problems down? Do you
have any suggestions how we could do better?
Mr. Hanlon. I think the challenge of the water
infrastructure is a very sort of retail undertaking. There are
16,000 publicly owned wastewater treatment plants in the
country, over 50,000 community water systems under the
jurisdiction of those local water infrastructure managers. And
so I think the full continuum is out there.
Senator Sessions. We support many of those through loans
and other programs. I guess I am saying they go to a local
contractor who may not be the most sophisticated contractor in
the latest techniques to be more effective. Do you think that
some of our moneys are spent in ways that could be better
spent?
Mr. Hanlon. I think the design of local infrastructure
improvement projects is left to the local governments and their
design engineers, primarily members of the American Society of
Civil Engineers and others, who basically are the experts in
designing either new systems or repairs to existing systems.
Senator Sessions. Mr. Hanlon, the EPA has a serious
responsibility enforcing water pollution laws. And there are
city and rural and municipal sewer systems that leak and that
impact adversely the environment. And you have responsibilities
in that regard.
One of the things I have seen both when I was United States
Attorney and then as Attorney General is that some areas really
have a difficult time having the funds necessary to meet what
the EPA demands that they meet oftentimes right there. I don't
want to raise a complex subject, and it is an embarrassment to
Alabama, but the largest municipal bankruptcy in the history of
the country was the water-sewer system in Jefferson County, our
largest county. I remember when I was Attorney General, EPA had
demanded what was then estimated to be $1 billion in sewer
upgrades. Well, it sounded like a good idea, I suppose. It took
my breath away, knowing how that was probably a third of the
State's budget that this one county was going to have to fund.
And then it went forward, and there were negotiations, and
lawsuits I guess were maintained, and the threats continued. So
the county ended up spending $4 billion. They borrowed the
money unwisely from people who have gone to jail as a result of
all of that. But the county went into bankruptcy, and it was
driven primarily by the expenditures to improve the water-sewer
system in the county.
What kind of policies do you have? I know one poor city in
the State that EPA worked with in my experience to try to get
the system improved and deal with the worst problems first. Do
you have any kind of policies that allow you to develop a plan
in these areas?
Mr. Hanlon. That subject has been one that we have had a
fair amount of discussions on with a variety of stakeholders,
including the Conference of Mayors and others over the last
year or so. It had led to the issuance of a memo by my boss,
Nancy Stoner, who is the Acting Assistant Administrator for the
Office of Water, her counterpart, Cynthia Giles, who heads up
EPA's Compliance Enforcement Office on October 27th, that laid
out an integrated planning framework for municipalities. Again,
it is not a requirement, but it is an option.
If the utility has basically a more cost effective way of
sort of aligning their local needs in terms of these projects
have the most potential to either provide protection for public
health or reduction of overflows on a sort of pound per dollar
basis, what the memo lays out is a process that EPA, working
with the States, is willing to entertain those proposals by
local governments to sequence their projects. It doesn't lower
the bar or sort of put off or absolve anyone from public health
or water quality protections. But basically it is an effort to
better sequence projects to get the most important projects to
the top of the list.
Senator Sessions. Do you have engineers that are capable of
negotiating that, or do you just compare reports and
suggestions about how to go forward? My time is up, maybe we
can follow up on that.
Mr. Hanlon. Both EPA and the States have technical staff on
board to entertain those discussions.
Senator Sessions. It is important.
Thank you, Mr. Chairman.
Senator Cardin. I hope we would be able to follow up on
that point, because I do think the cost effectiveness,
particularly to governments of limited capacity, is an issue
that we need to be very informed about, as to the best way to
proceed to make sure we protect public health, but mindful of
the capacity of the local governments.
Senator Sessions. Mr. Hanlon, if a city is in serious
violation, you require them to stop, isn't that right? It is
not a question of, there are times when you just say, you have
to fix this or shut the system down?
Mr. Hanlon. I think the conversations that occur, both
within the permitting context as well as the compliance and
enforcement context, again, the standards don't change. Most of
the water quality standards are established by the States. But
what happens within the construct of those discussions is sort
of how long it is going to take.
We understand that the sewer systems across the United
States we inherited from our grandparents, and they have been
in the ground for a hundred or more years, the pipes out in
front of this building. And we are not going to fix them in 3
years, we are not going to fix them in 5 years. So as the
compliance schedules are negotiated, basically the end point is
clear in terms of where we want to get to protect public health
and protect the environment. And it is the schedules that are
most often negotiated in terms of is it 10 years, is it 20
years. There are consent agreements that have been entered into
within the last 6 months that go up to 25 years.
Senator Cardin. Senator Inhofe.
Senator Inhofe. Did you want to go back and forth? OK,
thank you very much. Thank you, Mr. Chairman.
First of all, I took a quote out of your written statement,
and I want to repeat it here, because I think it is
significant. It says, ``one of the keys to the success of the
SRFs is the considerable flexibility that States have to decide
how funds are used under the varying State-specific
circumstances. This flexibility allows both programs to make
these much needed funds available to local governments in a
timely manner, allowing funds to enter local economies
quickly.'' I strongly agree with that, and I am a believer that
the States are best equipped to take care of these problems.
So I would ask first, are EPA's current SRF policies
continuing to provide the maximum flexibility to the States?
And I would ask those who will be on the second panel to listen
to your answers. I would also further request that you stay and
listen to their testimony if you have time to do so.
Mr. Hanlon. Yes. Basically the States, the statutory
authorities are a little bit different between the Clean Water
SRF and the Drinking Water SRF. On the Clean Water side, States
are required to put together a project priority list, and then
on an annual basis identify their list of projects they propose
to fund through an intended use plan. And they can go anywhere
on that list to select projects to fund. Generally basically
the States go to the top of their priority list in terms of
what are the most important public health or water quality
projects that they have identified within the State. So that is
the Clean Water Act.
On the Safe Drinking Water Act, a very similar process,
although the act encourages or requires States to have their
most important public health needs at the top of the list and
fund in accordance with those public health priorities as
identified in the State.
Within both funds, there have been some additional
requirements, beginning with the Recovery Act. For example,
green infrastructure, green project reserve, began with the
Recovery Act and was included in both the fiscal year 2010
appropriation and through the continuing resolution in the
fiscal year 2011 appropriation, encouraging--not requiring but
encouraging States to the extent projects were available to use
20 percent of their capitalization grant for green
infrastructure, water efficiency, or energy efficiency.
So States have sort of worked within the project list to
try to meet that congressional suggestion in terms of finding
the 20 percent.
Senator Inhofe. Congressional suggestion, that is a new
term.
[Laughter.]
Mr. Hanlon. We take those seriously, sir.
[Laughter.]
Senator Inhofe. Let me just say this. First of all, I am an
admirer of yours, Mr. Hanlon. You have had this job since,
what, 2002?
Mr. Hanlon. Yes, sir.
Senator Inhofe. So you have gone through different
Administrations. I don't think it is any real surprise that the
SRF program, other clean water programs and air programs and
others are normally--there is a propensity by any
Administration to use these programs to advance another agenda.
In this case, it could be the smart growth policies and this
type of thing. I will be asking the same question of the next
panel.
The SRF program is designed to give communities access to
low interest loans for infrastructure in order to meet the
water quality and public health goals. That is what they are
supposed to be doing. I complained last year that they are
getting into extraneous issues. And I would just say--I would
ask if you could explain how the EPA's sustainability policy is
not interfering with the important need to provide States with
the flexibility that you are going to hear about in the next
panel.
Mr. Hanlon. The October 2010 sustainability policy
basically laid out a number of activities; first of all, it
encouraged States to work with their local municipalities to
identify projects and to plan projects that would provide over
the long term, the sustainable provision of safe drinking water
and the wastewater treatment that would serve the local
municipality well over the long term. So that you don't only
look within the fence line of the municipality, but sort of
look beyond that in terms of what was going on within their
watershed, et cetera.
