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Testimony of J. Charles Fox
June 22, 1999

TESTIMONY OF
J. CHARLES FOX
ASSISTANT ADMINISTRATOR FOR WATER
U.S. ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE
SUBCOMMITTEE ON WATER RESOURCES AND THE ENVIRONMENT
OF THE
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
U.S. HOUSE OF REPRESENTATIVES

June 22, 1999

INTRODUCTORY REMARKS

Good afternoon Mr. Chairman and Members of the Subcommittee. I am Chuck Fox, Assistant Administrator for Water at the U.S. Environmental Protection Agency (EPA). I welcome this opportunity to discuss the Nation's investment in facilities to reduce water pollution and protect the environment and human health. I will also comment on several legislative proposals addressing clean water infrastructure, especially water pollution resulting from wet weather.

Looking back over the past quarter century, we can all be proud of our stewardship of Federal water infrastructure resources and of the environmental benefits that this investment has provided. Today, the Nation's sewage treatment facilities remove about 7.5 million metric tons -- that's over 16 billion pounds -- of oxygen depleting chemicals from wastewater each year.

We at EPA look forward to working with you and State and local governments in shepherding a range of important financial assistance programs and initiatives -- including the Clean Water State Revolving Funds (SRFs) -- into the twenty-first century.

CLEAN WATER STATE REVOLVING FUNDS

A National Pollution Control Success Story

For much of the last century the Nation's basic wastewater facilities were constructed primarily through local initiative, and at local expense. Federal financial assistance for the construction of wastewater infrastructure began during the 1950's and 1960's and increased dramatically with the enactment of the 1972 Clean Water Act (CWA). Since 1972, EPA has contributed almost $70 billion to wastewater infrastructure programs through the CWA construction grants program, the Clean Water SRF program, and other financial assistance programs.

Two basic statistics document this success [see Chart I]. First, the number of people served by secondary or advanced wastewater treatment doubled between 1972, when the CWA was first authorized, and 1996, rising from about 85 million to 173 million. Second, during that same time, pollutant loads from municipal treatment facilities have fallen about 40%. This environmental improvement is significant, especially in view of the 30% increase in population over the same period.

Our investment in the Nation's water-quality infrastructure has a positive influence on society -- economically, socially, and environmentally. The quality-of-life improvements made possible by our investment in wastewater infrastructure are enormous. Besides the obvious health benefits of eliminating the discharge of raw sewage into water bodies, Federal infrastructure programs contribute to the protection of ecosystems and watersheds, and improve habitats for wildlife, birds, and fish.

The economic and social benefits of water infrastructure projects can be seen in cities such as Boston, Cleveland, St. Petersburg, and Baltimore. In each of these communities, cleaning up the water has resulted in more aesthetically pleasing waterfronts, as well as economically vibrant, water-focused urban environments. Improving a community's water infrastructure can lead to increased tourism, as well as greater attractiveness to industry and other potential investors.

At the national level, every billion dollars invested in these infrastructure projects generates between 16,000 to 22,000 jobs in construction and related activities. The 1999 investment from the Clean Water SRF of close to $3 billion in new loans will thus result in between 40,000 and 60,000 jobs nationally. In short, this dramatic improvement in sewage treatment over the past quarter century is a national success story and a compelling example of the good that can come from cooperative efforts of Federal, State, and local governments.

Clean Water State Revolving Loan Fund -- A Sound Concept

Over ten years ago, Congress amended the Clean Water Act to create the Clean Water SRF program to replace the wastewater construction grants program. The SRF program was designed to provide a national financial resource for clean water infrastructure to help implement the Clean Water Act that would be managed by States and would provide funding in "perpetuity." These important goals have been met.

Under the SRF program, instead of making 55% grants to municipalities for wastewater projects, EPA makes grants to States to capitalize their "State revolving loan funds." States provide a 20% match to the Federal capitalization payment. Local governments get loans for up to 100% of the project costs at a loan rate below market rates. After completion of the project, the community repays the loan and these loan repayments are used to make new loans on a perpetual basis.

