SPEAKERS       CONTENTS       INSERTS    
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24–094CC

1996

H.R. 2747, THE WATER SUPPLY INFRASTRUCTURE ASSISTANCE ACT OF 1995

PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at [http://www.house.gov/transportation]. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.

(104–45)

HEARING

BEFORE THE

SUBCOMMITTEE ON

WATER RESOURCES AND ENVIRONMENT

OF THE

COMMITTEE ON
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TRANSPORTATION AND INFRASTRUCTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION

JANUARY 31, 1996

Printed for the use of the

Committee on Transportation and Infrastructure

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

BUD SHUSTER, Pennsylvania, Chairman

DON YOUNG, Alaska
WILLIAM F. CLINGER, Jr., Pennsylvania
THOMAS E. PETRI, Wisconsin
SHERWOOD L. BOEHLERT, New York
HERBERT H. BATEMAN, Virginia
BILL EMERSON, Missouri
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HOWARD COBLE, North Carolina
JOHN J. DUNCAN, Jr., Tennessee
SUSAN MOLINARI, New York
WILLIAM H. ZELIFF, Jr., New Hampshire
THOMAS W. EWING, Illinois
WAYNE T. GILCHREST, Maryland
Y. TIM HUTCHINSON, Arkansas
BILL BAKER, California
JAY KIM, California
STEPHEN HORN, California
BOB FRANKS, New Jersey
PETER I. BLUTE, Massachusetts
JOHN L. MICA, Florida
JACK QUINN, New York
TILLIE K. FOWLER, Florida
VERNON J. EHLERS, Michigan
SPENCER T. BACHUS, Alabama
JERRY WELLER, Illinois
ZACH WAMP, Tennessee
TOM LATHAM, Iowa
STEVEN C. LaTOURETTE, Ohio
ANDREA SEASTRAND, California
RANDY TATE, Washington
SUE KELLY, New York
RAY LaHOOD, Illinois
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BILL MARTINI, New Jersey
DAN FRISA, New York
TODD TIAHRT, Kansas
RICHARD H. BAKER, Louisiana

JAMES L. OBERSTAR, Minnesota
NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
WILLIAM O. LIPINSKI, Illinois
ROBERT E. WISE, Jr., West Virginia
JAMES A. TRAFICANT, Jr., Ohio
PETER A. DeFAZIO, Oregon
BOB CLEMENT, Tennessee
JERRY F. COSTELLO, Illinois
PETE GEREN, Texas
GLENN POSHARD, Illinois
BUD CRAMER, Alabama
BARBARA-ROSE COLLINS, Michigan
ELEANOR HOLMES NORTON, District of Columbia
JERROLD NADLER, New York
PAT DANNER, Missouri
ROBERT MENENDEZ, New Jersey
JAMES E. CLYBURN, South Carolina
CORRINE BROWN, Florida
JAMES A. BARCIA, Michigan
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BOB FILNER, California
EDDIE BERNICE JOHNSON, Texas
BILL K. BREWSTER, Oklahoma
KAREN McCARTHY, Missouri
FRANK MASCARA, Pennsylvania
THOMAS C. SAWYER, Ohio
GENE TAYLOR, Mississippi
JUANITA MILLENDER-McDONALD, California
ELIJAH E. CUMMINGS, Maryland

Subcommittee on Water Resources and Environment

SHERWOOD L. BOEHLERT, New York, Chairman

ZACH WAMP, Tennessee, Vice-Chairman
DON YOUNG, Alaska
THOMAS E. PETRI, Wisconsin
HERBERT H. BATEMAN, Virginia
BILL EMERSON, Missouri
WILLIAM H. ZELIFF, Jr., New Hampshire
THOMAS W. EWING, Illinois
WAYNE T. GILCHREST, Maryland
STEPHEN HORN, California
BOB FRANKS, New Jersey
JACK QUINN, New York
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TOM LATHAM, Iowa
STEVEN C. LaTOURETTE, Ohio
BILL MARTINI, New Jersey
BUD SHUSTER, Pennsylvania
(Ex Officio)

ROBERT A. BORSKI, Pennsylvania
ROBERT MENENDEZ, New Jersey
ROBERT E. WISE, Jr., West Virginia
JERRY F. COSTELLO, Illinois
GLENN POSHARD, Illinois
ELEANOR HOLMES NORTON, District of Columbia
JAMES A. BARCIA, Michigan
BOB FILNER, California
BILL K. BREWSTER, Oklahoma
KAREN McCARTHY, Missouri
GENE TAYLOR, Mississippi
ELIJAH E. CUMMINGS, Maryland
JAMES L. OBERSTAR, Minnesota
(Ex Officio)

