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1

39–010

" ! SENATE 108TH CONGRESS

2d Session

REPORT

2004

108–386

Calendar No. 772

WATER INFRASTRUCTURE

FINANCING ACT

REPORT

OF THE

COMMITTEE ON

ENVIRONMENT AND PUBLIC WORKS

UNITED STATES SENATE

TO ACCOMPANY

S. 2550

TOGETHER WITH

ADDITIONAL VIEWS

[Including cost estimate of the Congressional Budget Office]

OCTOBER 7, 2004.—Ordered to be printed
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

ONE HUNDRED EIGHTH CONGRESS

JAMES M. INHOFE, Oklahoma, Chairman

JOHN W. WARNER, Virginia

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH, Ohio

MICHAEL D. CRAPO, Idaho

LINCOLN CHAFEE, Rhode Island

JOHN CORNYN, Texas

LISA MURKOWSKI, Alaska

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

JAMES M. JEFFORDS, Vermont

MAX BAUCUS, Montana

HARRY REID, Nevada

BOB GRAHAM, Florida

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

RON WYDEN, Oregon

THOMAS R. CARPER, Delaware

HILLARY RODHAM CLINTON, New York

ANDREW WHEELER Majority Staff Director

KEN CONNOLLY, Minority Staff Director

(II)
iii

CONTENTS

Page

General Statement ................................................................................................... 1

Background .............................................................................................................. 2

Clean Water Act Program ................................................................................ 2

Safe Drinking Water Act Program .................................................................. 3

Need for legislation .......................................................................................... 4

Objectives of the Legislation ................................................................................... 5

Section-by-Section Analysis .................................................................................... 5

Section 1. Short title; table of contents. .......................................................... 5

TITLE I—WATER POLLUTION INFRASTRUCTURE

Sec. 101. Technical assistance for rural and small treatment works. .......... 6

Sec. 102. Projects eligible for assistance. ........................................................ 7

Sec. 103. Water pollution control revolving loan funds. ................................ 9

Sec. 104. Affordability. ..................................................................................... 9

Sec. 105. Water pollution control revolving loan funds. ................................ 10

Sec. 106. Transferability of funds. .................................................................. 12

Sec. 107. Grants program. ............................................................................... 13

Sec. 108. Costs of administering water pollution control revolving loan

funds. ............................................................................................................. 14

Sec. 109. Allocation formula. ........................................................................... 14

Sec. 110. Authorization of appropriations. ..................................................... 17

Sec. 111. Reports. ............................................................................................. 17

Sec. 112. Pilot program for alternative water source projects. ..................... 17

Sec. 113. Wet weather grants. ......................................................................... 18

Sec. 114. Technical correction. ......................................................................... 18

TITLE II—SAFE DRINKING WATER INFRASTRUCTURE

Sec. 201. Technical assistance for small centers. ........................................... 18

Sec. 202. Labor standards. ............................................................................... 19

Sec. 203. Preconstruction work. ...................................................................... 19

Sec. 204. Affordability. ..................................................................................... 20

Sec. 205. Safe drinking water revolving loan funds. ..................................... 20

Sec. 206. Grants program. ............................................................................... 22

Sec. 207. Other authorized activities. ............................................................. 23

Sec. 208. Small system revolving loan funds. ................................................ 23

Sec. 209. Authorization of appropriations. ..................................................... 24

Sec. 210. Removal of lead from drinking water in schools and in the

District of Columbia. ..................................................................................... 24

Sec. 211. Small public water system assistance program. ............................ 28

Sec. 212. Small public water system assistance program. ............................ 30

TITLE III—MISCELLANEOUS

Sec. 301. Definition of Administrator. ............................................................ 31

Sec. 302. Demonstration grant program for water quality enhancement

and management. .......................................................................................... 31

Sec. 303. Cost of service study. ....................................................................... 33

Sec. 304. State revolving fund review process. .............................................. 34

Sec. 305. Southeast Colorado safe drinking water supply. ........................... 34

Sec. 306. Assessment of perchlorate contamination. ..................................... 35

Sec. 307. National estuary program. ............................................................... 35

Sec. 308. Sewage control technology grant program. .................................... 36

Sec. 309. Special water resources study. ........................................................ 36

Legislative History .................................................................................................. 38

Hearings ................................................................................................................... 38

Rollcall Votes ............................................................................................................ 40
Page

iv

Regulatory Impact Statement ................................................................................. 42

Mandates Assessment ............................................................................................. 42

Appendix ................................................................................................................... 43

Letter, Association of State Drinking Water Administrators ....................... 43

Letter, Rural Community Assistance Program .............................................. 46

Memorandum, United States Environmental Protection Agency ................. 52

Cost of Legislation ................................................................................................... 54

Additional Views of Senators Jeffords, Baucus, Reid, Graham, Lieberman,

Wyden, Carper, and Clinton ............................................................................... 58

General Statement ........................................................................................... 58

Background ....................................................................................................... 58

Discussion ......................................................................................................... 59

Summary of Issues ........................................................................................... 61

Davis Bacon ...................................................................................................... 62

Clean Water Act ........................................................................................ 62

Safe Drinking Water Act .......................................................................... 63

Lead in Drinking Water ................................................................................... 64

EPA Regulations on Lead in Drinking Water ......................................... 64

Washington D.C. Experience .................................................................... 66

Committee Action ...................................................................................... 66

Committee Mark-Up of S. 2550, June 23, 2004 ...................................... 68

Deference to Local Governments ..................................................................... 72

Incentives for Compliance ................................................................................ 74

Grants ................................................................................................................ 75

CWA Funding Formula .................................................................................... 76

Project Authorizations ...................................................................................... 76

Additional Views of Senator Jeffords ..................................................................... 79

Letter, from Hon. Jon Kyl, U.S. Senator from the State of Arizona ............ 79

Changes in Existing Law ........................................................................................ 80
39–010

Calendar No. 772

108TH CONGRESS REPORT

2d Session " ! SENATE 108–386

WATER INFRASTRUCTURE FINANCING ACT

OCTOBER 7, 2004.—Ordered to be printed

Mr. INHOFE, from the Committee on Environment and Public

Works, submitted the following

REPORT

[to accompany S. 2550]

TOGETHER WITH

ADDITIONAL VIEWS

[Including cost estimate of the Congressional Budget Office]

The Committee on Environment and Public Works, to which was

referred a bill (S. 2550) to amend the Federal Water Pollution Control Act and the Safe Drinking Water Act to improve water and

wastewater infrastructure in the United States, having considered

the same reports favorably thereon with amendment and recommends that the bill, as amended, do pass.

GENERAL STATEMENT

S. 2550 is a bill which amends the Federal Water Pollution Control Act (CWA) and Title XIV of the Public Health Service Act (Safe

Drinking Water Act) to reauthorize the State Revolving Loan

Funds (SRF) in each Act. The bill also creates a research and demonstration program to develop new water and wastewater treatment approaches and technologies; authorizes a study of the nation’s water resources and creates several targeted grant programs

to address specific water and wastewater problems.
2

BACKGROUND

Clean Water Act Program

Enacted in 1948 and comprehensively amended in 1972, 1977,

1981 and 1987, the CWA governs the discharge of pollution into

the nation’s navigable waters. The 1972 amendments strengthened

the Federal construction grants program (Title II) through which

the Federal Government provided grants to municipalities to construct publicly owned wastewater treatment plants (POTWs). The

Federal share of the projects was increased from 55 percent to 75

percent of the total project cost. Five years later, in 1977, Congress

increased the role of States in managing the construction grants

program and provided new incentives to address wastewater needs

with innovative or alternative treatment technologies. Congress

continued to transition the program to the States by returning the

Federal cost share to 55 percent in its 1981 amendments to the

Act.

However, by 1987 concerns remained about how best to fully

transition the program to one primarily funded by the States and

local governments. As such the 1987 amendments further reformed

the way the Federal Government assisted local governments in

meeting the costs of water infrastructure projects. Recognizing a

need to extend the life of each dollar in the system, Congress

adapted an innovative approach, called the State Revolving Loan

Fund (SRF) through which States would receive an annual grant

with which they would capitalize revolving loan funds. Once a town

repaid a loan, the money could then be loaned again to another

community. The construction grants program was phased-out over

the next 5 years giving States ample time to get their SRFs fully

operational. The authorization for the construction grants program

ended in 1990. The authorization for the SRF ended in 1994, after

a sharp decline in its authorization level from $1.2 billion in 1993

and $600 million in 1994. This decline and eventual elimination of

the authorization level is a clear signal that Congress intended for

the Federal contribution to end and for the States and localities to

assume full responsibility for the cost of building their treatment

works.

The 1987 amendments also created an allocation formula according to which States would receive their annual share of the Federal

appropriation. The formula gave each State a prescribed percentage that except for a few minor adjustments in the 1990’s to account for the end of financing to three of the U.S. territories has

remained the same for the past 17 years. There is growing concern

that the current formula is no longer reflective of which States

have the greatest need for infrastructure funds.

In order to receive their share of the Federal pot of money, each

State signs a capitalization agreement with the Environmental

Protection Agency (EPA) which includes a commitment to match 20

percent of the Federal grant. States are further required to create

a priority list of projects that are eligible for funding using criteria

chosen by the State. The State is not required to fund according

to the order projects appear on the list largely because at any one

time a particularly large project may not have the local funds in

place. Further, a State may place those projects along a particular
3

1Senate Report 104–169 accompanying Safe Drinking Water Amendments Act of 1995. Page

10.2Ibid, pages 11–12.

water body highest on its priority list but would still need to provide funds to projects with perhaps great local importance, but less

statewide significance. The loans are available at market rates or

below and must be repaid within 20 years, the typical life of a

treatment works. Congress envisioned States providing loans expeditiously but also leveraging some of money to gain interest and

grow their individual funds.

Currently, POTWs, projects contained in a State’s nonpoint

source pollution plan (section 319) and projects contained in a

State’s estuary comprehensive, conservation and management plan

(section 320) are eligible for funding. States have provided $1.7 billion for nonpoint source projects and estuary-related projects. The

Clean Water Act and some State laws do not allow privately owned

treatment works to access the SRF.

Safe Drinking Water Act Program

In 1974, Safe Drinking Water Act (SDWA) was first enacted as

an amendment to the Public Health Services Act through which

the EPA had previously regulated contaminants in drinking water.

The Act was substantially amended in both 1986 and 1996. The

1974 law provided the EPA with authority to regulate drinking

water contaminants while providing the States with authority over

the implementation and enforcement of the EPA established standards. The Public Health Service Act required the regulation of 22

contaminants. In 1986, Congress amended SDWA to require the

EPA to issue regulations for 83 other contaminants by June 1989

and 25 others every 3 years thereafter. The EPA was also required

to publish regulations for the disinfection and filtration of public

water supplies.

Because the EPA, the States and public water systems had difficulty with the requirements of the 1986 amendments, Congress

again amended SDWA in 1996.1 Congress replaced the requirement

that the EPA regulate 25 contaminants every 3 years with a requirement that beginning in 1998 and each 5 years thereafter, the

EPA publish a list of contaminants that may need to be regulated

and beginning in 2000 and each 5 years thereafter determine

whether or not to regulate five of those contaminants. Concern over

how communities, particularly small systems, would pay to meet

these requirements and upgrade their systems lead Congress to duplicate the Clean Water SRF with the Drinking Water SRF.2 Similar in many ways to the Clean Water SRF, the Drinking Water

SRF provides communities with access to a State managed loan

program. However, Congress took this opportunity to improve upon

the SRF structure with many changes not included in the Clean

Water program that were designed to increase State flexibility. To

begin, to address the needs of disadvantaged communities, the

SDWA provides States with authority to provide negative interest

loans and principal forgiveness for disadvantaged communities

through the Drinking Water SRF and give these disadvantaged
4

3Clean and Safe Water for the 21st Century; Water Infrastructure Network. 2000. page ES–

1.

communities 30 years to repay the loan. The Drinking Water SRF’s

authorization of $1 billion expired in 2003.

Similar to the clean water program, States must also create a

priority list but are required to fund in order with a ‘‘ready-to-proceed’’ exception so that State programs do not sit idle if the project

at the top of its list is delayed in getting the local share of financing in order. States are required to give first priority to those

projects which address the most serious risk to human health, are

necessary to ensure compliance, and assist systems most in need

on a per household basis. The States are required to match 20 percent of the annual Federal capitalization grant. Private utilities are

eligible for the Drinking Water SRF.

The SDWA also distributes money to the States based on a formula. However, unlike the clean water formula, the drinking water

formula changes every 4 years with the publication of EPA’s drinking water needs assessment, mandated by the Safe Drinking Water

Act. States are required to document and submit to EPA the funding requirements for their communities to meet the costs of the

Act. EPA then determines what percent of the nationwide need

each State has. The formula for the distribution of Federal funds

is the State’s percent of the nationwide need adjusted to ensure

that those States with less than 1 percent of the nationwide need,

receive 1 percent of the funding. This amount would assist small

States, which otherwise might not receive enough funds to provide

adequate assistance to their communities, in maintaining viable

programs.

Need for legislation

The SRFs have been very successful in dispersing assistance to

POTWs and PWSs throughout the country. The State Clean Water

SRFs have funded $43.5 billion since their creation providing more

than 14,000 loans to communities across the country. It is important to note that some of these projects are initiated and implemented by nongovernmental entities that may experience difficulty

in some States in applying for and receiving SRF funds. The Drinking Water SRF has provided 1,776 loans totaling over $3.8 billion.

Of this amount, $1.5 billion went to assist systems that serve fewer

than 10,000 households. However, the need for infrastructure dollars continues to grow and according to several studies, outpaces

what the Nation as a whole spends.

The Environmental Protection Agency (EPA) conducts two surveys, every 4 years, of the States’ water and wastewater needs. According to the two most recent needs surveys for water (2001) and

wastewater (2002), EPA estimates the nationwide need to be $331

billion over 20 years. There are also several independent analyses

of the ‘‘gap’’ between what the Nation as a whole currently spends

on infrastructure and what the Nation needs to spend. In 1999, the

Water Infrastructure Network, a consortium of water and wastewater providers, researchers, environmentalists, engineers and

product manufacturers, released a study claiming the annual need

is $23 billion.3 The Congressional Budget Office released a gap
5

4U.S. Congressional Budget Office. ‘‘Future Investment in Drinking Water and Wastewater Infrastructure.’’ 2002. page x and 11. 5The U.S. Environmental Protection Agency. ‘‘The Clean Water and Drinking Water Gap

Analysis.’’ 2002. page 43.

analysis in which it concluded the gap for wastewater ranges, depending on various financial and accounting variables, from $23

billion to $37 billion per year and the gap for drinking water

ranges from $25.5 billion to $39.3 billion per year.4 The EPA also

conducted a gap analysis, separate from the various needs surveys,

in which it said the gap ranged from $3 billion to $26.7 billion a

year.5 It is important to note that these numbers reflect the gap

in both capital construction costs and operations and maintenance

costs, the latter of which the Federal Government does not fund.

Operations and maintenance are the responsibility of the local utility.

While it remains the committee’s intent to fulfill Congress’ 1987

CWA goal and turn this program entirely over to the States, the

committee, for the second consecutive Congress, has acknowledged

that the nationwide need continues to far outpace the amount of

funding that is available from all levels of government. Therefore,

the committee and the Congress has maintained a commitment to

fund the programs until the SRFs revolve at levels sufficient to

meet the needs of local communities. For instance, in 1995, when

appropriations were supposed to cease, the Clean Water SRF received $1.2 billion, double the previously authorized level. The lowest amount of funding it received was $625 million in 1997. Since

the expiration of the Act’s authorization in 1994, annual appropriations have fluctuated. In the past several years, annual appropriations have stayed around $1.35 billion. However, this amount and

the $850 million annually provided to the Drinking Water SRF are

not sufficient. Each level of government—local, State and Federal—

must assess what it is currently contributing, add to the available

funds, and determine how to increase efficiencies in their systems

to make the most of the funds in the system.

OBJECTIVES OF THE LEGISLATION

S. 2550 seeks to update the two State Revolving Loan Funds

(SRF), which are the primary Federal funding mechanisms for

clean water and drinking water. Both SRFs are expired and in

need of moderate updating. The Clean Water SRF lacks many of

the flexibility mechanisms that are currently a part of the drinking

water program. The bill also seeks to promote the research and development of new ways of meeting water quality goals through a

research and demonstration pilot program. Finally, the bill would

help communities meet the costs associated with many regulatory

requirements by providing limited and directed grant assistance.

SECTION-BY-SECTION ANALYSIS

Section 1. Short Title; Table Of Contents.

This section designates the title of the bill as ‘‘Water Infrastructure Financing Act’’ and lists the table of contents.
6

6The U.S Environmental Protection Agency, ‘‘Wastewater Treatment Programs Serving Small

Communities.’’ (EPA 832-R–02–004.) December 2002. Page 1.

TITLE I—WATER POLLUTION INFRASTRUCTURE

Sec. 101. Technical assistance for rural and small treatment works.

Summary

This section adds Section 222 to the Clean Water Act in which

it defines ‘‘Qualified Nonprofit Technical Assistance Provider’’ as a

qualified nonprofit technical assistance provider of water and

wastewater services to rural communities of 10,000 users and

fewer.

Section 222(b) will create a grant program through which the Administrator may make grants to qualified nonprofit technical assistant providers to:

(A) Assist small POTWs in planning, developing and obtaining financing for eligible projects, defined in section 603(c) of the Clean

Water Act;

(B) To capitalize revolving loan funds, in consultation with the

State, to rural and small municipalities for predevelopment costs,

including costs for planning, design, associated preconstruction,

and necessary activities for citing the facility and related elements,

or short-term costs incurred for equipment replacement that is not

part of a regular operation and maintenance activities. Loan terms

cannot exceed 10 years and loans cannot exceed $100,000. Loan repayments will be credited to the fund maintained by the qualified

nonprofit;

(C) Provide technical assistance and training for rural and small

POTWs and decentralized wastewater treatment systems to enable

them to protect water quality and achieve and maintain compliance

with the Act; and

(D) To disseminate information to rural and small municipalities

with respect to planning, design, construction and operation of

POTWs and decentralized wastewater treatment systems. The Administrator shall to the maximum extent practicable ensure that

grants are made available in each State. The nonprofit provider

will submit a report to the Administrator detailing the number of

communities served, the sizes of those communities and the types

of financing provided by the nonprofit provider.

Section 222(c) will authorize $25 million for each fiscal year 2005

through 2009.

Discussion

According to EPA, more than 70 percent of the nation’s housing

units with inadequate plumbing are in small communities. More

than 19 million households in small communities are on septic systems or cesspools as their primary source of treatment.6 The 2000

EPA Clean Watersheds Needs Survey indicates that small systems,

those serving fewer than 10,000 households, represent about 10

percent of the nationwide funding need, or $16 billion. 74 percent

of wastewater treatment systems serve small communities which

accounts for only 12 percent of the nation’s population. While the
7

needs of these communities are great, the ability of their ratepayers to pay the costs of those needs is limited.

The Environmental Protection Agency has several existing programs aimed at helping small systems and unsewered communities

maintain and upgrade their systems. The National Environmental

Training Center for Small Communities develops and delivers

training courses for both POTWs and drinking water systems operators. The National Small Flows Clearinghouse provides information about treatment options and the Operator On-Site Technical

Assistance Program (section 104(g) of the Clean Water Act) provides compliance assistance to small POTW operators as well as

help with maintenance and financing.

The committee however continues to hear of a need for additional

assistance for these small systems. In a letter to the committee on

February 5, 2004, the Rural Community Assistance Program cited

the need for assistance with predevelopment costs. Many small

POTWs cannot afford the costs associated with planning a project,

including the engineering costs. Without these initial steps completed, the POTW often has difficulty applying for an SRF loan to

begin construction. The Rural Community Advancement Program,

for example, runs several small SRFs in States to assist small

POTWs with these startup costs, enabling them to then apply for

funds through the State-run SRF for construction costs. Section

101 enables the Administrator to provide money to nonprofit technical assistance providers to create and run these smaller SRFs.

This section also provides nonprofit technical assistance providers

with funds to assist treatment works in identifying and securing financing for projects; provide technical assistance to operators of

systems on how to best manage their POTW and meet regulatory

requirements. It also authorizes funds for the dissemination of information on financing, system management and water quality for

small systems.

Sec. 102. Projects eligible for assistance.

Summary

This section amends Section 603(c) of CWA by modifying the

project eligibility list with several changes. 102(c)(1) mandates

projects comply with Section 513, which requires payment of a prevailing wage to all workers on a Federal construction project.

Section 102(c)(2) establishes that funds can be used only to provide assistance to a municipality, intermunicipal, interstate or

State agency, or private utility that principally treats municipal

wastewater or domestic sewage for construction, including costs of

planning, design, associated preconstruction and necessary activities for citing the facility and related elements of a treatment

works; implementation of management program under Section 319;

development and implementation of a management plan under section 320; water conservation projects, the primary purpose of which

is to protect, preserve or enhance water quality, including piping

and lining of irrigation canals, recovery or recycling of wastewater

or runoff from irrigation, irrigation scheduling, measurement or

metering of water use; or improvement of on-field irrigation efficiency; projects by a municipality intermunicipal, interstate or
8

7U.S. Congress. Committee on Environment and Public Works. ‘‘A Legislative History of the

Water Quality Act of 1987 (Public Law 100–4) Including Public Law 97–440; Public Law 97–

117; Public Law 46–483; and Public Law 96–148.’’ Senate Report 100–414. Page 375.

State agency to increase security at a POTW, excluding operation

and maintenance costs; to control municipal stormwater runoff;

and reuse, reclamation or recycling projects the primary purpose of

which is the preservation, protection or enhancement of water

quality.

Discussion

Section 513 of the Clean Water Act applies Davis Bacon prevailing wage standard to all federally funded grant programs created within the Clean Water Act. Section 602 of the Act defines the

terms under which the SRFs will function. As stated in 602(b)(6),

Davis Bacon applies to those projects funded in whole or in part

by ‘‘funds directly made available by Federal capitalization grants.’’

The statute clearly required Davis-Bacon to apply only to the first

distribution of funds because the first loan is the only one made directly available from the capitalization grants. State law would

guide subsequent ‘‘revolutions’’ of the money - loans made from repaid loan funds. As Senator George Mitchell, the bill manager,

stated on the floor during consideration of the 1987 amendments,

‘‘This restriction [meaning Davis Bacon and others] on the use of

Federal capitalization grant funds does not apply to funds contributed by the State . . . moneys repaid to the fund or other money.’’7

Section 602 also states that Davis Bacon and several other provisions of the law apply only to those treatment works constructed

prior to September 30, 1994. Along with Davis Bacon, 15 other provisions of the old Title II construction grants program were applied

to the SRF until September 30, 1994. When the program’s authorization expired, so did EPA’s authority to continue to require States

to apply any of these provisions to their programs. Section 102(c)(1)

of S. 2550 for the first time imposes Davis Bacon on every project

funded through the SRF regardless of whether it is from the initial

capitalization grant or subsequent rounds of loans.

By clarifying that preconstruction activities are eligible for funding, Section 102(c)(2) ensures treatment works are able to receive

financing for engineering costs and other planning costs that precede actual construction. This provision will ensure that small communities with few resources available to develop a project in its

early stages can receive assistance for pre-construction activities.

This provision maintains current law eligibility of both section

319 and section 320 projects.

It would extend eligibility to privately owned treatment works.

These systems are currently not eligible for assistance through the

SRF.

It also would extend eligibility to water conservation projects, the

primary purpose of which is the protection, preservation or enhancement of water quality. While typically seen as a problem for

western States, water supply has become a nation-wide concern.

One aspect of the problem is the lack of a clean water supply not

just the lack of water in general. This provision envisions enabling

States and localities to fund water conservation, reuse, recycling
9

and reclamation projects that will enhance the supply of clean, safe

water.

After the terrorist attacks of September 11, much attention is

being paid to security at the nation’s treatment works. While EPA

currently allows POTWs to use the SRFs for security-related costs,

this provision would state the eligibility in statute, clarifying that

in fact capital costs are eligible. Security costs associated with operations, maintenance and personnel are not eligible for the SRF.

Finally, with finalization of the stormwater Phase II regulations

(64 FR 68721), municipalities across the country face additional expenses trying to reduce and mitigate contaminated stormwater. Because there has been some confusion over whether these projects

are eligible for SRF funding, this provision clarifies that these costs

are in fact eligible for SRF loans.

Sec. 103. Water pollution control revolving loan funds.

Summary

This section amends the types of assistance that can be offered

through the SRF to include a revolving loan fund operated by a

municipal, intermunicipal or interstate entity, State, public or private utility, corporation, partnership, association, or nonprofit

agency to fund projects that are part of a 319 or 320 implementation. The loans must be fully paid within 30 years of their issuance.

Discussion

Projects included in a State’s estuary and nonpoint source implementation plans can often most effectively be implemented by

small, nonprofit organizations which traditionally have had difficulty accessing State SRFs. The loan process is often better suited

for governmental entities than small, local, watershed organizations. By allowing an entity to operate a smaller SRF, this provision seeks to make it easier for locally based watershed organizations to receive funding to fulfill the objectives of a State approved

319 or 320 project.

Sec. 104. Affordability.

Summary

This section amends Section 603 by adding a subsection (e)

which includes a series of flexibility mechanisms designed to improve assistance provided to disadvantaged communities and increase the flexibility offered to States. These provisions are similar

to provisions already in existing law in the SDWA.

Section (e)(1) defines ‘‘disadvantaged community’’ as a service

area, or portion of a service area that meets State affordability criteria,

Section (e)(2) provides the State with authority to provide additional subsidization, including principal forgiveness, to a disadvantaged community or one the State expects to become disadvantaged

as a result of a project.

Section (e)(3) limits the total loan subsidy to no more than 30

percent of the State’s annual capitalization grant.
10

Section (e)(4) allows the State to extend the life a loan from the

current statutory limit of 20 years to 30 years but not to exceed

the expected design life of the facility.

Section (e)(5) authorizes the Administrator to publish information to assist States in establishing affordability criteria.

Discussion

Tom Morrissey, President of the Association of State and Interstate Water Pollution Agencies testified on February 28, 2002,

‘‘States strongly support principal forgiveness.’’ This section takes

principal forgiveness and other flexibility mechanisms proposed

from the Safe Drinking Water Act and applies them to the Clean

Water program. These flexibility mechanisms provide the State

with the ability to provide additional assistance to disadvantaged

communities, such as forgiveness of their loans or zero-interest

loans. It also allows the State to provide a 30-year loan instead of

the current 20-year loan, provided the loan does not exceed the life

of the asset. New to both SRFs is the ability of the State to provide

these additional benefits to communities that may not meet a

State’s criteria for a disadvantaged community as a whole, but may

have a ‘‘portion of a service area’’ that does meet the criteria. Many

large cities do not qualify as disadvantaged under their State’s definition of the term because they have pockets of low-income ratepayers and industry and pockets of affluent ratepayers. Under Section 204(b) of the CWA, POTWs are prohibited from raising rates

on one sector of ratepayers, i.e. industry, in order to offset a cut

in rates to another sector, i.e. residential if the facility has ever received Federal grant money. Most of today’s treatment works were

funded at least in part with Title II construction grant dollars. Further, it is often politically difficult to raise rates only on those people with a proven ability to pay. In order to assist cities struggling

to pay for infrastructure upgrades without imposing too high a burden on their low-income ratepayers, this provision makes them eligible for disadvantaged assistance.

Sec. 105. Water pollution control revolving loan funds.

Summary

This section amends section 603(h) of the Clean Water Act.

Section (h)(1) adds several definitions including: ‘‘Restructuring’’

as the consolidation of management functions or ownership with

another facility or the formation of cooperative partnerships; and

‘‘Traditional Wastewater Approach’’ as a managed system used to

collect and treat wastewater from an entire service area consisting

of collection sewers, a centralized plant using physical or chemical

treatment processes, and a direct point of discharge to surface

water.

Section h(2)(A) requires States to amend their existing priority

system so that projects would be more likely to receive assistance

by submitting such other information as determined by the State,

and:

(i) An inventory of assets, including a description of those assets

(ii) A schedule for replacement of those assets

(iii)A financing plan indicating sources of revenue
11

8U.S. General Accounting Office. Water Utility Financing and Planning. (GAO–02–764). August 2002. Page 7. 9Ibid, page 42.

(iv)A review of options for restructuring the treatment works

(v) A review of options for approaches other than traditional

wastewater approach that may include actions or projects that

treat or minimize sewer or urban storm water discharges including

decentralized or distributed storm water controls, decentralized

wastewater treatment, low impact development technologies,

stream buffers, wetland restoration and actions to minimize the

amount of and direct connections to impervious surfaces.

Section h(2)(B) requires States to, in the development of the priority system, take into consideration appropriate chemical, physical

and biological data that the State considers reasonably available

and of sufficient quality

Section h(2)(C) requires the States to provide for public notice

and opportunity to comment on the priority system and list

Section h(2)(D) requires the State to publish, not less than biennially, a description of the projects in the State that are eligible for

assistance including each project’s priority ranking and the funding

schedule; and

Section h(2)(E) requires the State to ensure that projects are designed to achieve the optimum water quality management, consistent with the public health and the requirements of the Act.

Discussion

Current law requires States to establish a list of projects that are

eligible for, and have submitted applications for, funding. The State

then provides SRF funds to as many projects on the list as it can

with the available funds. As a State puts together its priority list,

it can assign priority based on whatever system the State develops

to meet its needs. Section 105 of S. 2550 would require the States

to add other factors to their system for determining priority. The

decision on how much weight to give each of these additional factors is left to the State. A State may choose, for example, to give

the most priority points to systems that serve under 10,000 households or who have a median income below the poverty level even

though S. 2550 does not refer to these criteria. However, the factors listed in this section must be used to give a project higher priority when determine which projects to fund in a given year from

a State’s priority list.