Because of the revolving nature of the funds, funds invested in the SRFs provide about four times the purchasing power over twenty years compared to funds used to make grants [see Chart II].

In addition, low interest SRF loans provide local communities with dramatic savings compared to loans with higher, market interest rates. An SRF loan at the interest rate of 3% has the same value to a community as a grant for 20% of project costs because of interest savings over 20 years (assuming an alternative market rate of 5.7%). If the State chooses to offer a zero interest loan, the loan would be equivalent to a grant for 50% of project costs.

More than $16 billion in Federal capitalization grant funds have been made available through FY 1999. With the addition of the State match, bond proceeds, and loan repayments, the cumulative funds available amount (i.e. funds in the "bank") was more than $27 billion as of June 30, 1998. We expect the States to make about $3 billion in loans in 1999, for a cumulative loan total of $26 billion (i.e. total loans made by the "bank") [see Chart III]. Since 1988, States have made over 6,800 individual loans.

National Clean Water Infrastructure Needs

EPA works with States to develop a "Clean Water Needs Survey" to identify needed water infrastructure investments in each State. Besides providing a gauge of current and future needs, the Needs Surveys provide a common reference point for all parties in planning for capital spending and in making other management decisions. EPA's latest Needs Survey was completed in 1996, and the next Needs Survey is scheduled to be released in February 2001.

The 1996 survey estimated wastewater needs of $128 billion, including $26.5 billion for secondary treatment projects, $17.5 billion for advanced treatment, and $73.4 billion for various types of sewage conveyance projects including collectors, interceptors, combined sewers, and storm water. Because these capital costs are documented by project plans and specifications they generally reflect needs over about 10 years. Most facilities are designed for a 20-year useful life. Note that about $21.6 billion of the costs is for new collectors and interceptors. Prior to 1994, the Clean Water Act provided that costs of collectors extending service to newly developing areas were not eligible for Federal participation.

The 1996 Needs Survey estimated $10.3 billion in the replacement / rehabilitation and inflow infiltration categories. Substantial new investment needs have been identified in this category since the 1996 survey. EPA is working with States and others to frame a comprehensive program to address sanitary sewer overflows (SSOs) and we are undertaking an effort to model these costs. The model considers costs incurred in addressing SSOs by sixty communities that have completed planning and design work.

Our preliminary estimate for SSO costs is approximately $81.9 billion. We will refine this estimate as our SSO rulemaking is developed over the next year. Although the SSO estimate is not as refined as, and there will be some overlap with, those estimates that are in the Needs Survey, we believe that the modeled SSO estimate is a substantial improvement over previous estimates.

Because the next Needs Survey is almost two years away and the program is evolving in areas such as SSOs, we have commenced an effort to refine needs estimates and to approximate the "funding gap" for wastewater infrastructure.

In undertaking this work, we are aware of other estimates concerning the costs of wastewater. For example, the recent estimate for "The Cost of Clean" issued by the Association of Metropolitan Sewerage Agencies and the Water Environment Federation is about $330 billion for wastewater costs.

EPA wanted to better understand the other estimates relative to our own assessments. In basic terms, these cost assessments tend to differ primarily because the basis for costs differ. For example, EPA requires that costs included in the estimates be established by planning or design documentation although "The Cost of Clean" does not. In addition, a significant portion of the costs estimated in "The Cost of Clean" are for replacement investments that are not captured in the Needs Survey.

Clean Water Infrastructure Investments

Although the authorization for SRF funding in the CWA expired in 1994, the President's FY 2000 budget proposes to maintain Federal capitalization of SRFs into the next century. The Administration's goal, set a few years ago, is to capitalize the SRF programs to revolve at a level of about $2 billion in financial assistance annually over the next several decades [see Chart IV]. Reaching this capitalization goal requires $800 million in each of fiscal years 2000 to 2005. Because of the revolving nature of the SRFs, this annual capitalization amount will allow the Clean Water SRF to provide about $3 billion in total annual assistance available over the next few years.