(ii)

CONTENTS
TESTIMONY
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    Becker, Phillip F., President, Utilities Consolidated, Inc., San Antonio, TX, on behalf of the Associated General Contractors of America

    Cowart, Claudia, President, Southwest Utility Systems, Inc., FT. Myers, FL, on behalf of the National Utility Contractors Association

    Eckman, Hon. Bill, Mayor, LA Plata, MD, on behalf of the National Rural Water Association

    Finnegan, Michael C., Counsel to Governor George E. Pataki, New York Governor's Office, accompanied by Glen Bruening

    Jordan, Charlie G., Director, Public Affairs, Denver Water Department, Denver, CO, on behalf of the Association of Metropolitan Water Agencies

    Kilby, Tommy, County Executive, Morgan County, Tennessee

    Kingman, Earl, Manager, Technical Services, Crops/Seed Division, GROWMARK, Inc., Bloomington, IL, on behalf of the National Council of Farmer Cooperatives

    Marchetti, Paul, President, Council of Infrastructure Financing Authorities (CIFA) and Executive Director, Pennsylvania Infrastructure Investment Authority (PENNVEST), Harrisburg, PA

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    Olson, Erik D., Senior Attorney, Natural Resources Defense Council and Steering Committee Coordinator, Washington, DC, on behalf of the Campaign for Safe and Affordable Drinking Water

    Perciasepe, Robert, Assistant Administrator, Office of Water, U.S. Environmental Protection Agency

    Speranza, Elisa, President, Speranza & Company, Boston, MA, on behalf of the American Water Works Association

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
    Barcia, Hon. James A., of Michigan
    Oberstar, Hon. James L., of Minnesota

PREPARED STATEMENTS SUBMITTED BY WITNESSES

    Becker, Phillip F

    Cowart, Claudia

    Eckman, Hon. Bill

    Finnegan, Michael C

    Jordan, Charlie
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    Kilby, Tommy

    Kingman, Earl

    Marchetti, Paul

    Olson, Erik D

    Perciasepe, Robert

    Speranza, Elisa

ADDITION TO THE RECORD

    National Association of Water Companies, statement

H.R. 2747, THE WATER SUPPLY INFRASTRUCTURE ASSISTANCE ACT OF 1995

WEDNESDAY, JANUARY 31, 1996
U.S. House of Representatives,
Subcommittee on Water Resources and Management,
Committee on Transportation and Infrastructure,
Washington, DC.

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    The subcommittee met, pursuant to notice, at 9:04 a.m. in room 2167, Rayburn House Office Building, Hon. Sherwood L. Boehlert (chairman of the subcommittee) presiding.

    Mr. BOEHLERT. Good morning, and welcome to the first meeting of the Water Resources and Environment Subcommittee for 1996.

    The Water Supply Infrastructure and Assistance Act, the legislation we will be discussing during today's hearing, has broad bipartisan support and was introduced with Mr. Oberstar, Mr. Borski, Chairman Shuster, and myself as original cosponsors.

    The time has come for us to chart a new course for America's drinking water policies, and I am proud that the Water Resources and Environment Subcommittee has gotten the ball rolling in the House of Representatives. It is my sincere belief and hope that we can have drinking water legislation on the President's desk by the Easter recess.

    Last fall, the Senate passed comprehensive drinking water legislation by a vote of 99 to 0, and there is no reason why this body should not be able to produce consensus drinking water legislation.

    We are entering an historic new chapter in the way we address the protection of America's most valuable natural resource, drinking water. In the past, the Federal Government has limited its role in the protection of this critical resource to the setting of standards for acceptable levels of pollutants. What are acceptable lead levels in our tap water, for example? We must do more than that. The financial and environmental realities of the 1990's demand it. Never again should the drinking water of one of America's premiere cities be contaminated by deadly pathogens, such as Cryptosporidium.
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    In the world's most advanced nation, 104 people died and 400,000 people became ill from drinking the water provided by their city. This tragic event in Milwaukee, one of America's premiere cities, was a warning to us all, that neglecting drinking water infrastructure and failing to protect our drinking water supplies can have deadly consequences.

    The Water Supply Infrastructure and Assistance Act tackles both of these problems head-on. The act provides $2.25 billion for the improvement of our Nation's drinking water infrastructure. The unfunded mandates of the past will be replaced with a State revolving fund, modeled after the successful lending program in the Clean Water Act.

    As pointed out repeatedly in the testimony of today's witnesses, America's drinking water infrastructure is in an alarming state of disrepair. In fact, some northeastern communities' drinking water is still being conveyed by 100-year-old wooden pipes. However, this legislation we will be considering today is much more than just a source of new money for water supply infrastructure.