We have worked with the States and with the water utilities
to develop a sustainability handbook. Again, it is a guidance
document, not required for States and local governments to
consider. We hope to have that out early next calendar year.
Senator Inhofe. OK, that is fine, Mr. Hanlon. Did you say
that you would be able--your schedule would allow you to stay
to listen to the second panel?
Mr. Hanlon. I have a commitment, the sustainable planning
effort that we talked about, the integrated planning effort we
talked about earlier, there is a meeting in town with a bunch
of local governments to sort of talk about implementing it. My
staff is here to hear the second panel.
Senator Inhofe. Thank you, sir.
Thank you, Mr. Chairman.
Senator Cardin. Thank you.
Senator Udall.
Senator Udall. Thank you, Senator Cardin.
We have been having a little bit of a discussion here back
and forth about funding for these programs. One point I just
want to make, and I am not asking for a comment on this, Mr.
Hanlon, but isn't it clear that, or maybe I am--isn't it clear
that folks that are hurt the most when you reduce the funding
in the Clean Water and Drinking Water State Revolving Funds are
rural communities and low income communities? Those are the
ones that aren't able to afford it. That is basically the case,
isn't it?
Mr. Hanlon. The data shows that small, mid and small size
communities have taken advantage of the State Revolving Funds,
because the States are able, through their management of the
fund, to first of all determine their creditworthiness;
basically, they are not going to make loans that can't be
repaid. But also, the State Revolving Fund programs tend to
avoid many of the transaction costs, the bond councils and
rating agencies and things that large municipalities do as a
matter of course.
So over time, the Clean Water State Revolving Fund has
provided 23 percent of the dollars over the last 20 or more
years to towns under 10,000 population, and the Drinking Water
Fund 37 percent of the money goes to towns under 10,000. That
is important as you look across the landscape. I was at a
meeting a month ago with the public health officials from the
State of Virginia, who document that--they believe that they
have 30,000 residents in the State of Virginia that do not have
access to basic sanitation. They either have outhouses or
straight pipes, in Virginia, in 2011.
Senator Udall. Shifting gears now, and I want to ask you
about the non-structural approaches to stormwater, also known
as green infrastructure. I have introduced legislation with
Senators Whitehouse and Cardin. And it would encourage EPA to
incorporate green infrastructure into its permitting actions
and overall promote green infrastructure approaches. Can you
give a quick explanation of what green infrastructure means in
terms of water infrastructure and what its advantages are?
Mr. Hanlon. Green infrastructure are techniques on the
ground that basically, for wet weather, during wet weather
events, either infiltrate, evapotranspirate, or store and re-
use rainwater. The benefit of those designs is first of all, it
eliminates some of the peak flows from getting into either
storm sewers, or into an area like this, combined sewers, that
then have to be sort of collected and treated before they are
discharged.
Other benefits of green infrastructure are neighborhood
impacts. You can put a lot of money in a tunnel or a pipe below
the ground and not see any sort of surface impacts or benefits.
Green infrastructure has the benefit of greening, if you will,
neighborhoods. It also has the benefit, if done at a larger
scale, to reduce the heat island effects of urban areas, has
the potential to improve air quality in urban areas, and
really, over the long term, has the potential of improving what
urban America looks like, if you look out 20, 30 years.
Senator Udall. What is EPA doing to incorporate green
infrastructure into its permitting activities, and how are
these actions reducing costs for local utilities?
Mr. Hanlon. From the permit program standpoint, the Clean
Water Act is a performance based statute. So its permits are
written basically, it is sort of the performance of an
individual project or an individual municipality that is the
end point for the permit. How the municipality gets there, EPA
typically doesn't get involved in the detailed designs, as we
spoke earlier. The local consulting engineer is working with
the public works department.
Having said that, EPA has had a major investment, over the
last 3 years, in green infrastructure. We have a green
infrastructure partnership, we are doing research in our Office
of Research and Development on green infrastructure techniques,
to better understand the efficiencies and efficacies of green
infrastructure techniques, not only in a parcel by parcel
basis, but at scale, at a sewer shed basis, 10 square blocks,
50 square blocks, how does green infrastructure work and what
efficiencies can we expect.
Senator Udall. Thank you very much.
Thanks, Chairman Cardin.
Senator Cardin. Senator Gillibrand.
Senator Gillibrand. Thank you, Mr. Chairman.
Thank you very much for coming to testify in front of this
Committee. New York has substantial water and sewer
infrastructure needs. I think the last estimate I saw was about
$70 billion of need over the next 20 years. So we have very
significant, grave concerns about how we can actually get that
important work done.
We also have many towns, particularly rural towns, that are
under consent order because of their dilapidated or broken
sewer systems. So one of the concerns that I have is that there
is not enough attention being given to repairing and upgrading
existing water infrastructure. The focus has been more often on
new growth and development.
To what extent is the EPA working with States to ensure
that funding is being utilized to repair infrastructure?
Mr. Hanlon. As I said earlier, under the Clean Water State
Revolving Fund, basically the States decide sort of what
projects go to the top of their list and which projects are
funded. Having said that, certainly there is an encouragement
from EPA, working with the States, to identify those existing
needs from a documented need basis or from a compliance basis,
and to use scarce SRF resources there first.
Senator Gillibrand. Well, yes, have heard you say a couple
of times that the success of the State Revolving Funds has been
quite meaningful. But in our State, there is still a massive
gap between the amount of funding that is needed and the amount
that is available to meet the infrastructure needs that we
have. What are the steps that need to be taken to ensure that
we don't end up with the massive infrastructure failures that
put health and safety at risk?
Mr. Hanlon. Again, I would like to compliment New York
State. They have been one of the leaders nationally in terms of
their management of the State Revolving Fund. There is a
technique called leveraging, where basically the State can go
to the bond market and actually--through leveraging
transactions, actually put multiples or two or three times the
amount provided through the Federal grant into infrastructure.
New York has done that annually since the late 1980s.
Having said that, again, I believe that the efforts at the
local level to identify what their critical infrastructure
needs are, through techniques like asset management, to
document their assets in place, what the condition of those
assets are. And then from a criticality standpoint do
assessments in terms of what the immediate needs are on a local
basis that should be queued up for consideration earlier, what
are the most critical projects locally. It is very difficult
for the people in Albany or impossible for EPA from the
distance we are to determine sort of what the relative
priorities are of projects within a local drinking water or
wastewater jurisdiction.
Senator Gillibrand. Well, one of the problems is, there is
just too much demand. You have a certain budget, so you have to
structure projects based on the budget need. But that doesn't
mean that that small town that is under consent order doesn't
have still an urgent need that is not being met. It just might
not have made that list.
So what I am really worried about is, if we agree that this
need of $70 billion investment over 20 years is legitimate, are
there any other ideas that you have besides getting local
communities to leverage money beyond the State Revolving Fund
models that you think we should begin to employ in different
parts of the country to make more resources available? Are all
States, for example, using these leveraging models to make more
Federal money available for more at-risk cities, States, and
communities that are already doing things well?
New York is just unique. We are an older State; our
infrastructure was built between 50 and 100 years ago. It is
now deteriorating significantly. We have 20 million people. So
it is not the same as every other State. So the needs are very
significant.
So are there things we should be doing on a national level
to make more Federal money available for the more urgent needs
around the country?
Mr. Hanlon. The issue of making more Federal money
available I will leave to the Subcommittee. With respect to
leveraging, there are somewhere between 25 and 30 States who
have leveraged their State Revolving Funds over time. We at EPA
have worked with our environmental finance advisory board. They
have produced a report that sort of demonstrates the benefits
of leveraging that we have made available to the States.