The factors to which a State must give additional weight include

an inventory of assets, including a description of the condition of

those assets and a schedule for replacing those assets. Aging systems are significant contributors to the infrastructure-financing

gap. 27 percent of drinking water utilities and 31 percent of wastewater utilities did not have plans for managing their existing capital assets.8 According to a 2002 General Accounting Office (GAO)

report, GAO found that ‘‘roughly half of the utilities actually rehabilitated or replaced 1 percent or less of their pipelines annually’’

even though 89 percent of drinking water utilities and 76 percent

of wastewater utilities believed a higher level was necessary to

maintain their systems.9 In order to fully understand the scope of

the problem the Nation faces, there must be an accounting of the
12

10Ibid, page 6.

health of our utilities. Further, if utilities are to make maximum

use of the funds available, it makes good business sense to have

a full understanding of the condition of one’s assets and how much

capital will need to be raised to replace those assets and over what

amount of time.

Additional factors include a financing plan indicating how that

capital will be raised including rate increases, grant assistance,

bonds, loans or other sources. In its 2002 report, of the utilities

surveyed, GAO found that 85 percent of drinking water utilities

and 82 percent of wastewater utilities were able to cover operations

and maintenance costs through local user fees. However, an estimated 29 percent of the utilities had to defer maintenance because

of insufficient funding.10 Providing additional weight to projects

that have these elements in place will encourage those utilities

that don’t have them, to create asset management and financing

plans. The committee hopes giving these elements additional

weight will also result in those utilities that already have them in

place to review their plans and take whatever steps necessary to

update them and if necessary, seek additional funding to properly

maintain their systems.

POTWs will also receive additional credit if they have reviewed

options for restructuring their treatment works. It some cases, it

may be more efficient and cost effective for a utility to consolidate

with a neighboring one, develop a partnership with the local energy

provider, or consider other cooperative partnerships like public-private partnerships or privatization. These are all encompassed in

the term restructuring, the goal of which is to improve upon the

management and financial structure of a utility to ensure it is operating as efficiently and cost-effectively as possible.

POTWs are also encouraged to look at nontraditional approaches,

including decentralized or distributed storm water controls, decentralized wastewater treatment, low impact development technologies and stream buffers. Communities are experimenting with

approaches other than traditional treatment and constructed conveyances to reduce contaminated runoff, reducing the amount of

water entering a treatment works or adjoining waterways. These

approaches may, in addition to possibly being more environmentally friendly than concrete and pipes, be more affordable. Particularly in small, rural communities, properly maintained decentralized wastewater treatment systems may also be an affordable

alternative to a treatment works.

Sec. 106. Transferability of funds.

Summary

Each year the Committee on Appropriations in the appropriations bill for Veterans’ Affairs, Housing and Urban Development

and Independent Agencies includes a provision allowing States to

transfer portions of a State’s capitalization grant from one SRF to

the other and back again. Section 106 permanently extends the authority to transfer no more than 33 percent of a State’s Clean

Water capitalization grant into the Drinking Water SRF. It clarifies that the funds transferred cannot be considered by a State to
13

meet its SDWA requirement to match the Federal capitalization

grant for the Drinking Water SRF by 20 percent.

Discussion

This section provides the States with much needed flexibility to

manage their water programs holistically. In any one year, a State

may have a particularly large drinking water or clean water project

for which it needs additional funds. This provision allows them to

transfer some money from one account to the other while protecting the corpus of the funds.

Sec. 107. Grants program.

Summary

This section creates a new provision in the CWA, 603(k) that directs a State to set aside a portion of its SRF for grants to eligible

projects under the following conditions:

(k)(1) Requires States, in any year in which appropriations do

not exceed $3 billion, to set aside 10 percent of its capitalization

grant. The grants cannot exceed 55 percent of the project cost. This

section allows the State to waive this set-aside if the average time

for processing loan applications during the preceding 12 months

does not exceed 90 days.

(k)(2) Requires the States, in any year in which appropriations

exceed $3 billion, to set aside not more than 10 percent nor less

than 5 percent of its revolving loan fund

Discussion

By including a grant component within the SRF, this section

seeks to keep the Nation focused on the SRFs as the primary funding mechanism for clean water. The bill acknowledges there is a

growing interest in providing POTWs with grant funds to help

meet those costs associated with Federal regulatory mandates. The

daily costs associated with operations and maintenance continue to

be a local responsibility with the Federal assistance available for

capital improvements through the SRF program.

This section would require the States to provide a portion of their

SRFs as a grant to local communities. By maintaining a single

funding source, rather than creating a new, competing program,

the focus remains on the SRF and the need to ensure it receives

adequate funding to meet the needs of local communities. The

small amount of the set-aside, ensures that the corpus of the fund

is protected well into the future by devoting the vast majority of

funds to the loan program. Further, by incorporating the grant into

the SRF, funding for the grant portion is more likely to be appropriated as the Clean Water SRF is a program that regularly receives annual appropriations. Whereas Congress has authorized

grant programs that have not received actual appropriations, the

SRF annually receives funding and the linkage to the grant program ensures that the grants too will receive funding.

Another goal of this section is to provide a quick infusion of grant

funds to communities. The bill allows States to waive the requirement to set-aside 10 percent of the capitalization grant if appropriations do not exceed $3 billion if the State improves the time it
14

takes to process the loan applications. The time it takes to receive

funding through the SRF is a prominent complaint by municipal

recipients and one the committee was urged to address by the Paul

Pinault, President of the Association of Metropolitan Sewerage

Agencies on February 28, 2002 during his testimony before the

Fisheries, Wildlife and Water Subcommittee. This too would ensure

that funds become available more quickly than under the current

system. With the incentive of avoiding a Federal mandate on the

use of their SRF funds, the committee believes States will have an

incentive to increase the speed of their loan application process.

Sec. 108. Costs of administering water pollution control revolving

loan funds.

Summary

This section increases the percentage of funds a State is authorized to set-aside for program administration from 4 percent to 6

percent.

Discussion

States incur significant costs administering the SRFs, a responsibility given them by Congress in the 1987 amendments to the

CWA. While the committee does not anticipate that the requirements in this bill will result in new administrative burdens to the

States, with the intended increase in appropriations authorized by

this bill to the program, it is reasonable to allow States to reserve

a larger, but still small, percentage of the SRF to pay their administrative costs.

Sec. 109. Allocation formula.

Summary

This section creates a new allocation formula. It creates several

definitions.

(1) Defines the base formula as the current formula outlined in

section 205(c)(3) of the CWA.

(2) Defines the needs survey as that conducted by EPA under

section 516(2).

(3) Defines the ‘‘needs survey percentage’’ as what percent of the

nationwide need for Categories I through VII of the most recent

needs survey an individual State’s need is.

(4) Defines the ‘‘next needs survey’’ as that occurring after the

2000 needs survey, the most recently completed survey.

(5) Defines a ‘‘State’’ as a State, the District of Columbia and the

Commonwealth of Puerto Rico.

Section 109(b) lays out the new formula first by requiring the

Administrator, before dispersing funds to the States, to set-aside

1.5 percent of the annual appropriation for Indian tribes, as defined in section 518(c) of the CWA. The Administrator is also required to take 0.25 percent of the annual appropriation for the territories of the United States.

Section 109(b)(4)(A) establishes a target allocation for all States.

The target for those States for which the needs survey percentage

is less than 1 percent, shall be 1 percent. The target for those
15

States for which the needs survey percentage is greater than 1 percent, shall be the needs survey percentage.

Section 109(b)(4)(B)-(D) Sections 109(b)(4)(B)-(D) establish a

transition period during which the allocation to each State (which

is a percentage of the whole) begins moving from its current level

to its target allocation. During this transition, States fall in three

groups as follows. First, States with a target allocation of 1 percent

receive successively higher amounts each year from fiscal year

2005 to 2009 and then remain flat (provided in subparagraph (B)).

Second, States with larger target allocations that meet criteria for

large, continuing needs (provided in subparagraph (C)) maintain

their allocation and, in cases of large growth in needs, receive additional money described in subparagraph (D). Third, States with

target percentages higher than 1 percent but that do not meet the

criteria for large, continuing need receive immediately their needs

survey percentage, and in cases of large growth in needs, receive

additional money as described in subparagraph (D).

Specifics of the transition follow. Section 109(b)(4)(B) provides

that each State with a target percentage of 1 percent is limited in

the growth of its allocation between its base formula and 1 percent

as follows: in 2005, these States can rise only 12 percent; in 2006,

16 percent; in 2007, 20 percent; in 2008, 24 percent; and in 2009

and each year thereafter, 28 percent above the base formula allocation. These limits on growth release once appropriations reach

$3.15 billion because at that level all States receive a larger

amount of money by their target allocations than current appropriations provide by their current allocation. For those States with

a needs survey percentage of greater than 1 percent, the growth in

allocation relative to the base formula is limited to zero during the

transition, but some of these States receive additional funds as described in subparagraph (D).

Section 109(b)(4)(C) provides that States will receive at least

their current dollar amount allocation if their needs survey percentages are 1 percent or less or if they meet one of three criteria

indicating large, continuing needs. The criteria indicating large,

continuing needs are higher needs in both categories V and VII between the previous and current needs surveys, growth in population between the 1990 decennial census and the 2000 decennial

census, or have a population equal to 4 percent of the total national

population as reported in the 2000 decennial census.

Section 109(b)(4)(D) provides additional funds to States reporting

large growth in needs. Subparagraph (D) defines large growth in

needs as a report of higher needs in both dollar terms and as a percentage of nationwide need. Such States receive extra funds when

annual appropriations are less than $1.38 billion. When annual appropriations exceed $1.38 billion, subparagraph (D) extends provision of additional funds also to those States with large, continuing

needs as described in subparagraph (C), regardless of whether

those States also reported large growth in needs.

Section 109(f) allows States to reserve the greater of 2 percent

of $100,000 for statewide water quality planning.
16

Discussion

The formula recognizes that in order for the Nation to address

the overall national need, each State will continue to need at least

the amount of its current allocation. The formula also recognizes

that some States receive allocations so small as to be negligible for

developing new infrastructure. The underlying policy statement of

the formula is that allocations should be determined by each

State’s percentage of need in the latest Needs Survey with no State

receiving less than 1 percent of the total.

To shift from the current allocation to the target allocation under

the Needs Survey - while simultaneously continuing to address the

overall national need - the allocation to small States must increase

while larger allocations cannot shrink. The formula reconciles this

dilemma by limiting the growth in allocation to all States first

until small States begin to grow, and then until appropriations rise

to a level at which all States grow.

To limit growth of all States and limit losses rationally, the formula recognizes three special situations:

1. States receiving allocations so small as to be negligible for developing infrastructure (defined as States whose reported needs are

1 percent or less of the national total). These States are the first

to see their allocations grow, but by no more than 12 percent in

2005, 16 percent in 2006, 20 percent in 2007, 24 percent in 2008,

and 28 percent in 2008 and thereafter.

2. States that have been receiving larger allocations and whose

reported needs continue to grow significantly (defined as having

risen both in dollar terms and as a percentage of the total need of

the nation). Allocations to these States rise by small amounts

which will vary by State.

3. Other States that have been receiving larger allocations and

that, although not reporting significant growth in needs, are nevertheless large States or those with particular needs to correct combined sewer overflow problems and non-point source pollution (defined as States that either report higher needs in Categories V and

VII, or whose population grew 10 percent or more in the last census, or whose population is at least 4 percent of the national total).

Allocations to these States do not shrink. If annual appropriations

grow by $30 million, reaching $1,380,000,000, then States in situation 3 begin to share in the nominal growth previously provided

only to States is situation 2.

To resume growth in all allocations as soon as possible and to

maintain the transition to the allocation targets, the formula

changes over time as follows. First, upon publication of the next

Needs Survey, the new needs numbers will become the basis for

the formula - therefore, States that grow significantly will fare better under the formula. Second, the limits on growth and loss will

fall away when appropriations reach $3,150,000,000. At this level,

the remaining formula will allocate based entirely on the needs

survey with a 1-percent floor.

Consistent with annual appropriations language, the formula requires the Administrator to reserve 1.5 percent of the annual Federal appropriation for the nation’s Indian tribes. It also sets aside

0.25 percent for water quality needs of the U.S. territories.
17

Under Section 205(j) of the CWA, the Administrator could reserve up to 1 percent or $100,000, whichever was greater, of funds

allocated to States under the construction grants program for water

quality management planning. Projects could include identifying

cost-effective and locally acceptable facility and nonpoint measures

to meet water quality standards; developing an implementation

plan for the measures described above; determining the cause of

water quality problems and determining those POTWs which

should be constructed with assistance through the grants program.

This section of the S. 2550 allows the States to reserve up to 2 percent or $100,000, whichever is greater to meet the purposes of

205(j) and Section (303)e) of the CWA. 303(e) outlines the continuing planning process through which States develop plans for

the management of all navigable waters within the State, including

effluent limitations, Total Maximum Daily Loads, and the inventory and ranking of needs for construction of POTWs.

Sec. 110. Authorization of appropriations.

Summary

This section authorizes funding of $ 3.2 billion in 2005 and 2006,

$3.6 billion in 2007, $4 billion in 2008, and $6 billion in 2009. The

EPA is authorized to reserve not more than $1 million per year to

pay the costs of conducting the Clean Water Needs Survey required

by CWA Section 516.

Sec. 111. Reports.

Summary

This section revises the statutory requirement under CWA Section 516 for State needs surveys from odd-numbered years to every

fourth year.

Discussion

The Clean Water Act requires the EPA to complete the needs

survey every 2 years. The Agency has been conducting the survey

every 4 years.

Sec. 112. Pilot program for alternative water source projects.

Summary

This section extends the authorization from 2005 through 2007

at $25 million per year.

Discussion

The program, created in 2000, authorizes the Administrator of

the Environmental Protection Agency to provide grants to State,

interstate and intrastate water resource development agencies,

local governmental agencies, private utilities and nonprofit organizations for alternative water resource projects that address a critical water supply need. The pilot program was authorized for $75

million for fiscal years 2002 through 2004. It has not received any

appropriated funds.
18

Sec. 113. Wet weather grants.

Summary

This section extends the eligibility for grants to projects to control stormwater runoff. It extends the authorization from 2005

through 2009 at $250 million per year.

Discussion

Enacted in 2000, CWA Section 221 authorized the Sewer Overflow Control Grants to assist municipalities meet the costs of combined (CSOs) and sanitary sewer overflows (SSOs). According to

the 2000 EPA Clean Watersheds Needs Survey, CSOs and SSOs

remain among the largest expenses faced by cities with costs to correct the overflow often in the billions of dollars. Funds could be

used by a municipality for planning, design and construction of

treatment works to intercept, transport, control or treat CSOs and

SSOs. Section 113 extends eligibility to projects to comply with

Phase I or Phase II of the storm water regulations (55FR47990 and

64FR235, respectively). The Federal cost share for eligible projects

is limited to 55 percent of the overall project cost.

The program was authorized for $750 million for fiscal years

2003 and 2004. Funding for the program was contingent upon appropriations for the Clean Water SRF exceeding $1.35 billion. Because appropriations have remained at this level, the grants program has not received any appropriated funds.

Sec. 114. Technical correction.

Summary

Makes a technical correction to Section 121.

Discussion

Current law has two sections 121—The Lake Ponchartrain Basin

and the Wet Weather Watershed Pilot Projects. This section renumbers the Wet Weather section as 122.

TITLE II—SAFE DRINKING WATER INFRASTRUCTURE

Sec. 201. Technical assistance for small centers.

Summary

This section reauthorizes $2 million each year for fiscal years

2005 through 2009 for the Environmental Finance Centers (SDWA

Section 1420(g)).

Discussion

This section provides resources to the Environmental Finance

Centers located at nine universities throughout the country. The

Centers provide financial and technical assistance to the regulated

community. They assist the operators of PWSs with lowering the

costs of compliance, increasing investment in their systems, encourage full cost pricing of services and identify financing options. The

Centers also provide advice and recommendations to the EPA on

environmental finance issues, trends and options.
19

Sec. 202. Labor standards.

Summary

Applies Davis-Bacon Act requirements that laborers and mechanics be paid at wages not less than the prevailing wage to all

projects financed by the Drinking Water SRF.

Discussion

The Davis Bacon Act of 1931 requires all contracts to which the

United States is a party to require the prevailing wage be paid to

laborers on construction projects. The Act is limited to contracts directly involving the United States unless otherwise stipulated.

Section 1450(e) of the Safe Drinking Water Act requires the Administrator to ‘‘take such action as may be necessary to assure

compliance with [Davis Bacon].’’ As enacted, Davis Bacon applies

only to those contracts to which the Administrator or Federal Government is a contractee. In the case of the SRF, the contracts are

between the State and the municipality and therefore, Davis Bacon

does not apply to the SRF. Section 1452 of SDWA which authorizes

the SRF does not include any language that would apply Davis

Bacon to the loans. This section would expand Davis Bacon to the

Drinking Water SRF for the first time since its creation in 1996.

Sec. 203. Preconstruction work.

Summary

This section modifies the project eligibility list with several

changes.

Section 203(1) clarifies that planning, design, and associated

preconstruction costs are eligible for funds under the Drinking

Water SRF as standalone items.

Section 203(2) states that replacement and rehabilitation of

aging systems, including treatment, storage and distribution systems are eligible expenses for the fund. This section also ensures

that projects to upgrade the security of a water system are eligible.

Discussion

By clarifying that preconstruction activities are eligible for funding, Section 203(1) ensures treatment works are able to receive financing for engineering costs and other planning costs that precede

actual construction. This provision will ensure that small communities with few resources available to develop a project in its early

stages can receive assistance for pre-construction activities.

The Safe Drinking Water Act establishes a priority for systems

to receive funding under the Drinking Water SRF (SDWA Section

1452(b)(3)) to include projects that address the most serious risk to

human health, are necessary to ensure compliance, and assist systems most in need on a per household basis. This section clarifies

that replacement and rehabilitation are also eligible expenses

under the Drinking Water SRF. As Jerry Johnson testified before

the Fisheries, Wildlife and Water Subcommittee on behalf of the

nation’s largest water utilities on February 28, 2002, many large

systems biggest expense is replacing old infrastructure and pipes.

The committee, by reiterating their eligibility, seeks to ensure that
20

once a State has addressed the compliance and public health

threats and helped those systems that are disadvantaged, they give

consideration to helping systems meet the cost of replacing their

aging infrastructure.

After the terrorist attacks of September 11, much attention is

being paid to security at the Nation’s water systems. The Public

Health and Bioterrorism Response Act of 2001 (P.L.107–188) required PWSs to assess their vulnerabilities. Systems are now in the

process of determining what changes need to be made to their facilities and how to pay for those upgrades. While EPA currently allows PWSs to use the SRFs for security-related costs, this provision

would state the eligibility in statute, clarifying that in fact capital

costs for security are eligible. Security costs associated with operations, maintenance and personnel are not eligible for the SRF.

Sec. 204. Affordability.

Summary

This section allows public water systems to receive funding assistance for portions of a service area served by the utility.

Discussion

Many large cities do not qualify as disadvantaged under their

State’s definition of the term because they have both pockets of

low-income ratepayers that meet the affordability criteria and industry and pockets of affluent ratepayers. These cities have difficulty raising rates because they have many ratepayers who simply cannot pay more and it is politically difficult to increase rates

on only those with a proven ability to pay. In order to assist cities

struggling to pay for infrastructure upgrades without imposing too

high a burden on their low-income ratepayers, this provision allows

a municipality to receive negative interest loans or principal forgiveness if a portion of their service area meets a State definition

of disadvantaged.

Sec. 205. Safe drinking water revolving loan funds.

Summary

Section 205(a) changes the amount of its capitalization grant a

State can reserve for administration of the program from 4 to 6

percent. Further, under current law, States may set aside up to 10

percent of the SRF, if the State provides an equal dollar amount,

for public water system supervision programs, to administer or provide technical assistance for source water protection programs, to

develop and implement capacity development strategies, and to administer operator certification programs. This section waves the

State match requirement. Finally, this section permanently extends

the States’ authority to transfer up to 33 percent of its Drinking

Water SRF into the Clean Water SRF. The transferred cannot be

used to meet the 20 percent match requirement.

Section 205(b) amends the current requirement that States establish a priority system under which projects receive funding for

the SRF. This section would require States to ensure that projects

are progressively more likely to receive assistance by submitting,

among other information requested by the State:
21

11Association of State Drinking Water Administrators, letter to the Committee, November 6,

2003.

(i) An inventory of assets, including a description of those assets

(ii) A schedule for replacement of those assets

(iii) A financing plan indicating sources of revenue

(iv) A review of options for restructuring the public water system

(v) A review of options for approaches other than traditional approach

This section maintains the SDWA requirement that States give

priority to projects that address the most serious risk to human

health; that are necessary to ensure compliance with the Act and

that assist systems most in need on a per-household basis according to State affordability criteria. It however modifies the requirement that States publish ‘‘periodically’’ a summary of the projects

eligible for, and receiving, assistance by requiring the reports at

least biennially.

Discussion

Section 205(a) allows States to reserve up to 6 percent of the

SRF for administrative costs. According to the State drinking water

administrators, the cost to administer the program exceeds the current 4 percent allowable set-aside.11 In 1996, Congress created the

SRF and gave States the authority to operate the program. With

this new responsibility came new costs. While the committee does

not anticipate that the requirements in this bill will result in new

administrative burdens to the States, with the intended increase in

appropriations authorized in the bill, it is reasonable to allow

States to reserve a larger, but still small, percentage of the SRF

to meet their administrative costs.

Section 205(a) also provides States with more flexibility by

changing one of the cost-share requirements in current law. States

are currently permitted to use 10 percent of their SRFs for specific

set-asides as long as they match that 10 percent. However, States

are also required to first match 20 percent of the capitalization

grant they receive each year from the Federal Government, essentially requiring a double-match on these funds from the States.

Given the financial constraints many States are under, few have

been able to match the full 10 percent. From 1996 through 2003,

States had reserved 4 percent of their grant with nine States reserving the full amount and seven reserving none. This section

waives the matching requirement for the 10 percent set-aside.

This section also would make permanent the ability of States to

transfer up to 33 percent of the Drinking Water SRF into their

Clean Water SRF. During a funding cycle, a State may have a particularly large drinking water or clean water project for which it

needs additional funds. This provision allows them to transfer some

money from one account to the other while protecting the corpus

of the funds. The transferred funds cannot count toward the State’s

required 20 percent match of the Federal grant.

Section 205(b) adds the definition of restructuring and traditional

approach to the statute. As part of its capitalization agreement

with the EPA, each State is required to develop a priority system

which determines the projects a State will fund each year with its
22

available funds. States must give priority to those projects which

address the most serious risk to human health, are necessary to

ensure compliance, and assist systems most in need on a per

household basis. This section leaves that requirement in place

while also requiring that States give additional priority points to

those projects who have in place an asset management plan, a capital replacement plan, a financing plan or have reviewed their restructuring options and nontraditional approaches.

While many PWSs have a long-term plan for replacement of their

aging assets, many do not. Yet in order to fully understand the

scope of the problem the Nation faces, there must be an accounting

of the health of our utilities. Further, it makes good business sense

to have a full understanding of the condition of one’s assets and

how much capital will need to raised to replace those assets and

over what amount of time.

Additional factors States must include in their priority list include a financing plan indicating how that capital will be raised including rate increases, grant assistance, bonds or other loans.

PWSs will also receive additional credit if they have reviewed options for restructuring their water systems. In some cases, it may

be better for a utility to consolidate with a neighboring one, develop

a partnership with the local energy provider, or consider other cooperative partnerships like public-private partnerships or privatization. These are all encompassed in the term restructuring, the

goal of which is to improve upon the management and financial

structure of a utility to ensure it is operating as efficiently and

cost-effectively as possible. PWSs that explore nontraditional approaches to treatment and source water protection will also be

given additional priority points. These new technologies may prove

to be less expensive than traditional approaches.

Sec. 206. Grants program.

Summary

This section establishes a new provision, 1452(s), that directs a

State to set aside a portion of its SRF for grants to eligible projects

as follows:

(s)(1) Requires a State, in any year in which appropriations do

not exceed $2.5 billion, to set aside 10 percent of its capitalization

grant. This provision can be waived by a State if the average time

for processing loan applications during the last 12 months does not

exceed 90 days

(s)(2) Requires a State, in any year in which appropriations ex- ceed $2.5 billion, to set aside not more than 5 percent nor less than

2.5 percent of its revolving loan fund.

Discussion

By including a grant component within the SRF, this section

seeks to keep the Nation focused on the SRF’s as the primary funding mechanism for drinking water. The committee acknowledges

there is a growing interest in providing PWSs with grant funds to

help meet those costs associated with Federal regulatory mandates.

The daily costs associated with operations, maintenance and capital improvements due to age continue to be a local responsibility
23

which the Federal Government can assist with through the SRF

program.

This section would require the States to provide a portion of their

SRFs as a grant to local communities. By maintaining a single

funding source, rather than creating a new, competing program,

the focus remains on the SRF and the need to ensure it receives

adequate funding to meet the needs of local communities. The

small amount of the set-aside, ensures that the corpus of the fund

is protected well into the future by devoting the vast majority of

funds to the loan program. Further, by incorporating the grant into

the SRF, funding for the grant portion is more likely to be appropriated as the Drinking Water SRF is a program that regularly receives annual appropriations. Whereas Congress authorizes grant

programs that do not receive actual appropriations, the SRF annually receives funding and the linkage to the grant program ensures

that the grants too will receive funding.

Another goal of this section is to provide a quick infusion of grant

funds to communities. The bill allows States to waive this requirement in (s)(1) if they improve the time it takes them to process the

loan applications, a leading criticism among applicants for assistance. With the incentive of avoiding a Federal mandate on the use

of their SRF funds, the committee believes States will have an incentive to increase the speed of their loan application process.

Sec. 207. Other authorized activities.

Summary

This section permits use of the Drinking Water SRF for implementation of source water protection plans.

Discussion

The SDWA required States to develop source water protection

plans by May 2003. States were allowed to use up to 15 percent

of their SRF for the development of these plans, as well as conservation easements, wellhead protection programs, capacity development programs and implementation of voluntary, incentive-based

source water protection projects. However, no more than 10 percent

of these funds could be used for any one of the categories listed

above. With many State plans completed, funds are now needed to

implement the plans. This section will allow States to use their

SRF funds to implement their source water protection plans.

Sec. 208. Small system revolving loan funds.

Summary

This section would establish a loan fund to be operated by a

qualified private, nonprofit entity for the purposes of helping small

water systems with predevelopment costs and short-term costs.

This program, in addition to those technical assistance programs

already statutorily provided in the Safe Drinking Water Act, are

authorized at $25 million per year for fiscal years 2005 to 2009.

States shall provide to the EPA an annual report on the activities

supported by this program. Loan terms cannot exceed 10 years and

loans cannot exceed $100,000. Loan repayments will be credited to

the fund maintained by the qualified nonprofit.
24

12Rural Community Advancement Program, letter to the Committee.

Discussion

The EPA has several existing programs to assist small PWSs, including an information clearinghouse for technical assistance providers called Simple Tools for Effective Planning. The Agency also

runs the Small System Technical Assistance Center Network, a series of technical assistance centers at universities throughout the

Country. The Agency partners with the National Rural Water Association and the Rural Community Assistance Partnership to provide technical assistance to PWSs including how to locate financing

for projects and how to run a water system. Further, the States

may reserve up to 2 percent of their SRF to provide technical assistance to small systems. Between 1996 and 2003, States had reserved 1.5 percent of their grants. Twenty-three States reserved

the full 2 percent while two States did not reserve any funds.

The committee however continues to hear of a need for additional

assistance for these small systems.12 Many small PWSs cannot afford the costs associated with planning a project, including the engineering costs. Without these initial steps completed, the PWS

often has difficulty applying for an SRF loan to begin construction.

The Rural Community Advancement Program, for example, runs

several small SRFs in States to assist small PWSs with these startup costs, enabling them to then apply for funds through the Staterun SRF for construction costs. This provision enables the Administrator, with the Agency’s technical assistance funds, to provide

money to nonprofit technical assistance providers to create and run

these smaller SRFs.

Sec. 209. Authorization of appropriations.

Summary

This section authorizes funding of $1.5 billion for 2005, $2 billion for 2006 and 2007, $3.5 billion for 2008, and $6 billion for 2009.

The EPA is authorized to withhold not more than $1 million per

year to conduct the drinking water needs survey required by

SDWA Section 1452(h).

Sec. 210. Removal of lead from drinking water in schools and in the

District of Columbia.

Summary

Section 210(a) requires the Administrator to establish a program

to provide grants to States to assist in paying or reimbursing, costs

to local education agencies for remediation lead contamination in

drinking water in schools and informing parents, students and

teachers about lead contamination in drinking water. It authorizes

$40 million each year for fiscal years 2005 through 2008 and permits the Administrator to reserve 5 percent to meet administrative

expenses. This is similar to current law Section 1465 which authorized a similar program that did not receive Federal appropriation

funds.

Section 1465 in current law provided funds to assist States in

meeting the requirements of Section 1464 which required States to

establish an assistance program for local education agencies to test
25

13 Annual Review of Energy and the Environment. 20:301–324, 1995.

and remediate lead contamination in drinking water from coolers

and other sources in schools. This section also required that results

of testing be available to the public and that remediation of non

lead-free drinking water coolers in schools within 15 months of October 31, 1998.