    H.R. 2747 is about promoting the efficient use of our Nation's limited infrastructure resources. The Water Supply Infrastructure and Assistance Act provides significant new resources for source water protection. As has been demonstrated repeatedly over the past decade, it is far cheaper to control pollutants at the source. As we will hear from Michael Finnegan of the New York Governor's Office later this morning, the New York City watershed is a fine example of this principle. The city of New York was faced with the option of spending over $8 billion to construct and operate water filtration systems, or spending a few hundred million dollars—a fraction of the whole—on source water protection in the Catskills. The choice was obvious, and H.R. 2747 provides the resources and flexibility so that communities can pursue sensible approaches toward protecting water supplies.
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    The watershed protection program developed for the 2,000-square-mile New York City watershed is a model for the Nation. Nine million people will continue to receive the world's finest drinking water, while billions of dollars in filtration costs have been avoided. The New York approach to source water protection should be promoted wherever possible.

    Every community in America stands to benefit from the passage of comprehensive drinking water legislation, and I will be working with every member of this committee and the Commerce Committee to make this legislation a reality.

    I would now like to recognize the ranking member of the Water Resources and Environment Subcommittee, my good friend, Mr. Borski.

    Mr. BORSKI. Thank you very much, Mr. Chairman, and let me congratulate you for holding this hearing and moving forward so quickly on H.R. 2747, a bill which you mentioned—and I agree—has strong bipartisan support.

    H.R. 2747 will help meet the pressing needs that communities all over the country have of providing a safe and reliable supply of drinking water.

    Mr. Chairman, you, Chairman Shuster, and the distinguished ranking member, Mr. Oberstar, should all be commended for your work on this important bill. I hope the work on this bill is an omen of things to come, and that we will be able to work together on other bills to protect our Nation's water quality.

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    The quality of drinking water is a major public health concern and a major concern of the American people. There is no question that the Federal Government should have a role in making sure that the American people have clean drinking water. I compliment my colleagues in recognizing that there are areas where local governments cannot go it alone, and that Federal help is needed.

    In recent years, more than 35,000 people have been struck by disease directly related to drinking water. That is far too many. In Milwaukee, 104 people actually died from drinking polluted water. That more than 100 people died from contaminated drinking water in one of America's major cities during the 1990's is simply unbelievable.

    We must take bold steps to stop the spread of these waterborne diseases, and H.R. 2747 is a big step in that direction. Over the past 20 years we have seen the success of our efforts at the Federal level to invest in wastewater treatment. Our rivers, lakes, and streams have become cleaner because of the Clean Water Act. It is absurd that we have helped local communities build sewage treatment facilities, and not helped them with their drinking water infrastructure.

    H.R. 2747 is a recognition that the American people want clean drinking water. The most significant measure to protect drinking water, however, is to prevent pollution from entering our rivers, lakes, and streams.

    Supporters of this bill, Mr. Chairman, should be aware of one important caution. The balanced budget plan will mean that there will be less investment in environmental programs in the future. Environmental programs will be competing with other priority programs for an ever-smaller discretionary pot. The chances that environmental programs will receive high priority for funding are questionable at best. The EPA appropriations bill for fiscal year 1996, which has not yet been passed, cuts grants for States and local communities for infrastructure assistance by 38 percent. There is no reason to believe that assistance for drinking water infrastructure won't suffer from cuts in discretionary spending. Each year, these cuts will become more and more drastic.
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    There are serious questions about whether there will be enough money for environmental protection. In H.R. 961, the majority promised increased funding for Clean Water Act infrastructure. The majority has promised increased funding for Superfund. H.R. 2747 funds drinking water infrastructure. How will all these programs be funded?

    H.R. 2747 is a good start, but it will require real dollars. Unfortunately, dollars to protect the environment are in short supply.

    Thank you, Mr. Chairman.

    Mr. Chairman, I ask unanimous consent that a statement by Mr. Oberstar be placed in the record at the appropriate place.

    Mr. BOEHLERT. Without objection, so ordered.

    [Mr. Oberstar's prepared statement follows:]

    [Insert here.]

    Mr. BOEHLERT. Panel I, Mr. Perciasepe. Welcome back.

    Robert Perciasepe, Assistant Administrator, Office of Water, of the Environmental Protection Agency.

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    We look forward to your testimony.

TESTIMONY OF HON. ROBERT PERCIASEPE, ASSISTANT ADMINISTRATOR, OFFICE OF WATER, U.S. ENVIRONMENTAL PROTECTION AGENCY

    Mr. PERCIASEPE. Thank you, Mr. Chairman. I am going to use a couple of charts here which, as you can see, did arrive.

