Tracy Mehan Testimony
G. TRACY MEHAN
ASSISTANT ADMINISTRATOR FOR WATER
U.S. ENVIRONMENTAL PROTECTION AGENCY
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS,
SUBCOMMITTEE ON FISHERIES, WILDLIFE, AND WATER
UNITED STATES SENATE
October 31, 2001
Good morning, Mr. Chairman and Members of the Subcommittee. I am Tracy
Mehan, Assistant Administrator for Water at the U.S. Environmental
Protection Agency. I welcome this opportunity to discuss the Nation's
investment in drinking water and wastewater treatment facilities to
protect human health and the environment.
As a Nation, we have made great progress over the past quarter century
in reducing water pollution and assuring the safety of drinking water.
The Clean Water Act and the Safe Drinking Water Act have served us well
and provide the solid foundation we need to make sure that all Americans
will continue to enjoy safe drinking water and clean river, lakes, and
Our success in improving drinking water and surface water quality is the
result of many programs and projects by local, State and Federal
governments in partnership with the private sector. But our cooperative
investment in water infrastructure -- in pipes and treatment plants --
has, more than any other single effort, paid dramatic dividends for
water quality and public health.
I would like to take a moment to recognize the events of September 11.
This hearing was originally scheduled for the thirteenth of September
and, as such, this testimony was developed prior to the tragic events of
September 11. Reviewing the testimony again after one month, I was
struck by how much the world, even the somewhat circumscribed world of
the water industry, has changed. As you know, EPA has established a
Water Protection Task Force to accelerate work that had been ongoing on
critical infrastructure protection. For the last month, my staff has
been working diligently with other federal agencies, states, and water
industry representatives to ensure that measures are in place to protect
our population from security threats that could endanger our drinking
water supplies or pollute our nation's waterways.
But this morning I want to move forward with our original testimony and
give you a brief overview of the progress we have made in improving
water quality and challenges we still face. I will summarize what EPA
knows about the need for future investment in clean water and drinking
Clean and Safe Water-- Accomplishments and Challenges
Most Americans would agree that the quality of both surface waters and
drinking water has improved dramatically over the past quarter century.
Thirty years ago, the Nation's waters were in crisis -- the Potomac
River was too dirty for swimming, Lake Erie was dying, and the Cuyahoga
River had burst into flames. Many of the Nation's rivers and beaches
were little more than open sewers.
The 1972 Clean Water Act has dramatically increased the number of
waterways that are once again safe for fishing and swimming. The Act
launched an all-out assault on water pollution, including new controls
over industrial dischargers, support for State efforts to reduce
polluted runoff, and a major investment by the Federal government to
help communities build sewage treatment plants.
The Federal government has provided over $80 billion in wastewater
assistance since passage of the Clean Water Act, which has dramatically
increased the number of Americans enjoying better water quality. The
economic and social benefits of improved water quality are readily
evident all across the country. Some of the most dramatic improvements
are seen in urban areas such as Boston, Cleveland, St. Petersburg and
Baltimore, where the efforts to restore the health and vitality of our
waters has also led to economically vibrant, water-focused urban
The dramatic progress made in improving the quality of wastewater
treatment since the 1970s is a national success. In 1968, only 86
million people were served by secondary or advanced treatment
facilities. Today, of the 190 million people served by wastewater
treatment facilities, about 165 million people are served by secondary
or better treatment.
We have also made dramatic progress in improving the safety of our
Nation's drinking water. Disinfection of drinking water is one of the
major public health advances in the 20th century. In the early 1970's,
growing concern for the presence of contaminants in drinking water
around the country prompted Congress to pass the Safe Drinking Water
Act. Today, the more than 265 million Americans who rely on public water
systems enjoy one of the safest supplies of drinking water in the world.
Under the Safe Drinking Water Act, EPA has established standards for 90
drinking water contaminants. Public water systems have an excellent
compliance record -- more than 90 percent of the population served by
community water systems receive water from systems with no reported
violations of health based standards in place as of 1994. In the past
decade, the number of people served by public water systems meeting
Federal health standards in place as of 1994 has increased by more than
Despite past progress in reducing water pollution, almost 40 percent of
the Nation's waters assessed by States still do not meet water quality
goals established by States under the Clean Water Act. On a national
scale, States report that the leading sources of pollution include
agriculture, municipal point sources, and urban runoff and storm sewers.
Other sources, ranging from factories to forestry operations, cause
water pollution problems on a site-specific basis. Point-source
pollution has been so greatly reduced that now non-point sources (i.e.,
diffuse runoff) are the leading cause of water pollution.