And at the end of that conversation, though, the critical
decisionmaking point for a State is they have to have projects
that are absolutely ready to go, ready to go to bid, ready to
go to construction before they can leverage their fund.
Otherwise, they are borrowing money, basically, to do the
leveraging transaction. If they can't turn that around in terms
of loans to local projects, basically they are not going to go
through a leveraging transaction.
So like New York has done, you have to have a full pipeline
that then can support a leveraging transaction.
Senator Gillibrand. Thank you.
[The prepared statement of Senator Gillibrand follows:]
Statement of Hon. Kirsten Gillibrand,
U.S. Senator from the State of New York
Chairman Cardin, thank you for holding this important
hearing today to highlight the challenges and the opportunities
that we face in maintaining our nation's water infrastructure.
This is one of the most important issues that this Committee is
responsible for, and it is one that affects the lives of
virtually every American--across every region of the country.
In each of our States, communities are grappling with the
challenge of maintaining safe and reliable water infrastructure
during a time when Federal, State, and local budgets are
stretched to their limits. In my State of New York, these
significant challenges were made even more urgent in the
aftermath of severe flooding caused by Hurricane Irene and
Tropical Storm Lee. These storms devastated communities across
eastern New York State and will have long-term impacts on the
region's infrastructure.
New York's water needs have been well documented in reports
by the New York State Department of Environmental Conservation
and the New York State Department of Health. The most recent
estimates project that it will cost over $70 billion to repair,
replace, and upgrade New York's wastewater and drinking water
infrastructure over the next 20 years.
New York has already made significant investments in
protecting our water infrastructure, but State and local
governments cannot meet this challenge alone. It is critical
that Congress and the Administration make a strong commitment
to ensuring that families across New York and the United States
have access to safe and reliable water. We can do this by
addressing the continued funding shortfall, investing in
``green'' infrastructure to provide long-term cost savings, and
ensuring that rural and disadvantaged communities have access
to Federal funding.
Mr. Chairman, thank you again for this hearing and for your
leadership on this important issue. I look forward to
continuing to work with you and with my colleagues on this
Committee to strengthen and improve the Federal response to our
nation's water infrastructure needs.
Senator Cardin. Senator Merkley.
Senator Merkley. Thank you, Mr. Chairman. I am going to
pass on my questions in order to bring up the next panel.
Senator Cardin. Thank you.
Senator Whitehouse.
Senator Whitehouse. Thank you, Chairman.
I would like to ask unanimous consent that a letter from
the National Utility Contractors Association of Rhode Island in
support of additional funding be part of the record.
Senator Cardin. Without objection, so ordered.
[The referenced information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. I would like to also ask that a letter
from the Warwick Sewer Authority in Rhode Island be put into
the record. And I would just like to read from it one short
passage: ``In addition to directly creating jobs, water
infrastructure projects stimulate other economic activity.
These projects depend on American-made pipes, fittings, cement,
aggregates and other products. The United States Conference of
Mayors estimates every job created through rebuilding our water
systems creates over 3.6 jobs elsewhere, and every dollar
invested in water infrastructure adds $6.35 to the national
economy.''
So I would like to ask that that also be put in the record.
Senator Cardin. Without objection, it will be included in
the record.
[The referenced information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. Finally, I would like to ask unanimous
consent that a letter from the Kingston Water District be
included in the record.
Senator Cardin. Without objection.
[The referenced information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. The Kingston Water District has sent a
few samples in of piping that they have removed. This is piping
taken from the Kingston City Center, and as you can see, it is
filled in and corroded a lot. This was installed in 1920. So
the city has been around since the 17th century, the late 17th
century or early 18th century. But these aren't pipes that are
that old, these are newer. And you can see how much of it has
been lost.
So that is the status quo out there. And we have a chance
to fix that. It is not just the big pipes as well, and it is
not just the old iron ones. This is a piece of plastic pipe.
And despite the fact that it is plastic, if you try to look
through it, the hole, I can barely get my finger through and
the pipe is 2 inches or so across. And because the plastic
piping is attached to the regular cast iron piping, it
tuberculates just as much as the others do.
So this is the status quo out there. I think this is a call
to action from the U.S. Congress to make sure that Americans
have the water quality infrastructure that they deserve, and we
are going to have to do this sooner or later. Why not do it
now, while we so urgently need the jobs?
So I want to congratulate Chairman Cardin for holding this
hearing. I thank Ranking Member Sessions for his support of
this hearing, and urge that we work our way forward, so that
America's drinking water no longer has to go through piping
that looks like this, while we have the ability to upgrade it.
Thank you very much.
[The referenced information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Cardin. Thank you, Senator Whitehouse. I appreciate
that. It will be difficult to figure out how we are going to
get that into the record, but we will do the best we can.
[Laughter.]
Senator Cardin. Let me thank Mr. Hanlon very much for your
testimony.
We will now turn to the second panel. And for that, let me
first turn to Senator Sessions, who I believe wants to
introduce one of the panelists.
Senator Sessions. I would be honored to introduce Van
Richey, who served as President and CEO of American Cast Iron
Pipe Company, or CIPCO, since 1989. Founded in Birmingham in
1905, CIPCO is a global manufacturer of industrial and capital
goods. CIPCO's founder, John Eagen, actually gave the company
to the employees in 1922. Since then, they have been frequently
recognized as one of the ``best companies to work for in
America.''
Mr. Richey was born in Cullman, Alabama, not too far north
of Birmingham; a pretty good town, Cullman is. Served in the
United States Army, received his BS and MBA degrees from the
University of Alabama, and completed Harvard's advanced
management program. An outstanding citizen, he served as
Chairman of the Business Council of Alabama, several boards,
including the President's Cabinet at the University of
Alabama--roll, Tide. Our Chairman, Senator Boxer, put on an
Oklahoma shirt with No. 1 on it. That faded fast, didn't it,
Senator Inhofe?
Senator Inhofe. Indeed it did.
[Laughter.]
Senator Sessions. So maybe she would be willing to put on
an Alabama one if your team wins.
He is active in the Boy Scouts, Alabama Health Services,
and University of Alabama Birmingham Health System and the
Salvation Army.
Thank you, Mr. Chairman. Mr. Richey will be an excellent
witness, and I appreciate his ability to come.
Senator Cardin. We will next turn to the Oklahoma Senator
for a response.
Senator Inhofe, do you want to make an introduction?
Senator Inhofe. Yes, I do. I am real pleased to have Joe
Freeman here. He has served as the Chief of the Oklahoma Water
Board since 1993. So he has been around for a long time. He
joined that board actually in 1990, to supervise financial
analysts in technical and credit reviews and served on the
water and wastewater facility loans.
Prior to joining the board, he was a banker, 13 years in
Oklahoma. He has deep roots there. He is a past president and
member of the board of directors of the Council of
Infrastructure Financing Authorities. He also serves on the
Oklahoma Funding Agency's coordinating team.
In 2010 he was named to the Oklahoma Rural Water Hall of
Fame. And there is somebody else who is in the Oklahoma Rural
Water Hall of Fame, who had the same job as Mr. Freeman many
years ago, and that was my father-in-law, Glade Kirkpatrick. He
was kind of Mr. Water at the time. And all the way back to when
we had the McClellan-Kerr navigation way going in, he was very
much involved in that. So we have that bias also.
I don't think there is anyone who could do a better job on
this panel, and I hope that you will be very straightforward on
some of the problems and lack of flexibility. That is what this
hearing is for, and we appreciate your being here, Mr. Freeman.
Senator Cardin. And Senator Merkley, for an introduction.