This proposed investment is consistent with the Administration's Deficit Reduction Plan as well as historical levels of Federal assistance for wastewater treatment. It will provide a substantial and sustained contribution to meeting the overall annual need.

The Bureau of the Census estimates that capital investment in wastewater infrastructure from all sources -- Federal, State, and local -- is just over $11 billion annually. This figure includes: local spending; State spending, including the SRF programs; and, other Federal investments (e.g. EPA assistance to needy communities, the Rural Utility Service, the Community Development Block Grant program).

Proposed Legislation to Reauthorize the Clean Water SRF Program

The Subcommittee asked that I comment on draft legislation reauthorizing the SRF program. I am pleased to say, Mr. Chairman, that many of the provisions of the draft bill generally are consistent with recommendations that the Administration has made in the past, including President Clinton's 1994 "Clean Water Initiative." For example, the Administration has supported expanding the range of financial assistance mechanisms available to small and disadvantaged communities. The Administration also has supported broader eligibility for diverse clean water projects, clarifying funding of administrative costs, and improving the access of small communities to the SRF.

EPA stands ready to provide technical assistance in the drafting of these provisions. For example, proposed language making a project eligible for SRF assistance when water quality is a "principal benefit" of the project may be overly broad. Language concerning administrative costs needs to be clarified.

In addition, we would be happy to work with the Committee to address a number of other needed adjustments or clarifications to the SRF program. For example, in reauthorizing the Safe Drinking Water Act (SDWA), Congress provided Governors with discretion to use specified amounts of SRF funds to support key State drinking water programs and projects. Our experience with this provision of the SDWA is positive, and a comparable provision, modeled after the President's FY 2000 budget proposal, should be considered for the Clean Water SRF program.

Finally, Mr. Chairman, I note that the proposed authorization level for the SRF in this proposed legislation is $2.3 billion in fiscal years 2000 - 2004. I have indicated in previous testimony that the Administration would like to encourage a constructive dialogue on the appropriate and affordable long-term funding level for the SRF program.

Funding at this level clearly would make a large contribution to the significant needs for wastewater treatment. I am sure that this proposed authorization represents the aspirations of the bill sponsors and will be applauded by witnesses later in the hearing. At the same time, it is not clear how these funds can be appropriated in FY 2000 in light of the deficit reduction agreement and the significantly reduced allocations to the appropriations subcommittees recently established by the Congress.

ADDRESSING URBAN WET WEATHER WATER POLLUTION

Since the passage of the original Clean Water Act in 1972, EPA and States have worked effectively together to address the environmental challenge presented by large point source dischargers, such as sewage treatment plants and industrial facilities. More recently, attention has focused on discharges of polluted runoff in urban areas such as discharges of contaminated storm water, overflows from combined sewers (CSOs), and overflows from sanitary sewers (SSOs). Collectively, these wet weather sources pose serious threats to public health and the health of our Nation's waters.

I am pleased to report, Mr. Chairman, that EPA, States and municipalities have made dramatic progress in defining cost-effective and flexible responses to urban, wet weather sources of water pollution. Unfortunately, H.R. 828, the "Combined Sewer Overflow Control and Partnership Act of 1999," and the draft bill that you asked that I comment on, the "Urban Wet Weather Priorities Act," would slow or undo the progress we now are making toward reducing wet weather pollution. The Administration strongly opposes enactment of these bills.

Combined Sewer Overflows

Overflows of combined storm and sanitary sewers have been recognized as a major cause of water pollution for many years. In 1994, the EPA published the CSO Policy. This Policy was the result of a cooperative process that included Federal, State, and local governments, environmental organizations, and other interested parties. It represents a consensus among all interested parties on how to best address the CSO problem.

The CSO Policy calls on communities to promptly implement nine minimum controls over CSOs, including activities such as: proper operation and maintenance; maximization of flow to the publicly owned treatment works for treatment; prohibition of CSOs during dry weather, and, public notification of CSO occurrences.

Communities with CSOs are also to develop a long-term CSO control plan that provides for attainment of water quality standards. Long-term plans typically include characterization, monitoring, and modeling of the combined sewer system, as well as public participation and cost/performance considerations.

