How an EPA program helps our communities fulfill a basic need
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In the aftermath of the 2016 election, with the public fixated on President Trump’s transition into office, the Environmental Protection Agency (EPA) launched an important new finance program designed to stimulate investment in water infrastructure projects.

In a Dec. 6, 2016, blog post, the EPA announced an interim final rule implementing this new federal loan program, created by the Water Infrastructure Financing Act (WIFIA) of 2014. Three days later, President Obama signed into law a continuing resolution that included $20 million in funding for the WIFIA program, enabling the EPA to move forward in earnest through a notice of funding availability last month.

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The WIFIA program aims to tackle major water infrastructure challenges faced by our nation’s local communities. According to EPA surveys, over the next 20 years, approximately $660 billion in funding will be necessary to meet certain water infrastructure needs. A 2012 report by the American Water Works Association stated that “restoring existing water systems as they reach the end of their useful lives and expanding them to serve a growing population will cost at least $1 trillion over the next 25 years, if we are to maintain current levels of water service.”

 

Much of the hope placed in WIFIA hinges on getting a big bang for every appropriated buck. Because WIFIA is a loan program, the EPA can leverage appropriated funds as much as 60 to one. Indeed, the EPA estimates that the $20 million appropriation tucked into the December 2016 continuing resolution—$3 million of which will be spent on administrative expenses—may create more than $1 billion in new credit assistance.

Furthermore, the WIFIA concept has been road-tested at the federal level through the Transportation Infrastructure Finance and Innovation Act (TIFIA), a Department of Transportation loan program that has funded several dozen projects.

The EPA has published rules and guidance on how to apply for WIFIA funding, what types of projects are eligible, and how EPA will evaluate applications. Several aspects of the WIFIA program stand out.

First, a wide range of entities may apply for funding, including local and state governments and their instrumentalities, tribes, corporations, partnerships, and state infrastructure financing authorities.

Second, project eligibility is broader under the WIFIA program than it is under the Clean Water and Drinking Water State Revolving Funds and other federal programs currently in effect. Eligibility under WIFIA includes, among others, projects intended to address water quantity concerns, for example, desalination, aquifer recharge, alternative water supply, water recycling, and drought mitigation.

Third, only large projects will qualify, with minimum size thresholds at $20 million for large communities and $5 million for small communities, which are those with populations of 25,000 or less.

Fourth, Congress set aside 15 percent of WIFIA funding for small communities, so rural areas will not necessarily be disadvantaged in competing against larger areas that possess the resources and personnel to satisfy the EPA’s extensive application requirements.

Finally, the EPA has identified geographic and project diversity as a primary goal of the program, thus increasing the likelihood that local communities from throughout the country will participate in the WIFIA program.

Applicants should be aware that Congress and the EPA established more than a dozen project selection criteria, with each assigned a relative weight. Notable criteria include the use of energy-efficient parts and systems, renewable or alternative sources of energy, or water recycling, infrastructure systems that protect against extreme weather events, and maintenance or protection of the environment or public health.

The fate of WIFIA rests in the hands of President Trump, his EPA administrator (likely Oklahoma Attorney General Scott Pruitt), and EPA staff.

While a number of EPA initiatives carried out under the Obama administration are likely to be reversed or ceased by the Trump administration, the WIFIA program may be an exception at least in part because it enables new major infrastructure projects without any further action from Congress. Indeed, based on his responses to questions for the record, Pruitt appears to be generally supportive of the WIFIA program.

In the meantime, the WIFIA program appears to be moving forward. The EPA will host informational webinars this month and next month, and letters of interest are due in April. Interested parties have until Feb. 17 to comment on the interim final rule, which sets forth key rules governing the WIFIA program. The current deadline for submitting letters of interest to the EPA is April 10.

Bart Kempf is counsel in the Nashville and Washington, DC offices of Bradley Arant Boult Cummings. His practice focuses on litigation, regulatory, and transactional matters involving environmental and natural resources law.


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