    First, I want to thank you and the Committee for taking up this issue. I think it's a vitally important issue to this Congress, to this Administration, and I think to the American people, and I think the Joint Summary Statements of both of you really lay out some of those reasons. I think it's not only Congress and the Administration, but the public water systems and the other water systems in the United States that also are looking forward to a reauthorization of some of the Safe Drinking Water Act provisions, and the authorization of a revolving fund.

    You know, this has happened three times now in the last 24 months, where the House of Representatives has authorized a Safe Drinking Water Revolving Fund; in this Congress alone, the Senate has done it, as you mentioned; and the Administration continues to request funding. There have been appropriations for three fiscal years now, but we have not been able to spend the money. It is timely that we move ahead on this.

    But let me give you a little context. We need a stronger health protective-Safe Drinking Water Act in total, of which this is a critical component. Just to mention the other pieces, we need to improve the regulatory process and the science in safe drinking water. We need to strengthen the prevention of contamination; you mentioned that. It's much cheaper to do this before it happens than after it happens. There can be links between both the regulatory process and the funding process toward prevention, as well as prevention programs themselves. And, of course, funding for States and water systems.
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    I want to mention that not only has Congress been on the record here, but 28 States now have passed legislation authorizing safe drinking water revolving funds. Four have it before their legislatures this year. Nine States have appropriated money to match these funds already, and two more have bond issues pending this year. The States are ready to come up to the plate on their side of this as well.

    Looking at what is needed in the funding, we need to authorize it, as I just mentioned. You can see that the system out there is ready for it. We need to target this. This is an important component, I think, of any Safe Drinking Water Act legislation, is that it has to be targeted toward compliance with the Safe Drinking Water Act requirements and protecting public health.

    We also need to make sure we build in the maximum State flexibility. Flexibility has been a key to success in the drinking water program, and in the clean water SRF, flexibility has been a key.

    Let me use this chart to talk quickly about the funding levels, which I think came up in the opening comments.

    The red—we have analyzed through a computer analysis, based on some assumptions of interest rates and loan repayment periods, etc., and some of the provisions in the laws, the Senate version of the bill that passed—as you mentioned, 99 to 0—and the amount of funding in the proposed bill before the committee today. The blue line, going out to 2036, is the committee numbers. The red line is the Senate numbers. Obviously, the Administration's objective here is to get enough money capitalized into this fund up front so that as the repayments come, it is revolving at a substantial and sustainable rate. We think that the amounts that are identified in your bill in this committee are a little bit low compared to what would be needed for a long-term sustainable level that is meaningful out there in the several hundreds of millions of dollars range.
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    We made some assumptions about the taps into the fund for technical assistance and setasides, and the more of those you have, the more long-term erosion there is in the concept of a revolving fund. While we are not opposed to taps for certain purposes, we think there ought to be controls on them so that they don't erode the fund over the long haul. That is another piece of work that we would like to do with you on the bill.

    So the summary on that chart is that the level of funding, we think, is too low in the current bill.

    Mr. Chairman, I am almost done. I see my red light is one.

    I also want to point out that the source water provisions in your bill seem to be limited to surface water. I want to point out that the green part of this bar chart is those systems in the United States that receive their water from groundwater, and they need protection, too, as well as the treatment facilities. I would ask you to make sure that, as we move this bill, it doesn't limit the funding available only to surface water drinking water systems. You can see that most of the small systems, which we really want to target some of this money to, are in that category.

    So let me just summarize my remaining points on the bill.

    First, public health protection needs to be the explicit target of the funds, and we think that is missing.

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    Eligibilities—as I mentioned, we have to clarify those eligibilities, particularly with respect to groundwater systems and with respect to those systems that are not regulated by public service, public utility commissions.

    The flexibility—you target the funds to go into the clean water SRF. I think you have to provide the States a little more flexibility there. Fifty percent of the States run their drinking water programs in their health departments, and most of the States have their clean water SRF in their environment departments or some other entity. We think these should be linked and closely coordinated, but we ought to provide the States with flexibility on how they would do that.

    The agency responsible for drinking water ought to have the primary responsibility for dealing with the health priorities that the fund would be used for.

    Last, as in the clean water SRF where we go through an annual process of what the intended use of the fund would be, and a public process at the State level, in order to integrate these funds we think there ought to be the opportunity for an ''integrated annual intended use plan,'' so an intended use plan on an annual basis that the State would prepare, I think, is also missing from your legislation, which would provide the context for the flexibility and the integration of the two funds.

    So with those comments, let me just say again that I applaud you all for moving this agenda forward. It is timely and needed. The States are ready; we are ready; and the SRF alone is not enough. We need other parts of safe drinking water worked on, and we want to work closely with the committee as you are ready to move ahead on this.
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    Thank you.