However, in Acorn v. Edwards (U.S. 5th Circuit, 1996), the Court

struck down as unconstitutional Sections 1464(d)(1) and (d)(3) because they violated the 10th Amendment of the Constitution. The

Court ruled ‘‘that section 300j-24(d) [SDWA Section 1464(d)] is an

unconstitutional intrusion upon the States’ sovereign prerogative to

legislate as it sees fit.’’ While the Court left in tact SDWA Section

1464(d)(2) which requires that the test results in Section 1464(d)(1)

be made publicly available, because the requirement to test was

struck down, Section 1464(d)(1) was essentially rendered meaningless. The Court’s decision technically applied only to the 5th Circuit

however, it established a precedent that would likely have been

upheld in other circuits. This view was recently upheld by EPA in

a memo to its Regional offices. Therefore, the committee struck the

entire section and instead proceeded with a voluntary program that

protects State sovereignty and encourages communities to test

their schools and make the results public. Section 210(b) provides the District of Columbia with $20 million

to address lead contamination in its water supply; activities may

include assessment of infrastructure; testing of water supplies; distribution of filters; evaluation of chemical additives; pipe replacement and evaluation and improvement of communication with the

public. This section also provides $2 million to the National Academy of Sciences to conduct a phased study of the lead contamination in drinking water. Phase I will evaluate compliance of the District of Columbia Water and Sewer Authority with regulations pertaining to lead and copper in drinking water and the potential

causes of the contamination. Phase II will assess from a cross-section of cities of varying population sizes across the country with

lead service lines the extent to which water levels in those cities

have exceeded the action level for lead and the potential causes of

the exceedences.

Discussion

Lead, a known toxin, is used in plumbing fixtures and had been

a primary ingredient in paint and automobile fuel until it was

phased out beginning in the 1970’s (The Elimination of Lead in

Gasoline v. M. Thomas).13 Great progress has been made in reducing exposure to lead by phasing out leaded gasoline and slowly rehabilitating lead-painted homes. However, swallowing or breathing

dust from paint chips is still the leading cause of lead exposure.

Lead water lines still exist in many cities, including the District of

Columbia.

In 1991, the EPA finalized the lead and copper rule (56 FR

26460), which would minimize lead and copper in drinking water

by reducing corrosivity. Under the rule, the goal for lead in drinking water is zero parts per billion (ppb). The rule also established

an Action Level, which is a combined measurement of lead
26

amounts and prevalence at which the PWS is required to act to reduce the lead. The Action Level is defined as 10 percent of homes

tested exceeding 15 ppb. At this level, the system is required to increase monitoring and testing, optimize corrosion control treatment

and inform the public about the exceedances. If the corrosion control treatment does not result in a decrease in households that exceed the action level, the system is required to begin replacing lead

service lines at a rate of 7 percent per year.

Unlike other contaminants regulated under the Safe Drinking

Water Act, lead is measured inside the residence or business, not

at the treatment plant, because it leaches into the water from the

service lines.

In accordance with the rule, the Washington Aqueduct, owned

and operated by the U.S. Corps of Engineers, installed the corrosion control treatment in 2000. During the monitoring period July

2000-June 2001, WASA reported sampling 50 homes. However in

its compliance order, docket No. SDWA–03–2004–0259 DS, EPA

found that of those 50 samples, 2 were taken from a previously

sampled location. WASA was required to sample from 50 unique locations during this time. Five of these samples were taken outside

of the required sampling period. EPA also found that WASA failed

to report six samples that were taken. EPA found that if WASA

had included these unreported samples, WASA would have exceeded the action level of lead in 90th percentile during July 2000 -

June 2001 timeframe.

In August 2002, WASA reported that during the compliance period July 1,2001 - June 30, 2002, it exceeded the action level for

lead. The lead level in first draw water samples from the 90th percentile of 53 residences tested was 75 ppb, well above the action

level of 15 ppb. WASA was required to implement a lead in drinking water public education program, and to initiate lead service

line replacement at a rate of 7 percent per year.

From January 2003 through December 2003, WASA continued to

test homes and continued to exceed the action level. As such, the

Agency was required to continue it public education program and

its lead service line replacement efforts.

EPA included several categories of findings regarding WASA’s

compliance with the lead and copper rule in their consent order

which include a failure to take samples within the monitoring period, a failure to conduct follow-up monitoring of partially replaced

lead service lines and a failure to comply with requirements for

public service announcements and to use required language in

written materials provided to the public as well as a failure to perform corrective action. It should be noted that EPA was informed

by WASA of these events and the data and signed off on the public

service announcements.

The EPA consent order requires WASA to take several corrective

actions including:

• Plans for updating its lead service line inventory and reporting to EPA.

• Requirement for WASA to strongly encourage full replacement of lead service lines with owners paying for their portion, including submission of a plan to EPA for encouraging homeowners

to agree to full replacement.
27

• Requirement for WASA to develop and submit a public education plan including public health issues, steps to reduce health

risks and steps to address EPA recommendations on effectiveness

of prior public education.

• Requirement for WASA to document to EPA that they have

provided water filers to all customers suspected or known to have

lead contamination at no charge as well as those with unknown

service line materials.

• Requirement for WASA to submit detailed sampling plans to

EPA.

On August 23, 2004, WASA began adding orthopohsophate to the

drinking water supply through the city to reduce the corrosivity of

the water supply in an effort to reduce lead levels. EPA estimates

that it will take 6 months to detect a reduction in lead levels.

One of the leading complaints against WASA throughout this period is that the agency failed to communicate effectively with the

public about how many homes had exceeded the action level (and

by how much) and what residents should do to protect themselves.

On February 27, 2004, D.C. Mayor Anthony Williams and

Councilmember Carol Schwartz notified Chairman Inhofe by letter

that they had ‘‘established the Interagency Task Force on Lead in

Drinking Water [which] has been meeting weekly to look into ways

[to, in addition to other actions,] identify funding sources to help

pay for [lead pipe] replacements and make certain [the District of

Columbia Water and Sewer Authority] and the D.C. Department of

Health communicate critical information to citizens promptly and

clearly.’’ In testimony before the Subcommittee on Fisheries, Wildlife and Water subcommittee on April 7, 2004, the Director of

EPA’s Region III, Donald Walsh, stated, ‘‘public education efforts

were ineffective, and we believe, not fully compliant in all instances

with EPA rules.’’ Additional testimony from a risk management expert and D.C. residents corroborated the view that public notification and education efforts were ineffective.

To speed the corrective efforts of EPA, Mayor Williams, the

Council of the District of Columbia, and the D.C. Water and Sewer

Authority, the committee believes additional assistance and scrutiny must be provided to the city as well as nation’s schools. Therefore, this section would authorize the National Academy of Sciences

to conduct a study, first of the situation in D.C. to determine the

exact cause of the problem. The Academy is then to assess the situation in other cities with lead service lines to determine if they too

have encountered elevated lead levels in their drinking water. Congress and the EPA must fully understand the scope and the cost

of the problem before proposing changes that will affect all cities

and that - though well-intentioned - may fail to address the problems in D.C.

The outrage of residents in D.C. about inadequate and misleading information about a known risk in their drinking water has

motivated the committee to authorize a $20 million grant to the

District of Columbia to take whatever actions are needed to mitigate the problem, including assess its infrastructure, test water

supplies, distribute filters, evaluate chemical additives, replace

pipes and evaluate and improve communication with the public.
28

Finally, concerns remain about the safety of drinking water in

D.C. schools. Similarly, there may be lead service lines and lead in

drinking water coolers in other schools throughout the country.

EPA recommends that school districts test for lead in their drinking water to ensure that it is safe for consumption. The individual

school buildings may still have too much lead in the drinking water

because of lead water fixtures. As such, the bill would provide

funds to schools to reimburse them for costs associated with testing

their water, removing water coolers and disseminating information,

including test results, to the school community.

Sec. 211. Small public water system assistance program.

Summary

This section establishes a new program under the Safe Drinking

Water Act to assist PWSs and Indian Tribes with meeting the costs

of drinking water regulations.

Section 1471 establishes a definition for an eligible activity as an

activity, including source water protection projects, carried out by

an eligible entity to ensure compliance with a national primary

drinking water regulation. It cannot include any activity to increase the population served by a public water system unless the

project is necessary to achieve compliance or provide an unserved

population with a safe water supply.

Section 1471 also defines an eligible entity as a small public

water system or Tribe that serves a community that is disadvantaged, as determined by the State, or may become disadvantaged

as a result of a project; or a public water system that will incur

$3 million or more in compliance costs. It also defines a small public water system as one serving less than 15,000.

Section 1472(a) establishes a program within EPA to assist small

public water systems in carrying out eligible activities.

Section 1472(b) requires that priority be given to those projects

that address the most serious risks to human health from lack of

compliance with national primary drinking water regulations; are

necessary to ensure compliance with national primary drinking

water regulations or assist systems serving communities that are

most in need based on affordability criteria established by the

State.

Section 1472(c) also authorizes the Administrator to use not less

than 1.5 percent of the funds made available under this Title for

grants to technical assistance providers to help eligible entities assess their needs, identify additional funding sources and plan, implement and maintain and eligible activity. Eligible entities are

limited to using not more than 5 percent of the funds received

under this Title for technical assistance.

Section 1472(d) further requires the Administrator to reserve not

less than 3 percent of funds for projects by Indian Tribes. The same

eligibilities and limitations apply to projects carried out by Tribes.

Specific program priority requirements are provided for Tribes.

Section 1472(e) limits funds to those projects which will aid in

compliance with the Act, those that restructure or consolidate facilities to achieve compliance or in cases where restructuring and

consolidation are not practicable, if the Administrator determines
29

14U.S. Congress. Committee on Environment and Public Works. The Cost to Local Governments to Implement the Clean Water Act and the Safe Drinking Water Act. Hearing. 108th Congress, 2nd session, July 26, 2002. Rick Bourgue, City Manager, City of Wewoka, OK.

that the system has made a good faith effort to comply with and

will adhere to an enforceable schedule to comply; or if the Administrator determines that the system lacks the technical, financial and

managerial capacity to ensure compliance.

Section 1472(f) limits the Federal share of any project to 80 percent of the cost of the project. The Administrator may waive the

cost-share in some circumstances.

Section 1472(g) requires that one year after disbursement, any

unused grants be returned to the Administrator for distribution to

other recipients.

Section 1473 requires the Administrator to submit a report to the

Committee on Environment and Public Works and the Committee

on Energy and Commerce that lists the activities being carried out

with the grants; the number of grants and the location of the recipient; each eligible entity that receives a grant; the amount of

each grant and description of activity funded. Section 1474 authorizes $200 million per year for fiscal years

2005 through 2008.

Discussion

While the infrastructure gap is affecting communities of all sizes

in all parts of the country, the struggle to meet rising costs is particularly difficult for small communities. As Elmer Ronnebaum, the

General Manager of Kansas Rural Water, testified on February 26,

2002 before the Committee on Environment and Public Works,

‘‘Many of the regulations will force small towns to come up with millions in financing - many systems will be stressed to comply. I think it is significant to observe a new dynamic in EPA regulations: the regulation of naturally occurring contaminants and the regulations of operations and maintenance in utilities. The result

of this new effort by EPA will be to greatly expand the number of systems forced

into costly compliance with EPA rules. For example, very few systems were required

to treat for EPA’s previous rules on organic contaminants, many with anthropogenic

origins. However, the forthcoming arsenic rule could capture as many as 4,000 communities; this will greatly drive the demand for additional funding resources. Upcoming EPA rules that may be expensive in thousands of rural communities include:

standards for certification of operators, filter backwash, radon, surface water treatment rules, arsenic, disinfection byproducts, ground water disinfection, etc.’’

This section of S. 2550 seeks to help communities address costs

due to compliance with the Safe Drinking Water Act. Systems are

faced with complying with several rules over the next few years,

including the new standard for arsenic (66 FR 6975). According to

EPA’s cost estimate, small systems could see an increase of up to

$327 per year. If the city is one like Wewoka, Oklahoma that is

home to 3,700 residents, 20 percent of whom are unemployed, a

$327 increase in water fees is exorbitant.14 Communities are also

struggling to comply with the Long Term 1 Enhanced Surface

Water Treatment Rule (67 FR 1811) and for those systems that

chemically treat their water, the Stage 1 Disinfectants and Disinfection Byproducts Rule (63 FR 69389).

This section of the bill seeks to help these systems meet the costs

associated with these and other drinking water regulations. It

would provide grants to small systems and Tribes to assist them

in coming into compliance with the statute. Those systems who are
30

not in compliance, face a public health threat or are disadvantaged

are to receive priority consideration. Funds are limited to those

projects which will aid in compliance with the Act. It is unlikely

that sufficient funding will be provided to this program to give

every system eligible for funds enough money to fully comply with

the Act. However, funds may be made available that will move

some systems much closer to compliance than if they had not received any Federal funding.

The system should consider restructuring and consolidation to

come into compliance. If these options are not practicable, and the

system is not in compliance with the Act, the system must have

made a good faith effort to comply and will adhere to an enforceable schedule to comply. Funds can also be used to assist those systems that lack the technical, financial and managerial capacity to

ensure compliance.

Sec. 212. Small public water system assistance program.

Summary

This section establishes a new program under the Safe Drinking

Water Act to assist PWSs and Indian Tribes with meeting the costs

of drinking water regulations.

Section 1471 establishes a definition for an eligible activity as an

activity, including source water protection projects, carried out by

an eligible entity to ensure compliance with a national primary

drinking water regulation. It cannot include any activity to increase the population served by a public water system unless the

project is necessary to achieve compliance or provide an unserved

population with a water supply.

Section 1471 also defines an eligible entity as a small public

water system or Tribe that serves a community that is disadvantaged, as determined by the State, or may become disadvantaged

as a result of a project; or a public water system that will incur

$3 million or more in compliance costs. It also defines a small public water system as one serving less than 15,000.

Section 1472(a) establishes a program within EPA to assist small

public water systems in carrying out eligible activities.

Section 1472(b) requires that priority be given to those projects

that address the most serious risks to human health from lack of

compliance with national primary drinking water regulations; are

necessary to ensure compliance with national primary drinking

water regulations or assist systems serving communities that are

most in need based on affordability criteria established by the

State.

Section 1472(c) also authorizes the Administrator to use not less

than 1.5 percent of the funds made available under this Title for

grants to technical assistance providers to help eligible entities assess their needs, to identify additional funding sources and plan,

implement and maintain and eligible activity. Eligible entities are

limited to using not more than 5 percent of the funds received

under this Title for technical assistance.

Section 1472(d) further requires the Administrator to reserve not

less than 3 percent of funds for projects by Indian Tribes. The same
31

eligibilities and limitations apply to projects carried out by Tribes.

Specific program priority requirements are provide for the tribes.

Section 1472(e) limits funds to those projects which will ensure

compliance with the Act, those to restructure or consolidate facilities to achieve compliance or in cases where restructuring and consolidation are not practicable, if the Administrator determines that

the system has made a good faith effort to comply and will adhere

to an enforceable schedule to comply; or if the Administrator determines that the system lacks the technical, financial and managerial capacity to ensure compliance.

Section 1472(f) limits the Federal share of any project to 80 percent of the cost of the project. The Administrator may waive the

cost-share in some circumstances.

Section 1472(g) requires that one year after disbursement, any

unused grants be returned to the Administrator for distribution to

other recipients.

Section 1473 requires the Administrator to submit a report to the

Committee on Environment and Public Works and the Committee

on Energy and Commerce that lists the activities being carried out

with the grants; the number of grants and the location of the recipient; each eligible entity that receives a grant; the amount of

each grant and describes the activity funded.

Section 1474 authorizes $1 billion per year for 2005 through

2008.

Discussion

This section is fundamentally the same as the preceding section

with two exceptions. This section limits funding to those systems

for whom the money will ensure, instead of aid, compliance. It further authorizes $1 billion a year instead of $200 million a year.

TITLE III—MISCELLANEOUS

Sec. 301. Definition of Administrator.

Summary

This section clarifies that references to the ‘‘Administrator’’ are

to the Administrator of the Environmental Protection Agency.

Sec. 302. Demonstration grant program for water quality enhancement and management.

Summary

Section 302(a) establishes a nationwide demonstration grant program within EPA to promote innovations in technology and alternative approaches to water quality management as well as reduce

costs to municipalities incurred in complying with the CWA and

the SDWA.

Section 302(b) requires municipal applicants to submit to the Administrator a plan that is developed in coordination with the State

in which the municipality is located and interested stakeholders. It

further requires the applicant to describe the water impacts it

seeks to address, include a strategy to address the water quality

program and achieve the same goals that could be achieved using
32

more traditional methods or those required by the CWA and the

SDWA and include a schedule for achieving the goals.

Section 302(b) further defines the types of projects that are eligible to include those that address excessive nutrient growth; urban

or rural population pressures; lack of an alternative water supply;

difficulty in water conservation and efficiency; lack of support tools

and technologies; lack of monitoring or data analysis; nonpoint

source water pollution; sanitary and combined sewer overflows;

problems with naturally occurring constituents of concern; problems with erosion or excess sediment; new approaches to water

treatment, distribution and collection and new methods for collecting and treating wastewater.

The Administrator much ensure, to the maximum extent practicable, that the projects are diverse geographically, in terms of the

technologies tested and the nontraditional approaches used and

that each category of projects described above is adequately represented. Higher priority should be given to projects that address

multiple problems and are regionally applicable.

The Administrator must ensure, to the maximum extent practicable, that at least one community serving less than 10,000 receives a grant each year and that no municipality receives more

than 25 percent of the funds.

This section also limits the Federal cost share to 80 percent

which the Administrator may waive for affordability reasons.

Section 302(c) requires each grant recipient to report to the Administrator on the progress of the project after one, two and 3

years. The Administrator must report to Congress 2 years after enactment on the results of the demonstration program.

Section 302(d) requires the Administrator, to the maximum extent practicable, to incorporate the results of the projects into programs administered by the Administrator.

Section 302(e) authorizes the Administrator to award grants and

enter into cooperative agreements with research institutions, educational institutions and other appropriate entities for research and

development on the use of innovative and alternative technologies

to improve water quality or drinking water supply. Eligible projects

include those to increase the effectiveness and efficiency of public

water supply systems; to encourage the use of innovative or alternative technologies or approaches related to water supply or availability; and to increase the effectiveness and efficiency of treatment

works.

This section authorizes $20 million per year from fiscal year 2005

through fiscal year 2009 to carry out this Title.

Section 302(f) authorizes $20 million for each year from fiscal

year 2005 through fiscal year 2009 to carry out Section 302 except

(e).

Discussion

One important aspect of reducing the infrastructure financing

gap is finding more affordable alternatives for POTWs and PWSs.

As the Deputy Assistant Administrator from EPA’s Office of Water

testified before the committee on February 26, 2002:

‘‘This strategy to renew our water and wastewater infrastructure . . . puts a high

premium on optimizing the efficient use of our current capital assets and the new
33

investments we must make. That will require the use of innovative technologies for

improved services at lower life-cycle costs, which in turn means supporting research

and development on these innovative technologies.’’

To further encourage research into innovative technologies, Section 302 establishes in the EPA both a research and development

program and a demonstration grant program. The research program is aimed at increasing the effectiveness and efficiency of public water supply systems, encouraging the use of innovative or alternative approaches to water supply or availability and increasing

the effectiveness of the treatment works. It is authorized at $20

million per year from fiscal year 2005 through fiscal year 2009.

The demonstration grant program targets water quality management and enhancement. It requires at least a 20 percent non-Federal cost share for projects. The program will promote innovations

in technology and alternative approaches to water quality management and supply, with the goal of reducing municipal costs of complying with the Clean Water Act and the Safe Drinking Water Act.

Municipalities selected for programs must describe a strategy by

which the demonstration grants could achieve similar results as

those mandated by the two statutes or those that could be achieved

by traditional water quality methods. Grant recipients must submit

annual reports to EPA which must submit a report to Congress.

The Administrator must ensure to the maximum extent practicable

that innovative technologies, geographic distribution, and non-traditional approaches are represented.

The National League of Cities, the Conference of Mayors, and the

American Metropolitan Sewerage Association (AMSA) testified in

favor of demonstration grant program at a February 2002 hearing.

AMSA testified that such a program is ‘‘vitally important.’’

Sec. 303. Cost of service study.

Summary

This section requires the National Academy of Sciences (NAS) to

identify existing standards for affordability; determine the manner

in which those standards are determined; determine how affordability differs depending on community size and location and study

the extent to which affordability affects the decision of a utility to

increase rates. This section also requires the NAS to evaluate the

factors and characteristics that are required for a community to be

considered disadvantaged.

Discussion

Small and disadvantaged communities often struggle to meet

regulatory costs as well as to maintain their POTWs and PWSs.

Whether a community receives additional financial assistance in

meeting their obligations often depends on how States define disadvantaged. Further, how the EPA, the States and the communities themselves define affordable has a direct impact on whether

the community as a whole and individual ratepayers receive additional financial assistance.
34

Sec. 304. State revolving fund review process.

Summary

This section requires the Administrator to consult with States,

other Federal agencies, and utilities to identify ways to expedite

and improve the application and review process for the SRFs and

take such administrative action as authorized under existing law

to achieve that goal. The Administrator shall provide to Congress

a report that contains recommendations for legislation to further

improve the processes.

Discussion

While each State is required to comply with several Federal requirements, each also imposes many of its own. This provision requires the Administrator to work with States and other agencies to

develop recommendations for streamlining the application process

and lessening the amount of time it takes to receive funds. One of

the goals of the Water Infrastructure Financing Act is make the

SRF more user-friendly. This study is one step in that effort.

Sec. 305. Southeast Colorado safe drinking water supply.

Summary

Section 305 authorizes $85 million for the Southeast Colorado

Water Activity Enterprise to assist communities in Pueblo and

Prowers Counties, Colorado to construct a water transmission line

from the Pueblo Reservoir to the city of Lamar, Colorado.

Discussion

The Arkansas Valley Conduit originally received congressional

authorization in the 1960’s as part of the Fryingpan-Arkansas

Project to provide abundant, clean water to the people of Southeast

Colorado. At the time of authorization, the Federal Government

had already deemed the Arkansas River as unacceptable for drinking water purposes, yet forty years have passed without construction. Recent drought conditions have worsened the quality and created water shortages along the river. Selenium and other contaminants coupled with the drought have seriously imperiled Southeast

Colorado’s drinking water supplies, leaving expensive and inefficient treatment processes as the only option. Feasibility reports

have shown that Southeast Colorado lacks the ability to pay for

such treatment facilities and therefore must rely on Federal assistance. The studies have shown that the Conduit is a viable solution

to the drinking water situation. This section provides funding to

the communities to construct the conduit. The committee expects

other funding sources will be needed to complete the project. While

the committee historically does not fund individual water projects,

because the Department of Interior failed to follow through on construction of the project, already authorized by Congress, the committee believes this is an appropriate project to reiterate congressional support for by providing an additional authorization.
35

Sec. 306. Assessment of perchlorate contamination.

Summary

Requires the U.S. Geological Survey to conduct a nationwide assessment of sites contaminated with perchlorate and the geological

conditions of those sites.

Discussion

Perchlorate is both naturally occurring and man made. While the

majority of perchlorate manufactured in the U.S. is used as solid

rocket fuel, perchlorate is also used in such widely distributed consumer products as fireworks, road flares, and automobile airbags.

In addition, prior to the development of more modern drugs, perchlorate was used as a drug to treat thyroid disorders such as

Graves disease. Perchlorate is still approved by the FDA as a drug

and is administered in conjunction with certain medical imaging

techniques. Because of such widespread use perchlorate has been

discovered in both soil and water samples. In 1998, perchlorate was

placed on the EPA’s Contaminant Candidate List. Those substances placed on the list are then considered for regulation. However, the EPA concluded that it could not regulate the contaminant

at that time because the Agency lacked both a risk assessment and

occurrence data.

In 1999, as part of the Unregulated Contaminant Monitoring

Rule, all large PWSs were to monitor for perchlorate over the subsequent 2-year period to determine if large amounts of the public

were being exposed to perchlorate in their drinking water. The results of the monitoring of treated drinking water, not source water,

found that 2 percent of the 26,000 results showed detectable levels

of perchlorate.

The EPA also initiated a risk assessment for perchlorate. Currently, there is not a scientific consensus on what level of perchlorate must be consumed to create an adverse health effect. Because of the lack of consensus, in March 2003, EPA and the Department of Defense requested the National Academy of Sciences

advise EPA on questions related to its draft perchlorate risk assessment. The NAS’ assessment of EPA’s report is due in January

2005. The fiscal year 2004 Department of Defense Authorization

Act required the Agency to have an independent epidemiological

study and endocrinological review of human exposure to perchlorate in drinking water.

Section 306 requires the U.S. Geological Survey to conduct an assessment of sites contaminated by perchlorate to provide data on

the extent of water contamination.

Sec. 307. National estuary program.

Summary

Reauthorizes the National Estuary Program at $35 million for an

additional 5 years through 2010.

Discussion

In 1987, Congress established the National Estuary Program

(NEP) by adding Section 320 to the Clean Water Act. The goal of
36

Section 320 is the promotion of comprehensive conservation and

management plans (CCMPs) for estuaries of national significance

through the collaborative voluntary efforts of Federal, State, local,

non-profit and private interests. Today, the NEP includes 28 estuaries in 18 States and Puerto Rico. All 28 estuary programs are in

the process of implementing their CCMPs. The NEP is currently

authorized at $35 million annually through fiscal year 2005. This

legislation would reauthorize the NEP at $35 million annually

through FY2010.

Sec. 308. Sewage control technology grant program.

Summary

Adds a new section to the Federal Water Pollution Control Act

in which $100 million is authorized for 2005 through 2009 to provide grants to POTWs in the Chesapeake Bay Watershed that treat

at least 500,000 gallons of wastewater per day and install technologies that are designed to reduce total nitrogen in discharged

wastewater to an average annual concentration of 5 milligrams per

liter.

Discussion

Excessive nutrients, including nitrogen, remain one of the most

serious pollution problems facing the Chesapeake Bay. The overabundance of nitrogen and phosphorous deplete the oxygen levels

in the Bay, causing a condition known as hypoxia. Sea life virtually

disappears in hypoxic water. Recent modeling of EPA’s Bay Program has found that nutrient discharges must be reduced by more

than 35 percent in order to fully restore the Bay. Sources that

must reduce their nitrogen outputs include municipal wastewater

treatment plants.

There are 304 major wastewater treatment plants in the Chesapeake Bay watershed: Pennsylvania, 123, Maryland, 65, Virginia,

86, New York, 18, Delaware, 3, Washington, DC, 1, and West Virginia, 8. These plants contribute about 60 million pounds of nitrogen per year - one-fifth - of the total load of nitrogen to the Bay.

Given the large amount of nitrogen being released from POTWs,

one way to effectively address this problem is to upgrade these

plants to remove more nitrogen from their effluent. The average

secondary treatment plant discharge contains 12–16 milligrams of

nitrogen per liter; some techniques, such as biological nutrient removal can cut this nitrogen discharge level by over half. Upgrading

these plants with nutrient removal technologies to achieve nitrogen

reductions of 3 mg/liter would remove 46 million pounds of nitrogen

in the Bay each year or 40 percent of the total nitrogen reductions

needed.

Sec. 309. Special water resources study.

Summary

Section 309(a) adds the Secretary of Homeland Security to the

Water Resources Council.

Section 309(b) authorizes the Water Resources Council to carry

out a study of water management programs used by all levels of

government and the private sector to increase water supplies and
37

improve availability; consult with agencies and entities to develop

recommendations for a comprehensive water strategy. The water

strategy must:

(i) Respect the primary role of States in regulating water rights

and uses,

(ii) Identify incentives to ensure an adequate and dependable

supply of water through 2054,

(iii) Suggest strategies to avoid increased mandates on State and

local governments,

(iv) Eliminate duplication and conflict among Federal programs,

(v) Considers all available technologies and methods to optimize

water supply reliability, availability, and quality,

(vi) Recommends means of capturing excess water and flood

water for conservation and use in drought,

(vii) Suggests financing options for supply and public works

projects,

(viii) Suggests strategies to conserve existing water supplies, including repairing aging infrastructure,

(ix) Includes other objectives relating to the effective management of water supply to ensure reliability, availability and quality.

This section further requires the Council to evaluate Federal

water programs in existence on the date of enactment and submit

to Congress and the President recommendations to eliminate discrepancies and duplication and any other circumstances that interfere with the effective operation of the programs. The Council also

must develop and make publicly available water planning models.

The Council is required to develop and coordinate public awareness activities to provide the public with access to understandable

information on water supply, reuse and conservation. The Council

must consult with interested groups including those representing

the agriculture, fisheries and forestry industries, fire management

interests, rural and urban water associations, environmental interests, engineering and construction interests, the scientific community that is concerned with climatology and hydrology, resource dependent businesses and any other group the Council considers necessary.

The Council is required to submit reports every 180 days after

the Council’s first meeting to the President and relevant congressional committees. A final report must be submitted no later than

3 years after the first meeting of the Council which details the

Council’s findings and conclusions, recommendations for legislation

and other policies. Section 309(c) authorizes $9 million for 2005 to

be used until expended.

Discussion

Water supply is growing concern not only in the western United

States, which is commonly associated with water shortages and

fights, but also in the eastern United States which recently suffered from a long drought. While water supply is and should continue to be a State governed issue, there are several Federal programs that address the issue of supply. Better coordination of these

programs may be necessary. Further, the Federal Government may

be able to provide useful resources, information and tools to the

States while respecting their primacy over the issue.
38

The U.S. Water Resources Council, established by the Water Resources Planning Act of 1965, had been responsible for studying the

nation’s water and related land resources. It prepared periodic assessments to determine whether these resources were adequate to

meet national water requirements and developed important economic and environmental criteria for water projects - known as the

Principles and Guidelines - that are still used by Federal water resource planning agencies. Under President Carter, it was suggested

that the WRC’s role be expanded to include greater regulatory authority and stronger review of water projects. This proved very unpopular with many stakeholders and the Council was eliminated.

This section would reauthorize the Council to develop recommendations for a comprehensive water strategy which must respect the rights of States, avoid mandates on local and State governments while suggesting options for addressing water shortages,

means of capturing excess water and financing water projects. The

Council is also charged with assessing current data and making

recommendations about duplication among the Federal agencies

with a role in water supply. The Council is charged with developing

and making publicly available water planning models and initiating a public information campaign on water reuse and conservation.

LEGISLATIVE HISTORY

On June 21, 2004, Senator Crapo, for himself, Senator Inhofe

and Senator Murkowski, introduced the Water Infrastructure Financing Act (S. 2550). The bill was read twice and referred to the

Committee on Environment and Public Works. The committee met

on June 23, 2004 to consider the bill. The bill, as amended, was ordered reported on June 23, 2004.

