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March 1, 2021

Smith's Research & Gradings

EPA To Regulate "Forever Chemicals" in Water

EPA To Regulate "Forever Chemicals" in Water

At Press Time: Today, the U.S. Environmental Protection Agency (EPA) issued two actions to protect public health by addressing per- and polyfluoroalkyl substances (PFAS) in drinking water, highlighting the agency's commitment to address these long-lasting "forever chemicals" that can enter drinking water supplies and impact communities across the United States. The Biden-Harris administration is committed to addressing PFAS in the nation's drinking water and will build on these actions by advancing science and using the agency's authorities to protect public health and the environment.

The EPA announcement comes after the Municipal Analysts Group of New York (MAGNY) hosted a luncheon discussion on Water.  

Leonard Jones, managing director at Moody's and MAGNY Program chair, organized the event entitled: Water: Navigating the Waves of Policy, Regulation and Coronavirus.

In the opening remarks, Mr. Jones  thanked the sponsors and noted the virtual webinar would discuss how water-related utilities are critical components of the nation's health and economic stability.

The MAGNY description added utilities are wrestling with maintaining service quality while ensuring accessibility and affordability. What are the risks to the sector from coronavirus and how can the sector overcome them to achieve its mission? Is the regulatory process adequately addressing the concerns in protecting America's waters? What policies at the federal level are being discussed and how might these policies impact the industry? How is the federal government supporting the industry financially to ensure its success?

The discussion was moderated by Doug Scott, Managing Director, Fitch Ratings US Public Finance, Water & Sewer Group. The panelists were: Kareem Adeem, Director, City of Newark, New Jersey Department of Water & Sewer Utilities; G. Tracy Mehan, III, Executive Director, Government Affairs, American Water Works Association; and Matthew Hobby, Senior Risk Manager, U.S. EPA WIFIA program.

Mr. Scott prefaced the discussions by noting that water is a local issue. People approach water differently including how they pay for it.

The big changes facing the utilities is the world in which they are operating. It is more digital.  How to use the technology is a new question.

Mr. Scott explained that we are able to see water at a much more magnified level than decades ago when the regulations were written. So, while the forever chemicals have been known for decades, what has changed is the ability to detect chemicals at molecular level in water.

"All people need access to clean and safe drinking water. One way that EPA is committed to keeping our communities safe is by addressing PFAS," said EPA Acting Assistant Administrator for Water, Radhika Fox, when announcing the new proposed regulations. "These actions will underpin better science, better future regulation, and improved public health protections."

Taken together, the EPA's two actions will support the agency's efforts to better understand and ultimately reduce the potential risks caused by the broad class of PFA chemicals. EPA is reproposing the Fifth Unregulated Contaminant Monitoring Rule (UCMR 5) to collect new data on PFAS in drinking water and the agency is reissuing final regulatory determinations for perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) under the Safe Drinking Water Act (SDWA).  
The EPA announcement read, "After a thorough review in accordance with Biden-Harris administration executive orders and other directives, the agency is reissuing these actions. EPA will build on them using a strong foundation of science while working to harmonize multiple authorities to address the impacts of PFAS on public health and the environment. EPA is also committed to a flexible approach and working collaboratively with states, tribes, water systems, and local communities that have been impacted by PFAS."

The proposed UCMR 5 would provide new data that is critically needed to improve EPA's understanding of the frequency that 29 PFAS are found in the nation's drinking water systems and at what levels. EPA will accept public comment on the proposed UCMR 5 for 60 days, following publication in the Federal Register. EPA will also hold a virtual stakeholder meeting twice during the public comment period.

Water As Infrastructure
The overall focus of the MAGNY panel discussion was on the roughly the 50,000 public water systems, or community water systems that serve most of the American population.

Mr. Scott asked Mr. Mehan about the AWWA's a report titled, "Buried no longer: confronting America's infrastructure challenge", which laid out the scope of the nation's drinking water infrastructure needs.

The AWWA's report basically used a different methodology than EPA uses for assessing the infrastructure investment gap on drinking water utilities, Mr. Megan said.  The AWWA's method extends beyond just the cost of replacement, but also covers the necessary expansion given population growth and economic growth.

To be sure, the replacement component is a major concern. The drinking water sector is part of a distribution system, which is aging and nearing the point where it needs replacement.  The Office of Groundwater and Drinking Water at EPA says the average cycle on replacing distribution lines is 200 years, which is courting trouble.

The distribution system is a huge component, and the bottom line is that by 2050, there is a need for US$1.7 trillion dollars.

Drilling down a bit, Mr. Scott asked Mr. Adeem how Newark is coping with aging infrastructure.  Mr. Adeem explained that over the past two decades,  (he emphasized ) a lot of public utilities were purchased by private utilities because the public utilities could not make the repairs to maintain the system. Newark took a different approach Newark started having a conversation in early 2012 about the cost of water, the cost to maintain the water and waste water infrastructure in the city.

When the new administration (post- Governor Christie) came into office, Newark immediately passed a rate increase. The rate increase allowed Newark to start putting money into the buried infrastructure. And they are continuing to do that today.

Mr. Adeem averred this work was unrelated to climate crisis and lead leaching into the drinking water. The City's focus was to continue funding projects and address the issue of rehabilitation of an aging infrastructure.

Mr. Scott followed Mr. Adeem's remarks about funding by asking about the EPA's WIFIA program, which itself has been funding many projects over the last couple of years. Mr. Hobby, as a direct lender, was asked if there is a dominant theme in the type of projects that the WIFIA is seeing applying for funding?

WIFIA is a federal lending program within the EPA, so most of the borrowers are municipalities. WIFIA is essentially a private placement program and the EPA is focused on water and waste water project outcomes. Under the WIFIA  program, projects can only fund up to 49% of project costs by the EPA. The WIFIA loans are typically used by borrowers alongside municipal bonds in State Revolving Fund debt.

Mr. Hobby highlighted a few important themes. One of the big categories are water reuse projects, which is essentially using clean wastewater to replenish groundwater supplies. It's injected into the ground to recharge aquifers and it often used in order to prevent sea water intrusion, and some are replenishing surface water. Most of these projects have been in California. But, one of the largest was in was in Hampton Roads, Virginia.

Another theme that he has seen are new water intakes from lakes and rivers. He had a project in Wisconsin that was creating a new intake from the Great Lakes because its wells were reaching capacity, completely changing its water source. He noted several communities in Oregon worked together to create a new water source from a river.

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