    Mr. BOEHLERT. Thank you very much.

    As you well know, we have dual jurisdiction here. We have to work with the Commerce Committee, and our numbers came up in consultation with the Appropriations committee——

    Mr. PERCIASEPE. Understood.

    Mr. BOEHLERT [continuing]. In dealing with the real world that we find ourselves in.

    You say our figures are too low. What should our figures be?

    Mr. PERCIASEPE. Obviously, the Congress and the Administration have been in some interesting and protracted discussions about a 7-year plan, and actually, someday, a 1996 appropriation. We are actually working on a 1997 budget to send to the Congress in the next several weeks.

    It is our position that an appropriation level that is probably somewhere between the Senate and the House, closer to a $500 million a year revolving rate, is probably doable and compatible with both of our 7-year balanced budget proposals. That is something that we are exploring in great detail.
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    Mr. BOEHLERT. We're on the same wavelength.

    Mr. PERCIASEPE. So I think that would require somewhere near $5 billion into the fund over that 7-year timeframe. You have a 3-year authorization, I believe, of $2.3 billion or $2.5 billion. If you had a 7-year level with an amount that got up around $5 billion, you would have a situation where it would be revolving at $500 million a year out in the future, and you have to put some controls on the open-endedness of some of the taps so that the taps don't—we use a median assumption on the taps that are provided for. We are in favor of some of those. I just think you have to have some control on it; otherwise, you erode the fund in the future.

    So it is a combination of those two things that will put it in good stead for sustainability. Again, I'm talking about adjusted for inflation here, Mr. Chairman; not in 1996 dollars, but adjusted out in the future for inflation. That's the way our chart works.

    Mr. BOEHLERT. Thank you for that.

    We could have an entire hearing on the benefits and opportunities of source water protection. This is something very near and dear to my heart. You know about the watershed-based approach, the New York City watershed, which happens to be part of my Congressional district.

    Talk to me and the committee a little bit, if you will, about the savings and benefits of using source water protection and pollution prevention compared to building filtration facilities.
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    Mr. PERCIASEPE. The example that you used in your opening statement of New York City is probably a very big example of this. But even this avoidance of filtration—which is at play in the New York City system, at least in the Delaware-Catskill part of it, not so much the part over in the Putnam County and Westchester County areas—the idea of protecting source water transcends whether you avoid filtration or not. Most of the public health scientists in the world are going to tell you that filtration is an essential barrier to disease prevention in drinking water, and should be in every surface water filtration system. We are of the view that there are some instances where the surface water can be of high enough quality that that filtration would not be required, but it will require very careful management of the environment and activities in that watershed area. And there are places in the country, New York City being one, where we are trying very hard—and I know the city and the State and our Regional Office have been working very hard—to accomplish that, and great strides have been made there, and we are very optimistic. There are other parts of the country where they have already gone through that hurdle.

    But of the systems that use surface water in the United States, 93 percent of them already have filtration in place. Many States—maybe half the States of the country—have their own filtration laws that predated the Federal filtration law.

    The key to prevention is not whether you avoid filtration or not, but even if you do source water protection, you can reduce your treatment costs, even after you have filtration in place because most places in the country, where their drinking water comes from, there are other activities going on. New York State is blessed with the Catskill park system and an agricultural region in part of their area. So the prevention idea, I think, transcends filtration avoidance, although that is the most dramatic example. Probably 1 percent to 2 percent of the systems in the country will be able to avoid filtration totally. As I said, we're at 93 percent already having it.
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    Mr. BOEHLERT. Well, I think all eyes are on the New York City watershed, and I want to commend you and all associated with EPA for the outstanding cooperation given to all involved in the State of New York and the city of New York. We will be hearing later on from Mr. Finnegan from the Governor's Office, and he has just been the general in sort of directing this whole campaign and crusade, and he did a magnificent job.

    It's a fascinating story. It's a win-win situation for everyone.

    Mr. PERCIASEPE. We agree with that.

    Mr. BOEHLERT. So thank you for what you and EPA have done to make it possible.

    Mr. Borski?

    Mr. BORSKI. Thank you, Mr. Chairman.

    Mr. Perciasepe, I want to welcome you and thank you for your testimony.

    As you heard, this committee is prepared in a bipartisan manner to move forward. That's when this committee works best and that's when this Government works best. I can assure you that from our end we will be working as closely as we can with the majority to ensure that we have a bill that can meet approval with the Administration and get signed into law.

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    I could assure you that most of the differences—or at least some of them—that you have spoken about are jurisdictional and are differences because of the Commerce Committee's jurisdiction on pieces of this, but again, I'm sure that all of this can be worked out.