HEARINGS

The committee has been working on legislation to reauthorize the

two SRFs and provide additional resources to communities

throughout the 107th and 108th Congresses. The Subcommittee on

Fisheries, Wildlife, and Water held four hearings related to clean

water and drinking water programs and one legislative hearing on

S. 1961. The full committee held one legislative hearing on S. 1961.

On March 27, 2001, The Subcommittee on Fisheries, Wildlife,

and Water held a hearing on water and wastewater infrastructure

needs. Testimony was received from Hon. Christine Todd Whitman,

Administrator, Environmental Protection Agency; Mr. Jon

Sandoval, Chief of Staff, Idaho Department of Environmental Quality, Boise, ID; Mr. David Struhs, Secretary, Florida Department of

Environmental Protection, Tallahassee, FL; Mr. Harry Stewart, Director, Water Division, New Hampshire Department of Environmental Services, Concord, NH; and Mr. Allen Biaggi, Administrator, Nevada Department of Conservation and Natural Resources, Division of Environmental Protection, Carson City, NV.

On April 30, 2001 in Columbus, Ohio, the Subcommittee Fisheries, Wildlife, and Water held a field hearing, focusing on the

types of water infrastructure challenges facing local communities in

that region. Testimony was received from Hon. Lydia Reid, Mayor
39

of Mansfield, OH; Hon. Robert Vicenzo, Mayor of St. Clairsville,

OH; Mr. Christopher Jones, Director, Ohio Environmental Protection Agency; Columbus, OH; Mr. Erwin Odeal, Executive Director,

Northeast Ohio Regional Sewer District, Cleveland, OH; Mr. Robert Stevenson, Commissioner, Department of Public Utilities, Division of Water/Wastewater, Toledo, OH; Mr. Patrick T. Karney,

P.E., Director, Metropolitan Sewer District of Greater Cincinnati,

Cincinnati, OH; and Mr. Patrick Gsellman, Environmental Supervisor, Bureau of Engineering, Akron, OH.

On October 31, 2001, the Subcommittee on Fisheries, Wildlife,

and Water held an oversight hearing on innovative financing techniques for water infrastructure improvements. Testimony was received by Mr. G. Tracy Mehan III, Assistant Administrator, Office

of Water, Environmental Protection Agency; Mr. Stephen E. Howard, Senior Vice President, Lehman Brothers; Mr. Rick Farrell, Executive Director, Council of Infrastructure Financing Authorities;

Mr. Peter L. Cook, Executive Director, National Association of

Water Companies; Mr. Harold J. Gorman, Executive Director, New

Orleans Sewage and Water Board, on behalf of the Association of

Metropolitan Water Agencies; and Mr. Paul Pinault, Executive Director, Narragansett Bay Commission, on behalf of the Association

of Metropolitan Sewerage Agencies.

On November 14, 2001, the Subcommittee on Fisheries, Wildlife,

and Water held a hearing on water supply. Testimony was received

from Hon. Mike Parker, Assistant Secretary of the Army for Civil

Works; Mr. John Keys, Commissioner for the Bureau of Reclamation, Department of the Interior; Mr. Tom Weber, Deputy Chief of

Programs, Resources Conservation Service, Department of Agriculture; Ms. Ane Diester, Associate Vice President, Metropolitan

Water District of Southern California, testifying as the non-Federal

Chair of the National Drought Council; Mr. Jay Rutherford, Director, Water Supply Division, Vermont Department of Environmental

Conservation, on behalf of the Association of State Drinking Water

Administrators; Mr. Ken Frederick, Senior Fellow, Resources for

the Future; and Mr. Leland ‘Roy’ Mink, Director, Idaho Water Resources Research Institute.

On February 26, 2002, the Committee on Environment and Public Works held the first legislative hearing on S. 1961 and other

water infrastructure related bills. Testimony was received from

Senator Jon Kyl; Mr. Ben Grumbles, Deputy Assistant Administrator for Water, Environmental Protection Agency; Hon. Douglas

H. Palmer, Mayor of Trenton, NJ and chairman of the Urban

Water Council of the Conference of Mayors; Hon. Joseph A. Moore,

Alderman of the city of Chicago, on behalf of the League of Cities;

Ms. Nancy Stoner, Director, Clean Water Project, Natural Resources Defense Council; Mr. Paul Schwartz, National Policy Director, Clean Water Action; Mr. Bill Kukurin Associated Builders and

Contractors; Mr. Jim Barron, President, Ronkin Construction, on

behalf of the National Utility Contractors Association; Mr. Terry

Yellig, Building Trades Attorney, Sherman, Dunn, Cohen, Leifer &

Yellig, on behalf of the International Union of Operating Engineers.

On February 28, 2002, the Subcommittee on Fisheries, Wildlife,

and Water held the second legislative hearing on S. 1961 and other
40

water infrastructure related bills. Testimony was received from

Senator Paul S. Sarbanes; Mr. Robert Hirsch, Associate Director of

Water, U.S. Geological Survey; Mr. Andrew M. Chapman, President, Elizabethtown Water Company, on behalf of the National Association of Water Companies; Mr. Ed Archuleta, General Manager, El Paso Water Utilities, on behalf of the Association of the

Metropolitan Water Agencies; Mr. Paul Pinault, Executive Director,

Narragansett Bay Commission on behalf of the Association of Metropolitan Sewerage Agencies; Mr. Elmer Ronnebaum, General

Manager, Kansas Rural Water Association, on behalf of the National Rural Water Association; Mr. Howard Neukrug, Director, Office of Watershed of the Philadelphia Water Department, on behalf

of the American Water Works Association; Mr. Tom Morrissey,

President, Association of State and Interstate Water Pollution Control Administrators; and Mr. Jay L. Rutherford, P.E., Director,

Water Supply Division for the Vermont Department of Environmental Conservation, on behalf of the Association of State Drinking

Water Administrators.

On February 15, 2002, Senators Graham, Crapo, Jeffords and

Smith introduced S. 1961, the Water Investment Act of 2002. The

committee reported the bill on May 17, 2002 by a vote of 13 to 6.

On June 21, 2004, Senators Crapo, Inhofe and Murkowski introduced S. 2550, the Water Infrastructure Investment Act of 2004.

ROLL CALL VOTES

The Committee on Environment and Public Works met to consider S. 2550 on June 23, 2004. A manager’s amendment offered

by Senators Inhofe and Crapo was agreed to by voice vote.

An amendment filed by Senator Jeffords was accepted by unanimous consent. The Amendment makes technical changes to the

projects eligible for assistance.

An amendment filed by Senator Voinovich was accepted by unanimous consent. The amendment requires the States to use 2 percent of their Clean Water SRF for water quality management planning.

An amendment filed by Senator Jeffords was accepted by unanimous consent. The amendment allows States to use SRF funds to

provide grants to local watershed groups to capitalize local revolving loan funds to provide resources to nontraditional projects.

A substitute amendment offered by Senator Jeffords was defeated by rollcall with 9 ayes and 10 nays. Senators Jeffords, Baucus, Reid, Graham, Leiberman, Boxer, Wyden, Carper and Clinton

voted for the amendment. Senators Inhofe, Warner, Bond,

Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas and Allard

voted against the amendment.

An amendment offered by Senator Jeffords to authorize a program to address lead in drinking water was defeated by roll call

vote with 9 ayes and 10 nays. Senators Jeffords, Baucus, Reid,

Graham, Leiberman, Boxer, Wyden, Carper and Clinton voted for

the amendment. Senators Inhofe, Warner, Bond, Voinovich, Crapo,

Chafee, Cornyn, Murkowski, Thomas and Allard voted against the

amendment.

A Bond second degree amendment to the Jeffords amendment

which would have required EPA, before reducing the acceptable
41

level of lead in fixtures to .2 percent as directed in the Jeffords’

amendment to ensure there would not be a loss of jobs in the brass

and cooper fixture industry was defeated by voice vote.

An amendment offered by Senator Crapo to authorize funds for

the District of Columbia to address lead in its drinking water; authorize a study by the National Academy of Sciences into the D.C.

lead situation and to determine if a nationwide problem exists and

to provide funds to mitigate lead in drinking water in the nation’s

schools passed by roll call with 13 ayes and 6 nays. Senators Allard, Bond, Carper, Chafee, Cornyn, Crapo, Graham, Murkowski,

Reid, Thomas, Voinovich, Warner and Inhofe voted for the amendment. Senators Baucus, Boxer, Clinton Lieberman, Wyden, and Jeffords voted against the amendment.

An amendment offered by Senator Jeffords to require States to

look at local development plans as part of their continuing planning process outlined section 303(e) of the CWA was defeated by

roll call vote with 9 ayes and 10 nays. Senators Jeffords, Baucus,

Reid, Graham, Leiberman, Boxer, Wyden, Carper and Clinton

voted for the amendment. Senators Inhofe, Warner, Bond,

Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas and Allard

voted against the amendment.

An amendment offered by Senator Boxer to require the United

States Geological Survey to conduct an assessment of sites contaminated by perchlorate was agreed to by rollcall with 10 ayes

and 9 nays. Senators Jeffords, Baucus, Reid, Graham, Leiberman,

Boxer, Bond, Wyden, Carper and Clinton voted for the amendment.

Senators Inhofe, Warner, Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas and Allard voted against the amendment.

An amendment by Senator Voinovich to reauthorize the sewer

overflow control grants, clarifying that storm water is an eligible

expense, was accepted by voice vote as amended by a second degree

amendment by Senator Crapo to reauthorize the National Estuary

Program, the sewer overflow control grants, create a Sewer Control

Technology grant program and Small Public Water System Assistance Program. Senator Voinovich accepted the Crapo second degree

amendment.

An amendment by Senator Reid to impose Davis Bacon prevailing wage requirements on both the Clean Water SRFs and

Drinking Water SRFs was agreed to by roll call vote with 12 ayes

and 7 nays. Senators Baucus, Boxer, Carper, Chafee, Clinton,

Graham, Lieberman, Murkowski, Reid, Voinovich, Wyden and Jeffords voted for the amendment. Senators Allard, Bond, Cornyn,

Crapo, Thomas, Warner and Inhofe voted against the amendment.

An amendment by Senator Reid to create a small system assistance grant program was agreed to by roll call with 10 ayes and 9

nays. Senators Baucus, Bond, Boxer, Carper, Clinton, Graham,

Lieberman, Reid, Wyden, and Jeffords voted for the amendment.

Senators Allard, Chafee, Cornyn, Crapo, Murkowski, Thomas,

Voinovich, Warner and Inhofe voted against the amendment.

An amendment by Senator Graham to create a water resources

research program was agreed to by a vote of 13 ayes and 6 nays.

Senators Baucus, Bond, Boxer, Carper, Chafee, Clinton, Graham,

Lieberman, Murkowski, Reid, Voinovich, Wyden and Jeffords voted
42

for the amendment. Senators Allard, Cornyn, Crapo, Thomas, Warner and Inhofe voted against the amendment.

The committee passed the bill by voice vote with Senator Jeffords

recorded as voting nay.

REGULATORY IMPACT STATEMENT

In compliance with Section 11(b) of rule XXVI of the Standing

Rules of the Senate, the committee makes evaluation of the regulatory impact of the reported bill. The bill does not create any additional regulatory burdens, nor will it cause any adverse impact on

the personal privacy of individuals.

MANDATES ASSESSMENT

In compliance with the Unfunded Mandates Reform Act of 1995

(Public Law 104–4), the committee finds that S. 1961 would not impose unfunded mandates on local, State or tribal governments.
43

APPENDIX
44
45
46
47
48
49
50
51
52
53
54

COST OF LEGISLATION

Section 403 of the Congressional Budget and Impoundment Control Act requires that a statement of the cost of the reported bill,

prepared by the Congressional Budget Office, be included in the report. That statement follows:
55

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 2550, a bill to amend the Federal Water Pollution Control Act

and the Safe Drinking Water Act to improve water and wastewater infrastructure in the United States, as ordered reported

by the Senate Committee on Environment and Public Works on

June 23, 2004, and revised by the committee staff on August 18,

2004.

Summary

CBO estimates that implementing this legislation would cost

about $20 billion over the next 5 years, assuming the appropriation

of the authorized amounts. The funds would be used by the Environmental Protection Agency (EPA) to provide grants to States and

nonprofit organizations to support a wide range of water quality

projects and programs. The Joint Committee on Taxation (JCT) estimates that enacting S. 2550 would reduce revenues by $222 million over the 2005–2009 period and by $1.14 billion over the next

10 years. Enacting the bill would not affect direct spending.

S. 2550 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA).

Estimated Cost to the Federal Government

The estimated budgetary impact of S. 2550 is shown in Table 1.

The costs of this legislation fall within budget function 300 (natural

resources and environment).

Basis of Estimate

For this estimate, CBO assumes that S. 2550 will be enacted in

the fall of 2004, that the full amounts authorized will be appropriated for each year, and that outlays will follow the historical

pattern of spending for EPA programs. Components of the estimated costs are described below.

TABLE 1. ESTIMATED BUDGETARY EFFECTS OF S. 2550, THE WATER INFRASTRUCTURE FINANCING

ACT

By Fiscal Year, in Millions of Dollars

2004 2005 2006 2007 2008 2009

CHANGES IN REVENUES

Estimated Revenues1 ....................................................... 0 –1 –7 –26 –64 –124

SPENDING SUBJECT TO APPROPRIATION

EPA’s Spending for Water Infrastructure and Grants

Under Current Law.

Authorization Level2 ........................................ 2,214 35 0 0 0 0

Estimated Outlays .......................................... 2,172 1,908 1,648 1,050 363 16

Proposed Changes.

Authorization Level ......................................... 0 6,524 6,943 7,342 9,217 12,677

Estimated Outlays .......................................... 0 1,141 2,366 4,127 5,914 6,871

EPA’s Spending for Water Infrastructure and Grants

Under S. 2550.

Authorization Level2 ........................................ 2,214 6,559 6,943 7,342 9,217 12,677

Estimated Outlays .......................................... 2,172 3,049 4,014 5,177 6,277 6,887

1Estimate provided by JCT.

2The 2004 level is the amount appropriated for that year to EPA for the following programs: clean water State revolving fund, safe drinking

water State revolving fund, the national estuary program, and environmental finance centers. The 2005 level includes the amount authorized

under current law for the national estuary program.
56

Revenues

This bill would increase the funds available under the clean

water State revolving fund (SRF) and the safe Drinking Water

SRF, which could result in some States leveraging their funds by

issuing additional tax-exempt bonds. The JCT estimates that the

consequent reductions in revenue would total $222 million over the

2005–2009 period and $1.14 billion over the next 10 years.

SPENDING SUBJECT TO APPROPRIATION

S. 2550 would authorize appropriations totaling about $43 billion

over the next 5 years for EPA’s water infrastructure and grant programs (see Table 2).

TABLE 2. SPECIFIED AUTHORIZATIONS IN S. 2550

By Fiscal Year, in Millions of Dollars

2005 2006 2007 2008 2009

Clean Water SRF Grants1 .................................................................... 3,200 3,200 3,600 4,000 6,000

Safe Drinking Water SRF Grants1 ....................................................... 1,500 2,000 2,000 3,500 6,000

Small System Revolving Fund ............................................................ 25 25 25 25 25

Wet Weather Grants ............................................................................ 250 250 250 250 250

Alternative Water Source Projects ....................................................... 25 25 25 0 0

Grants for Lead Removal in Schools and in the District of Columbia ................................................................................................... 60 40 40 40 0

Environmental Finance Centers .......................................................... 2 2 2 2 2

Technical Assistance for Nonprofits ................................................... 25 25 25 25 25

Small Public Water Assistance Grants ............................................... 1,200 1,200 1,200 1,200 200

Research and Demonstration Grant Programs ................................... 40 40 40 40 40

Sewage Control Technology Grant Program ........................................ 100 100 100 100 100

Southeast Colorado Safe Drinking Water Grant ................................. 85 0 0 0 0

EPA Rate Study ................................................................................... 1 1 0 0 0

National Estuary Program ................................................................... 0 35 35 35 35

Special Water Resources Study .......................................................... 9 0 0 0 0

National Academy of Sciences Study ................................................. 2 0 0 0 0 ,

Total Authorization Level ................................. 6,524 6,943 7,342 9,217 12,677

1SRF = State revolving fund.

The bill would authorize the appropriation of $35 billion over the

2005–2009 period for EPA to provide capitalization grants for the

SRF program ($20 billion for the clean water SRF program and $15

billion for the safe Drinking Water SRF program). States would use

such grants along with their own funds to make low-interest loans

to communities and grants to Indian tribes to construct wastewater

treatment facilities and to fund other projects that would improve

the quality of drinking water. This bill would make several revisions to those grant programs, including expanding the types of

projects eligible for assistance, changing the formulas used to allocate grant money among the States, and extending the repayment

terms for loans made by States.

This legislation also would authorize the appropriation of $1.25

billion over the 2005–2009 period for EPA to make grants to States

to remedy sewage overflows (that is, the discharge of untreated

wastewater) and stormwater runoff (that is, water from rain or

snow that doesn’t infiltrate the ground). S. 2550 also would authorize the appropriation of $5 billion over the same period for EPA to

make grants to small public water systems to address the cost of

complying with drinking water regulations. In addition, the bill
57

would authorize about $1.5 billion over the next 5 years for various

other purposes, including establishing a small system revolving

fund, several grant programs aimed at promoting innovations in

technology and alternative approaches to water quality management, a grant program to address the removal of lead from schools

and in the District of Columbia, a grant program for Southeast Colorado to support the construction of a water transmission line, and

an EPA study of the rate structure of public water systems and

treatment works.

Intergovernmental and Private-Sector Impact

S. 2550 contains no intergovernmental or private-sector mandates as defined in UMRA. The bill would benefit State, local, and

tribal governments by reauthorizing and expanding grants to administer the revolving funds for the Clean Water and Safe Drinking Water programs. In addition, it would provide specific financial

assistance to rural communities, school systems (through the

States), and the District of Columbia.

Estimate Prepared By: Federal Spending: Susanne S. Mehlman;

Federal Revenues: Annabelle Bartsch; Impact on State, Local, and

Tribal Governments: Gregory Waring; Impact on the Private Sector: Karen Raupp.

Estimate Approved By: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.
58

ADDITIONAL VIEWS OF SENATORS JEFFORDS, BAUCUS, REID,

GRAHAM, LIEBERMAN, WYDEN, CARPER, AND CLINTON

GENERAL STATEMENT

S. 2550, the Water Infrastructure Financing Act, reauthorizes

the Clean Water State Revolving Fund (CWSRF) and the Drinking

Water State Revolving Fund (DWSRF) in an attempt to increase

funding available for critical water infrastructure investments.

However, this bill fails in several respects to modernize the State

Revolving Funds and to truly meet the water infrastructure needs

of our nation’s communities.

BACKGROUND

S. 2550 amends two major statutes - the Federal Water Pollution

Control Act (Clean Water Act) and Title XIV of the Public Health

Service Act (Safe Drinking Water Act) to increase authorized funding levels for each of the State Revolving Funds (SRFs). The

CWSRF was created in 1987 and the DWSRF was created in 1996.

S. 2550 focuses on modernizing the CWSRF.

Each time the Clean Water Act was substantially amended,

funding was a major issue. In 1972, 1987, and today, Congress

struggled to identify the appropriate level of the Federal financial

commitment to clean water. In testimony before the Senate Committee on Environment and Public Works in October 2002, marking

the 30th anniversary of the Clean Water Act, former Senator

George Mitchell (D-ME) outlined the history of the struggle to provide clean water funding.

‘‘In 1972, Congress chose to significantly increase Federal participation in clean water programs. It peaked at $5

billion in 1979 and 1980.

In 1981, President Reagan proposed the elimination of

all funding for clean water unless Congress reduced the

size and scope of the program. The Congress attempted to

respond to the President’s demand. Clean water funding

was reduced from $5 billion a year to $2.4 billion a year.

We reduced the types and numbers of projects that were eligible for Federal funding, and we reduced the Federal

share of the cost for construction projects from 75 percent

to 55 percent.

A further step to reform Federal involvement was the

adoption of a transition strategy to move the country away

from construction grants toward what was then seen as an

innovative mechanism called the State Revolving Fund.

The 1987 amendments authorized almost $10 billion over

5 years for the phase-out of the construction grants program and $8.4 billion over 5 years for the SRF. We knew

at that time that this level of funding was inadequate to

fully meet our Nation’s clean water needs, which then were

estimated at between $75 billion and $100 billion. But this

was a compromise struck between those who favored and

those who opposed any Federal investment in clean water.

Regrettably, despite our efforts, President Reagan vetoed the bill in 1986. In 1987, the Congress reenacted the
59

bill. The President vetoed it again, but this time Congress

overrode the veto and the Water Quality Act became law.

In 1987, we envisioned a situation where after the initial 5-year period of Federal investment, the SRF would

begin to revolve on its own and the Federal investment in

clean water programs would no longer be necessary. That

was not the first choice of many of us, but it was necessary

to get some legislation enacted to keep the process moving.

Mr. Chairman, as you and the members of the committee

know, Federal funding has continued, now at an annual

rate of about $1.3 billion a year. I understand that the debate continues over the level of and the mechanism and the

formula for distribution of the Federal investment in clean

water . . .’’

Clean water funding is not a new issue. In fact, it has been a

focal point of debate surrounding clean water policy for decades.

DISCUSSION

Today, the need for additional investment in both water and

drinking water infrastructure remains clear. There are three major

estimates of the spending gap for water infrastructure, which range

from $200 billion to $500 billion over 20 years. It is imperative that

we take care of this looming problem.

In April 2000, the Water Infrastructure Network

(WIN) released its first report, Clean and Safe Water for

the 21st Century, which identified a clean water spending

gap of $380 billion over 20 years and a drinking water

spending gap of $300 billion over 20 years.

On September 30, 2002, EPA released The Clean

Water and Drinking Water Infrastructure Gap Analysis

which estimates the spending gap for clean water needs at

$270 billion over 20 years. The Gap Analysis estimates the

spending gap for drinking water needs at $265 billion over

20 years.

In May 2002, the Congressional Budget Office (CBO)

released a report that estimated capital needs for clean

water and drinking water infrastructure. Additional analysis by CBO estimated the spending gap for clean water

needs between $132 billion and $388 billion over 20 years

and the spending gap for drinking water needs at between

$70 billion and $362 billion over 20 years.

Over the last several years, a large, bi-partisan coalition of Senators have sent letters requesting additional funds to the President, the Budget Committee, and the appropriators.

On April 18, 2002, Senators Sarbanes, Jeffords, and

others joined colleagues in requesting $5.2B for appropriations in fiscal year 2003.

On June 20, 2002, Senators Jeffords, Smith, Graham,

and Crapo also sent a letter to the Chairman and Ranking

Member of the VA, HUD and Independent Agencies Subcommittee on the Appropriations Committee to request additional resources to the Clean Water and Drinking Water

State Revolving Loan Funds.
60

On December 10, 2002, Senators Sarbanes and Jeffords along with thirty-one colleagues sent a letter to the

President requesting his Fiscal 2004 budget provide $5.2

billion for SRFs.

On March 7, 2003, Senators Sarbanes, Jeffords, and

Crapo sent a letter to the Senate Budget Committee requesting $5.2B for SRFs.

On April 2, 2003, Senators Jeffords and Sarbanes sent

a letter to the Chairman and Ranking Member of the

Budget Committee to insist that the Senate-approved

funding levels for the Clean Water and Safe Water State

Revolving Loan Funds be approved in conference.

On May 9, 2003, twenty-nine senators signed a bipartisan letter to the Chairman and Ranking Member of the

Appropriations Committee to ask them to provide an allocation for the Subcommittee on VA, HUD, and independent Agencies that will provide $5.2 billion for the

Clean Water and Safe Drinking Water Revolving Funds

(SRF). This letter was circulated by Senators Jeffords,

Crapo, and Sarbanes.

On March 2, 2004, thirty-one senators sent a bipartisan letter to the Chairman and Ranking Member of the

Budget Committee to urge them to make clean water and

drinking water infrastructure a priority and provide an allocation of $5.2 billion for the Clean Water and Safe

Drinking Water Revolving Funds (SRF). This letter was

circulated by Senators Sarbanes, Snowe, and Jeffords.

Senators Sarbanes, Crapo, and Jeffords offered an

amendment to the Budget resolution in March 2004 to provide an allocation of $5.2 billion for the CWSRF and

DWSRF. This amendment was accepted by voice vote.

On March 30, 2004, thirty-seven senators sent a bipartisan letter to the Chairman and Ranking Member of

the Budget Committee to urge the acceptance in conference of the Senate-approved funding levels for the Clean

Water and Safe Drinking Water State Revolving Fund

(SRF), which provides $3.2 billion for the Clean Water

SRF and $2 billion for the Safe Drinking Water SRF. This

letter was circulated by Senators Carpo, Sarbanes, and

Jeffords.

On May 11, 2004, fifty-three senators sent a bipartisan letter to the Chairman and Ranking Member of the

VA, HUD, and Independent Agencies Subcommittee on the

Appropriations Committee asking that they provide $3.2

billion for the Clean Water Revolving Fund and $2 billion

for the Safe Drinking Water Revolving Fund in the FY05

appropriations bill. This letter was circulated by Senators

Jeffords, Sarbanes, and Voinovich.

In the past two fiscal years, the Administration has sought a 37

percent cut in clean water infrastructure spending, proposing only

$850 million for the CWSRF. For the past 2 years, Senators Crapo,

Sarbanes, and Jeffords have offered an amendment to the budget

resolution to increase funding for water infrastructure. Each year,
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the amendment was accepted by the Senate, but failed to emerge

from conference.

In the 107th Congress, the Committee on Environment and Public Works passed S. 1961, the Water Investment Act, which increased funding levels for the CWSRF and DWSRF to a total of $35

billion over 5 years. This bill both increased the authorized funding

levels and took key steps to modernize the SRFs. S. 2550 as reported by the committee does not achieve the same result and does

not represent a bi-partisan consensus on the best approach to increase water infrastructure funding.

SUMMARY OF ISSUES

First, although the underlying bill was successfully amended in

committee to apply Davis-Bacon labor standards to the CWSRF

and the DWSRF, the report inaccurately describes the evolution of

these labor standards and their applicability to the SRFs.

Second, despite the recent revelations regarding the inadequacy

of our current regulatory structure for lead in drinking water, the

provision related to lead in drinking water that is included in this

bill actually weakens rather than strengthens existing statutory requirements. In addition, it fails to take any action to address the

No. 1 lesson learned from the Washington, D.C. lead in drinking

water incidents - improving communication of health risks with the

public. In fact, this section actually eliminates existing statutory

requirements for the communication of the results of lead in drinking water tests conducted in schools with parents.

Third, this bill takes no action to ensure that Federal funds do

not create an incentive for water infrastructure investments that

conflict with local development plans. It fails to recognize and respond to the fact that by providing funds for water infrastructure

investments, the Federal Government is, whether intentionally or

unintentionally, providing incentives for particular types of development.

Fourth, this bill fails to even attempt to enhance compliance with

the Clean Water Act by omitting a key provision included in S.

1961, the Water Investment Act, during the 107th Congress.

Fifth, the bill, after being successfully amended in committee,

takes into account the special circumstances surrounding a series

of specific water infrastructure needs, and it authorizes a series of

grant programs. However, the bill also dictates spending decisions

to States by creating a mandatory set-aside for water infrastructure grants, reducing the flexibility of States, reducing the funds

available for water infrastructure projects, and duplicating the program-specific grants included in the bill.

Sixth, the formula replacing the existing Clean Water Act distribution formula does not allow for adequate transition time for

States to adjust to revised allocations and unevenly distributes the

burden of the re-allocation of funds to a small number of States.

Finally, the bill includes a project authorization for the Southeast

Colorado Water Activity Enterprise at a cost of $85 million with no

explanation for its selection for earmarking in the bill in lieu of

many other similar projects.
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DAVIS BACON

S. 2550 includes two provisions, sections 102 and 202, which assure that Davis-Bacon prevailing wage requirements will apply to

all projects financed by federally capitalized State revolving funds

under both the Clean Water Act (CWA) and the Safe Drinking

Water Act (SDWA) for as long as these programs continue to be

federally funded.

Davis Bacon: Clean Water Act

Section 102 of this bill applies the Davis Bacon prevailing wage

standard to all funds distributed through the CWSRF. The majority report includes a skewed interpretation of existing law and the

applicability of Davis Bacon to the CWSRF. Section 102 of S. 2550

clarifies that the prevailing wage requirements of the Davis-Bacon

Act incorporated in the Clean Water Act (CWA) apply to construction of all projects financed with the assistance of State revolving

funds.

Section 513 of the CWA provides that ‘‘all laborers and mechanics employed by contractors or subcontractors on treatment works

for which grants are made under this Act shall be paid wages at

rates not less than those prevailing for the same type of work on

similar construction in the immediate locality.’’ The 1987 Water

Quality Act shifted Federal support for construction of treatment

works under the CWA from a program of direct Federal grants to

a program of Federal capitalization grants to support State revolving loan funds (SRF) with the intention of phasing out the Federal

capitalization grant program by the end of fiscal year 1994. As a

result, section 602(b)(6) of the new Title VI of the CWA that created the SRF program provided that the Davis-Bacon prevailing

wage requirements in section 513 of the Act would continue to

apply to all projects constructed ‘‘before fiscal year 1995 with funds

directly made available’’ by Federal capitalization grants. Notwithstanding the expectation that SRFs would become completely selfsufficient by fiscal year 1995, Congress has continued to appropriate funds for new Federal capitalization grants to the States’

SRFs every year since.