Senator Merkley. Thank you very much, Mr. Chairman. It is
my pleasure today to introduce one of our distinguished
witnesses, Mr. Gregory DiLoreto, of Portland, Oregon. Mr.
DiLoreto holds degrees in civil engineering and public
administration from Oregon State and Portland State University.
He has applied his expertise in these two areas to serving the
public, and has become one of the most highly respected water
administrators in the country.
Under his leadership, the Tualatin Valley Water District
has been a leader in the field of sustainability, receiving two
awards from the American Public Works Association, and recently
doubling their renewable energy generation, all while serving
more than 200,000 customers in the Portland metro area.
Mr. DiLoreto has been a leader in the field of civil
engineering as well, and is here today to represent the
American Society of Civil Engineers as their new president-
elect. Congratulations.
Water infrastructure is extremely important to Oregon, as
it is to States throughout our nation. The next generation of
projects will be critical for the maintenance and improvement
of that infrastructure. Oregon is looking to the Federal
Government to partner in these efforts.
With his dual expertise in water administration and civil
engineering, Mr. DiLoreto is exceptionally qualified to testify
to the state of our nation's water infrastructure and potential
consequences of inaction or under-action. Mr. Chairman, I am
very pleased to introduce to the Subcommittee Mr. Gregory
DiLoreto.
Senator Cardin. Thank you very much.
Let me now welcome the Marylander that is on the panel, Ted
Scott, a Maryland small business owner with expertise in green
infrastructure for stormwater management and design. Mr. Scott
is a practicing professional civil engineer, certified
professional in erosion and sediment control, LEED
accreditation professional, and master stormwater practitioner
with over 25 years of experience. Mr. Scott's firm provides
design and maintenance for stormwater systems as well as
environmental restoration consultation.
Mr. Scott also serves on the board of directors of Blue
Water Baltimore, a group that uses community-based restoration
to achieve clean, healthy water in Baltimore Harbor and the
Chesapeake Bay. Mr. Scott, we welcome you also to our
Committee.
We will start with Mr. DiLoreto and then work our way
across.
STATEMENT OF GREGORY E. DILORETO, PRESIDENT-ELECT, AMERICAN
SOCIETY OF CIVIL ENGINEERS
Mr. DiLoreto. Mr. Chairman, Senator Sessions and members of
the Subcommittee, again, my name is Gregory E. DiLoreto, and I
am the President-Elect of the American Society of Civil
Engineers.
I am also the Chief Executive Officer for the publicly
owned Tualatin Valley Water District in the Portland, Oregon,
metropolitan area. The district is the second largest water
utility in Oregon, serving over 200,000 customers in the
Portland area. I am also a licensed professional engineer in
Oregon.
As a public official, I am honored to be here today to
testify on behalf of ASCE on the state of America's drinking
water and wastewater infrastructure as the Subcommittee
examines our nation's water infrastructure challenges and
opportunities.
Every 4 years ASCE publishes the Report Card for America's
Infrastructure which grades the current state of 15 national
infrastructure categories on a scale of A through F. In 2009
our most recent report card gave the nation's wastewater and
drinking water infrastructure systems a grade of D^.
As a snapshot at a moment in time, the Report Card
identifies 20-year funding needs. It does not answer critical
questions about the impact of delayed or reduced investments in
key infrastructure systems as the nation grapples with its
aging public works. That is why ASCE has undertaken a series of
four economic studies to identify the long-term consequences to
the nation's economy due to our deteriorating infrastructure.
In July of this year we issued the first report on the
under-investment in the nation's surface transportation system.
Our second report, which we will issue Thursday, answers the
questions of how the condition of the nation's deteriorating
wastewater and drinking water infrastructure impinges on our
economic performance. In other words, how does that D^ for
water treatment and transmission affect America's economic
future?
The answer is sobering. Our report, the Economic Impact of
Current Investment Trends in Water and Wastewater Treatment
Infrastructure, concludes that the nation's wastewater and
drinking water infrastructure is under great strain. By now, I
am sure every member of this Subcommittee is aware of the
funding needs for drinking water and wastewater systems.
According to our report, if current investment trends persist,
by 2020, just 8 years from now, the anticipated capital funding
gap will be $84 billion. This funding gap will lead to $147
billion in increased costs for businesses and a further cost of
$59 billion for households.
In the worst case, by 2020 the U.S. could lose almost
700,000 jobs. By 2020 the average annual effect on the U.S.
economy is expected to be $416 billion in lost GDP. Putting the
problem in terms that all of us can understand, the average
family household budget will increase by about $900 per year
due to increased water rates and lost income.
Our key solutions are ambitious and will not be achieved
overnight. But Americans are capable of real and positive
change. In the short term, we believe that Congress must act
quickly to address the under-investments in drinking water and
wastewater infrastructure. Congress needs to first reinvigorate
the State Revolving Loan Fund programs under the Clean Water
Act and the Safe Drinking Water Act by reauthorizing Federal
funding of $13.8 billion over 5 years. Second, explore the
potential for a water infrastructure finance innovations
authority that would access funds from the U.S. Treasury at
their rates and use those to support loans and credit
mechanisms for water projects. Those loans would be repaid with
interest back to the Treasury.
Three, eliminate the State cap on private activity bonds
for water infrastructure projects that could bring $6 billion
to $7 billion annually in new private financing to bear on the
problem. Fourth, allow public-private partnerships as one of
the many methods of financing infrastructure improvements. ASCE
supports the use of PPPs, but only when the public interest is
protected. And we believe any public revenue derived from PPPs
should be and must be dedicated exclusively to comparable
infrastructure facilities in the State or locality where the
project is based.
Fifth, establish a national infrastructure bank. Such a
bank would leverage public funds with private dollars to invest
in the infrastructure. And sixth, investigate legislation to
establish a dedicated source of revenue for wastewater and
drinking water projects that would provide a stable, long-term
basis for financing these critical systems.
Now, finally, the Federal Government cannot be the bank of
last resort. Individual water utilities must consider the
possibility of increasing the price of water to local
ratepayers. Water must be appropriately priced to ensure
improvements can rebuild the infrastructure.
All these solutions involve costs, separately or in
combination. These solutions will require action at the
national, regional, local, private levels and will not occur
automatically.
I want to thank you, Mr. Chairman, for the opportunity to
testify, and I would be pleased to answer your questions.
[The prepared statement of Mr. DiLoreto follows:]
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Senator Cardin. Thank you for your testimony.
Mr. Freeman.
STATEMENT OF JOE FREEMAN, CHIEF, FINANCIAL ASSISTANCE DIVISION,
OKLAHOMA WATER RESOURCES BOARD
Mr. Freeman. Good morning, Mr. Chairman and members of the
Committee. As Senator Inhofe said, my name is Joe Freeman, I am
Chief of the Financial Assistance Division of the Oklahoma
Water Resources Board.
We administer the Clean Water State Revolving Fund in
Oklahoma, along with the financial portion of the Drinking
Water State Revolving Fund, and three other State water and
wastewater funding programs. I am pleased to be with you today
to share Oklahoma's views with the Committee on the challenges
and opportunities that face us.
Today I am not only representing the State of Oklahoma, but
also the Council of Infrastructure Financing Authorities, the
Association of Clean Water Administrators, and the Western
States Water Council. We believe sustained Federal funding is
essential to realizing our nation's water quality goals, and we
hold strongly to the view that the State Revolving Fund loan
program should remain a foundation for future projects in
meeting water infrastructure needs.
It is vital that the SRF partnership between Federal and
State governments continue as the basic mechanism for
assistance to communities in addressing water quality issues.