    This is not a new bill, of course. This is something that President Clinton has proposed before. Again, I'm very hopeful that we can get this through in a rather expedient fashion.

    I would like to take the opportunity while you are here, however, to ask you about the impacts of the reduced appropriations for EPA in this bill and the effects of the recent Government shutdown on programs related to drinking water and to water quality generally.

    Mr. PERCIASEPE. The reductions in this bill, or just generally?

    Mr. BORSKI. The appropriations bill that we have pending before us.

    Mr. PERCIASEPE. OK, the appropriations bill.

    Well, obviously, again on the drinking water side, on what this hearing is on today, the infrastructure side, there are reduced amounts from what was requested and what I think can reasonably be worked into a balanced budget 7-year plan. We are very convinced that we can get the kinds of numbers that I was just talking about into that, and they are not apparent yet and we're going to have to keep working on that.
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    On the regular operational side, obviously we've been shut down for 1 month on a calendar basis where we did not work; and during that time, most of our activities were not underway in terms of field inspections or our regulatory processes. The contractors were terminated and then restarted. So there's more than a one-to-one ratio. But to be honest with you, we are still assessing the damage that was done. I think even more so than the shutdowns, the fact that we don't have a budget—I know that this has to be a bipartisan effort to get a budget done, but we can't plan drinking water regulations, drinking water inspections, drinking water technical assistance programs when we have 1-month—I call them ''fiscal months.'' So obviously we need to move beyond that. I applaud everybody in the Congress who has worked on trying to do that.

    Mr. BORSKI. Let me ask you about this bill specifically. Could the budget cuts have any effect on your implementation of your responsibilities under this bill?

    Mr. PERCIASEPE. Would the budget impact on what our responsibilities would be under this bill? I really haven't done that kind of an analysis. We are geared up with some capability to get a drinking water revolving fund guidance, etc., out. It isn't a new thing; we have some experience under our belt from doing it in the clean water area. But obviously, if we don't have a budget, we won't be able to do it.

    This is sort of like a ''chicken and egg'' thing. Do you want to do these things? Yes. Are you capable of doing these things? Yes. But if you don't have a budget, if you don't have contractor support, if you don't have the ability to plan beyond a 1-month horizon, it is very difficult to mount that effort.
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    So everything at the agency is impacted. What I just said is everything, not just drinking water. There's no special advanced impact here to drinking water; obviously, it's a higher priority in the agency than some things, but certainly it is a problem from a planning perspective.

    Mr. BORSKI. Thank you, sir.

    No further questions, Mr. Chairman.

    Mr. BOEHLERT. I would just like to mention that EPA has no better friends on a bipartisan basis than the two gentlemen before you, Mr. Borski and the Chair.

    We are talking about the funding for this bill. I sort of view it like a poker game; this is just the initial ante. There's no question in my mind that we're going to have to have more money for a longer period of time. But I think part of our job is instructional, and we have to educate our colleagues. If we come out with a higher figure initially, I think we might scare a lot of them away.

    So as we go forward with this on a bipartisan basis—and you'll have some strong support in this subcommittee—I think we can get a more acceptable figure, from the standpoint of need, than the initial $2.25 billion over a 3-year period. We'll work with you.

    Mr. Franks?

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    Mr. FRANKS. No questions, Mr. Chairman.

    Mr. BOEHLERT. All right.

    Mr. Horn?

    Mr. HORN. Thank you, Mr. Chairman.

    We've had floods in northern California that were substantial. We've had floods in the Mississippi Valley. We've had floods in quite a number of places.

    Do you keep any data on the degree to which wastewater and water plants are made inoperable by that, and data as to what is needed to bring them up to a level of efficiency?

    Mr. PERCIASEPE. I don't have personal knowledge of this Congressman, but I'm going to go out on a limb and say that when the Mississippi floods occurred, and when we had substantial flooding in California, that the agency—in cooperation with FEMA and other Federal agencies—activates an emergency response. One of the things that EPA and our Regional Offices are geared up to do is deal with that issue.

    So I am going to go out on a limb here and tell you that we could produce that, if you have an interest on how many plants—there were substantial impacts, particularly in the Mississippi flooding of several years ago, to drinking water and wastewater systems, and many of them were inoperable for quite some time. It is by virtue of gravity that wastewater plants are often located near the water, because that's why the water is there, and it is also by virtue of proximity to the source why drinking water plants are often located near water. So they are often susceptible to flooding. Usually they are designed to deal with that, and after the flood waters recede, be able to get operational after a certain period of time. But some of those events that you mentioned were very significant events, century-kinds of events.
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    Mr. HORN. If you wouldn't mind, I would appreciate a letter responding at this point in the record.