Moreover, after enactment of the 1987 Water Quality Act, the

Administrator of the Department of Labor’s Wage and Hour Division concluded that, under newly enacted section 602(b)(6) of the

CWA, the Davis-Bacon prevailing wage requirements in section 513

of the Act did not apply to ‘‘State matching funds required to be

contributed into the SRF, moneys repaid to the SRF, or other moneys.’’ Under this interpretation, Davis-Bacon prevailing wage requirements were applied the first time SRF funds supported by

Federal capitalization grants were used to financially assist construction of a water treatment project; however, when funds repaid

back to the SRF were ‘‘recycled’’ and used again to support construction of additional water treatment projects, Davis-Bacon

would not apply. Furthermore, EPA determined that, after the end

of fiscal year 1994, the Davis-Bacon prevailing wage requirements

in section 513 of the CWA no longer applied even to the construction of treatment works financed by SRFs with funds made directly

available by Federal capitalization grants.
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The combined effect of these interpretations has undermined the

longstanding policy of assuring that all construction workers employed on projects supported by CWA grants should not be paid

less than locally prevailing wage rates. Accordingly, in order to correct the evaporation of Davis-Bacon prevailing wage protection for

workers employed on construction projects that continue to be financially assisted by EPA notwithstanding Congress’ expectation

in 1987 that Federal support for this activity would cease at the

end of fiscal year 1994, section 102 of S. 2550 would amend section

603(c) of the CWA to provide that the Davis-Bacon prevailing wage

requirements in the Act will once again apply to construction of all

projects assisted in whole or in part by SRFs with Federal funds,

including those supported by funds directly made available through

Federal capitalization grants and those supported by ‘‘recycled’’

Federal funds.

Davis Bacon: Safe Drinking Water Act

Section 202 of S. 2550 clarifies that the prevailing wage requirements of the Davis-Bacon Act incorporated in the Safe Drinking

Water Act (SDWA) apply to construction of all projects financed

with the assistance of State revolving funds.

The SDWA was originally enacted in 1974. The Act authorized

EPA to make grants to assist in the development and demonstration (including construction) of projects that exhibit new or improved methods, approaches or technology for providing a safe supply of drinking water to the public. Section 1450(e) of the SDWA

includes a broadly worded provision that directs the EPA Administrator to ‘‘take such action as may be necessary to assure compliance with provisions of the [Davis-Bacon Act].’’ This provision not

only obligates the EPA Administrator to include Davis-Bacon prevailing wage requirements in contracts for the construction projects

to which EPA or the Federal Government is a direct party, but also

obligates the Administrator to insure that such requirements are

applied to construction projects supported by grants and other

forms of assistance provided by EPA pursuant to authorization

under the SDWA. Any other interpretation of Section 1450(e)

would render it redundant inasmuch as the Davis-Bacon Act, itself,

is automatically applicable by operation of law to all contracts in

excess of $2,000 to which an agency of the federal government is

a party for construction of public buildings and public works.

Thus, when Congress enacted the Safe Drinking Water Act

Amendments of 1996, which created the State Revolving Fund

(SRF) program that provides annual capitalization grants to each

State in order to fund an SRF that provides financial assistance to

local agencies to facilitate compliance with EPA’s national primary

drinking water standards, it was unnecessary to include a separate

Davis-Bacon provision. Nevertheless, EPA administratively determined that the Davis-Bacon prevailing wage requirement in the

SDWA does not apply to construction projects assisted by the SRFs.

In order to clarify Congress’ original intent, section 202 of S.

2550 would amend section 1450(e) of the SDWA to make it clear

that Davis-Bacon requirements apply to all construction projects

assisted in whole or in part by grants, loans, loan guarantees, refinancing, or any other form of assistance provided under the SDWA,
64

including assistance provided by SRFs with funds directly made

available from Federal capitalization grants or with ‘‘recycled’’

funds made available by repayment of Federal capitalization grant

funds. As such, section 202 of S. 2550 would not expand application

of Davis-Bacon prevailing wage requirements to the SRFs authorized under the Safe Drinking Water Act Amendments of 1996, but

rather make clear Congress’ original intent that those requirements apply to all construction projects assisted under the SDWA.

LEAD IN DRINKING WATER

Lead occurs naturally in the environment. However, during the

industrial revolution and subsequent years, lead became a commonly used product in solder, paint, and other industrial processes.

Today, lead is commonly used in ammunition, solder and lead

pipes, ceramic glazes, computer monitors, and medical, scientific

and military equipment.

Lead exposure occurs today from a variety of sources including

air (burning fuel, lead smelters, burning solid wastes), drinking

water (lead pipes and solder), bodies of water (contaminated by industrial waste or air deposition), dust and soil around landfills and

in old urban areas with lead paint, food (accumulates in food chain/

food storage), and paint (banned in 1978.)

Health effects of lead depend on the extent of the exposure. The

target system for chronic exposure is the nervous system. Hearing

loss, high blood pressure, and anemia can result. High levels damage the brain and kidneys and cause miscarriage.

Lead exposure is particularly dangerous for children who retain

about 68 percent of the lead that enters their bodies while adults

retain about 1 percent, according to the Environmental Health

Education Center, University of Maryland School of Nursing. Children exposed to lead may experience low birth weight, growth retardation, mental retardation, learning disabilities, muscle cramps,

stomach cramps, anemia, and kidney and brain damage. Lead is

also particularly harmful during pregnancy, affecting the unborn

child or leading to miscarriages and stillbirths.

The current blood lead level standard, set by the Centers for Disease Control (CDC), is 10 parts per billion. The CDC Advisory

Committee for Blood Lead Levels is currently undertaking a review

to determine if this number should be reduced. This review is in

part spurred by a major study published in the New England Journal of Medicine on April 17, 2003 which found that even blood lead

level concentrations below 10 micrograms per liter (or 10 parts per

billion) are harmful to children. A working group of the CDC Advisory Committee completed a report in February 2004 indicating

that there are adverse effects of blood lead levels below 10 parts

per billion.

EPA Regulations on Lead in Drinking Water

Before 1991, EPA regulations included a Maximum Contaminant

Load of 50 parts per billion for lead in drinking water. In June

1991, the EPA issued the lead and copper rule (56 FR 26460),

which eliminated the MCL and established a new framework for

dealing with lead in drinking water. The Maximum Contaminant

Level Goal (MCLG) was set at zero. As described in the report for
65

S. 2550, in lieu of an enforceable standard for lead content in

drinking water, the rule establishes a sampling program with a

trigger threshold above which public water systems have to take

steps to change corrosion control, treat source water, replace lead

service lines, and conduct public education.

In general, public water systems are required to sample homes

in areas where lead could be expected to be present in drinking

water (due to lead service lines, date of construction of the homes,

or other factors). If the 90th percentile of the samples taken exceeds 15 parts per billion, the requirements of the rule are triggered. If a system has extremely low lead levels for two consecutive

6-month monitoring periods, it can move to monitoring once every

3 years.

Once the 90th percentile requirement is triggered, the public

water system must take the following actions:

1. Water quality parameter monitoring used to determine

water corrosivity.

2. Public Education: specific requirements in regulations

regarding text of announcements. Billing inserts must be

sent directly to customers, newspaper notices and public

service announcements required. There are no public education requirements if the 90th percentile threshold is not

triggered.

3. Source Water Monitoring and Treatment: sampling and

treatment changes to reduce lead concentration. State involvement in establishing maximum permissible lead levels in source water. In Washington, D.C., that function

would be performed by EPA Region III because Washington, D.C. does not have primacy over the administration of the Safe Drinking Water Act.

4. Corrosion Control Treatment: Study required to identify

changes in corrosion control required, follow-up monitoring

required. Study is allowed to take 18 months and systems

have 24 months to install the revised corrosion control

treatment. This process could take over 3 years, during

which time a public water system would remain in compliance with the lead and copper rule.

If a system completes these actions and continues to exceed the

90th percentile requirements, they are required to monitor and/or

replace lead service lines. The public water system must replace 7

percent of their lead service lines per year OR they may test the

water in the service line and if all samples are less than 15 parts

per billion the system may ‘‘count’’ the service line as replaced.

This type of sampling is conducted in the home, where residents

run their faucet for a longer period of time to get to the water in

the pipe.

In summary, the effectiveness of the lead and copper rule to reduce lead exposure through drinking water depends heavily on

public education. The extended time periods during which corrosion

control procedures can be modified while the water system remains

in compliance make it imperative that adequate public education

occurs to ensure that people take precautionary steps to reduce

lead exposure while water chemistry is being modified.
66

In addition, because public water systems with extremely low

lead levels can move to a monitoring program that requires testing

only every 3 years, it is conceivable that public water systems that

have switched to chloramines to comply with the disinfection byproduct rule or for other reasons have not tested their systems for

lead contamination for a 3-year period, raising concern about the

degree to which the experience of Washington, D.C. could be a national problem.

It is worth noting that under the Safe Drinking Water Act, leaded solder in homes was banned as of 1987. However, ‘‘lead-free’’

faucets are defined as containing 8 percent lead. The industry has

developed voluntary leaching standards for those components that

typically dispense water for human consumption. Based on the information available to date, these voluntary standards do not apply

to bathtub faucets.

Washington, D.C. Experience

Earlier this year it was first reported that lead levels in the D.C.

public water system were significantly higher than Federal guidelines, and had been so for more than 2 years. The report for S.

2550 provides a detailed summary of the events in Washington,

D.C. with regard to lead in drinking water.

Committee Action

In response to the public health risk and the public outrage at

the handling of the Washington, D.C. situation, Senator Jeffords

and the democratic members of the Senate Committee on Environment and Public Works requested a hearing of the full committee

on this issue. On April 7, 2004, the Fisheries, Wildlife, and Water

Subcommittee held a hearing entitled, ‘‘Detection of Lead in the

D.C. Drinking Water System.’’ Testimony was received from Benjamin Grumbles, Acting Assistant Administrator of the Office of

Water at EPA, Donald Welsh, Director, Region III, EPA, Jerry

Johnson, General Manager, District of Columbia Water and Sewer

Authority, Dr. Daniel Lucey, Interim Chief Health Officer, District

of Columbia Department of Health, Thomas Jacobus, General Manager, Washington, Aqueduct, Baltimore District, U.S. Army Corps

of Engineer’s Gloria Borland, Dupont Circle Parents, Dr. Jody

Lanard, M.D., Risk Communication Consultant, and Dr. Dana

Best, M.D., Children’s National Medical Center.

On May 4, 2004, Senator Jeffords introduced the ‘‘Lead-Free

Drinking Water Act of 2004’’ with Senator Sarbanes and Delegate

Holmes-Norton, and Congressman Waxman introduced the House

companion bill. This legislation included a comprehensive approach

to improving the current regulatory structure for lead in drinking

water, based on the lessons learned from the Washington, D.C. incident. The bill was referred to the Senate Committee on Environment and Public Works, and no action has been taken. A short

summary of the bill follows:

LEAD-FREE DRINKING WATER ACT OF 2004

To amend the Safe Drinking Water Act to ensure that the District of Columbia and States are provided a safe, lead-free supply

of drinking water.
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• Requires the Environmental Protection Agency (EPA) to review and revise the national primary drinking water regulation for

lead within 18 months after the date of enactment. The revised

regulation shall establish a maximum contaminant level (MCL) for

lead in drinking water as measured at the tap, or, if EPA determines that it is not practicable to establish such a level, the Agency

shall establish a treatment technique to prevent adverse health effects. Requires that any new standard be at least as protective as

the current regulations. • Accelerates and ensures complete replacement of lead service

lines in systems that exceed the MCL or action level for lead in national primary drinking water regulations:

- Upon exceeding the MCL or action level for lead under

the national primary drinking water regulations, a water

system must replace at least 10 percent of its lead service

lines annually until they are gone.

- Priority is given to those homes with high lead test results and those that provide drinking water to infants,

children, and pregnant and lactating women.

- Eliminate the existing loophole allowing systems to

avoid replacing lead service lines by conducting water

tests.

- Establishes community water systems or nontransient

noncommunity water systems as the responsible entity to

replace lead service lines, including those owned by homeowners. Gives homeowners the final authority to determine if their lead service line is replaced. • Revamps public notice requirements.

- Upon exceeding the MCL or action level for lead, community water systems or nontransient noncommunity

water systems will, within 30 days, deliver notice to all

customers of the scope of the testing, the results, and corrective actions to be taken. A warning will be provided on

all water bills regarding the presence of a public health

risk from high lead levels in the drinking water. Repeat

notice will be provided every 90 days as long as the exceedance continues.

- Community water systems or nontransient noncommunity water systems will provide, within 14 days of the receipt of results, notification to each home tested of their

own results, the scope of the testing conducted and the results, and referrals for any required medical intervention.

- Requires special emphasis on alerting parents, caregivers, and other individuals and entities of the significantly greater risks to infants, children and pregnant and

lactating women posed by lead contamination of drinking

water; and encouraging individuals and entities when appropriate to immediately modify behavior to minimize exposure to lead in drinking water.

- Requires the EPA to establish verification procedures to

determine the effectiveness of public notification within 6

months.

• Establishes routine public education on lead in drinking

water.
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- Requires routine public education programs at community water systems or nontransient noncommunity water

systems that is designed to improve the general level of

public understanding of the risks posed by lead contamination and protective actions that can be taken. EPA may

waive this requirement for systems that have not exceeded

the action level for lead since June 7, 1991.

• Requires that, upon exceeding the MCL or action level for

lead, community water systems or nontransient noncommunity

water systems provide on-location filters certified for lead removal

to each residence, school, and day care facility in the service area

of the community water system or nontransient noncommunity

water system that could reasonably be expected to experience lead

contamination of drinking water in excess of the MCL or action

level for lead at any time after the date of exceedance.

- Priority is given to vulnerable populations, such as infants, children, and pregnant and lactating women, and to

residences, schools, and day care facilities that should

have priority based on testing results. Filters are to be explicitly made available regardless of whether individual

residences are known to have lead service lines.

• Establishes testing requirements and corrective actions for

Federal buildings.

• Requires one-time nationwide testing for lead in drinking

water at all community water systems or nontransient noncommunity water systems to be completed within 18 months of enactment.

• Modifies monitoring protocols to ensure that tests conducted

under the national primary drinking water regulations for lead are

conducted at 6 month intervals, that a statistically relevant sample

is used that is fully representative of all types of residential dwellings and commercial establishments, and that increased testing is

conducted after any substantial modification in the treatment of

drinking water or during any period in which the drinking water

exceeds the MCL or action level for lead.

• Requires that community water systems and nontransient

noncommunity water systems re-evaluate and optimize corrosion

control plans within 1 year of a change in water treatment or an

exceedance of the MCL or action level for lead.

• Establishes a lead service line replacement fund that authorizes $200 million per year for 2005 through 2009. Provides $40 million per year to the District of Columbia.

• Revises current Safe Drinking Water Act definition of ‘‘leadfree’’ as 8 percent lead to 0.2 percent lead and makes it unlawful

to import, manufacture, process, distribute in commerce, or install

in any residence anything but lead-free plumbing fixtures and components as of January 1, 2005.

• Establishes requirements for testing and removal of lead in

schools. Authorizes $30 million per year for this purpose.

Committee Mark-Up of S. 2550, June 23, 2004

Amendment Offered by Senator Jeffords

During the mark-up of S. 2550 on June 23, 2004, Senator Jeffords offered an amendment based on the Lead-Free Drinking
69

Water Act of 2004 to take the first critical steps to address the

most egregious issues that were highlighted by the Washington,

D.C. lead in drinking water crisis. This amendment was endorsed

by Consumer Federation of America, Clean Water Network, Children’s Defense Fund, and representatives of the Washington, D.C.

parents group involved in this issue. The residents of DC wrote: ‘‘It

is our hope that other mothers in this country will not have to experience the frustration, anger, and fear that we have during the

many months that this crisis has dragged without resolution.’’

First, the amendment strengthened existing public notice requirements in several key ways. As described in the report to S.

2550, one the leading complaints against WASA throughout this

period is that the agency failed to communicate effectively with the

public about how many homes had exceeded the action level (and

by how much) and what residents should do to protect themselves.

The effectiveness of the public notification of the presence of lead

in drinking water is the crux of the Lead and Copper Rule. In testimony before the Subcommittee on Fisheries, Wildlife and Water on

April 7, 2004, the Director of EPA’s Region III, Donald Walsh, stated, ‘‘public education efforts were ineffective, and we believe, not

fully compliant in all instances with EPA rules.’’ Additional testimony from a risk management expert and D.C. residents corroborated the view that public notification and education efforts were

ineffective.

Specifically, the Jeffords amendment took the following steps to

revamp public notice requirements: • Upon exceedance of the MCL or action level for lead, community water systems or nontransient noncommunity water systems,

within 30 days, must deliver notice to all customers of the scope

of the testing, the results, and corrective actions to be taken. A

warning will be provided on all water bills regarding the presence

of a public health risk from high lead levels in the drinking water.

Repeat notice will be provided every 90 days as long as the exceedance continues.

• Community water systems or nontransient noncommunity

water systems will provide, within 14 days of the receipt of results,

notification to each home tested of their own results, the scope of

the testing conducted and the results, and referrals for any required medical intervention.

• Requires special emphasis on alerting parents, caregivers, and

other individuals and entities of the significantly greater risks to

infants, children and pregnant and lactating women posed by lead

contamination of drinking water; and encouraging individuals and

entities when appropriate to immediately modify behavior to minimize exposure to lead in drinking water.

• Requires the EPA to establish verification procedures to determine the effectiveness of public notification within 6 months.

Despite the fact that the failure of the public notification system

is recognized as one of the most prominent concerns heard from

Washington, D.C. residents, S. 2550 as amended by the Crapo

amendment on lead takes no action to reform or improve the public

notification system associated with the Lead and Copper Rule.

Second, the amendment required the removal of 10 percent of all

lead service lines per year until they are gone, once a public water
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system exceeded the action level for lead. It is commonly believed

that the major cause of the Washington, D.C. lead in drinking

water incident was caused by increasing corrosivity of the water

supply, leading to leaching of lead from lead service lines and

plumbing components. The solution selected by the EPA and WASA

suggests that controlling the corrosivity of the water supply will reduce lead content in the water system. On August 23, 2004, WASA

began adding orthophosphate to the drinking water supply through

the city to reduce the corrosivity of the water supply in an effort

to reduce lead levels. EPA estimates that it will take 6 months to

detect a reduction in lead levels.

The current regulation requires replacement of 7 percent of lead

service lines per year only until a system no longer exceeds the action level. In addition, the current rules allow a public water system to ‘‘test’’ the water in the service line and if all samples are

less than 15 parts per billion the system, to ‘‘count’’ the service line

as replaced. The current regulations ensure only one thing - that

public water systems that have lead service lines will never actually replace all of them. As described in the report to S. 2550, there

is a general consensus that the cause of the lead problems in

Washington, D.C. was corrosive water causing lead to leach from

lead service lines. The Jeffords amendment closed the loophole allowing public water systems to ‘‘test out’’ of lead service line replacement requirements. It required the removal of lead service

lines from public water systems with lead contamination problems,

ensuring that the main source of that lead would be eliminated. It

authorized $200 million per year for the replacement of lead service

lines and earkmarked $40 million per year for this purpose. Section

210 of S. 2550 takes no action to eliminate lead service lines.

Third, the Jeffords amendment revised the current Safe Drinking

Water Act definition of ‘‘lead-free’’ from 8 percent lead to 0.2 percent lead and made it unlawful to import, manufacture, process,

distribute in commerce, or install in any residence anything but

lead-free plumbing fixtures and components as of January 1, 2005.

The fact that a Federal statute permits the advertisement of products as ‘‘lead-free’’ when they actually contain 8 percent lead is an

egregious violation of the public trust. In addition, since the adoption of this definition, much progress has been made in the development of lead-free alternatives, which are currently sold on the

open market by companies such as Cambridge Brass. Phasing out

lead in plumbing components, coupled with the replacement of lead

service lines, would have ensured that lead is absent from our

drinking water. S. 2550 as amended by the Crapo amendment

takes no action to modify this definition. Finally, the Jeffords

amendment required the testing and remediation of lead contamination in schools and authorized $30 million annually for this purpose. This amendment made several changes to existing law. The

main improvements this amendment makes over current law, section 1464 of the SDWA, are:

• it increases funds available to States to reimburse local educational agencies for costs incurred as they conduct the testing and

remediation of lead in schools;
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• it provides for the Administrator of the EPA to carry out a

program for the testing and remediation of lead contamination in

schools if States fail to do so; • it extended the expired authorization for $30 million per year

for these purposes.

Section 1464 of the SDWA also requires that test results for lead

in drinking water in schools be made available to the public and

that parents, teachers, and employee organizations are notified of

the availability of those test results. The Jeffords amendment required that testing and remediation occur, that funds were available to States for this program, that people were notified of the results, and that, if States failed to execute a program, the EPA

would execute a program to ensure that testing and remediation of

lead in schools would actually occur.

The Jeffords amendment would have helped to restore public

confidence in a system that is broken and to ensure that lead in

our water is a thing of our past. This amendment would have ensured that our children’s schools will be lead-free, that citizens will

know when their water systems test high for lead, that the words

‘‘lead-free’’ will actually mean ‘‘lead-free’’, and that lead service

lines will not be allowed to sit leaching lead for decades in public

water systems.

The Jeffords amendment was defeated by a vote of 10–9. Voting

for the amendment were Senators Jeffords, Baucus, Reid, Graham,

Lieberman, Boxer, Wyden, Carper, and Clinton. Voting against the

amendment were Senators Inhofe, Warner, Bond, Voinovich, Crapo,

Chafee, Cornyn, Murkowski, Thomas, and Allard.

Amendment Offered by Senator Crapo

Instead of adopting the Jeffords amendment which would have

taken substantive action to reduce lead in drinking water, the committee adopted the Crapo amendment regarding lead which, instead of enhancing public health protection as a result of the Washington, D.C. lead in drinking water crisis, actually rolls back existing requirements. Section 210 of S. 2550 establishes as similar reimbursement program to that in existing law, section 1465 of the

SDWA, and that established by Senator Jeffords’ amendment. Section 1465 in current law provided funds to assist States in meeting

the requirements of section 1464 which required that States establish an assistance program for local educational agencies to test

and remediate lead contamination in drinking water from coolers

and other sources in schools. This section also required that results

of testing be available to the public, including teachers, other

school personnel, and parents. It also required remediation of non

lead-free drinking water coolers in schools within 15 months of October 31, 1988. The Jeffords amendment mirrored these provisions.

The majority report describes the results of the court case, Acorn

v. Edwards (U.S. 5th Circuit, 1996), in which the Court struck

down as unconstitutional Sections 1464(d)(1) and (d)(3) because

they violated the 10th Amendment of the Constitution. The report

quotes a portion of the Court’s decision which stated, ‘‘that section

300j–24(d) [SDWA Section 1464(d)] is an unconstitutional intrusion

upon the States’ sovereign prerogative to legislate as it sees fit.’’

The report cites this Court decision as justification for the deletion
72

of the testing and remediation program and the public notification

requirements of Section 1464.

However, the majority report excludes the first half of this sentence in Acorn v. Edwards, which explained that the reason for the

Court’s finding was because States did not have the option to decline regulation. ‘‘Because § 300j–24(d) deprives States of the option

to decline regulating non-lead free drinking water coolers, we likewise find no merit to this argument and conclude that § 300j–24(d)

is an unconstitutional intrusion upon the States’ sovereign prerogative to legislate as it sees fit.’’ Acorn v. Edwards, 81 F. 3d 1387 at

1394 (1996). The Jeffords amendment solved this problem by requiring that, if a State did not execute the testing, remediation,

and public notification requirements, the EPA would be required to

perform this function. Thus, the Jeffords amendment established a

program to test and remediate lead in drinking water in schools,

provided funds for States to implement the program, ensured that

this program would actually occur by requiring EPA to perform

these functions if States did not – thereby resolving the concerns

of the Court with regard to the 10th Amendment, and retained existing public notification requirements for test results.

Section 210 of S. 2550, as offered by Senator Crapo, strikes all

of the testing and remediation requirements of section 1464 and,

in lieu of those requirements, authorized a voluntary reimbursement program for States who choose to take action to address lead

in schools. Section 210 of S. 2550 specifically excluded provisions

making test results available to the public. Instead of responding

to the public outrage over the lack of information provided about

the Washington, D.C. lead incident, section 210 of S. 2550 amendment actually removes existing public notification requirements in

current law. Instead of responding to the public concern regarding

lead in schools, section 210 of S. 2550 actually rolls back existing

requirements for testing and remediation of lead in schools by

turning mandatory requirements into voluntary requirements.

Overall, section 210 of S. 2550 fails to take meaningful action to

enhance protections from lead in drinking water provided by our

current statutes and regulations and, instead, rolls back existing

protections designed to protect children from exposure to lead in

schools.

DEFERENCE TO LOCAL GOVERNMENTS

The Water Infrastructure Financing Act fails to take action to

ensure that Federal funds do not create an incentive for water infrastructure investments that conflict with local development

plans. It fails to recognize and respond to the fact that by providing

funds for water infrastructure investments, the Federal Government can often drive local decisions about development and growth.

Commercial and residential development requires substantial infrastructure to support it. It requires investment from the public

sector for roads, water lines, and school and public safety resources, as well as private infrastructure such as power and telephone lines. Public officials have developed infrastructure-related

tools for managing growth. For example, local officials may establish urban service areas, adopt adequate public facilities ordinances, levy impact taxes or fees, or use similar mechanisms to in-
73

ternalize the true economic costs of new development. In addition,

an increasing number of States have recently enabled or required

local jurisdictions to manage land more efficiently through the designation of growth areas or application of State criteria for funding

infrastructure.

Usually costing of millions of dollars per mile, capital investments in new water infrastructure are among the most expensive

forms of public infrastructure needed to support development. Sewage treatment plants often cost millions of dollars each, and water

lines cost several hundred thousand dollars per mile, costs that are

not insignificant. Moreover the costs of operation and maintenance

of infrastructure are substantial and continuing.

Infrastructure construction is not only capital intensive; it has a

significant effect on the environment. In a report from the Open

Lands Project, a Chicago-based urban conservation group, the

group found that water infrastructure plans which are not coordinated with development plans such as land use plans, watershed

plans, and transportation plans may cause environmental problems. The report states, ‘‘the effect of urbanization on water quality

may be the most important ‘environmental impact’ of the entire

[planning] process, and yet it remains unexamined and

unaddressed.’’ The report also found that because infrastructure

plans were not sufficiently coordinated with development plans,

‘‘the State has allowed communities to extend sewer lines into

areas that include wetlands, flood plains and other environmentally sensitive property.’’

State and local officials bear the responsibility of making choices

about their own approaches to development. Because the Federal

Government plays a prominent role in the financing of water infrastructure, Congress is also partly responsible to ensure that funding for water infrastructure through the SRF solves existing water

quality problems and complements, rather than conflicts with, ongoing State or local initiatives to manage growth and development.

Senator Jeffords offered an amendment during the business

meeting on June 23, 2004 to address this issue. The amendment

would have taken four specific actions:

• Similar to the priority system amendments in section 105 of

S. 2550, States would give additional priority in distributing funds

from SRFs to projects that are consistent with existing local land

use, transportation, and watershed plans, and to those projects

that review options for urban waterfront development or

brownfields revitalization that may be conducted in conjunction

with the project. This section would not require that any new plans

be created. Instead, it depends on existing plans created by local

governments as the guide. If water infrastructure projects are consistent with these guides, they would receive additional priority. If

not, they would remain eligible, but would simply not receive additional priority for this particular factor;

• The existing continuous planning process required by section

303(e) of the CWA would be revised to incorporate applicable regional or local land use plans. This section does not add any new

planning requirements. It requires only that regional or local land

use plans be reviewed as part of the existing continuous planning

process;
74

• A National Academy of Sciences study would be authorized on

the impact of water and wastewater investments on local land use

development patterns; and • Extra priority would be given to States when distributing SRF

funds to an explicit list of waterfront redevelopment projects.

Projects included in this list are:

Windsor, Vermont, Riverside Redevelopment.

St. Louis, Missouri, Brownfield Pilot Program.

Hudson River Park, New York.

Fields Point, Rhode Island.

Milwaukee, Wisconsin, Riverfront Development.

Lawrence Gateway Environmental Restoration Project.

Detroit River, Michigan, Master Plan.

Ohio Riverfront Sturdy, Cincinnati, Ohio.

Montgomery, Alabama, Riverfront Development.

Wabash Riverfront Development, Indiana.

Mississippi Riverfront, Tennessee.

The Jeffords amendment failed in committee by a vote of 10–9

with Senators Jeffords, Baucus, Reid, Graham, Lieberman, Boxer,

Wyden, Carper, and Clinton supporting the amendment and Senators Inhofe, Warner, Bond, Voinovich, Crapo, Chafee, Cornyn,

Murkowski, Thomas, and Allard voting against the amendment.

INCENTIVES FOR COMPLIANCE

S. 1961, the Water Investment Act, passed by the Committee on

Environment and Public Works in the 107th Congress included a

provision that treatment works found to be in significant noncompliance with the Clean Water Act are prohibited from receiving

assistance other than those funds that would be needed to bring a

system into compliance in accordance with an enforceable administrative or judicial order or other than those funds for planning, design, or security. The exceptions in that bill ensured that utilities

that are seeking to return to compliance are still eligible, that planning and design functions are still eligible, and that security improvements are still eligible.

This provision would provide an added incentive for utilities to

maintain compliance with the CWA. It targets the worst offenders–

the primary criteria for significant non-compliance are:

• exceed specific conventional pollutant limits by 40 percent or

specific toxic pollutantlimits by 20 percent at a given discharge

point for two or more months during the two consecutive quarters;

• violate any monthly effluent limit at a given point by any

amount for any four or more months during the two consecutive

quarters.

A recent EPA report by the Office of Enforcement and Compliance Assistance documented extensive non-compliance with the

CWA. In 2002, 83 percent of facilities in SNC were repeat SNCs.

In 2001, 25 percent of major facilities were in SNC. Sixteen percent–29 percent remained in that status for 2 years or longer. Of

those that returned to compliance, there is a 50/50 probability that

they will return to SNC again within 2 years.