The flexibility in the CSO Policy enables States and communities to manage their CSOs in the manner that best suits their unique circumstances. This flexibility is evident in the different approaches that States and communities are taking to control CSO discharges, including separating combined sewer systems, implementing the nine minimum measures and developing and implementing long-term CSO control plans in their regulatory framework, and/or reviewing the designated uses at the impacted water bodies.

Communities are making good progress in implementing the CSO Policy. Today, 83% of all combined sewer systems are either implementing the nine minimum controls or are putting the measures in place. In addition, 74% of combined sewer systems have their long-term control plans in place or are required to put them in place.

The CSO Policy is working -- it is the best road map to achieve our goal of protecting public health and the environment in areas impacted by CSO discharges. H.R. 828 would reduce our ability to continue effective implementation of the CSO Policy.

The Administration has several major objections to H.R. 828.

The "Urban Wet Weather Priorities Act" does not address water quality standards for CSOs but does include provisions addressing court orders and implementation schedules that are comparable to those in H.R. 828.

Finally, H.R. 828 provides for a new Federal grant program for CSO project implementation and the "Urban Wet Weather Priorities Act" provides for a new grant program for CSOs, SSOs and storm water projects. Proposed authorizations are up to $1 billion in H.R. 828 and $3 billion in the "Urban Wet Weather Priorities Act."

The Administration is opposed to creating a new grant program to fund implementation of CSO or other wet weather projects. As I noted earlier, the SRF program is a solid and proven financial tool that is operated by the States and available to address these wet weather needs. Should the Congress determine that additional Federal funds are needed for wet weather projects, these additional funds would be better used to provide additional capitalization for the State Revolving Funds (SRFs) in each State.

The CSO policy has us on a path to reducing the impact of CSOs on the water bodies where they discharge. The passage of H.R. 828 or comparable provisions of the "Urban Wet Weather Priorities Act" would undo much of the progress made to date.

Reducing Water Pollution From Storm Water Runoff

Runoff of storm water from municipalities and industrial sites is a serious and widespread source of water pollution. In 1987, the Congress amended the Clean Water Act by adding a new subsection 402(p) directing EPA to develop regulations requiring discharge permits for these pollution sources.

In implementing this amendment to the Act, the Agency worked with State, municipal and technical organizations and, since 1995, the Urban Wet Weather Federal Advisory Committee. These discussions over the past few years have greatly aided the Agency in developing storm water policy and regulations.

In 1990, EPA finalized the Storm Water Phase I regulations to address polluted runoff from a large number of priority sources, including certain major industrial facilities, separate storm sewers in cities of populations over 100,000, and construction sites over 5 acres in size.

The Agency is now in the final stages of developing the Storm Water Phase II regulations which will address urban runoff from smaller municipalities, those with a population under 100,000, located in an urbanized area, as well as runoff from construction sites between 1 and 5 acres in size. The Phase II regulations will provide a flexible approach to attaining water quality standards that promotes the use of best management practices, such as prohibiting illicit sewage connections to storm sewers and providing information to the public about pollution prevention measures they can take to minimize storm water impacts. The Agency will publish the final Storm Water Phase II regulations this Fall.

The Administration is strongly opposed to the provision of the draft "Urban Wet Weather Priorities Act" that would exempt storm water dischargers from a fundamental requirement of the Clean Water Act -- that permits result in attainment of water quality standards.

Section 402(p)(3)(B), subparagraph (v) of the proposed bill states that the "Implementation of storm water best management practices shall determine compliance with the water quality and technology-based requirements of the Act." This provision would undercut the Clean Water Act requirement that permits under section 402 of the Act result in attainment of water quality standards. Proposed new paragraph (iv) defining the term "maximum extent practicable" raises the same concern.