In the past two decades few federally authorized programs have
proven as effective in realizing their intended goals as the
SRF programs. It is important to note that the assistance made
available to communities is significantly greater than the
initial Federal investment as a result of State match, loan
repayments, issuance of bonds, and interest earnings. The State
Revolving Funds nationwide have committed over $84 billion to
projects for wastewater infrastructure and over $20 billion for
drinking water infrastructure. The majority of funding goes to
the highest priority projects that clean up polluted streams,
rivers, and estuaries and ensure safe drinking water
nationwide.
Furthermore, public investment in water infrastructure
yields significant economic benefits. The U.S. Department of
Commerce estimates that $1 invested in water infrastructure
generates $2.62 in economic output in other industries, and
that each job created in the local water and sewer industry
creates 3.68 jobs in the national economy. States, including
Oklahoma, as the recipients of SRF capitalization grants,
recognize that we incur a number of responsibilities. We must
manage those funds in a fiscally responsible manner and be
accountable. We must give priority in our funding decisions to
the resulting water quality benefits and the urgency of
environmental problems needing resolution. We need to pay
particular attention to the challenges faced by small, rural,
and disadvantaged communities.
We see our mission as using all the possible tools and
strategies to achieve the largest impact in terms of achieving
the goals of the Clean Water Act and the Safe Drinking Water
Act. As we look to the future, the ability of States to meet
water and wastewater infrastructure needs is based on continued
funding of the SRF programs at a sufficient level to ensure the
full realization of the revolving nature of the funds and to
maximize the utilization of leveraging by States such as
Oklahoma that choose the leveraging option.
We recognize the current budget realities and the fact that
the annual capitalization grants represent a significant
percentage of the overall EPA budget. We understand the need
for budget restraint, but would hope that not too great a share
of that restraint is at the expenses of the SRF programs.
Through the Oklahoma Comprehensive Water Plan, the Oklahoma
Water Resources Board and its many partners assessed the water
and wastewater infrastructure needs over the next 50 years in
Oklahoma. Detailed information was gathered from large and
small urban and rural systems to complement the needs survey
conducted through the Environmental Protection Agency. In
Oklahoma, we have documented alone over the next 50 years $82
billion in needs for water and wastewater infrastructure. In
order to meet these needs, it is going to take continued
partnership and innovative discussions between local and State
governments and the Federal Government.
As a proactive response to the findings of our intensive
water planning efforts, we have compiled a committee of
infrastructure financing professionals with the goal of
investigating solutions to meeting Oklahoma's infrastructure
needs. The group is evaluating a number of options, including
restructuring our State infrastructure loan programs and
creation of a credit reserve enhancement program.
As this Committee weighs the future of SRF legislation, we
would hope that you will keep the record of accomplishments by
States and the perspective of State program managers uppermost
in your considerations. After years of successful program
operation, it is clearly the experience of Oklahoma that the
more latitude and operating flexibility that States are
allowed, the greater our ability is to accomplish our
environmental and financial goals. Certainly, States need to
continue to be fully accountable for their use of Federal
dollars, but excessive oversight or administrative control by
EPA stifles innovation and the ability of States to best
respond to local needs.
The success of the program derives from the flexibility of
the SRF model, which allows each State to decide the best
approach to meet its individual water quality needs. The SRF
programs have historically allowed for individual water quality
needs to be addressed using traditional construction methods or
in many cases, more green methods. We believe that it is
important to recognize that water quality needs vary from State
to State and that States are in the best position to recognize
the needed priorities for providing assistance.
Oklahoma's needs are most likely not much different than
the needs in other States, but we are confident that we if take
intense planning and collaborative teamwork, Federal, State,
and local partners coming together to find creative solutions
to address infrastructures, we can succeed.
In closing, I just want to remind you of the success that
State-run SRF programs have had in addressing our nation's
water quality and drinking water issues, and I hope that
together we can work to protect water for future generations.
Thank you.
[The prepared statement of Mr. Freeman follows:]
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Senator Cardin. Thank you, Mr. Freeman, for your comments.
Mr. Scott.
STATEMENT OF THEODORE E. SCOTT, EXECUTIVE VICE PRESIDENT AND
FOUNDER, STORMWATER MAINTENANCE
Mr. Scott. Good morning, Mr. Chairman and members of the
Committee. Thank you for the opportunity to be here today.
I am going to lend a little bit of a different perspective,
one of an on the ground small businessman that deals with these
issues.
I am a professional engineer, and I am co-owner of a civil
engineering firm and a niche construction and maintenance
company that specializes in stormwater related infrastructure.
We work from Richmond, Virginia, to Connecticut. A critical
part of our work is minimizing the impacts on the environment.
Being involved in this field for 25 years, I have been part
of a paradigm shift toward green infrastructure. I am also
involved in work that addresses our aging stormwater
infrastructure.
Ever since people began converting land for their use, the
changes to the physical characteristics of the land and
resulting stormwater runoff have impacted the environment.
Traditionally, engineers have designed storm drain systems that
reduce water filtering into the ground, increased flows and
downstream flooding, and eventually send the problem
downstream. This results in impacts to what were natural
filters, streams, bays, estuaries, and ultimately the oceans.
Minuscule pieces of plastic, once thought too small to matter,
are becoming great floating masses in our oceans. This all
begins with how we treat our stormwater on the street.
About 30 years ago, some parts of the country, including my
home State of Maryland, began to regulate the treatment of
stormwater. The first methods used were large basins and ponds
that collected drainage and treated it in centralized ponds and
basins. Several decades of research have indicated that these
practices do not allow enough water to filter into the ground
and convey a significant amount of pollutants downstream. The
results were continued impacts.
Since the 1990s alternative ways to treat stormwater have
been researched and implemented. Referred to as green
infrastructure, these practices are a different way of planning
communities and urban areas. Alternative materials such as
green roofs and permeable pavement are used for surfaces that
absorb pollutants and allow stormwater to filter directly into
the ground. Landscape practices use natural processes to slow
flows, absorb water, and remove pollutants. With careful
planning and engineering and landscape design, stormwater
practices have become an integral part of the community and are
considered amenities.
As these practices represent a change in the way land is
developed, adoption has taken some time. In Maryland, new
regulations were suggested for the use of these practices
starting in the year 2000. Because voluntary change was not
embraced, the regulations were revised to mandate these
practices on every project beginning in 2009. These practices
are now becoming the status quo for stormwater design in
Maryland.
Green infrastructure differs in many other ways from
traditional large engineered ponds. Being smaller, they require
more hand labor and less heavy equipment. Maintenance changes
requiring teams of laborers instead of large equipment with few
operators. This generates permanent jobs, not one-time
construction employment assignments.
Because skill sets and equipment requirements are less with
green infrastructure, a wide range of alternatives to
traditional construction are available. Grass roots NGOs, such
as Blue Water Baltimore, have initiated numerous community
projects involving green infrastructure. Through efforts like
these, clean water has become a meaningful vehicle to bring
urban communities together.
Many stormwater treatment facilities, such as ponds and
basins, are nearing 30 years old. The materials in these
systems have finite life systems. Failure of pipe systems leads
to hazardous sinkholes and pollution from sediments. The
failure of stormwater ponds can result in catastrophic floods
that can damage property, cause injuries or even death. These
situations can be easily avoided by requiring inspection and
maintenance programs for aging stormwater infrastructure. Costs
for maintaining stormwater facilities are usually borne by
property owners, just like other expenses of maintaining a
property, such as repairs to plumbing or heating systems.
Many municipalities and large corporations understand the
value of maintaining their infrastructure and have programs in
place. These municipalities and landowners have found that
ongoing inspection and routine maintenance involve budgeted
costs that can be incidental to doing business. Others,
including many Federal facilities, await specific mandates to
begin maintaining their infrastructure. Meanwhile, many Federal
and private stormwater facilities have become point sources for
pollution and some on the verge of catastrophic failure.