Given the large number of facilities in SNC and the apparent frequency with which they return to SNC, it is clear that incentives

to encourage compliance are required. However, S. 2550, the Water
75

Infrastructure Financing Act, includes no provisions to provide an

incentive for compliance or to ensure that Federal funds are spent

in a manner that leads to compliance. A provision similar to that

included in section 103 of S. 1961, the Water Investment Act, in

the 107th Congress was included in the substitute amendment offered by Senator Jeffords which failed by a vote of 10–9. Voting in

support of the amendment were Senators Jeffords, Baucus, Reid,

Graham, Lieberman, Boxer, Wyden, Carper, and Clinton. Senators

Inhofe, Warner, Bond, Voinovich, Crapo, Chafee, Cornyn, Murkowski, Thomas, and Allard voted against the amendment.

GRANTS

S. 2550, as amended, recognizes that there are some needs that

should be met above and beyond the funding levels authorized in

the Clean Water State Revolving Fund. In particular, wet weather,

stormwater, and small community needs are some of the most

pressing water quality problems facing municipalities today. The

second degree amendment offered by Senator Crapo to the

Voinovich amendment on this topic included amendments filed by

Senators Jeffords (wet weather and stormwater), Warner (Chesapeake Bay), Chafee (National Estuaries), Graham (alternative

water source development) and Reid (small systems).

However, the bill also dictates spending decisions to States by

creating a mandatory set-aside for water infrastructure grants, reducing the flexibility of States, reducing the funds available for

water infrastructure projects, and duplicating the program-specific

grants included in the bill. On September 14, 2004, the Council of

Infrastructure Financing Authorities (CIFA) wrote to the committee stating, ‘‘This provision is troubling in several respects. Initially, it seems at odds with the goal you support of allowing States

maximum flexibility in determining how best to meet their individual water quality priorities. An arbitrary set aside runs counter

to the primary role provided to the States in managing the SRFs.’’

CIFA goes on to say:

‘‘The legislation specifies no basis for the grant set

aside. The requirement is not directed toward addressing

hardship situations nor is any financing need identified

that would require a grant in lieu of a loan. Further, the

language permitting a waiver of the grant requirement if

loan applications are processed timely leaves in even greater doubt the possible rationale for the set aside requirement.

While there is no apparent benefit deriving from the set

aside, there are a number of potential adverse impacts. A

set aside to provide grants is contrary to the underlying

purpose of the revolving fund to continually maximize

available resources, derived from Federal capital grants,

State matching dollars and the loan repayment stream, to

finance water infrastructure. The cumulative effect of a 10

percent set aside, not subject to repayment to the SRF,

would be a significant diminishing in funds revolving and

thus less financing ultimately available to communities.
76

In the case of States that leverage SRF funds, the negative impact of the set aside is multiplied. States have discretion to use the Federal capitalization grants as collateral

to borrow in the public bond market to increase the pool of

available funds for project lending. Assuming a leveraging

factor ranging from 2:1 to 3:1, States could experience as

much as a 30 percent reduction in project funding initially

as a result of the grant set aside requirement. Over time

this reduction will increase exponentially.’’

CWA FUNDING FORMULA

The revisions to the Clean Water Act SRF distribution formula

included in the Water Infrastructure Financing Act are flawed in

two important ways. First, the formula places unfair burdens on

three States-Iowa, Michigan, and West Virginia-to the benefit of

the others. To illustrate, if the Majority formula proposal were

adopted, Michigan would see its allocation over 5 years cut by more

than half, or over $166 million. Iowa and West Virginia would also

see substantial cuts over the same 5-year period. All together,

these three States would see $215 million less over the life of the

formula. The majority of States would see only very modest gains

in allocations over 5 years; Florida, a State with burgeoning water

infrastructure funding needs, would see barely an increase of $5

million over 5 years. More damaging than the inequitable distribution of losses under the formula in the Water Infrastructure Financing Act, is the formula’s lack of a period of time to transition

from a States’ current allocation to the proposed allocation. The immediacy of the adoption of what is in some cases major change in

a States’ allocation using the formula in the Water Infrastructure

Financing Act is likely to compromise the ability of the water authorities in those States to carry out their mission.

In contrast, the substitute amendment offered by Senator Jeffords at the mark-up on June 23, 2004 included a revised formula

that would spread losses more thinly across States and allow time

for the losses to take effect. Using a ‘‘transition period’’ over the 5-

year lifespan of the formula, States that experience losses in water

infrastructure funding are protected from significant cuts in the

first year, and are allowed to absorb those cuts over time.

PROJECT AUTHORIZATIONS

Finally, the bill includes a project authorization for the Southeast

Colorado Water Activity Enterprise at a cost of $85 million with no

explanation for its selection for earmarking in the bill in lieu of

many other similar projects. The report accompanying the reported

bill includes no explanation as to why this project was selected as

the nation’s highest priority for water projects in the Safe Drinking

Water Act program. In addition, the substitute amendment offered

by Senator Jeffords included project authorizations for multiple

water infrastructure projects. This amendment failed by a vote of

10–9 with Senators Jeffords, Baucus, Reid, Graham, Lieberman,

Boxer, Wyden, Carper, and Clinton voting for the amendment and

Senators Inhofe, Warner, Bond, Voinovich, Crapo, Chafee, Cornyn,

Murkowski, Thomas, and Allard voting against the amendment.
77

The projects which failed to receive support in this amendment and

therefore, are not authorized in this bill, include:

Memphis Metropolitan Area Groundwater Study, Arkansas, Tennessee;

Old Nogales Highway, Colonia, Arizona;

Big Creek Watershed Restoration through Stormwater Control,

Georgia;

White River Environmental Restoration through CSO Replacement, Indiana;

Bastrop Morehouse Parish Water Supply, Louisiana;

Fall River and New Bedford Environmental Infrastructure

Project, Massachusetts;

Statewide Combined Sewer Overflow Upgrades, Michigan;

Northeastern Minnesota water infrastructure, Minnesota;

DeSoto County Environmental Infrastructure, Mississippi;

Lower Platte River Drinking Water, Nebraska;

Central New Mexico Environmental Infrastructure, New Mexico;

Parshall Drinking Water Supply, North Dakota;

Southeastern Pennsylvania Water Infrastructure, Pennsylvania;

Lake Marion and Lake Moultrie drinking water and wastewater

collection, South Carolina;

Cheyenne River Sioux Tribe Water System, South Dakota;

Colonias environmental infrastructure, Texas;

Park City Water infrastructure, Utah;

Chittenden County Storm Water Improvement, Chittenden

County, Vermont;

Town of Waitsfield—Wastewater Treatment Facilities/Water relocation;

Town of Colchester Airport Parkway;

Wastewater Treatment Plant, South Burlington, Vermont;

The following California Affordable Quantity and Quality Water

Act (CAL-AQQWA) Feasibility Studies:

A conjunctive use project, in cooperation with the Calaveras

County Water District;

A water reclamation project, in cooperation with the city of Carson;

A water reclamation project, in cooperation with the Coastside

County Water District;

A water supply project at Pacheco Creek, Los Viboras Creek, and

Dos Picachos Creek, in cooperation with the San Benito County

Water District;

A wetland restoration project, in cooperation with the city of San

Diego;

A sediment management project at the Twitchell Reservoir, in cooperation with the Santa Maria Valley Water Conservation

District;

A groundwater assessment project at the North River, in cooperation with the Tia Juana Valley County Water District;

Regional Seawater Desalination Program-San Diego County

Water Authority;

Mission Springs Water District Water and Water InfrastructureDesert Hot Springs;
78

Eastern Santa Clara River Subbasin (Perchlorate) Remediation

Initiative-Castaic Lake Water Agency;

Bay Area Regional Desalination Project;

Calexico New River Public Health Protection Project;

South Montebello Water Infrastructure Improvement-Montebello;

Big Bear Lake Environmental Restoration project, San

Bernardino Mountains;

Recycled Water Transmission Pipelines/pipeline construction,

Eastern Municipal Water district;

Raymond Basin Groundwater Restoration Project-Raymond

Basin Management Board;

Groundwater Recovery Enhancement and Treatment (GREAT)

Program, city of Oxnard;

Beach Septic System Improvements, Los Angeles County;

San Diego Region Three Reservoir Intertie Project, San Diego

County;

Port of Stockton, Port of Stockton (Rough and Ready Island);

Amador Regional Wastewater Collection and Treatment project,

Amador Water Agency;

Canal Point Wastewater System, city of Pahokee, Florida;

City of Marathon Wastewater Improvement, city of Marathon,

Florida;

Cypress Creek Restoration, Florida;

Key West Stormwater Improvements, Florida;

Lake Region Water Treatment Plan, Florida;

Lower West Coast Regional Irrigation Distribution System, Florida;

Miami Dade NW Wellfield-UV Disinfection of Raw Water, Florida;

Tri-County Biosolids Pelletization Facility, Florida;

East-Central Florida Integrated Water Resources Project, Florida;

Arkansas Valley Conduit, Colorado;

Southeast Colorado publicly owned water related environmental

infrastructure, Colorado;

Anacostia River Ecosystem Restoration and Combined Sewer

Overflow, Washington, D.C.;

Baltimore Metropolitan/Gwynns Falls project, Maryland;

St. Louis Environmental Infrastructure, Missouri;

Lake Tahoe Restoration, Nevada;

Henderson Watershed Assistance, Nevada;

Ohio Environmental Infrastructure Program, Ohio;

Rural Washington wastewater treatment and water supply,

Washington;

Milwaukee Metropolitan Sewer District, Wisconsin; and

Wind River Irrigation Project, Wyoming.
79

ADDITIONAL VIEWS OF SENATOR JEFFORDS

July 11, 2004

JAMES INHOFE

Chairman, Senate Environment and Public Works Committee

Washington, DC

JAMES JEFFORDS

Ranking Member, Senate Environment and Public Works Committee

Washington, DC

MICHAEL CRAPO

Chairman, Subcommittee on Fisheries, Wildlife and Water

Senate Environment and Public Works Committee

Washington, DC

DEAR SENATORS INHOFE, JEFFORDS AND CRAPO:

I write to you today to express our concerns regarding S. 2550, the Water Infrastructure Financing Act. I believe that the changes to the Clean Water Act State

Revolving Fund allocation formula proposed in this bill would continue the tremendous funding disparity in clean water funds that leaves many States, including my

own, with insufficient resources to even come close to meeting their water infrastructure needs. That is wrong and it has to change. Let me tell you why this bill

does not address the problem.

The proposed formula in S. 2550 is not a true needs-based allocation. Instead, the

bill uses needs as a target for future allocations, tying consideration of need to future appropriations levels for the entire fund. To shift from the current allocation

to the target allocation under the needs survey, the appropriation level of the fund

must reach $3.15 billion. That appropriation level, however, has only averaged $1.35

billion a year, which is a far cry from the trigger. Consequently, under the proposed

formula, there is a real possibility that States, like my home State of Arizona, will

never receive their fair share of the funds authorized and appropriated for the State

Revolving Fund.

In those years that we do not appropriate $3.15 billion, which I predict will be

every year, the bill’s transition formula would apply. The transition formula protects

small states—which, under this formula, grow first—and permits large States to

keep their current large allocation despite lack of need. These limits on growth and

loss are nothing more than a recipe for choosing winners and losers. In effect, the

Committee is asking States with exploding populations and growing needs, like my

own, to subsidize the water infrastructure in these other States and pay more for

the same infrastructure within their own States. This is not sound Federal policy.

For those States that would receive less funding under a needs-based formula, the

burden should be on them to explain why their States should receive more than

they need while other States receive dramatically less.

I have consistently advocated a formula that is based on need as documented in

the EPA Clean Water Act Watershed Needs Survey. In August 2001, I offered an

amendment to the VA-HUD appropriations bill that would have changed the allocation formula to a needs-based formula with a 1-percent floor. I withdrew the amendment, but only after securing a commitment from this Committee and a Senate Resolution, to work together to fix this problem and report out a needs-based allocation

formula. I have worked closely with you and your Committee since then, including

testifying on this issue. I had high hopes that we would make progress this year

to get a bill that was fair and equitable for all of the States. Thus, I was surprised

and disappointed to hear that you are moving forward with S. 2550, the Water Infrastructure Financing Act.

Moving to a needs-based formula would eliminate unfunded mandates in a manner that is fair and equitable. There is a precedent here in the Safe Drinking Water

Act, which allocations funds on the basis of drinking water need. In the time since

the markup, you once again indicated your willingness and pledged your support to

work with us to address this issue. I am ready to work with you and look forward

to getting this issue resolved this time.

Sincerely,

JON KYL

United States Senator
80

CHANGES IN EXISTING LAW

In compliance with section 12 of rule XXVI of the Standing Rules

of the Senate, changes in existing law made by the bill as reported

are shown as follows: Existing law proposed to be omitted is enclosed in øblack brackets¿, new matter is printed in italic, existing

law in which no change is proposed is shown in roman:

* * * * * * *

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

FEDERAL WATER POLLUTION CONTROL ACT

* * * * * * *

SEC. 220. PILOT PROGRAM FOR ALTERNATIVE WATER SOURCE

PROJECTS.

(a) * * *

* * * * * * *

(j) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to

be appropriated to carry out this section øa total of $75,000,000 for

fiscal years 2002 through 2004¿ $25,000,000 for each of fiscal years

2005 through 2007. Such sums shall remain available until expended.

* * * * * * *

øSEC. 221. SEWER OVERFLOW CONTROL GRANTS.¿

SEC. 221. WET WEATHER GRANTS.

(a) IN GENERAL.—In any fiscal year in which the Administrator has available for obligation at least $1,350,000,000 for the purposes

of section 601—

(1) the Administrator may make grants to States for the

purpose of providing grants to a municipality or municipal entity for planning, design, and construction of treatment works

to intercept, transport, control, or treat municipal combined

sewer overflows øand sanitary sewer overflows¿ , sanitary

sewer overflows, and stormwater runoff; and

(2) subject to subsection (g), the Administrator may make

a direct grant to a municipality or municipal entity for the purposes described in paragraph (1).

(b) PRIORITIZATION.—In selecting from among municipalities

applying for grants under subsection (a), a State or the Administrator shall give priority to an applicant that—

(1) is a municipality that is a financially distressed community under subsection (c);

(2) has implemented or is complying with an implementation schedule for the nine minimum controls specified in the

CSO control policy referred to in section 402(q)(1) and has

begun implementing a long-term municipal combined sewer

overflow control plan øor a separate sanitary sewer overflow

control plan¿;
81

(3) is a municipality that is subject to the Phase I or Phase

II stormwater regulations;

ø(3)¿ (4) is requesting a grant for a project that is on a

State’s intended use plan pursuant to section 606(c); or

ø(4)¿ (5) is an Alaska Native Village.

(c) FINANCIALLY DISTRESSED COMMUNITY.— (1) DEFINITION.—In subsection (b), the term ‘‘financially

distressed community’’ means a community that meets affordability criteria established by the State in which the community is located, if such criteria are developed after public review and comment.

(2) CONSIDERATION OF IMPACT ON WATER AND SEWER

RATES.—In determining if a community is a distressed community for the purposes of subsection (b), the State shall consider,

among other factors, the extent to which the rate of growth of

a community’s tax base has been historically slow such that

implementing a plan described in subsection (b)(2) would result

in a significant increase in any water or sewer rate charged by

the community’s publicly owned wastewater treatment facility.

(3) INFORMATION TO ASSIST STATES.—The Administrator

may publish information to assist States in establishing affordability criteria under paragraph (1).

(d) COST-SHARING.—The Federal share of the cost of activities

carried out using amounts from a grant made under subsection (a)

shall be not less than 55 percent of the cost. The non-Federal share

of the cost may include, in any amount, public and private funds

and in-kind services, and may include, notwithstanding section

ø603(h)¿ 603(i), financial assistance, including loans, from a State

water pollution control revolving fund.

(e) ADMINISTRATIVE REPORTING REQUIREMENTS.—If a project

receives grant assistance under subsection (a) and loan assistance

from a State water pollution control revolving fund and the loan

assistance is for 15 percent or more of the cost of the project, the

project may be administered in accordance with State water pollution control revolving fund administrative reporting requirements

for the purposes of streamlining such requirements.

(f) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to

be appropriated to carry out this øsection $750,000,000 for each of

fiscal years 2002 and 2003. Such sums shall remain available until

expended.¿ section $250,000,000 for each of fiscal years 2005

through 2009, to remain available until expended.

(g) ALLOCATION OF FUNDS.—

(1) FISCAL YEAR 2002.—Subject to subsection (h), the Administrator shall use the amounts appropriated to carry out

this section for fiscal year 2002 for making grants to municipalities and municipal entities under subsection (a)(2), in accordance with the criteria set forth in subsection (b).

(2) FISCAL YEAR 2003.—Subject to subsection (h), the Administrator shall use the amounts appropriated to carry out

this section for fiscal year 2003 as follows: (A) Not to exceed $250,000,000 for making grants to

municipalities and municipal entities under subsection

(a)(2), in accordance with the criteria set forth in subsection (b).
82

(B) All remaining amounts for making grants to States

under subsection (a)(1), in accordance with a formula to be

established by the Administrator, after providing notice

and an opportunity for public comment, that allocates to

each State a proportional share of such amounts based on

the total needs of the State for municipal combined sewer

overflow controls øand sanitary sewer overflow controls¿ , sanitary sewer overflow controls, and stormwater runoff

controls identified in the most recent survey conducted

pursuant to section 516(b)(1).

(h) ADMINISTRATIVE EXPENSES.—Of the amounts appropriated

to carry out this section for each fiscal year—

(1) the Administrator may retain an amount not to exceed

1 percent for the reasonable and necessary costs of administering this section; and

(2) the Administrator, or a State, may retain an amount

not to exceed 4 percent of any grant made to a municipality or

municipal entity under subsection (a), for the reasonable and

necessary costs of administering the grant.

(i) REPORTS.—Not later than December 31, 2003, and periodically thereafter, the Administrator shall transmit to Congress a report containing recommended funding levels for grants under this

section. The recommended funding levels shall be sufficient to ensure the continued expeditious implementation of municipal combined sewer overflow øand sanitary sewer overflow controls¿ , sanitary sewer overflow, and stormwater runoff nationwide.

* * * * * * *

SEC. 320. NATIONAL ESTUARY PROGRAM.

* * * * * * *

(i) AUTHORIZATION OF APPROPRIATIONS.—There are authorized

to be appropriated to the Administrator not to exceed ø$35,000,000

for each of fiscal years 2001 through 2005¿ $35,000,000 for each of

fiscal years 2005 through 2010 for—

(1) expenses related to the administration of management

conferences under this section, not to exceed 10 percent of the

amount appropriated under this subsection;

(2) making grants under subsection (g); and

(3) monitoring the implementation of a conservation and

management plan by the management conference or by the Administrator, in any case in which the conference has been terminated.

The Administrator shall provide up to $5,000,000 per fiscal year of

the sums authorized to be appropriated under this subsection to

the Administrator of the National Oceanic and Atmospheric Administration to carry out subsection (j).

* * * * * * *

REPORTS TO CONGRESS

SEC. 516. The Administrator, in cooperation with the States,

including water pollution control agencies and other water pollution control planning agencies, shall make (1) a detailed estimate
83

of the cost of carrying out the provisions of this Act; (2) a detailed

estimate, biennially revised, of the cost of construction of all needed

publicly owned treatment works in all of the States and of the cost

of construction of all needed publicly owned treatment works in

each of the States; (3) a comprehensive study of the economic impact on affected units of government of the cost of installation of

treatment facilities; and (4) a comprehensive analysis of the national requirements for and the cost of treating municipal, industrial, and other effluent to attain the water quality objectives as established by this Act or applicable State law. The Administrator

shall submit such detailed estimate and such comprehensive study

of such cost to the Congress no later than February 10 of each

øodd-numbered¿ fourth year. Whenever the Administrator, pursuant to this subsection, requests and receives an estimate of cost

from a State, he shall furnish copies of such estimate together with

such detailed estimate to Congress.

* * * * * * *

SEC. 603. WATER POLLUTION CONTROL REVOLVING LOAN FUNDS.

(a) REQUIREMENTS FOR OBLIGATION OF GRANT FUNDS.—Before

a State may receive a capitalization grant with funds made available under this title and section 205(m) of this Act, the State shall

first establish a water pollution control revolving fund which complies with the requirements of this section.

(b) ADMINISTRATOR.—Each State water pollution control revolving fund shall be administered by an instrumentality of the State

with such powers and limitations as may be required to operate

such fund in accordance with the requirements and objectives of

this Act.

ø(c) PROJECTS ELIGIBLE FOR ASSISTANCE.—The amounts of

funds available to each State water pollution control revolving fund

shall be used only for providing financial assistance (1) to any municipality, intermunicipal, interstate, or State agency for construction of publicly owned treatment works (as defined in section 212

of this Act), (2) for the implementation of a management program

established under section 319 of this Act, and (3) for development

and implementation of a conservation and management plan under

section 320 of this Act. The fund shall be established, maintained,

and credited with repayments, and the fund balance shall be available in perpetuity for providing such financial assistance.¿

(c) PROJECTS ELIGIBLE FOR ASSISTANCE.—

(1) REQUIREMENTS.—A project shall be eligible to receive

funding, in whole or in part, from a State water pollution control revolving fund under this section only if the project meets

the requirements of section 513.

(2) USE OF FUNDS.—Funds in each State water pollution

control revolving fund shall be used only for—

(A) providing financial assistance to a municipality,

intermunicipal, interstate, or State agency, or private utility that principally treats municipal wastewater or domestic sewage, for construction (including costs for planning,

design, associated preconstruction, and necessary activities

for siting the facility and related elements) of treatment

works (as defined in section 212);
84

(B) implementation of a management program established under section 319;

(C) development and implementation of a conservation

and management plan under section 320;

(D) water conservation projects or activities the primary purpose of which is the protection, preservation, or

enhancement of water quality, including through—

(i) piping or lining of an irrigation canal;

(ii) recovery or recycling of wastewater or runoff

from irrigation;

(iii) irrigation scheduling;

(iv) measurement or metering of water use; or

(v) improvement of on-field irrigation efficiency;

(E) providing financial assistance to a municipality or

an intermunicipal, interstate, or State agency for reuse, reclamation, or recycling projects the primary purpose of

which is the protection, preservation, or enhancement of

water quality;

(F) providing financial assistance to a municipality or

an intermunicipal, interstate, or State agency for projects to

increase the security of wastewater treatment works (excluding any expenditure for operations or maintenance); or

(G) providing financial assistance to a municipality or

an intermunicipal, interstate, or State agency for measures

to control municipal stormwater, the primary purpose of

which is the preservation, protection, or enhancement of

water quality.

(d) TYPES OF ASSISTANCE.—Except as otherwise limited by

State law, a water pollution control revolving fund of a State under

this section may be used only—

(1) to make loans, on the condition that—

(A) such loans are made at or below market interest

rates, including interest free loans, at terms not to exceed

20 years;

(B) annual principal and interest payments will commence not later than 1 year after completion of any project

and all loans will be fully amortized not later than 20

years after project completion;

(C) the recipient of a loan will establish a dedicated

source of revenue for repayment of loans; and

(D) the fund will be credited with all payments of principal and interest on all loans;

(2) to buy or refinance the debt obligation of municipalities

and intermunicipal and interstate agencies within the State at

or below market rates, where such debt obligations were incurred after March 7, 1985;

(3) to guarantee, or purchase insurance for, local obligations where such action would improve credit market access or

reduce interest rates;

(4) as a source of revenue or security for the payment of

principal and interest on revenue or general obligation bonds

issued by the State if the proceeds of the sale of such bonds

will be deposited in the fund;
85

(5) to provide loan guarantees for similar revolving funds

established by municipalities or intermunicipal agencies;

(6) to earn interest on fund accounts; øand¿

(7) for the reasonable costs of administering the fund and

conducting activities under this title, except that such amounts

shall not exceed ø4 percent¿ 6 percent of all grant awards to

such fund under this titleø.¿ ; and

(8) to carry out a project under paragraph (2) or (3) of section 601(a), which may be—

(A) operated by a municipal, intermunicipal, or interstate entity, State, public or private utility, corporation,

partnership, association, or nonprofit agency; and

(B) used to make loans that will be fully amortized not

later than 30 years after the date of the completion of the

project.

(e) TYPES OF ASSISTANCE FOR DISADVANTAGED COMMUNITIES.— (1) DEFINITION OF DISADVANTAGED COMMUNITY.—In this

subsection, the term ‘disadvantaged community’ means the service area, or portion of a service area, of a treatment works that

meets affordability criteria established after public review and

comment by the State in which the treatment works is located.

(2) LOAN SUBSIDY.—Notwithstanding any other provision of

this section, in a case in which the State makes a loan from the

water pollution control revolving loan fund in accordance with

subsection (c) to a disadvantaged community or a community

that the State expects to become a disadvantaged community as

the result of a proposed project, the State may provide additional subsidization, including the forgiveness of the principal

of the loan.

(3) TOTAL AMOUNT OF SUBSIDIES.—For each fiscal year, the

total amount of loan subsidies made by the State pursuant to

this subsection may not exceed 30 percent of the amount of the

capitalization grant received by the State for the fiscal year.

(4) EXTENDED TERM.—A State may provide an extended

term for a loan if the extended term—

(A) terminates not later than the date that is 30 years

after the date of completion of the project; and

(B) does not exceed the expected design life of the

project.

(5) INFORMATION.—The Administrator may publish information to assist States in establishing affordability criteria described in paragraph (1).

ø(e)¿ (f) LIMITATION TO PREVENT DOUBLE BENEFITS.—If a

State makes, from its water pollution revolving fund, a loan which

will finance the cost of facility planning and the preparation of

plans, specifications, and estimates for construction of publicly

owned treatment works, the State shall ensure that if the recipient

of such loan receives a grant under section 201(g) of this Act for

construction of such treatment works and an allowance under section 201(l)(1) of this Act for non-federal funds expended for such

planning and preparation, such recipient will promptly repay such

loan to the extent of such allowance.

ø(f)¿ (g) CONSISTENCY WITH PLANNING REQUIREMENTS.—A

State may provide financial assistance from its water pollution con-
86

trol revolving fund only with respect to a project which is consistent with plans, if any, developed under sections 205(j), 208,

303(e), 319, and 320 of this Act.

ø(g)¿ ƒ(h) PRIORITY LIST REQUIREMENT.—The State may provide financial assistance from its water pollution control revolving

fund only with respect to a project for construction of a treatment

works described in subsection (c)(1) if such project is on the State’s

priority list under section 216 of this Act. Such assistance may be

provided regardless of the rank of such project on such list.¿

(h) PRIORITY SYSTEM REQUIREMENT.—

(1) DEFINITIONS.—In this subsection:

(A) RESTRUCTURING.—The term ‘restructuring’

means—

(i) the consolidation of management functions or

ownership with another facility; or

(ii) the formation of cooperative partnerships.

(B) TRADITIONAL WASTEWATER APPROACH.—The term

‘traditional wastewater approach’ means a managed system

used to collect and treat wastewater from an entire service

area consisting of—

(i) collection sewers;

(ii) a centralized treatment plant using biological,

physical, or chemical treatment processes; and

(iii) a direct point source discharge to surface

water.

(2) PRIORITY SYSTEM.—A State shall establish a system for

providing financial assistance from the water pollution control

revolving fund of the State under which the State—

(A) gives more weight to an application for assistance

by a treatment works if the application includes such other

information as the State determines to be appropriate

and—

(i) an inventory of assets, including a description

of the condition of those assets;

(ii) a schedule for replacement of assets;

(iii) a financing plan indicating sources of revenue

from rate payers, grants, bonds, other loans, and other

sources;

(iv) a review of options for restructuring the treatment works; or

(v) a review of options for approaches other than a

traditional wastewater approach that may include actions or projects that treat or minimize sewage or

urban stormwater discharges using—

(I) decentralized or distributed stormwater

controls;

(II) decentralized wastewater treatment;

(III) low impact development technologies;

(IV) stream buffers;

(V) wetland restoration; or

(VI) actions to minimize the amount of and direct connections to impervious surfaces;
87

(B) takes into consideration appropriate chemical,

physical, and biological data that the State considers reasonably available and of sufficient quality;

(C) provides for public notice and opportunity to comment on establishment of the system and the summary

under subparagraph (D);

(D) publishes not less than biennially in summary form

a description of projects in the State that are eligible for assistance under this title that indicates—

(i) the priority assigned to each project under the

priority system of the State; and

(ii) the funding schedule for each project, to that

extent the such information is available; and

(E) ensures that projects undertaken with assistance

under this title are designed to achieve, in the estimation

of the State, the optimum water quality management, consistent with the public health and water quality goals and

requirements of this title.

ø(h)¿ (i) ELIGIBILITY OF NON-FEDERAL SHARE OF CONSTRUC- TION GRANT PROJECTS.—A State water pollution control revolving

fund may provide assistance (other than under subsection (d)(1) of

this section) to a municipality or intermunicipal or interstate agency with respect to the non-Federal share of the costs of a treatment

works project for which such municipality or agency is receiving assistance from the Administrator under any other authority only if

such assistance is necessary to allow such project to proceed.

(j) TRANSFER OF FUNDS.— (1) IN GENERAL.—The Governor of a State may—

(A)(i) reserve not more than 33 percent of a capitalization grant made under this title; and

(ii) add the funds reserved to any funds provided to the

State under section 1452 of the Safe Drinking Water Act

(42 U.S.C. 300j–12); and

(B)(i) reserve for any year an amount that does not exceed the amount that may be reserved under subparagraph

(A) for that year from capitalization grants made under

section 1452 of that Act (42 U.S.C. 300j–12); and

(ii) add the reserved funds to any funds provided to the

State under this title.

(2) STATE MATCH.—Funds reserved under this subsection

shall not be considered to be a State contribution for a capitalization grant required under this title or section 1452(b) of the

Safe Drinking Water Act (42 U.S.C. 300j–12(b)).