Although the Act requires that permits attain water quality standards, it does not require that permits include numeric effluent limitations in every case. In cases where adequate information exists to develop more specific conditions or limitations to meet water quality standards, these conditions or limitations are to be incorporated into storm water permits as necessary and appropriate. The Agency affirmed this approach in the Interim Permitting Approach For Water Quality-Based Effluent Limitations In Storm Water Permits [Perciasepe, 1996]. (In the case NRDC v. Costle, 568 F.d. 1369 (D.C. Cir. 1977), the court stated that EPA need not establish numeric effluent limitations where such limitations were infeasible.) However, where implementation of BMPs is not adequate to obtain water quality standards, then other approaches should be considered.

Sanitary Sewer Overflows

In May of this year, the President directed EPA to propose, by May 2000, a "strong national regulation to prevent the over 40,000 annual sanitary sewer overflows". . Sanitary sewer overflows (SSOs) release raw sewage into our communities' streets, playgrounds, local streams and waterways. Sanitary sewer systems play a critical role in the protection of public health. Many of our nations sewer systems are experiencing overflows, due to an aging infrastructure, inadequate investment in operation and maintenance, limitations in design of older infrastructures, and increasing demands on sanitary systems from growing populations.

There are over 40,000 sewer overflows each year across the nation. These overflows often contain high levels of disease causing viruses, bacteria, and other pathogens. Individuals can be exposed to these pathogens through recreational waters, shellfish consumption, and sometimes drinking water sources. SSOs are a leading identified cause of beach closures and swimming advisories. Overflows that reach the Nation's rivers, lakes, and wetlands also can impair aquatic life.

EPA, in cooperation with a State-EPA SSO Work Group and the SSO Federal Advisory Subcommittee, is working to develop a national program that will address these overflows and the risks they pose to public health and the environment. The program will combine permitting, compliance assurance, proper operation and maintenance, and enforcement activities together in a way that will give municipalities a clear framework to invest and expand their systems, while ensuring greater national consistency.

The regulatory framework that EPA is developing for SSOs will clarify our existing regulations. The Agency will propose regulations that include: improved reporting and record keeping requirements; a requirement to develop and implement a plan that addresses the capacity assurance, management, operation, and maintenance of collection systems; public notification requirements; and a clarification on which types of SSOs are prohibited. We expect to propose a SSO regulation by May 2000.

The draft "Urban Wet Weather Priorities Act" calls for a strong national initiative regarding SSOs. The Administration shares this determination to address SSOs and is eager to work with the municipal and other organizations interested in SSOs to define how best to respond to the President's directive to develop strong national SSO regulations.

Although we recognize the need for issuing regulations, the Agency does not believe that the deadlines in this draft legislation are practical given the complexities of this rule and their widespread coverage. EPA fully intends to issue a proposed regulation by May 2000 to comply with the Presidential directive. At least one additional year will be necessary for issuance of the final rule to provide for public comment, analyzing and addressing those comments, and developing and reviewing a final regulation.

While the Agency is developing these regulations, EPA and State NPDES authorities will continue to address SSO problems through enhanced compliance assurance activities, improved permit language addressing sanitary sewers and SSOs, and enforcement action.

The draft "Urban Wet Weather Priorities Act" contains a statutory provision to provide liability protection to certain SSOs. The Administration does not support such a statutory provision, and prefers to address this issue through rulemaking. Incorporating a liability protection provision into the statute may limit EPA's discretion to frame the provision in a manner that best protects the government's ability to enforce applicable requirements, and increase the government's burden when bringing an enforcement action. EPA has developed a liability protection provision in its draft regulatory framework and has requested comments on this issue from the SSO Federal Advisory Subcommittee.

CONCLUSION

I would like to thank you, Mr. Chairman and members of the Subcommittee for this opportunity to testify on the Clean Water State Revolving Fund and EPA's on-going efforts to respond to the pollution caused by urban/wet weather runoff. We are committed to effective management of the SRFs and to working with the Committee to both improve the operations of the SRF and to define the appropriate level of long-term capitalization of the SRFs. With respect to wet weather water pollution, we are developing sound and flexible approaches to CSOs, SSOs, and storm water runoff. Enactment of the proposed legislation would be a step backward for these important efforts.

I will be happy to answer any questions.


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