With the appropriate regulatory directives, the resources
and jobs that were dedicated to constructing this
infrastructure can be converted to maintaining and repairing
it. Some have suggested environmental regulations and
infrastructure maintenance mandates are bad for business. My
personal experience is the opposite. Many business owners, like
myself, have identified how regulations change the business
environment and met the changing market's needs, resulting in
success. Over the course of the worst economic environment
since World War II for design and construction firms, we have
quadrupled the size of our firm. Regulations involving green
and existing infrastructure are the primary drivers for this
growth.
Thank you, Mr. Chairman and Committee members, for the
opportunity to appear before you today. I appreciate it.
[The prepared statement of Mr. Scott follows:]
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Senator Cardin. Thank you, Mr. Scott.
Mr. Richey.
STATEMENT OF VAN L. RICHEY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICAN CAST IRON PIPE COMPANY
Mr. Richey. Thank you, Chairman Cardin and Ranking Member
Sessions, for the opportunity to testify here today.
I am Van Richey, President and CEO of American Cast Iron
Pipe Company. American is a leading domestic manufacturer of
waterworks products, with manufacturing plants in Alabama,
Oklahoma, Arizona, Texas, Minnesota, and South Carolina.
Our 2,600 employees proudly make the pipe, valves,
hydrants, and other products that are vital to our nation's
water distribution and wastewater collection systems. American
was founded in 1905, and in 1922 the company's founder, John J.
Eagan, left all the stock in the company in a trust for the
benefit of the employees, who are still the beneficial owners
today. Our structure philosophy led Fortune Magazine to include
us as one of the 100 best companies to work for for 8 straight
years.
Today, however, I am speaking on behalf of both our
company's employees and the other domestic manufacturers of
ductile iron pipe. They are Griffin, McWane and Mueller/U.S.
Pipe. Our industry employs approximately 16,000 people in 20
States. Iron pipe has been the backbone of our country's water
systems since the 1800s, and is still the preferred pipe used
for drinking water systems.
It is almost completely manufactured from recycled
materials, removing hundreds of thousands of old cars from our
nation's highways and junk yards every year. I want to thank
the members of this Committee for all the support you have
shown in maintaining and improving our water infrastructure. I
know that you are keenly aware of the crisis that we all face.
Past generations had the wisdom to invest in clean, safe
drinking water and in treating wastewater. But today, the
system is breaking down. Communities are facing major
challenges to replace their water infrastructure, much of which
was constructed 100 to 150 years ago. On average, 25 percent of
treated water is lost. An investment funding gap of more than
$500 billion exists.
The recession has hit our industry especially hard. Almost
50 percent of our business has evaporated with the lack of new
housing starts. Our business with water utilities has also
suffered because of their difficulty in raising capital for
projects. As a result, our industry's employment is down almost
30 percent and could decline further, a loss of approximately
4,700 high paying manufacturing jobs along with tens of
thousands of construction jobs.
Once a foundry closes, it is usually gone forever, as are
the jobs that it provides. Investment in water infrastructure
creates new jobs and boosts our economy. Studies show that $1
billion of investment creates or supports up to 27,000 jobs and
adds $9 billion to our GDP. While funds are scarce, two proven
policies will improve our water systems, foster economic growth
in the manufacturing sector, and preserve and create jobs
quickly. They are the State Revolving Funds and the private
activity bonds.
Let me thank the Committee for its support of the SRF
programs. They have been crucial to help ensure the quality of
America's drinking water and wastewater facilities. And there
is a pressing need to reauthorize them. Although no program
should be immune to budgetary review, we ask the Committee to
continue to recognize the effectiveness of the SRF programs.
We should also look to public-private partnerships for
additional sources of investment. Lifting the State volume caps
on PABs for water projects would inject billions of dollars
into the infrastructure. PABs encourage State and local
governments to collaborate with private capital to meet a
public need without increasing the debt of governments. The
debt is borne by the private sector, therefore benefiting users
and customers.
The revenue impact would be nominal relative to the
significant benefits. Each year $35 million in lost tax revenue
would leverage as much as $5 billion annually in private
capital, creating more than 135,000 jobs and adding almost $45
billion to the nation's GDP. This is a good investment under
any circumstance and the perfect example of a public-private
partnership.
Senators Robert Menendez and Mike Crapo have introduced the
Sustainable Water Infrastructure Investment Act. I would like
to thank the Committee co-sponsors of this bill, Senators
Cardin, Gillibrand, Inhofe, and Whitehouse. I also thank
Senator Baucus for his support.
Along with the companion bill in the House, both bills have
bipartisan support, creating an opportunity for Congress to
tackle a pressing public problem on a cooperative and cost
effective basis.
In summary, today we are facing crises of lost water, lost
jobs, and the lost opportunity to address our country's needs.
The reauthorization of the SRF programs is important for
Congress to address as soon as possible to help provide the
core Federal funding for State and local infrastructure. I
believe domestic manufacturers and their employees can fairly
compete for these projects.
Lifting the volume cap on PABs would generate billions in
annual investment at a minimal cost. By meeting the public need
through these two measures, Congress could protect hundreds of
thousands of domestic jobs. On behalf of our industry's 16,000
employees, we respectfully ask Congress to enact both of these
measures without delay, and thank you all for your service and
opportunity.
[The prepared statement of Mr. Richey follows:]
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Senator Cardin. Let me thank all four of you for your
testimony. I found it extremely helpful. We all understand that
we need the resources to improve our water infrastructure.
It would be, I think, extremely valuable on the
reauthorization of the State Revolving Funds. I think that
would be very helpful. This Committee has done that; we have
gotten it out of the Committee. It is not an easy issue,
because of regional differences and the politics of
reauthorization of bills in this Congress. But to me, it not
only gives you the legal authority of the reauthorization, but
it gives you the predictability to know that the program will
be there at a predictable level, so locals can do their
planning. I agree with that. Mr. Richey and Mr. Freeman, I
think both of you mentioned the private activity bond limits,
the Menendez-Crapo legislation, which as you noted, I am a co-
sponsor. I think that could help. So we do need to get
predictable funding.
My first question, though, deals with some of you have
pointed out that there are ways that the Federal Government
could be more helpful in the way that the money gets out to the
local governments. Can you give us any specific recommendations
as to some of the concerns that you have on the requirements
that the Federal Government has imposed that is restricting
your ability to leverage or get money out quicker for water
infrastructure? Any specific recommendations?
Mr. Freeman. I would be happy to try to answer that
question, Mr. Chairman. And I won't say it is Congress as much
as possibly the EPA, it is duplicative administrative reporting
requirements. Like I said in my testimony, I believe we should
be totally held accountable for the use of the Federal money.
No way am I saying we shouldn't be. But I believe there is
duplication of reporting requirements that would help a great
deal.
I am also a little concerned on the additional
subsidization level. In Oklahoma, the 30 percent suggested, it
would reduce Oklahoma's ability to leverage by [unclear]
percent. We are right now providing below market interest
rates, 30 percent below market for a drinking water SRF loan
and 40 percent below a AAA rate for the smallest of borrower in
our State, and I think we are pretty well subsidizing. But I am
worried about the ongoing revolving fund nature of the fund
with required continued subsidization. I think that the
reporting requirements is the main thing, and I would be happy
to follow up on that.
Senator Cardin. That would be helpful, if you could get us
the specific concerns you have on the reporting requirements.
That would be very helpful to this Committee. I appreciate
that.
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Senator Cardin. All of you have mentioned the economic
impact here. Mr. Scott, I am very impressed that during this
economic period you have quadrupled your company. That is
certainly impressive. Mr. Richey, your comments about the
economic impact.
Explain to me how we can leverage that more effectively,
particularly the green infrastructure, which is jobs that can't
be exported overseas. What more do you want us to do that could
help unleash economic activity, particularly in the green
energy or the green sector?