(k) SET-ASIDE.—

(1) $3,000,000,000 OR LESS MADE AVAILABLE.—

(A) IN GENERAL.—In the case of a fiscal year for which

appropriations for State revolving loan funds do not exceed

$3,000,000,000, a State shall set aside 10 percent of the

capitalization grant of the State under section 601(a) to

provide grants to eligible users described in subsection (c)

in the amount of not more than 55 percent of the total cost

of a project for which a grant is made.

(B) WAIVER.—A State may waive the requirement of

subparagraph (A) if the average time for processing loan
88

applications during the preceding 12 months did not exceed

90 days.

(2) MORE THAN $3,000,000,000 MADE AVAILABLE.—In the case

of a fiscal year for which appropriations for State revolving

loan funds exceed $3,000,000,000, a State shall set aside not

more than 10 nor less than 5 percent of the State revolving loan

fund of the State.

* * * * * * *

SEC. 604. ALLOTMENT OF FUNDS.

ø(a) FORMULA.—Sums authorized to be appropriated to carry

out this section for each of fiscal years 1989 and 1990 shall be allotted by the Administrator in accordance with section 205(c) of

this Act.¿

(a) DEFINITIONS.—In this subsection:

(1) BASE FORMULA.—The term ‘base formula’ means the formula for the allotment of funds made available to carry out this

section for a fiscal year to States in accordance with section

205(c)(3).

(2) NEEDS SURVEY.—The term ‘needs survey’ means a needs

survey conducted under section 516(2).

(3) NEEDS SURVEY PERCENTAGE.—The term ‘needs survey

percentage’, with respect to a State, means the percentage applicable to the State under a formula for the allotment of funds

made available to carry out this section for a fiscal year to

States in amounts determined by the Administrator based on

the ratio that—

(A) the needs of a State described in categories I

through VII of the most recent needs survey; bears to

(B) the needs of all States described in categories I

through VII of the most recent needs survey.

(4) NEXT NEEDS SURVEY.—The term ‘next needs survey’

means the first needs survey that is completed after the 2000

needs survey.

(5) STATE.—The term ‘State’ means a State, the District of

Columbia, and the Commonwealth of Puerto Rico.

(b) ALLOCATION OF FUNDS.—

(1) IN GENERAL.—Funds made available to carry out this

section for a fiscal year shall be allocated by the Administrator

in accordance with this subsection.

(2) INDIAN TRIBES.—Of the total amount of funds available,

1.5 percent shall be allocated to Indian tribes (within the meaning of section 518(c)).

(3) CERTAIN TERRITORIES AND FREELY ASSOCIATED

STATES.—Of the total amount of funds made available, 0.25

percent shall be allocated to Guam, the United States Virgin Islands, American Samoa, the Commonwealth of the Northern

Mariana Islands, the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau to be

allocated among those territories and freely associated states, as

determined by the Administrator.

(4) STATES.—

(A) TARGET ALLOCATION.—Each State shall have a target allocation that—
89

(i) in the case of a State for which the needs survey

percentage is less than 1.0 percent, shall be 1.0 percent;

and

(ii) in the case of any other State, shall be the

needs survey percentage.

(B) LIMITATION ON GROWTH.— (i) APPLICABILITY.—This subparagraph applies

with respect to any fiscal year for which the amount of

funds made available to carry out this section is

$3,150,000,000 or less.

(ii) STATES WITH A NEEDS SURVEY PERCENTAGE OF

1.0 PERCENT OR LESS.—In the case of a State for which

the needs survey percentage is 1.0 percent or less, the

growth in allocation in dollar terms relative to the base

formula shall be limited to—

(I) 12 percent for fiscal year 2005;

(II) 16 percent for fiscal year 2006;

(III) 20 percent for fiscal year 2007;

(IV) 24 percent for fiscal year 2008; and

(V) 28 percent for fiscal year 2009 and each

fiscal year thereafter.

(iii) STATES WITH A NEEDS SURVEY PERCENTAGE OF

GREATER THAN 1.0 PERCENT.—In the case of a State for

which the needs survey percentage is greater than 1.0

percent, the growth in allocation in dollar terms relative to the base formula shall be limited to 0.0 percent

(before an allocation, if any, is made under subparagraph (D)).

(C) LIMITATION ON LOSS.— (i) STATES WITH A NEEDS SURVEY PERCENTAGE OF

1.0 PERCENT OR LESS.—A dollar amount that is not less

than the dollar amount under the base formula shall

be allocated to States described in subparagraph (A)(i).

(ii) STATES FOR WHICH THE NEEDS SURVEY PER- CENTAGE IS GREATER THAN 1.0 PERCENT.—A dollar

amount that is equal to the dollar amount under the

base formula shall be allocated to States described in

subparagraph (A)(ii) (before an allocation, if any, is

made under subparagraph (D)) that—

(I) in the most recent needs survey, reported

higher needs in both categories V and VII than the

State reported in the previous needs survey;

(II) grew in population by more than 10 percent between the 1990 decenniel census and the

2000 decenniel census; or

(III) has a population equal to 4 percent or

more of the total population of the United States,

as reported in the 2000 decenniel census.

(D) UNALLOCATED BALANCE.— (i) LESS THAN $1,380,000,000 MADE AVAILABLE.—For

a fiscal year for which less than $1,380,000,000 is

made available to carry out this section, the

unallocated balance of available funds shall be allocated in equal amounts to all States that, in the most
90

recent needs survey, report higher total needs both in

absolute dollar terms and as a percentage of the total

United States needs.

(ii) $1,380,000,000 OR MORE MADE AVAILABLE.— For a fiscal year for which $1,380,000,000 or more is

made available to carry out this section, the

unallocated balance of available funds shall be allocated in equal amounts to all States that—

(I) are described in clause (i); or

(II) are described in subparagraph (C).

ø(b)¿ (c) RESERVATION OF FUNDS FOR PLANNING.—Each State

shall reserve each fiscal year 1 percent of the sums allotted to such

State under this section for such fiscal year, or $100,000, whichever

amount is greater, to carry out planning under sections 205(j) and

303(e) of this Act.

ø(c)¿ (d) ALLOTMENT PERIOD.— (1) PERIOD OF AVAILABILITY FOR GRANT AWARD.—Sums allotted to a State under this section for a fiscal year shall be

available for obligation by the State during the fiscal year for

which sums are authorized and during the following fiscal

year.

(2) REALLOTMENT OF UNOBLIGATED FUNDS.—The amount of

any allotment not obligated by the State by the last day of the

2-year period of availability established by paragraph (1) shall

be immediately reallotted by the Administrator on the basis of

the same ratio as is applicable to sums allotted under title II

of this Act for the second fiscal year of such 2-year period.

None of the funds reallotted by the Administrator shall be reallotted to any State which has not obligated all sums allotted

to such State in the first fiscal year of such 2-year period.

(f) RESERVATION OF FUNDS FOR PLANNING.—A State shall reserve to carry out planning under sections 205(j) and 303(e) for each

fiscal year the greater of—

(1) 2 percent of the amount allocated to the State under this

section for the fiscal year; or (2) $100,000.

* * * * * * *

øSEC. 607. AUTHORIZATION OF APPROPRIATIONS.

øThere is authorized to be appropriated to carry out the purposes of this title the following sums:

ø(1) $1,200,000,000 per fiscal year for each of fiscal year

1989 and 1990;

ø(2) $2,400,000,000 for fiscal year 1991;

ø(3) $1,800,000,000 for fiscal year 1992;

ø(4) $1,200,000,000 for fiscal year 1993; and

ø(5) $600,000,000 for fiscal year 1994.¿

SEC. 607. AUTHORIZATION OF APPROPRIATIONS.

(a) IN GENERAL.—There are authorized to be appropriated to

carry out this title—

(1) $3,200,000,000 for each of fiscal years 2005 and 2006;

(2) $3,600,000,000 for fiscal year 2007;

(3) $4,000,000,000 for fiscal year 2008; and
91

(4) $6,000,000,000 for fiscal year 2009.

(b) AVAILABILITY.—Amounts made available under this section

shall remain available until expended.

(c) RESERVATION FOR NEEDS SURVEYS.—Of the amount made

available under subsection (a) to carry out this title for a fiscal year,

the Administrator may reserve not more than $1,000,000 per year

to pay the costs of conducting needs surveys under section 516(2).

* * * * * * *

TITLE VII—MISCELLANEOUS

SEC. 701. SEWAGE CONTROL TECHNOLOGY GRANT PROGRAM.

(a) DEFINITION OF ELIGIBLE FACILITY.—In this section, the term

‘eligible facility’ means a municipal wastewater treatment plant

that—

(1) as of the date of enactment of this title, has a permitted

design capacity to treat an annual average of at least 500,000

gallons of wastewater per day; and

(2) is located within the Chesapeake Bay watershed in any

of the States of Delaware, Maryland, New York, Pennsylvania,

Virginia, or West Virginia or in the District of Columbia.

(b) GRANT PROGRAM.— (1) ESTABLISHMENT.—Not later than 1 year after the date

of enactment of this title, the Administrator shall establish a

program within the Environmental Protection Agency to provide

grants to States and municipalities to upgrade eligible facilities

with nutrient removal technologies.

(2) PRIORITY.—In providing a grant under paragraph (1),

the Administrator shall—

(A) consult with the Chesapeake Bay Program Office;

(B) give priority to eligible facilities at which nutrient

removal upgrades would—

(i) produce the greatest nutrient load reductions at

points of discharge; or

(ii) result in the greatest environmental benefits to

local bodies of water surrounding, and the main stem

of, the Chesapeake Bay; and

(C) take into consideration the geographic distribution

of the grants.

(3) APPLICATION.—

(A) IN GENERAL.—On receipt of an application from a

State or municipality for a grant under this section, if the

Administrator approves the request, the Administrator

shall transfer to the State or municipality the amount of

assistance requested.

(B) FORM.—An application submitted by a State or

municipality under subparagraph (A) shall be in such form

and shall include such information as the Administrator

may prescribe.

(4) USE OF FUNDS.—A State or municipality that receives

a grant under this section shall use the grant to upgrade eligible facilities with nutrient removal technologies that are de-
92

signed to reduce total nitrogen in discharged wastewater to an

average annual concentration of 4 milligrams per liter.

(5) COST SHARING.— (A) FEDERAL SHARE.—The Federal share of the cost of

upgrading any eligible facility described in paragraph (1)

using funds provided under this section shall not exceed 55

percent.

(B) NON-FEDERAL SHARE.—The non-Federal share of

the costs of upgrading any eligible facility described in

paragraph (1) using funds provided under this section may

be provided in the form of funds made available to a State

or municipality under—

(i) any provision of this Act other than this section

(including funds made available from a State revolving fund established under title VI); or

(ii) any other Federal or State law.

(c) AUTHORIZATION OF APPROPRIATIONS.— (1) IN GENERAL.—There is authorized to be appropriated to carry out this section $100,000,000 for each of fiscal years 2005

through 2009, to remain available until expended.

(2) ADMINISTRATIVE COSTS.—The Administrator may use

not to exceed 4 percent of any amount made available under

paragraph (1) for a fiscal year to pay administrative costs incurred in carrying out this section.

* * * * * * *

[42 U.S.C. 300F—JUL. 1, 1944]

SAFE DRINKING WATER ACT

* * * * * * *

SHORT TITLE

SEC. 1400. This title may be cited as the ‘‘Safe Drinking Water

Act’’.

* * * * * * *

PART A—DEFINITIONS

DEFINITIONS

SEC. 1401. * * *

(14) The term ‘‘Indian Tribe’’ means any Indian tribe having a Federally recognized governing body carrying out substantial governmental duties and powers over any area. For

purposes of section ø1452,¿ 1452 and part G, the term includes

any Native village (as defined in section 3(c) of the Alaska Native Claims Settlement Act (43 U.S.C. 1602(c))).

* * * * * * *

SEC. 1420. * * *

* * * * * * *
93

(g) ENVIRONMENTAL FINANCE CENTERS.— (1) IN GENERAL.—The Administrator shall provide initial

funding for one or more university-based environmental finance centers for activities that provide technical assistance to

State and local officials in developing the capacity of public

water systems. Any such funds shall be used only for activities

that are directly related to this title.

(2) NATIONAL CAPACITY DEVELOPMENT CLEARINGHOUSE.— The Administrator shall establish a national public water system capacity development clearinghouse to receive and disseminate information with respect to developing, improving,

and maintaining financial and managerial capacity at public

water systems. The Administrator shall ensure that the clearinghouse does not duplicate other federally supported clearinghouse activities.

(3) CAPACITY DEVELOPMENT TECHNIQUES.—The Administrator may request an environmental finance center funded

under paragraph (1) to develop and test managerial, financial,

and institutional techniques for capacity development. The

techniques may include capacity assessment methodologies,

manual and computer based public water system rate models

and capital planning models, public water system consolidation

procedures, and regionalization models.

ø(4) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to carry out this subsection

$1,500,000 for each of the fiscal years 1997 through 2003.¿

(4) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to carry out this subsection $2,000,000

for each of fiscal years 2005 through 2009.

(5) LIMITATION.—No portion of any funds made available

under this subsection may be used for lobbying expenses.

* * * * * * *

RESEARCH, TECHNICAL ASSISTANCE, INFORMATION, TRAINING OF

PERSONNEL

SEC. 1442. * * *

* * * * * * *

(e) TECHNICAL ASSISTANCE.—øThe Administrator may provide¿

(1) IN GENERAL.—The Administrator may provide technical

assistance to small public water systems to enable such systems to achieve and maintain compliance with applicable national primary drinking water regulations. Such assistance

may include circuit-rider and multi-State regional technical assistance programs, training, and preliminary engineering evaluations. The Administrator shall ensure that technical assistance pursuant to this subsection is available in each State.

Each nonprofit organization receiving assistance under this

subsection shall consult with the State in which the assistance

is to be expended or otherwise made available before using assistance to undertake activities to carry out this subsection.

There are authorized to be appropriated to the Administrator

to be used for such technical assistance $15,000,000 for each
94

of the fiscal years 1997 through 2003. No portion of any State

loan fund established under section 1452 (relating to State

loan funds) and no portion of any funds made available under

this subsection may be used for lobbying expenses. Of the total

amount appropriated under this subsection, 3 percent shall be

used for technical assistance to public water systems owned or

operated by Indian Tribes.

(2) SMALL SYSTEM REVOLVING LOAN FUND.— (A) IN GENERAL.—In addition to amounts provided

under this section, the Administrator may provide grants to

qualified private, nonprofit entities to capitalize revolving

funds to provide financing to eligible entities described in

subparagraph (B) for—

(i) predevelopment costs (including costs for planning, design, associated preconstruction, and necessary

activities for siting the facility and related elements)

associated with proposed water projects or with existing water systems; and

(ii) short-term costs incurred for replacement

equipment, small-scale extension services, or other

small capital projects that are not part of the regular

operations and maintenance activities of existing water

systems.

(B) ELIGIBLE ENTITIES.—To be eligible for assistance

under this paragraph, an entity shall be a small water system (as described in section 1412(b)(4)(E)(ii)).

(C) MAXIMUM AMOUNT OF LOANS.—The amount of financing made to an eligible entity under this paragraph

shall not exceed—

(i) $100,000 for costs described in subparagraph

(A)(i); and

(ii) $100,000 for costs described in subparagraph

(A)(ii).

(D) TERM.—The term of a loan made to an eligible entity under this paragraph shall not exceed 10 years.

(E) ANNUAL REPORT.—For each fiscal year, a qualified

private, nonprofit entity that receives a grant under subparagraph (A) shall submit to the Administrator a report

that—

(i) describes the activities of the qualified private,

nonprofit entity under this paragraph for the fiscal

year; and

(ii) specifies—

(I) the number of communities served;

(II) the sizes of those communities; and

(III) the type of financing provided by the

qualified private, nonprofit entity.

(F) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to carry out this subsection

$25,000,000 for each of fiscal years 2005 through 2009.

* * * * * * *

ø(m) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to carry out the purposes of this section
95

$599,000,000 for the fiscal year 1994 and $1,000,000,000 for each

of the fiscal years 1995 through 2003. To the extent amounts authorized to be appropriated under this subsection in any fiscal year

are not appropriated in that fiscal year, such amounts are authorized to be appropriated in a subsequent fiscal year (prior to the fiscal year 2004). Such sums shall remain available until expended.¿

(m) AUTHORIZATION OF APPROPRIATIONS.—

(1) IN GENERAL.—There are authorized to be appropriated

to carry out this section—

(A) $1,500,000,000 for fiscal year 2005;

(B) $2,000,000,000 for each of fiscal years 2006 and

2007;

(C) $3,500,000,000 for fiscal year 2008; and

(D) $6,000,000,000 for fiscal year 2009.

(2) AVAILABILITY.—Amounts made available under this

subsection shall remain available until expended.

(3) RESERVATION FOR NEEDS SURVEYS.—Of the amount

made available under paragraph (1) to carry out this section for

a fiscal year, the Administrator may reserve not more than

$1,000,000 for each fiscal year to pay the costs of conducting

needs surveys under subsection (h).

* * * * * * *

GENERAL PROVISIONS

SEC. 1450. * * *

* * * * * * *

ø(e) The Administrator shall take such action as may be necessary to assure compliance with provisions of the Act of March 3,

1931 (known as the Davis-Bacon Act; 40 U.S.C. 276a–276a(5)). The

Secretary of Labor¿

(e) LABOR STANDARDS.—

(1) IN GENERAL.—The Administrator shall take such action

as is necessary to ensure that all laborers and mechanics employed by contractors and subcontractors on construction

projects financed, in whole or in part, by a grant, loan, loan

guarantee, refinancing, or any other form of assistance provided

under this title (including assistance provided from the State

drinking water revolving fund under section 1452) are paid

wages at rates that are not less than the rates prevailing for the

same type of work for similar construction in the immediate locality, as determined by the Secretary of Labor in accordance

with the Act of March 3, 1931 (40 U.S.C. 276a et seq.).

(2) AUTHORITY AND FUNCTIONS.—The Secretary of Labor

shall have, with respect to the labor standards specified in this

subsection, the authority and functions set forth in Reorganization Plan Numbered 14 of 1950 (15 F.R. 3176; 64 Stat. 1267)

and section 2 of the Act of June 13, 1934 (40 U.S.C. 276c).

* * * * * * *
96

STATE REVOLVING LOAN FUNDS

SEC. 1452. (a) GENERAL AUTHORITY.—

* * * * * * *

(2) USE OF FUNDS.—Except as otherwise authorized by this

title, amounts deposited in a State loan fund, including loan

repayments and interest earned on such amounts, shall be

used only for providing loans or loan guarantees, or as a source

of reserve and security for leveraged loans, the proceeds of

which are deposited in a State loan fund established under

paragraph (1), or other financial assistance authorized under

this section to community water systems and nonprofit noncommunity water systems, other than systems owned by Federal agencies. Financial assistance under this section may be

used by a public water system only for expenditures ø(not¿ (including expenditures for planning, design, and associated

preconstruction and for recovery for siting of the facility and related elements but not including monitoring, operation, and

maintenance expenditures) of a type or category which the Administrator has determined, through guidance, will facilitate

compliance with national primary drinking water regulations

applicable to the system under section 1412 or otherwise significantly further the health protection objectives of this title.

The funds may also be used to provide loans to a system referred to in section 1401(4)(B) for the purpose of providing the

treatment described in section 1401(4)(B)(i)(III). The funds

shall not be used for the acquisition of real property or interests therein, unless the acquisition is integral to a project authorized by this paragraph and the purchase is from a willing

seller. Of the amount credited to any State loan fund established under this section in any fiscal year, 15 percent shall be

available solely for providing loan assistance to public water

systems which regularly serve fewer than 10,000 persons to

the extent such funds can be obligated for eligible projects of

public water systems or to replace or rehabilitate aging collection, treatment, storage (including reservoirs), or distribution

facilities of public water systems or provide for capital projects

to upgrade the security of public water systems.

* * * * * * *

(b) INTENDED USE PLANS.—

(1) IN GENERAL.—After providing for public review and

comment, each State that has entered into a capitalization

agreement pursuant to this section shall annually prepare a

plan that identifies the intended uses of the amounts available

to the State loan fund of the State.

(2) CONTENTS.—An intended use plan shall include—

(A) a list of the projects to be assisted in the first fiscal

year that begins after the date of the plan, including a description of the project, the expected terms of financial assistance, and the size of the community served;

(B) the criteria and methods established for the distribution of funds; and
97

(C) a description of the financial status of the State

loan fund and the short-term and long-term goals of the

State loan fund.

(3) USE OF FUNDS.— ø(A) IN GENERAL.—An intended use plan shall provide,

to the maximum extent practicable, that priority for the

use of funds be given to projects that—

ø(i) address the most serious risk to human

health;

ø(ii) are necessary to ensure compliance with the

requirements of this title (including requirements for

filtration); and

ø(iii) assist systems most in need on a per household basis according to State affordability criteria.¿

(A) DEFINITIONS.—In this paragraph:

(i) RESTRUCTURING.—The term ‘restructuring’

means changes in operations (including ownership, accounting, rates, maintenance, consolidation, and alternative water supply).

(ii) TRADITIONAL APPROACH.—The term ‘traditional

approach’ means a managed system used to treat and

distribute drinking water to an entire service area consisting of a centralized water system using biological,

physical, or chemical treatment processes.

(B) PRIORITY SYSTEM.—An intended use plan shall provide, to the maximum extent practicable, that—

(i) priority for the use of funds be given to

projects—

(I) that address the most serious risk to

human health;

(II) that are necessary to ensure compliance

with the requirements of this title (including requirements for filtration); and

(III) that assist systems most in need on a perhousehold basis according to State affordability

criteria; and

(ii) the State shall give more weight to an application for assistance by a community water system if the

application includes such other information as the

State determines to be necessary and—

(I) an inventory of assets, including a description of the condition of those assets;

(II) a schedule for replacement of assets;

(III) a financing plan indicating sources of

revenue from rate payers, grants, bonds, other

loans, and other sources;

(IV) a review of options for restructuring the

public water system; or

(V) a review of options for approaches other

than a traditional approach.

ø(B)¿ (C) LIST OF PROJECTS.—Each State shall, after

notice and opportunity for public comment, publish and

øperiodically¿ at least biennially update a list of projects

in the State that are eligible for assistance under this sec-
98

tion, including the priority assigned to each project and, to

the extent known, the expected funding schedule for each

project.

* * * * * * *

(d) ASSISTANCE FOR DISADVANTAGED COMMUNITIES.—

* * * * * * *

(3) DEFINITION OF DISADVANTAGED COMMUNITY.—In this

subsection, the term ‘‘disadvantaged community’’ means the

service area , or portion of a service area, of a public water system that meets affordability criteria established after public review and comment by the State in which the public water system is located. The Administrator may publish information to

assist States in establishing affordability criteria.

* * * * * * *

(g) ADMINISTRATION OF STATE LOAN FUNDS.— (1) COMBINED FINANCIAL ADMINISTRATION.—Notwithstanding subsection (c), a State may (as a convenience and to

avoid unnecessary administrative costs) combine, in accordance

with State law, the financial administration of a State loan

fund established under this section with the financial administration of any other revolving fund established by the State if

otherwise not prohibited by the law under which the State loan

fund was established and if the Administrator determines

that—

(A) the grants under this section, together with loan

repayments and interest, will be separately accounted for

and used solely for the purposes specified in subsection (a);

and

(B) the authority to establish assistance priorities and

carry out oversight and related activities (other than financial administration) with respect to assistance remains

with the State agency having primary responsibility for

administration of the State program under section 1413,

after consultation with other appropriate State agencies

(as determined by the State): Provided, That in nonprimacy States eligible to receive assistance under this section, the Governor shall determine which State agency will

have authority to establish priorities for financial assistance from the State loan fund.

(2) COST OF ADMINISTERING FUND.—Each State may annually use up to ø4¿ 6 percent of the funds allotted to the State

under this section to cover the reasonable costs of administration of the programs under this section, including the recovery

of reasonable costs expended to establish a State loan fund

which are incurred after the date of enactment of this section,

and to provide technical assistance to public water systems

within the State. For fiscal year 1995 and each fiscal year

thereafter, each State may use up to an additional 10 percent

of the funds allotted to the State under this section—

(A) for public water system supervision programs

under section 1443(a);
99

(B) to administer or provide technical assistance

through source water protection programs;

(C) to develop and implement a capacity development

strategy under section 1420(c); and

(D) for an operator certification program for purposes

of meeting the requirements of section ø1419, if the State

matches the expenditures with at least an equal amount

of State funds. At least half of the match must be additional to the amount expended by the State for public

water supervision in fiscal year 1993.¿ 1419. An additional

2 percent of the funds annually allotted to each State

under this section may be used by the State to provide

technical assistance to public water systems serving 10,000

or fewer persons in the State. Funds utilized under subparagraph (B) shall not be used for enforcement actions.

(3) GUIDANCE AND REGULATIONS.—The Administrator shall

publish guidance and promulgate regulations as may be necessary to carry out the provisions of this section, including—

(A) provisions to ensure that each State commits and

expends funds allotted to the State under this section as

efficiently as possible in accordance with this title and applicable State laws;

(B) guidance to prevent waste, fraud, and abuse; and

(C) guidance to avoid the use of funds made available

under this section to finance the expansion of any public

water system in anticipation of future population growth.

The guidance and regulations shall also ensure that the States,

and public water systems receiving assistance under this section, use accounting, audit, and fiscal procedures that conform

to generally accepted accounting standards.

(4) STATE REPORT.—Each State administering a loan fund

and assistance program under this subsection shall publish

and submit to the Administrator a report every 2 years on its

activities under this section, including the findings of the most

recent audit of the fund and the entire State allotment. The

Administrator shall periodically audit all State loan funds established by, and all other amounts allotted to, the States pursuant to this section in accordance with procedures established

by the Comptroller General.

(5) TRANSFER OF FUNDS.—

(A) IN GENERAL.—The Governor of a State may—

(i)(I) reserve not more than 33 percent of a capitalization grant made under this section; and

(II) add the funds reserved to any funds provided

to the State under section 601 of the Federal Water Pollution Control Act (33 U.S.C. 1381); and

(ii)(I) reserve for any fiscal year an amount that

does not exceed the amount that may be reserved under

clause (i)(I) for that year from capitalization grants

made under section 601 of that Act (33 U.S.C. 1381);

and

(II) add the reserved funds to any funds provided

to the State under this section.
100

(B) STATE MATCH.—Funds reserved under this paragraph shall not be considered to be a State match of a capitalization grant required under this section or section

602(b) of the Federal Water Pollution Control Act (33

U.S.C. 1382(b)).

* * * * * * *

(k) OTHER AUTHORIZED ACTIVITIES.—

(2) LIMITATION.—For each fiscal year, the total amount of

assistance provided and expenditures made by a State under

this subsection may not exceed 15 percent of the amount of the

capitalization grant received by the State for that year and

may not exceed 10 percent of that amount for any one of the

following activities:

(A) To acquire land or conservation easements pursuant to paragraph (1)(A)(i).

(B) To provide funding to implement voluntary, incentive-based source water quality protection measures pursuant to clauses (ii) and (iii) of paragraph (1)(A).

(C) To provide assistance through a capacity development strategy pursuant to paragraph (1)(B).

(D) To make expenditures to delineate or assess source

water protection areas pursuant to paragraph (1)(C) (including implementation of source water protection plans).

* * * * * * *

(s) SET-ASIDE.—

(1) $2,500,000,000 OR LESS MADE AVAILABLE.—

(A) IN GENERAL.—In the case of a fiscal year for which

appropriations for State revolving loan funds do not exceed

$2,500,000,000, a State shall set aside 10 percent of the

capitalization grant of the State under subsection (a) to

provide grants to projects eligible for assistance under subsection (a)(2) of not more than 55 percent of the total cost

of a project for which a grant is made.

(B) WAIVER.—A State may waive the requirement of

subparagraph (A) if the average time for processing loan

applications during the preceding 12 months did not exceed

90 days.

(2) MORE THAN $2,500,000,000 MADE AVAILABLE.—In the case

of a fiscal year for which appropriations for State revolving

loan funds exceed $2,500,000,000, a State shall set aside not

more than 5 nor less than 2.5 percent of the State revolving

loan fund of the State.

* * * * * * *

LEAD CONTAMINATION IN SCHOOL DRINKING WATER

SEC. 1464

* * * * * * *

ø(d) REMEDIAL ACTION PROGRAM.—

ø(1) TESTING AND REMEDYING LEAD CONTAMINATION.—

Within 9 months after the enactment of this section, each
101

State shall establish a program, consistent with this section, to

assist local educational agencies in testing for, and remedying,

lead contamination in drinking water from coolers and from

other sources of lead contamination at schools under the jurisdiction of such agencies.

ø(2) PUBLIC AVAILABILITY.—A copy of the results of any

testing under paragraph (1) shall be available in the administrative offices of the local educational agency for inspection by

the public, including teachers, other school personnel, and parents. The local educational agency shall notify parent, teacher,

and employee organizations of the availability of such testing

results.

ø(3) COOLERS.—In the case of drinking water coolers, such

program shall include measures for the reduction or elimination of lead contamination from those water coolers which

are not lead free and which are located in schools. Such measures shall be adequate to ensure that within 15 months after

the enactment of this subsection all such water coolers in

schools under the jurisdiction of such agencies are repaired, replaced, permanently removed, or rendered inoperable unless

the cooler is tested and found (within the limits of testing accuracy) not to contribute lead to drinking water.¿

(d) REMOVAL OF LEAD IN SCHOOLS.—

(1) IN GENERAL.—Not later than 270 days after the date of

enactment of the Water Infrastructure Financing Act, in consultation with each State, the Administrator shall establish a

program to provide grants to States to assist in paying, or to

provide reimbursement for, costs incurred by local educational

agencies in testing for, remediating, and informing students,

parents, teachers, and employees about lead contamination in

drinking water from coolers and from other sources of lead contamination at schools under the jurisdiction of the local educational agencies.

(2) FUNDING.— (A) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to carry out this subsection

$40,000,000 for each of fiscal years 2005 through 2008.