    Mr. Chairman, I would like to have it included at this point.

    Mr. BOEHLERT. Without objection.

    Mr. HORN. Another area that interests me here, because I am coauthor of this legislation on privatization—we have not cleared it through the subcommittee and the full committee yet, but we're about to—I wonder to what degree does EPA feel that some privatization is necessary if we're going to have sufficient money to do all the things that a lot of us think ought to be done?

    Mr. PERCIASEPE. EPA—first of all let me say that in the drinking water world, when you look at those 60,000 systems that I was mentioning, almost half of them are private already, which is a very different universe than what we were dealing with when we talked about the Clean Water Act and the sewage and wastewater treatment arena, where there are fewer privatized plants, although there is a growing number of plants that are either privatized or the operations are privatized.

    The agency's position on this is that this ought to be an option available for mayors and local officials to consider. To the extent that we have any obstacle that is put into place by us, when we have been approached we have tried to work those obstacles out. We had a number of pilots around the country where we've been working on this—Indianapolis is one, another plant in Ohio—and they took two different tacks. One, they privatized the operation; in the other one, they privatized most of the ownership. In both cases we are analyzing how that operation is running and how it is working. I do believe that this is an option that ought to be available. We shouldn't mandate it, but we certainly shouldn't be in the way of it.
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    Mr. HORN. In terms of grant programs, I've forgotten how many grant programs we have in strictly the water area of EPA, but as you know, the policy in the case of the Federal Aviation Administration is that you really can't privatize it until you pay back the funds that the Federal Government invested in an airport. Do we have a substantial number of situations where that might apply? Or what is the policy of EPA, should something be privatized and you've given it a few million here and there?

    Mr. PERCIASEPE. Obviously, since the inception of the program in 1972, where there was a grant program before the loan program, if you combine the two, we're probably at over $60 billion that the Federal Government has invested on the wastewater side. We're a lot lower, obviously, on the drinking water side, although there have been some grants, but nothing of that magnitude.

    We try to depreciate the Federal investment so that the payback is commensurate with the timeframe of the time approaching the privatization idea. So there is an ability in the agency, and we've worked this out with OMB and others, to look at what the appropriate payback would be. So obviously the Federal Government under that kind of a policy won't get the $60 billion back if we sold all those sewage treatment plants or wastewater treatment plants, but we would get some depreciated amount back. That's something that you all ought to consider in the legislation as you're looking at.

    Mr. HORN. Thank you.

    Mr. BOEHLERT. Thank you very much, Mr. Horn.
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    And thank you very much, Mr. Perciasepe. I know you're going right from here to the Commerce Committee. You're becoming a professional witness; and I might add, a very good one at that.

    Thank you so much.

    Panel II consists of—the envelope, please—Michael Finnegan, Counsel to New York Governor George Pataki; Tommy Kilby, County Executive, Morgan County, Tennessee; and Bill Eckman, Mayor, LaPlata, Maryland.

    I would like to tell all of our witnesses, in this panel and in all panels throughout the day, that your statements will appear in the record in their entirety. We would ask that you try to summarize the statement. We will not adhere hard and fast to the 5-minute rule because what you have to say is very important to us and we need to hear it. But we have a long day ahead of us.

    We will let the panel get organized.

    First, it's my pleasure—well, I'm going to have the witnesses testify in the order called, so Mr. Finnegan, you will be first. But beforehand, let me acknowledge that I'm President of the Michael Finnegan Fan Club because in New York State we faced a crisis of monumental proportions as we were dealing with the problem of the New York City watershed. At one time the deterioration in relationship between the city of New York and the watershed towns was so serious that violence was threatened. Governor Pataki took a personal interest in this matter. Mr. Finnegan, his counsel, was sort of the engineer that drove the locomotive forward, to a point where there was a resolution of that longstanding problem, and I'm sure Mr. Finnegan's testimony will refer to that.
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    But only in America could something like this happen. Last week and the week before, the watershed towns were devastated by flooding. As a matter of fact, the President has declared them disaster areas. The most significant thing that came out of that experience was that the city of New York was the first to respond to the crisis in the watershed towns by sending personnel and equipment and so much else up to the area to help them recover from this disaster.

    I say that that interesting chapter in this story has been made possible because of our first witness this morning, so it is with great pleasure that I welcome you, Mr. Finnegan.

TESTIMONY OF HON. MICHAEL C. FINNEGAN, COUNSEL TO GOVERNOR GEORGE E. PATAKI, NEW YORK GOVERNOR'S OFFICE, ACCOMPANIED BY GLEN BRUENING; AND HON. BILL ECKMAN, MAYOR, LA PLATA, MD, ON BEHALF OF THE NATIONAL RURAL WATER ASSOCIATION

    Mr. FINNEGAN. Thank you, Mr. Chairman.