Mr. Scott. My suggestion, as I mentioned, our experience in
Maryland is probably a good example. In the year 2000, green
infrastructure was suggested in our stormwater design manual.
The industry, the land development industry, land improvement
industry, did not embrace it, mostly because it was a change in
the way they had to do business. It is a change in the way we
design sites; it is a change in the way we construct sites.
Because of the resistance to change, the green
infrastructure didn't happen as a suggestion in the Maryland
State design manual. In 2009 the legislature then followed up I
think with some pressure from the environmental community to
actually mandate it. Now that it is mandated, it is happening.
I heard earlier the EPA has taken a similar tack as far as
suggesting approaches, or suggesting the use of green
infrastructure. Because it is a significant change in the way
the design and construction of new sites occurs, it is not
likely that that is going to go very far, if it is just
suggested. There have to be more teeth in it to actually make
it happen. We watched it over 9 years in Maryland, and that was
our experience.
On the maintenance and inspection side of things, it is a
similar situation. EPA is working on their stormwater rule, and
if that rule has some teeth to it, some meat to it as far as
requiring inspection and maintenance of existing stormwater
management ponds and systems that have been in place for the
past, in some areas 20 to 30 years, if they are not maintained,
if they are not inspected, there is no pollutant removal. They
are not performing.
So suggestions to do this, and most stormwater management
facilities that are constructed, there are suggestions on the
plans, and the owners are suggested to inspect and maintain
them. But until they actually have to do it, in many cases it
just doesn't happen.
Senator Cardin. Thank you.
Mr. Richey, I just want to make one observation on one of
the comments you made. It has to go, we have to highlight that.
Twenty-five percent of the treated water is lost.
Mr. Richey. Yes, sir, that is because of decaying
pipelines. We know that that water has to be treated, it has to
be pumped. So you have energy costs, you have precious water
that is being lost. But back to the green infrastructure,
almost all of our product in ductile iron pipe is made from
recycled materials. So the way the Federal Government could
help us is put a domestic preference in that the taxpayers are
paying for anyway, in the SRFs and PABs, and help us use that
recycled material here domestically.
Senator Cardin. Excellent suggestion. But if we can reduce
the leakage by 25 percent, think about the energy savings,
think about the efficiency factors, think about the chemicals
that don't need to be used. There is a lot of savings, a lot of
loss here with that 25 percent. I just didn't want that to go
without putting a spotlight on that.
Mr. Richey. That is right, Senator, and we would like to
see all pipeline replaced with our pipe. We could solve that
problem overnight.
[Laughter.]
Senator Cardin. As long as we use your pipe.
Mr. Richey. Yes. OK, any of our pipes, as long as it is
ductile iron pipe.
[Laughter.]
Senator Cardin. Thank you very much.
I will turn to Senator Sessions.
Senator Sessions. Mr. Chairman, I will let Senator Inhofe,
our Ranking Member, go ahead.
Thank you, Jim, for coming and for your leadership over
many years on these issues.
Senator Inhofe. Thank you very much.
On this 25 percent, I was going to ask about that, is that
nationwide? I was gone during part of your testimony?
Mr. Richey. Yes, Senator, that is an average of 25 percent.
Senator Inhofe. It is an average.
Mr. Richey. Some places are going to be worse than that.
Senator Inhofe. Is it going to be worse in some of the more
mature parts of the country? Do you have that broken down? Do
you know what Oklahoma is, for example?
Mr. Richey. I don't have that information, but I believe it
would be, in the older, more mature areas where you have older
pipelines, yes, some of our pipe has been in the ground for
over 100 years and working great. But there are other areas
where it just hasn't been maintained properly. Also you have
seismic shifts in the soil and the things that destroy
pipelines after a lot of use.
Senator Inhofe. Your suggestion is that cast iron lasts
quite a while?
Mr. Richey. Yes, sir. In fact, we have a club called the
Century Club and several communities are members of that, where
you have to have your pipeline over 100 years, and you join
this club.
Senator Inhofe. Well, I have a request of you. First of
all, on that line, I can remember when they would all look at
the newer States, like Oklahoma's statehood in 1907, as not
having the problems. However, it has turned around now, a lot
of the more mature parts of the country have now had new
infrastructure. So we don't want to be left out, and I would be
interested in maybe, Mr. Freeman, if you can find out the
specific information about Oklahoma.
But the request I have of you, Mr. Richey, is that if you
think of anything that would make it beneficial to the American
Cast Iron Pipe Company to make your job easier in Oklahoma,
will you call me personally?
Mr. Richey. Thank you, sir.
Senator Inhofe. Mr. Freeman, you mentioned the flexibility,
you were here when Mr. Hanlon testified, and I know he is
trying, I know where his real concern is in terms of giving
flexibility, but you said increased flexibility is still
desired. What type of flexibility do you want to recommend
right now that needs to be improved?
Mr. Freeman. As I previously mentioned, I think that
flexibility on the additional subsidization to allow States to
implement that as is more necessary from State to State. As I
mentioned in my testimony, in Oklahoma through our
comprehensive water plan that I know that you have been aware
of, Senator Inhofe, we have identified $82 billion in need.
What you just said is true, the more mature States, but now it
is in Oklahoma.
Senator Inhofe. That is right. And you talked about the
small, rural, and disadvantaged communities. We have a lot of
those.
Mr. Freeman. Yes, sir.
Senator Inhofe. And we have a program, the Credit Reserve
Enhancement Program, that we are considering. Do you want to
elaborate any more on that?
Mr. Freeman. Yes, I would be pleased to. Through our
comprehensive water plan, in identifying this large water and
wastewater need over the next 50 years, we know that the State
Revolving Fund alone, even at its current level of funding, let
alone its being possibly reduced, and our State funding
programs, are not going to be adequate to meet that $82 billion
of need.
And as you are aware, the economic realities nationally,
but in Oklahoma I think we are doing a little better than most
other States, but still, trying to go ask the legislature for
additional moneys, come up with an idea that would require a
vote of the people, and Representative Richardson of the
Oklahoma House of Representatives is currently working on this
with us, would be where instead of the State putting up $50
million or $100 million in additional appropriation, what we
would ask is that the State, if the water board ever defaulted
on one of our bond issues, one of our State bond issues, that
the State at that time would then issue general obligation
bonds to meet those defaults.
Statistically, since the water board has been in water and
wastewater financing loan-wise since 1985, before the SRF
programs were in existence, we have never had any default or
any payment problem at all. So statistically, the State would
never have to put up a penny of money by issuing those general
obligation bonds. If the State would allow us to have, let's
say, $100 million, we have already visited with Standard and
Poors rating service, we could issue up to $1 billion in
additional debt to provide funding for Oklahoma's communities
throughout the State.
Senator Inhofe. I appreciate that, and I have often said,
one of the reasons I so appreciate this Committee, this
Committee has the largest jurisdiction of any committee in the
Senate, Environment and Public Works. Of course, you are right
in the middle of both of those. One of my concerns, because I
do have the background of being the mayor of a major city, is
the biggest problems facing communities and counties and cities
in Oklahoma is not crime on the streets, it is unfunded
mandates.
We are doing a very good job, and you are doing a very good
job in Oklahoma. We just want to maximize that and be able to
assist you all we can.
Thank you, Mr. Chairman.
Senator Cardin. Senator Sessions.
Senator Sessions. Thank you.
Mr. Richey, I show a map here that indicates the number of
States in the United States that have companies that
manufacturer cast iron pipe, ductile iron pipe. We have seen
the ones in yellow, Mr. Chairman, where plants have closed in
recent years.
So just basically, I guess you and Mr. DiLoreto would say
that subdivisions are down, very few subdivisions are being
constructed, very few shopping centers are being constructed.