(B) ADMINISTRATIVE EXPENSES.—The Administrator

may use not more than 5 percent of amounts made available under subparagraph (A) for a fiscal year to pay administrative expenses incurred in carrying out this subsection.

øFEDERAL ASSISTANCE FOR STATE PROGRAMS REGARDING LEAD

CONTAMINATION IN SCHOOL DRINKING WATER

øSEC. 1465. (a) SCHOOL DRINKING WATER PROGRAMS.—The Administrator shall make grants to States to establish and carry out

State programs under section 1464 to assist local educational agencies in testing for, and remedying, lead contamination in drinking

water from drinking water coolers and from other sources of lead

contamination at schools under the jurisdiction of such agencies.

Such grants may be used by States to reimburse local educational

agencies for expenses incurred after the enactment of this section

for such testing and remedial action.
102

ø(b) LIMITS.—Each grant under this section shall be used by

the State for testing water coolers in accordance with section 1464,

for testing for lead contamination in other drinking water supplies

under section 1464, or for remedial action under State programs

under section 1464. Not more than 5 percent of the grant may be

used for program administration.

ø(c) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated to carry out this section not more than

$30,000,000 for fiscal year 1989, $30,000,000 for fiscal year 1990,

and $30,000,000 for fiscal year 1991.¿

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

(a) GRANT.—

(1) IN GENERAL.—The Administrator may provide to the

District of Columbia a grant of $20,000,000 to be used to address lead contamination in the water supply of the District of

Columbia.

(2) USE OF GRANT FUNDS.—Funds provided under paragraph (1) may be used for activities such as—

(A) assessment of infrastructure (which may include,

on a voluntary basis, fixtures within private residences, including replacement faucet strainers);

(B) testing of water supplies throughout the water system;

(C) distribution of filters to residences with high lead

levels;

(D) evaluation of chemical additives (including zinc

orthophosphate) to the water supply;

(E) pipe replacement; and

(F) evaluation and improvement of communication

with the general public, particularly households with water

that tested above the action level for lead.

(3) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to carry out this subsection $20,000,000.

(b) STUDY BY THE NATIONAL ACADEMY OF SCIENCES.—

(1) IN GENERAL.—The Administrator shall contract with

the National Academy of Sciences to conduct a 2-phase study

in accordance with this subsection.

(2) PHASE I.—In phase I of the study, the National Academy of Sciences shall conduct a comprehensive evaluation of—

(A) compliance by the District of Columbia Water and

Sewer Authority with regulations pertaining to lead and

copper in drinking water (including meeting the public notification requirements of the regulations); and

(B) the potential causes of lead in the water supply of

the District of Columbia.

(3) PHASE II.—In phase II of the study, the National Academy of Sciences shall assess, from a cross-section of cities of

varying population sizes across the United States with lead

service lines—

(A) the extent to which water levels in those cities have

exceeded the action level for lead; and
103

1Note: This bill, as amended by the committee, includes different provisions for Sections 1471-

1474.

(B) the potential causes of the exceedences (including

service lines, chemical additives in the water supply, equipment upgrades, and pipes in residences).

(4) REPORT.—Not later than 1 year after the date of enactment of this paragraph, the National Academy of Sciences shall

submit to the Committee on Environment and Public Works of

the Senate and the Committee on Energy and Commerce of the

House of Representatives a report describing the findings made

in the study.

(5) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to carry out this subsection $2,000,000.

* * * * * * *

PART G—SMALL PUBLIC WATER SYSTEM

ASSISTANCE1

SEC. 1471. DEFINITIONS.

In this part:

(1) ELIGIBLE ACTIVITY.—

(A) IN GENERAL.—The term ‘‘eligible activity’’ means an

activity that is carried out by an eligible entity to ensure

compliance with national primary drinking water regulations applicable to the eligible entity under section 1412.

(B) INCLUSION.—The term ‘‘eligible activity’’ includes

source water protection.

(C) EXCLUSION.—The term ‘‘eligible activity’’ does not

include any activity to increase the population served by a

public water system, except to the extent that the Administrator determines an activity to be necessary to—

(i) achieve compliance with a national primary

drinking water regulation; and

(ii) provide a water supply to a population that, as

of the date of enactment of this part, is not served by

a safe public water system.

(2) ELIGIBLE ENTITY.—The term ‘‘eligible entity’’ means—

(A) a small public water system that—

(i) if located in a State, serves a community that,

under affordability criteria established by the State

under section 1452(d), is determined by the State to

be—

(I) a disadvantaged community; or

(II) a community that would otherwise become

a disadvantaged community as a result of carrying

out an eligible activity, as determined by the State;

or

(ii) if located in an area governed by an Indian

Tribe, serves a community that is determined by the

Administrator, under criteria published by the Administrator under section 1452(d) and in consultation with

the Secretary, to be—
104

(I) a disadvantaged community; or

(II) a community that would otherwise become

a disadvantaged community as a result of carrying

out an eligible activity, as determined by the State;

and

(B) a public water system that— (i) would incur $3,000,000 or more in costs in complying with national primary drinking water regulations promulgated under this Act; and

(ii) is a disadvantaged community or a community

may otherwise become disadvantaged as a result of

carrying out an eligible activity, as determined by the

State.

(3) PROGRAM.—The term ‘‘program’’ means the small public

water system assistance program established under section

1472(a).

(4) SECRETARY.—The term ‘‘Secretary’’ means the Secretary

of Health and Human Services, acting through the Director of

the Indian Health Service.

(5) SMALL PUBLIC WATER SYSTEM.—The term ‘‘small public

water system’’ means a public water system (including a community water system and a noncommunity water system) that

serves a population of 15,000 or fewer individuals.

SEC. 1472. SMALL PUBLIC WATER SYSTEM ASSISTANCE PROGRAM.

(a) ESTABLISHMENT.—Not later than July 1, 2006, the Administrator shall establish within the Environmental Protection Agency a

small public water system assistance program for, and provide

grants to, eligible entities for use in carrying out eligible activities.

(b) PRIORITY.— (1) IN GENERAL.—The Administrator shall provide grants

to eligible entities for eligible activities that—

(A) address the most serious risks to human health

from lack of compliance with the regulations specified in

subparagraph (B);

(B) are necessary to ensure compliance with national

primary drinking water regulations applicable to eligible

entities under section 1412; and

(C) assist systems serving communities that are most in

need, as calculated on the basis of median household income, under affordability criteria established by the State

under section 1452(d) (or, in the case of eligible entities in

an area governed by an Indian Tribe, under affordability

criteria established by the Administrator, in consultation

with the Secretary).

(2) MANAGEMENT COOPERATIVES.—The Administrator shall

consider giving priority for grants under this section to eligible

activities that are carried out by communities that form management cooperatives.

(d) TECHNICAL ASSISTANCE.—In providing grants under this

section, the Administrator shall—

(1) use not less than 1.5 percent of funds made available

to carry out this section to provide grants to nonprofit technical

assistance organizations to be used to assist eligible entities

in—
105

(A) assessing needs relating to eligible activities;

(B) identifying additional available sources of funding

to meet the cost-sharing requirements under the program;

and

(C) planning, implementing, and maintaining any eligible activities of the eligible entities that receive funding

under this section;

(2) require that none of the funds provided under paragraph (1) be used to pay for lobbying expenses; and

(3) require that for each fiscal year, not more than 5 percent of the funds received by an eligible entity under this section

may be used to obtain technical assistance in planning, implementing, and maintaining eligible activities for which funding

is provided under this section.

(e) INDIAN TRIBES.—

(1) IN GENERAL.—In providing grants under this section,

the Administrator shall use not less than 3 percent of funds

made available to carry out this section for each fiscal year to

provide grants to eligible entities that are located in areas governed by Indian Tribes.

(2) PROGRAM PRIORITY REQUIREMENT.—

(A) LIST OF ELIGIBLE ACTIVITIES.—

(i) IN GENERAL.—The Administrator, in consultation with the Secretary, shall, for each fiscal year, identify, and, consistent with subsection (b) and considering the criteria described in subparagraph (B), list in

descending order of priority, eligible activities for eligible entities located in areas governed by Indian Tribes

for which funds provided from a grant under this part

may be used.

(ii) COORDINATION.—

(I) IN GENERAL.—To the maximum extent

practicable, the Administrator shall ensure that

the preparation of the list under clause (i) is coordinated with any needs assessment conducted

under section 1452(i)(4).

(II) ADDITIONAL CONSIDERATION.—Any additional financial needs of small public water systems located in areas governed by Indian Tribes

that are associated with the cost of complying with

a national primary drinking water regulation (including a regulation concerning arsenic) that is

promulgated after the then most recent needs survey conducted under section 1452(i)(4) shall be

factored into the determination of financial need

for, and prioritization of, eligible activities under

this section.

(B) CRITERIA.—The Administrator shall, in preparing

a list under subparagraph (A), consider giving priority to

any listed eligible activities that are to be carried out by

communities that form management cooperatives (including management cooperatives between systems that do not

have public water system connections).
106

(3) ALLOCATION OF GRANT FUNDING.—For each fiscal year,

the Administrator, in consultation with the Secretary, shall provide grants to eligible entities located in an area governed by

an Indian Tribe for the maximum number of eligible activities

for which the funding allocation makes assistance available,

based on the priority assigned by the Administrator to eligible

activities under paragraph (2).

(4) LIMITATION ON USE OF FUNDS.—For each fiscal year,

not more than 5 percent of the funds received by an eligible entity located in an area governed by an Indian Tribe under this

section may be used to obtain technical assistance in planning,

implementing, and maintaining eligible activities that are funded under this section.

(f) LIMITATION ON RECEIPT OF FUNDS.—An eligible entity may

receive a grant under this section only—

(1) if the Administrator determines that use of the grant

will aid compliance with national primary drinking water regulations applicable to the eligible entity under section 1412;

(2)(A) to restructure or consolidate the facility to achieve

compliance with applicable national primary drinking water

regulations; or

(B) in a case in which restructuring or consolidation of the

facility is not practicable, if the Administrator determines

that—

(i) the eligible entity has made a good faith effort to

achieve compliance with applicable national primary

drinking water regulations; and

(ii) the eligible entity is adhering to an enforceable

schedule for complying with those regulations; and

(3) if—

(A) the Administrator determines that an eligible entity

may lack the technical, managerial, operations, maintenance, or financial capacity to ensure compliance with national primary drinking water regulations applicable to the

eligible entity under section 1412, and the eligible entity

agrees to undertake feasible and appropriate changes in operations (including changes in ownership, management, accounting, rates, maintenance, consolidation, provision of an

alternative water supply, or other procedures); and

(B) the Administrator determines that the measures are

necessary to ensure that the eligible entity has the technical, managerial, operational, maintenance, and financial

capacity to comply with applicable national primary drinking water regulations over the long term.

(g) COST SHARING.—

(1) IN GENERAL.—

(A) LIMIT.—Except as provided in paragraph (2), the

share of the total cost of an eligible activity funded by a

grant under this section shall not exceed 80 percent.

(B) USE OF OTHER FEDERAL FUNDS.—To pay the portion of an eligible activity that is not funded by a grant

under this section, an eligible entity located in an area governed by an Indian Tribe may use Federal financial assistance other than assistance received under this section.
107

2Note: This bill, as amended by the committee, includes different provisions for Sections 1471-

1474.

(2) WAIVER OF COST-SHARING REQUIREMENT.— (A) IN GENERAL.—The Administrator may waive the requirement of an eligible entity to pay all or a portion of the

share of an eligible activity that is not funded by a grant

under this section, based on a determination by the State

that the eligible entity is unable to pay any or all of the

share.

(B) LIMITATION.—For each fiscal year, the total amount

of cost-share waivers provided by the Administrator to eligible entities located in an area governed by an Indian

Tribe under subparagraph (A) shall not exceed 30 percent

of the amount of funding used to provide grants to Indian

Tribes under this part.

(h) UNOBLIGATED FUNDS.—Any funds not obligated by the

small public water system assistance program established under

subsection (a) for an eligible activity within 1 year after the date on

which funds are made available to carry out this part shall be returned to the Administrator for use in providing new grants under

this part.

SEC. 1473. REPORTS.

Not later than January 1, 2006, and annually thereafter

through January 1, 2010, the Administrator shall—

(1) submit, to the Committee on Environment and Public

Works of the Senate and the Committee on Energy and Commerce of the House of Representatives, a report that, for the preceding fiscal year—

(A) lists the eligible activities for eligible entities that

receive funds under this part for the preceding fiscal year;

(B) identifies the number of grants provided under this

part to eligible entities located in areas governed by Indian

Tribes, and in each State;

(C) identifies each eligible entity that receives a grant

to carry out an eligible activity;

(D) identifies the amount of each grant provided to an

eligible entity to carry out an eligible activity; and

(E) describes each eligible activity funded by such a

grant (including the status of the eligible activity); and

(2) make the report under paragraph (1) available to the

public.

SEC. 1474. AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to carry out this part

$200,000,000 for each of fiscal years 2005 through 2009.

* * * * * * *

PART G—SMALL PUBLIC WATER SYSTEM

ASSISTANCE2

SEC. 1471. DEFINITIONS.

In this part:
108

(1) ELIGIBLE ACTIVITY.—

(A) IN GENERAL.—The term ‘‘eligible activity’’ means an

activity that is carried out by an eligible entity to ensure

compliance with national primary drinking water regulations applicable to the eligible entity under section 1412.

(B) INCLUSION.—The term ‘‘eligible activity’’ includes

source water protection.

(C) EXCLUSION.—The term ‘‘eligible activity’’ does not

include any activity to increase the population served by a

public water system, except to the extent that the Administrator determines an activity to be necessary to—

(i) achieve compliance with a national primary

drinking water regulation; and

(ii) provide a water supply to a population that, as

of the date of enactment of this part, is not served by

a safe public water system.

(2) ELIGIBLE ENTITY.—The term ‘‘eligible entity’’ means—

(A) a small public water system that—

(i) if located in a State, serves a community that,

under affordability criteria established by the State

under section 1452(d), is determined by the State to

be—

(I) a disadvantaged community; or

(II) a community that would otherwise become

a disadvantaged community as a result of carrying

out an eligible activity, as determined by the State;

or

(ii) if located in an area governed by an Indian

Tribe, serves a community that is determined by the

Administrator, under criteria published by the Administrator under section 1452(d) and in consultation with

the Secretary, to be—

(I) a disadvantaged community; or

(II) a community that would otherwise become

a disadvantaged community as a result of carrying

out an eligible activity, as determined by the State;

and

(B) a public water system that—

(i) would incur $3,000,000 or more in costs in complying with national primary drinking water regulations promulgated under this Act; and

(ii) is a disadvantaged community or a community

may otherwise become disadvantaged as a result of

carrying out an eligible activity, as determined by the

State.

(3) PROGRAM.—The term ‘‘program’’ means the small public

water system assistance program established under section

1472(a).

(4) SECRETARY.—The term ‘‘Secretary’’ means the Secretary

of Health and Human Services, acting through the Director of

the Indian Health Service.

(5) SMALL PUBLIC WATER SYSTEM.—The term ‘‘small public

water system’’ means a public water system (including a com-
109

munity water system and a noncommunity water system) that

serves a population of 15,000 or fewer individuals.

SEC. 1472. SMALL PUBLIC WATER SYSTEM ASSISTANCE PROGRAM.

(a) ESTABLISHMENT.—Not later than July 1, 2006, the Administrator shall establish within the Environmental Protection Agency a

small public water system assistance program for, and provide

grants to, eligible entities for use in carrying out eligible activities.

(b) PRIORITY.— (1) IN GENERAL.—The Administrator shall provide grants

to eligible entities for eligible activities that—

(A) address the most serious risks to human health

from lack of compliance with the regulations specified in

subparagraph (B);

(B) are necessary to ensure compliance with national

primary drinking water regulations applicable to eligible

entities under section 1412; and

(C) assist systems serving communities that are most in

need, as calculated on the basis of median household income, under affordability criteria established by the State

under section 1452(d) (or, in the case of eligible entities in

an area governed by an Indian Tribe, under affordability

criteria established by the Administrator, in consultation

with the Secretary).

(2) MANAGEMENT COOPERATIVES.—The Administrator shall

consider giving priority for grants under this section to eligible

activities that are carried out by communities that form management cooperatives.

(d) TECHNICAL ASSISTANCE.—In providing grants under this

section, the Administrator shall—

(1) use not less than 1.5 percent of funds made available

to carry out this section to provide grants to nonprofit technical

assistance organizations to be used to assist eligible entities

in—

(A) assessing needs relating to eligible activities;

(B) identifying additional available sources of funding

to meet the cost-sharing requirements under the program;

and

(C) planning, implementing, and maintaining any eligible activities of the eligible entities that receive funding

under this section;

(2) require that none of the funds provided under paragraph (1) be used to pay for lobbying expenses; and

(3) require that for each fiscal year, not more than 5 percent of the funds received by an eligible entity under this section

may be used to obtain technical assistance in planning, implementing, and maintaining eligible activities for which funding

is provided under this section.

(e) INDIAN TRIBES.—

(1) IN GENERAL.—In providing grants under this section,

the Administrator shall use not less than 3 percent of funds

made available to carry out this section for each fiscal year to

provide grants to eligible entities that are located in areas governed by Indian Tribes.

(2) PROGRAM PRIORITY REQUIREMENT.—
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(A) LIST OF ELIGIBLE ACTIVITIES.—

(i) IN GENERAL.—The Administrator, in consultation with the Secretary, shall, for each fiscal year, identify, and, consistent with subsection (b) and considering the criteria described in subparagraph (B), list in

descending order of priority, eligible activities for eligible entities located in areas governed by Indian Tribes

for which funds provided from a grant under this part

may be used.

(ii) COORDINATION.—

(I) IN GENERAL.—To the maximum extent

practicable, the Administrator shall ensure that

the preparation of the list under clause (i) is coordinated with any needs assessment conducted

under section 1452(i)(4).

(II) ADDITIONAL CONSIDERATION.—Any additional financial needs of small public water systems located in areas governed by Indian Tribes

that are associated with the cost of complying with

a national primary drinking water regulation (including a regulation concerning arsenic) that is

promulgated after the then most recent needs survey conducted under section 1452(i)(4) shall be

factored into the determination of financial need

for, and prioritization of, eligible activities under

this section.

(B) CRITERIA.—The Administrator shall, in preparing

a list under subparagraph (A), consider giving priority to

any listed eligible activities that are to be carried out by

communities that form management cooperatives (including management cooperatives between systems that do not

have public water system connections).

(3) ALLOCATION OF GRANT FUNDING.—For each fiscal year,

the Administrator, in consultation with the Secretary, shall provide grants to eligible entities located in an area governed by

an Indian Tribe for the maximum number of eligible activities

for which the funding allocation makes assistance available,

based on the priority assigned by the Administrator to eligible

activities under paragraph (2).

(4) LIMITATION ON USE OF FUNDS.—For each fiscal year,

not more than 5 percent of the funds received by an eligible entity located in an area governed by an Indian Tribe under this

section may be used to obtain technical assistance in planning,

implementing, and maintaining eligible activities that are funded under this section.

(f) LIMITATION ON RECEIPT OF FUNDS.—

(1) IN GENERAL.—Except as provided in paragraph (2), a

grant under this section shall not be provided to an eligible entity that, as determined by the Administrator—

(A) does not have the technical, managerial, operations,

maintenance, or financial capacity to ensure compliance

with national primary drinking water regulations applicable to the eligible entity under section 1412; or
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(B) is in significant noncompliance with any applicable

national primary drinking water regulation.

(2) EXCEPTION FOR RECEIPT OF GRANT.—An eligible entity

described in paragraph (1) may receive a grant under this section only—

(A) if the Administrator determines that use of the

grant will ensure compliance with national primary drinking water regulations applicable to the eligible entity under

section 1412;

(B)(i) to restructure or consolidate the facility to

achieve compliance with applicable national primary

drinking water regulations; or

(ii) in a case in which restructuring or consolidation of

the facility is not practicable, if the Administrator determines that—

(I) the eligible entity has made a good faith effort

to achieve compliance with applicable national primary drinking water regulations; and

(II) the eligible entity is adhering to an enforceable

schedule for complying with those regulations; and

(C) in a case in which paragraph (1)(A) applies to an

eligible entity, and the eligible entity if—

(i) the eligible entity agrees to undertake feasible

and appropriate changes in operations (including

changes in ownership, management, accounting, rates,

maintenance, consolidation, provision of an alternative

water supply, or other procedures); and

(ii) the Administrator determines that the measures are necessary to ensure that the eligible entity has

the capacity described in paragraph (1)(A) to comply

with applicable national primary drinking water regulations over the long term.

(3) REVIEW.—Before providing assistance under this section

to an eligible entity that is in significant noncompliance with

any national primary drinking water regulation applicable to

the eligible entity under section 1412, the Administrator shall

conduct a review to determine whether paragraph (1)(A) applies

to the entity.

(g) COST SHARING.—

(1) IN GENERAL.—

(A) LIMIT.—Except as provided in paragraph (2), the

share of the total cost of an eligible activity funded by a

grant under this section shall not exceed 80 percent.

(B) USE OF OTHER FEDERAL FUNDS.—To pay the portion of an eligible activity that is not funded by a grant

under this section, an eligible entity located in an area governed by an Indian Tribe may use Federal financial assistance other than assistance received under this section.

(2) WAIVER OF COST-SHARING REQUIREMENT.—

(A) IN GENERAL.—The Administrator may waive the requirement of an eligible entity to pay all or a portion of the

share of an eligible activity that is not funded by a grant

under this section, based on a determination by the State
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that the eligible entity is unable to pay any or all of the

share.

(B) LIMITATION.—For each fiscal year, the total amount

of cost-share waivers provided by the Administrator to eligible entities located in an area governed by an Indian

Tribe under subparagraph (A) shall not exceed 30 percent

of the amount of funding used to provide grants to Indian

Tribes under this part.

(h) UNOBLIGATED FUNDS.—Any funds not obligated by the

small public water system assistance program established under

subsection (a) for an eligible activity within 1 year after the date on

which funds are made available to carry out this part shall be returned to the Administrator for use in providing new grants under

this part.

SEC. 1473. REPORTS.

Not later than January 1, 2006, and annually thereafter

through January 1, 2010, the Administrator shall—

(1) submit, to the Committee on Environment and Public

Works of the Senate and the Committee on Energy and Commerce of the House of Representatives, a report that, for the preceding fiscal year—

(A) lists the eligible activities for eligible entities that

receive funds under this part for the preceding fiscal year;

(B) identifies the number of grants provided under this

part to eligible entities located in areas governed by Indian

Tribes, and in each State;

(C) identifies each eligible entity that receives a grant

to carry out an eligible activity;

(D) identifies the amount of each grant provided to an

eligible entity to carry out an eligible activity; and

(E) describes each eligible activity funded by such a

grant (including the status of the eligible activity); and

(2) make the report under paragraph (1) available to the

public.

SEC. 1474. AUTHORIZATION OF APPROPRIATIONS.

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

* * * * * * *

[42 U.S.C. 1962)—JUL. 22, 1965]

WATER RESOURCES PLANNING ACT

SHORT TITLE

SECTION. 1. This Act may be cited as the ‘‘Water Resources

Planning Act’’.

* * * * * * *

SEC. 101. There is hereby established a Water Resources Council (hereinafter referred to as the ‘‘Council’’) which shall be composed of the Secretary of the Interior, the Secretary of Agriculture,

the Secretary of Homeland Security, the Secretary of the Army, the
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Secretary of Commerce, the Secretary of Housing and Urban Development, the Secretary of Transportation, the Administrator of the

Environmental Protection Agency, and the Chairman of the Federal Power Commission. The Chairman of the Council shall request

the heads of other Federal agencies to participate with the Council

when matters affecting their responsibilities are considered by the

Council. The Chairman of the Council shall be designated by the

President.

øSEC. 102. The Council shall—¿

SEC. 102. DUTIES OF COUNCIL.

(a) IN GENERAL.—The Council shall—

ø(a)¿ (1) maintain a continuing study and prepare an assessment biennially, or at such less frequent intervals as the

Council may determine, of the adequacy of supplies of water

necessary to meet the water requirements in each water resource region in the United States and the national interest

therein; øand¿

ø(b)¿ (2) maintain a continuing study of the relation of regional or river basin plans and programs to the requirements

of larger regions of the Nation and of the adequacy of administrative and statutory means for the coordination of the water

and related land resources policies and programs of the several

Federal agencies; it shall appraise the adequacy of existing and

proposed policies and programs to meet such requirements;

and it shall make recommendations to the President with respect to Federal policies and programsø.¿ ; and

(3) carry out a special water resources study in accordance

with subsection (b).

(b) SPECIAL WATER RESOURCES STUDY.—

(1) IN GENERAL.—The Council shall carry out a special

water resources study to—

(A) use existing water assessments and conduct such

additional assessments as are necessary to project future

water supply and demand;

(B) study water management programs used by the

Federal Government, State and local governments, and private entities to increase water supplies and improve the

availability, reliability, and quality of freshwater resources;

(C) consult with agencies and entities to develop recommendations consistent with laws (including treaties, decrees, and compacts) for a comprehensive water strategy

that—

(i) respects the primary role of States in regulating

water rights and uses;

(ii) identifies incentives to ensure an adequate and

dependable supply of water through the year 2054;

(iii) suggests strategies to avoid increased mandates on State and local governments;

(iv) eliminates duplication and conflict among

Federal programs;

(v) considers all available technologies and methods to optimize water supply reliability, availability,

and quality, while safeguarding the environment;
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(vi) recommends means of capturing excess water

and flood water for conservation and use in a drought;

(vii) suggests financing options for—

(I) water supply and water management

projects; and

(II) appropriate public works projects;

(viii) suggests strategies to conserve existing water

supplies, including recommendations for repairing

aging infrastructure; and

(ix) includes other objectives relating to the effective management of the water supply to ensure reliability, availability, and quality;

(D) evaluate Federal water programs in existence on

the date of enactment of this paragraph and submit to Congress and the President recommendations on—

(i) means of eliminating discrepancies between the

goals of the programs and actual service delivery;

(ii) duplication among programs; and

(iii) any other circumstances that interfere with the

effective operation of the programs;

(E) based on a review of water plans, develop and

make available to the public water planning models to reduce water resource conflicts; and

(F) develop and coordinate public awareness activities

to provide the public with access to understandable informational material, including, at a minimum—

(i) descriptions of the value and benefits of land

stewardship to reduce the impact of water shortages;

and

(ii) clear instructions for appropriate responses to

water supply shortages, including—

(I) water conservation;

(II) water reuse; and

(III) detection and elimination of water leaks.

(2) CONSULTATION.—In carrying out this subsection, the

Council shall consult with interested groups, including groups

that represent—

(A) agricultural production, wildlife, and fishery interests;

(B) forestry and fire management interests;

(C) rural and urban water associations;

(D) environmental interests;

(E) engineering and construction interests;

(F) the portion of the scientific community that is concerned with climatology and hydrology;

(G) resource-dependent businesses and other private entities (including the recreation and tourism industries); and

(H) any other group, organization, or entity that the

Council considers necessary to advance the work of the

Council.

(3) REPORTS.— (A) INTERIM REPORTS.—Not later than 180 days after

the first meeting of the Council following the date of enactment of this paragraph, and every 180 days thereafter, the
115

Council shall submit to the President, the Committee on

Energy and Natural Resources and the Committee on the

Environment and Public Works of the Senate, and the

Committee on Resources, the Committee on Transportation

and Infrastructure, and the Committee on Energy and

Commerce of the House of Representatives an interim report that describes the progress made by the Council in carrying out this subsection.

(B) FINAL REPORT.—As soon as practicable, but not

later than 3 years, after the date of the first meeting of the

Council referred to in subparagraph (A), the Council shall

submit to the President and the Committees referred to in

subparagraph (A) a final report that includes—

(i) a detailed statement of the findings and conclusions of the Council; and

(ii) recommendations for legislation and other policies to implement those findings and conclusions,

including—

(I) a list of recommendations that can be implemented immediately in accordance with existing

law; and

(II) a list of recommendations that require

statutory changes prior to implementation.

* * * * * * *

SEC. 401. There are authorized to be appropriated to the Water

Resources øCouncil:¿ Council each of the following amounts:

ø(a)¿ (1) The sum of $2,886,000 for fiscal year 1979 for the

Federal share of the expenses of administration and operation

of river basin commissions, including salaries and expenses of

the chairmen, but not including funds authorized by øsubsection (c) below:¿ paragraph (3): Provided, That not more than

$750,000 annually shall be available under this subsection for

any single river basin commissionø;ø .

ø(b)¿ (2) øthe sum¿ The sum of $2,668,000 for fiscal year

1979 for the expenses of the Water Resources Council in administering this Act, not including funds authorized by øsubsection (c) belowø;¿ paragraph (3).

ø(c)¿ (3) The sum of $3,179,900 for fiscal year 1979 for

preparation of assessments, and for directing and coordinating

the preparatin of such river basin plans as the Council determines are necessary and desirable in carrying out the policy of

this Act: Provided, That $828,900 shall be available under this

subsection for preparation of the Columbia River Estuary Special Study: Provided further, That $308,000 shall be available

under this subsection for preparation of the New England Port

and Harbor Study and $135,000 shall be available for completion of the Hudson River Basin Level B Study: Provided further, That $150,000 shall be available under this subsection for

completion of Case Studies of the Application of Cost Sharing

Policy Options for Flood Plain Management in the Connecticut

River Basin: Provided further, That not more than $2,500,000

shall be available under this subsection for the preparation of

assessments: Provided further, That the Council may transfer
116

funds authorized by this subsection to river basin commissions

and to Federal and State agencies upon such terms and conditions as it determines are necessary and desirable to carry out

the above functions in an economical, efficient, and timely

manner, and that such commissions and agencies are hereby

authorized to receive and expend such funds pursuant to this

subsection.

(4) The sum of $9,000,000 for fiscal year 2005 to be used

to carry out the special water resources study under section

102(b), to remain available until expended.

* * * * * * *

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