Clean Water and Drinking Water State Revolving Loan Funds
The primary mechanism that EPA uses to help local communities finance
water infrastructure projects is the State Revolving Fund (SRF)
established in the Clean Water Act and the Safe Drinking Water Act. The
SRFs were designed to provide a national financial resource for clean
and safe water that would be managed by States and would provide a
funding resource "in perpetuity." These important goals are being
achieved. Other Federal, State, and private sector funding sources are
also available for community water infrastructure investments.
Under the SRF programs, EPA makes grants to States to capitalize their
SRFs. States provide a 20% match to the Federal capitalization payment.
Local governments get loans for up to 100% of the project costs at below
market interest rates. After completion of the project, the community
repays the loan, and these loan repayments are used to make new loans on
a perpetual basis. Because of the revolving nature of the funds, funds
invested in the SRFs provide about four times the purchasing power over
twenty years compared to what would occur if the funds were distributed
In addition, low interest SRF loans provide local communities with
dramatic savings compared to loans with higher, market interest rates.
An SRF loan at the interest rate of 2.6% (the average rate during the
year 2000) saves communities 25% compared to using commercial financing
at an average of 5.8% (see Chart 1).
The Federal government has provided more than $18 billion in
capitalization grants to States for their Clean Water SRFs through
FY2001. With the addition of the State match, bond proceeds, and loan
repayments, the cumulative funds available for loans from the Clean
Water SRFs were more than $34 billion of which $3.4billion was still
available as of June 30, 2000.
Since 1988, States have made over 9,500 individual loans for a total of
$30.4 billion. In 2000, the Clean Water SRFs issued a record total of
1,300 individual loans with a value of $4.3 billion (see Chart 2). The
Clean Water SRFs have provided about $3 billion in loans each year for
several years and are widely considered a tremendous success story.
In 1996, Congress enacted comprehensive amendments to the Safe Drinking
Water Act which created an SRF program for financing of drinking water
projects. The Drinking Water SRF was modeled after the Clean Water SRF,
but States were given broader authority to use Drinking Water SRFs to
help disadvantaged communities and support drinking water program
Through fiscal year 2001, Congress has appropriated $4.4 billion for the
Drinking Water SRF program. EPA has reserved $83 million for monitoring
of unregulated contaminants and operator certification reimbursement
grants. Through June 30, 2001, States have received $3.65 billion in
capitalization grants, which when combined with state match, bond
proceeds, and other funds provided $5.2 billion in total cumulative
funds available for loans. Through June 30, 2001, States have made close
to 1,800 loans totaling $3.7 billion. Approximately 74% of the loans
(39% of dollars) were provided to small water systems that frequently
have a more difficult time obtaining affordable financing. States also
reserved a total of approximately $575 million of SRF capitalization
grants for other activities that enhance the management of water
systems, protect sources of drinking water, and support the drinking
water program. Although the Drinking Water SRF is considerably newer
than the Clean Water SRF, it is showing the same promise as an
infrastructure financing success story.
Congress should consider adding some of the flexibilities of the
Drinking Water SRF program to the Clean Water SRF program and should
extend the provision which allows States to transfer funds between their
Clean Water and Drinking Water SRFs in order to allow States the
flexibility to better direct funds towards priority needs.
Water Infrastructure -- Future Needs
The Clean Water Act ' 516 (b)(1) and the Safe Drinking Water Act '1452
both require that EPA periodically develop a "needs survey" to identify
needed water infrastructure investments.
In February of this year, EPA released its second report on drinking
water infrastructure needs showing that $150.9 billion is needed over
the next 20 years to ensure the continued provision of safe drinking
water to consumers.
The survey found that water systems need to invest $102.5 billion,
approximately 68% of the total need, in what the report calls "current
needs." In most cases, current needs would involve installing,
upgrading, or replacing infrastructure within the next few years to
enable a water system to continue to deliver safe drinking water. A
system with a current need, therefore, usually is not in violation of
any health-based drinking water standard. For example, a surface water
treatment plant may currently produce safe drinking water, but the
plant's filters may require replacement due to their age and declining
effectiveness, if the plant is to continue to provide safe water. Future
needs account for the remaining $48.4 billion in needs; for example,
projects that systems would undertake over the next 20 years as part of
routine replacement such as reaching the end of a facility's service
The survey includes needs that are required to protect public health,
such as projects to preserve the physical integrity of the water system,
convey treated water to homes, or to ensure continued compliance with
specific Safe Drinking Water Act regulations (see Chart 3). Transmission
and distribution costs are the largest category, at 56% of the total
need, or $83.1 billion. Treatment projects make up the second largest
category of needs (i.e., 25%) and have a significant benefit for public
Approximately 21%, or $31.2 billion, is needed for compliance with
current and proposed regulations under the Act. Nearly 80% of the
regulatory need is to comply with rules which protect consumers from
harmful surface water microbial contaminants, such as Giardia and E.
coli. Most of the total needs derive from the costs of installing,
upgrading, and replacing the basic infrastructure that is required to
deliver drinking water to consumers -- costs that water systems would
face independent of any Safe Drinking Water Act regulations.