Private developments are down, and cities have tight budgets,
so they are down. Would you say this is putting an
extraordinary stress on the people who make the items that
compose our infrastructure, and Mr. DiLoreto, our engineering
support teams, too?
Mr. Richey, do you want to start?
Mr. Richey. Yes, Senator. The jobs are lost; we have lost
jobs. And some of those jobs, I am sad to say, may never come
back. And now I am worried about the jobs that are still
existing, how do we make it through to the recovery of the
economy? That is what we are here for today. I think that these
two funding mechanisms that we are talking about will allow--it
just gives the communities another tool in the toolbox which
they can use to raise funds to replace the infrastructure that
does need replacing after all these years.
Senator Sessions. Well, I tend to agree with that. It is a
needed infrastructure item. We have a deep American industry
and that industry definitely is in a crisis situation.
Would you agree that from an engineering perspective, Mr.
DiLoreto, that it is a tough time?
Mr. DiLoreto. Absolutely. I commented that I was in a fast
growing utility, we were putting in 200 to 300 meters a month
in our utility. Last month we got a 27-lot subdivision, and we
thought, oh, my gosh, this is the biggest thing we have seen in
4 years. The civil engineers, their jobs are being lost in that
manner. The industry is being lost in that manner. Even my own
maintenance workers we have had to change jobs of what they
have done. And when an opening comes for one of these
positions, hundreds of applications we get.
Senator Sessions. Mr. Richey, what would be the impacts on
job creation in your sector if a bill like 939 that would lift
the volume caps on private bonds became reality?
Mr. Richey. Senator, we have estimated about 27,000 jobs
would be added by if we could start tomorrow in increasing the
private activity bond, taking the cap off of it.
Senator Sessions. One of the things, Mr. Chairman and
Ranking Member on the Budget Committee, and those red ink
numbers just overwhelm you every day, but one way to strengthen
the United States balance sheet is to take some of these costs
off our balance sheet, so private activity bonds put the total
risk on the private activity provider. And in a way it has some
costs, and we need to be sure we pay for that cost. But in
terms of adding to the debt of the United States, it is much
smaller than if we loaned the money out ourselves.
How would the cities utilize, Mr. Richey, the private
activity bonds? As a practical matter, how would that work?
Mr. Richey. I think what happens is the cities would
determine, OK, do I need this funding, because I can't raise it
through tax revenues, I can't raise taxes, I am not getting the
ad valorem taxes on property. How do I get the funds that I
need to replace infrastructure that needs to be replaced?
So they advertise this, private activity bonds are issued.
They are tax-exempt from Federal tax, and that encourages
investors to take that risk that the local governments don't
have to take any more.
Senator Sessions. Mr. Freeman, do you have any comment on
that from your perspective?
Mr. Freeman. No, sir.
Senator Sessions. Mr. DiLoreto.
Mr. DiLoreto. No.
Senator Sessions. Well, it is my understanding that many
States are not currently using an entire volume cap. How does
exempting water and wastewater plants and infrastructure deal
with that problem?
Mr. Richey. I think the difficulty there is that many of
these projects we are talking about are multi-year projects.
When they don't know or the locals don't know if the State
Revolving Fund is going to have that funding every year, then
there is a lack of funding, a lack of confidence about future
projects. And if they had no cap, then they knew they could
fund multi-year projects, we would start seeing the
infrastructure being developed and being replaced where
necessary.
Senator Sessions. Let's talk, one moment, Mr. Chairman, you
can interrupt me, I just went over my time limit. But the idea
of Buy America is something that a lot of us look carefully at.
But I have come to have a growing feeling that we need to be
far more interested in how we can help our manufacturing that
creates jobs in the United States. The Wall Street Journal just
had a big article about plants closing and how much it costs
the Government, unemployment insurance, food stamps, welfare,
other problems that occur there, right out of the Treasury,
direct expenditures out of the U.S. Treasury.
But first, Mr. Richey, you are competitive, you are in the
world market competition. Would you explain to us some of the
things that provide what many would consider unfair advantages
from our trading partners? I know China is a manufacturer of
pipe and an exporter of pipe. What are some of the advantages
countries like that might have that are really unfair in your
view?
Mr. Richey. Thank you for the question. I sort of divided
the two areas. One is unfair practices and the other is
societal needs in the United States. So unfair practices, we
know that we are competing not with other companies, we are
competing with other countries. And I can stand toe to toe with
another company, but not another country. The countries I am
talking about allow subsidies for their exporters, they
manipulate the currency, they have unbelievable high tariffs if
I try to ship anything to their country. Yet we have very low
tariffs coming into this country.
And we also know that they dump, we know that they sell in
this country cheaper than the sell in their own country. So I
have all that working against me. At the same time, we have
things that we hold near and dear to our hearts here. We want
to have a good environment, we want to have safety, we want to
have pension plans, we want to have health care. So these
taxpayers in this country are actually subsidizing not my
business, they are subsidizing foreign competitors, foreign
countries when we use taxpayer dollars to buy foreign products
for these infrastructure projects and other things.
Senator Sessions. If you took the currency manipulation,
let's say at 25 percent, which we have estimated on China, that
gives an advantage to the importer of that much. And the
environmental regulations that you face are far more intense
than most of your foreign competitors, is that not correct?
Mr. Richey. Yes, sir, in fact, we estimated that 25 percent
of the particulate matter in a smoggy day in Los Angeles comes
directly from China. So it is not just what happens in this
country. We are actually allowing them to pollute this country.
Senator Sessions. Well, I think that is a justification
for, as we craft this, to try to do it in a way that at least
levels the playing field so our manufacturers have that
ability.
Now, on the Buy American language, it does not prohibit
foreign competition. Can you share some of the things that
would allow a foreign competitor to still participate under
some of the language, the Buy American language that has been
suggested?
Mr. Richey. Yes, Senator, in fact, it is really ironic,
because it is not just Buy American, it is to encourage foreign
competition. Because we are saying, all right, we will compete
with you. If you have the same rules, if you sign the
international agreements, if you sign a WTO agreement, then
come on. We welcome you.
But don't compete against us when you don't allow us a fair
shake to get in your country, but you want to come here. We are
not asking to Buy American only, it is a Buy American
preference unless you sign those international agreements. If
you sign the international agreements, no problem. We welcome
you and welcome to compete with you.
Senator Sessions. Thank you.
Senator Cardin. Mr. Richey, I think you said that just the
way we have to get that message out to not only the American
people but the international community. Because on a level
playing field, we will do just fine.
Mr. Richey. That is right.
Senator Cardin. And we have allowed foreign countries to
subsidize, to do illegal trading practices, including dumping,
as you pointed out, and we have not taken appropriate steps to
allow our manufacturers to compete on a level playing field.
I just want to identify myself with the comments that you
have made, and thank Senator Sessions for those comments. It is
about jobs here in America and we can compete and we need to
make sure we do everything we can to have a level playing
field.
Let me thank the panel again for your testimony. The
Committee has received testimony from the American Water Works
Association, Water Environmental Federation, Association of
Metropolitan Water Agencies, The Clean Water Construction
Coalition, the United Association of Journeymen and Apprentices
of the Plumbing and Pipefitters Industry of the United States
and Canada, and the Subsurface Technologies. Without objection,
these statements will be made part of the Committee record.
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Senator Sessions. Mr. Chairman, Mr. Richey has provided a
series of reports and documents that would support the
testimony he has given. I would like to make that part of the
record and ask that the record be left open for additional
statements or comments.
Senator Cardin. Without objection, all that will be agreed
to, and that will be included in the record.
With that, the Committee will stand adjourned. Thank you
all very much.
[Whereupon, at 11:40 a.m., the Committee was adjourned.]
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