March 2015, Vol. 70, No. 3
Washington Watch
EPA Water Infrastructure Initiative A Mystery
President Obama’s proposed budget for fiscal year 2016 has $478 billion in new spending for infrastructure over six years, but little or none of that would go to sewer and drinking water work, not that Congress will approve the tax increases to pay for it anyway.
Nor would the Environmental Protection Agency’s newly-announced Water Infrastructure and Resiliency Finance Center provide additional funds beyond those available through the long-standing Clean Water and Drinking Water State Revolving Funds, whose funding has been diminishing as Congress attempts not just to reduce the federal deficit but successive administrations, including Obama’s, attempt to wean cities and counties off the SRFs.
That leaves the new EPA infrastructure financing center announced in mid-January as the latest and best hope for a spurt in federal help to counties and cities for repair of underground utilities. But the EPA press material was exceedingly vague about exactly what kind of help the center will be providing to local governments faced with very expensive water infrastructure repair projects and insufficient revenue to fund those projects. The EPA said the center “will serve as a resource for communities, municipal utilities and private entities as they seek to address water infrastructure needs with limited budgets.” The agency will mostly help local governments “explore public-private partnerships and innovative financing solutions.” What leverage the EPA will be able to apply in that process is unclear. But apparently no funding will be involved.
However, if one flips over to the White House website there is an announcement about the broader Obama administration initiative on infrastructure taking shape, the Qualified Public Infrastructure Bond (QPIB) that President Obama has proposed as part of his 2016 budget request. It would be used for water infrastructure among other infrastructure projects. Putting two and two together, the EPA apparently is hoping that Congresses approves this new QPIB which would then be the starting point for the public-private partnerships the new Financing Center hopes to put together across the country. Why the EPA did not mention this QPIB initiative, given its relevance, is puzzling.
In announcing the Center, the agency pointed to its unspecified involvement in a Maryland project as an example of how the new EPA Center could help birth new water infrastructure projects. The Prince George’s County Urban Stormwater Retrofit Public-Private Partnership Demonstration Pilot is a $100 million initiative to demonstrate how community-based, public-private partnerships can spur green infrastructure-driven storm water controls. An agency spokesman was unable to provide any details about the EPA’s involvement in that project.
QPIBs will expand the scope of private activity bonds (PABs) which are often issued by private companies in order to finance transportation and airport improvements. They have tax advantages for the issuers. Unlike PABs, the QPIB bond program will have no expiration date, no issuance caps and interest on these bonds will not be subject to the alternative minimum tax. These modifications will increase QPIB’s impact as a permanent, lower cost financing tool to increase private participation in building our nation’s public infrastructure. QPIBs would not be available for privately-owned facilities or privatizations of public facilities.
Senate to Consider White House-Opposed Permitting Reform Bill
Whereas Republicans in the House are likely to make trouble for any Obama administration methane regulations, the White House has promised a veto of a GOP-led pipeline permitting reform bill. The House passed the bill on Jan. 21 by a vote of 253-160. The Natural Gas Pipeline Permitting Reform Act (H.R. 161) gives the Federal Energy Regulatory Commission (FERC) 12 months in which to approve a pipeline construction application. Federal regulatory agencies with environmental responsibilities such as the Environmental Protection Agency, Corps of Engineers and the Fish and Wildlife Service would have three months after FERC approval to approve or disapprove a permit for pipeline construction. If the regulatory agency did not act within three months after FERC approval, the project would go forward.
The Obama administration has promised to veto the bill if the Senate passes it. In the Statement of Administration Policy, the White House said: “The administration recognizes the need for additional energy infrastructure and supports the timely consideration of project applications. The administration, however, strongly opposes the bill because it would allow the automatic approval of natural gas pipeline projects if the FERC or other Federal agencies do no issue the required permit, license, or approval within rigid, unworkable timeframes.”
The GOP-controlled Senate will almost certainly approve the House bill. The question is whether the Senate will add amendments which will attract Democratic votes. The Republicans will need six Democrats to get to the 60 votes needed to stop a filibuster, and an additional seven votes to override an Obama veto, if one is forthcoming. The House vote was 253-169, which is about 20 votes short of what would be necessary to override an Obama veto.
Proposed Obama Methane Emissions Plan Lacks Details
The Obama administration announced a plan to cut methane emissions from pipeline operations but gave no specifics beyond the federal agencies which would be running rulemakings. The technical details of that rulemaking, and the extent of the cut of methane emissions they seek to produce, won’t be known for some time. While the White House said it wants natural gas industry input into the rulemakings, transmission companies are likely to fight any aggressive requirements for preventing methane leaks from compressors, valves, pneumatic controllers and other equipment, arguing they are already doing that on their own, voluntarily, and obtaining significant methane reductions. Moreover, Republicans in Congress, who now control both the House and Senate, would seek to block restrictions perceived by the industry as unduly tough.
The only specific goal the administration set was to reduce methane emissions from the oil and gas sector by 40-45 percent from 2012 levels by 2025. Methane emissions accounted for nearly 10 percent of U.S. greenhouse gas emissions in 2012, of which nearly 30 percent came from the production transmission and distribution of oil and natural gas. Emissions from the oil and gas sector are down 16 percent since 1990 and current data show significant reductions from certain parts of the sector, notably well completions. Nevertheless, emissions from the oil and gas sector are projected to rise more than 25 percent by 2025 without additional steps to lower them.
The EPA has been edging toward an air emissions regulation on methane for the past few years. The agency will ostensibly announce an initial proposal containing specifics this summer and finalize it in 2016. That would be the kind of quick action the agency is not known for. Rulemakings typically drag on for years.
Martin Edwards, vice president at INGAA, says that any EPA action is likely to focus on newly constructed facilities. With regard to existing facilities, pipeline companies are already aggressively looking for methane leaks from above-ground facilities such as compressors, pneumatic controllers, seals and other equipment. Under INGAA’s guidance, the industry is developing voluntary guidelines for directed inspection and maintenance.
Republicans in Congress have already warned the administration not to go too far from that consistency. House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) issued a statement saying: “Studies show that while our energy production has significantly increased, methane emissions have continued to decline. This is something that should be celebrated, not bound by new red tape.”
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