EPA's most recent survey of clean water infrastructure needs was
released in 1996, and we plan on releasing a new clean water needs
survey in 2002. The 1996 clean water needs survey estimated needs of
$140 billion, including $26.5 billion for secondary treatment projects,
$17.5 billion for advanced treatment, and $73.4 billion for various
types of sewage conveyance projects, including collectors, interceptors,
combined sewers, and storm water, and $10 billion for nonpoint pollution
control projects (see Chart 4).
EPA is working to supplement the 1996 clean water needs survey as more
accurate information becomes available. For example, the Agency has
developed a model that better predicts costs associated with reducing
sanitary sewer overflows.
Broader Context of Water Infrastructure Financing
Over the past year, several stakeholder groups including the Water
Infrastructure Network, the Association of Metropolitan Sewerage
Agencies, and the American Water Works Association issued reports
estimating water infrastructure needs. These estimates were all
substantially above those of EPA's Needs Surveys. Generally, these cost
estimates differ from EPA's because the methodologies and definitions
for developing them differ. For example, EPA Needs Surveys include only
projects that are eligible for SRF funding under the Clean Water Act and
Safe Drinking Water Act. Also, EPA requires that costs included in the
Needs Surveys be established by planning or design documentation.
The Agency also decided to undertake a broader review of needs and
spending for water and wastewater infrastructure, including estimating
whether there is a quantifiable gap between future needs and current
spending. This analysis B known as the Gap Analysis B has just recently
undergone independent peer review by external subject matter experts. We
expect the final analysis will be ready for public release later this
EPA recognizes that effective decision-making concerning water
infrastructure financing benefits from a better understanding of the
broader context of this effort. Key components in the broader context of
water infrastructure that need to be more fully evaluated include the
- Population Growth: Steady growth and shifts in population
put substantial pressure on local governments to provide
expanded drinking water and sewer services. While EPA does not
provide funding for projects related to population growth per
se, this is an important factor for locals.
- Aging Infrastructure: Many sewage and drinking water pipes
were installed between 50 and 100 years ago, and these pipes are
nearing the end of their useful lives.
- Current Treatment Issues: In 1998, States, Tribes, and
interstate commissions determined that wastewater treatment
facilities and combined sewer overflows were two of the leading
causes of impairment to estuaries. A June 2000 EPA report
"Progress in Water Quality" estimates that by 2016, pollution
levels could be similar to levels observed in the mid-1970s if
there is no increase in treatment efficiency.
- Research and Development: Innovation, research, and
development are essential elements of promoting the use of more
effective, efficient, and affordable technologies in water and
wastewater treatment. A recent EPA report on public and private
R&D expenditures associated with water pollution abatement (AA
Retrospective Assessment of the Costs of the Clean Water Act
1972-1997") showed that expenditures decreased by half from the
early 1970s to the late 1990s. The Federal investment in
drinking water research has increased substantially over the
past 5 years.
- Increasing Operation and Maintenance Costs: As the size and
complexity of water and sewer systems increase, and facilities
get older, the costs of operations and maintenance tend to
- Affordability: Although water has historically been
underpriced, some systems may find it difficult to replace or
update aging water and sewer systems and keep household user
charges at affordable levels, especially for low-income
households and communities.
A number of stakeholder groups have called for a significant
increase in Federal investment in water and wastewater
infrastructure. Certainly, there will be a continuing role for the
Federal government in helping to meet the challenge of extensive
infrastructure investment need, but it cannot be the only solution.
The solutions will have to be multi-faceted with Federal, State, and
local, public and private investment of time, energy, money,
research, and, perhaps most needed, innovative thinking and bold
actions. We must encourage states and local governments to think
strategically as they plan for forthcoming rules and program
requirements, infrastructure repair and replacement, and overall
protection of the water that sustains their communities.
Ensuring that our water infrastructure needs are addressed in a
sustainable manner will require a shared commitment on the part of
the Federal, state and local governments, private business, and
consumers. Governor Whitman and I are committed to working in
partnership with Congress, States, local governments, the private
sector, and others to better understand the water infrastructure
challenges we face and to play a constructive role in helping to
define an effective approach to meeting these challenges in the
We believe that the SRF mechanism has proven to be a powerful and
effective tool in helping states and utilities achieve their public
health and environmental goals. As your Committee continues to study
water infrastructure needs, the Administration would like to
encourage a constructive dialogue on the appropriate role of the
federal government in addressing these needs. Thank you, Mr.
Chairman, for giving me the opportunity to speak with you this