    I might say that I am the first member in Albany of your fan club, as well. We certainly couldn't have achieved what we did without your help, and without the help of Mr. Perciasepe, whom I had never met until today.

    I am quite surprised, actually, that what we did has come to the attention of so many in Washington. We quietly set about resolving a problem outside the scope of the political disputes that had certainly been commonplace in New York State for more than a century and a half.
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    Not surprisingly, we are here to ask your assistance and the assistance of your committee in seeking some funding for a very important part of the watershed protection plan, namely, the testing and continual monitoring of the water quality in the watershed. As you know, we have the largest unfiltered water supply system in the country. The New York City watershed remains part of that 7 percent that Mr. Perciasepe referenced in his testimony. We think it's important that we discuss the issue that you certainly referenced earlier, namely, source protection and pollution prevention. It is an important part of protecting water quality, not just of an unfiltered system like we have in New York, but certainly of any water supply system in the country.

    Specifically, we are asking, Mr. Chairman, that H.R. 2747 be amended to include an authorization for $105 million over 7 years for our source protection and pollution prevention monitoring and testing program. The Senate recently passed such an authorization. We feel it is essential to making our program work.

    I could offer testimony for hours about the essential elements of the agreement in principle which was announced last November. Suffice it to say that it contains many, many important parts, including a land acquisition program which will result in New York City actually tripling its holdings surrounding the reservoir system in the Catskill watershed. Unfortunately, for years, largely as a result of scarce resources and the political infighting which you referenced earlier, New York City was only able to acquire about 3 percent of the landholdings surrounding the reservoirs.

    With this program we will be able to acquire somewhere around 10 to 12 percent of the lands surrounding the watershed. That's an important part of the program, but in order to end the strife that, as I said earlier, has been ongoing for a century and a half, it was important that we had a regulatory program which did not result in the elimination of the economic viability of the area. Many had seen the four prior proposals which emerged from 1989 through 1995 as actually suffocating any potential growth in the entire watershed. Others—certain of your colleagues, in fact—suggested that it was a violation of property and due process rights of the residents. On the other hand, New York City and New York State and EPA saw it as a public health and water quality issue.
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    At the end of the day we were able to resolve it to the satisfaction of all parties so that we are satisfied that public health, water quality, economic viability, property, and due process rights are all protected. The way we were able to do that is amend the regulations, providing that first of all they be science-based, and second that we regulate only so much as necessary to protect the public health. Now, as you can imagine, that resulted in some great discussion and some rather heated disagreement about what was necessary to protect the public health.

    In the end we came to the conclusion that we could make some assumptions and proceed forward on the basis that, most importantly, we would test, we would monitor, and we would present the results to a body with the authority to review the results of the testing and monitoring on an annual basis; and at the end of the 5-year period, as part of the agreement, they had an affirmative obligation to suggest to the primacy agent—in this case, Department of Health, NDPA—whether changes in the scheme were warranted or whether they were not warranted. We think that that works, but the essential component is to have a testing and monitoring system that is the best in the world. Without that, we will not have the confidence of the public that in fact water quality and the public health are being protected.

    I see the red light is on; that means I'm done.

    Mr. BOEHLERT. Thank you very much.

    It won't surprise you to learn that the Chair is very understanding of and sympathetic to your request, and will do his best to try to enlighten my colleagues on the wisdom of your words.
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    County Executive Kilby, you would normally be next, but the Vice Chair of this subcommittee, Mr. Wamp, is en route from another committee hearing, and he asked that we defer just for a moment so that he can get here. He wants to hear your testimony. And I treat county executives with kid gloves because I used to be one, and I'm very sympathetic.

    Mr. Mayor, how about you? You're next.

    Mayor ECKMAN. Thank you, Mr. Chairman and members of the committee. I appreciate the opportunity to appear today and to testify in support of this bill on behalf of small towns and rural water systems.

    As you know, my name is Bill Eckman. I'm the Mayor of LaPlata. It is the county seat of Charles County, about 25 miles south of the Beltway, so I'm close to home here. We are a small town; we have 6,700 people, but we are not all that small. I'm also the President of the Maryland Rural Water Association and the Maryland Municipal League, and I'll tell you that in the Maryland Municipal League we have somewhere around 130 towns in Maryland that are smaller than LaPlata. Our Rural Water Association has 100 members that serve less than 10,000 people. They have some special needs.

    I would like to relate the need for this State Revolving Fund to one of our smaller systems, the community of Potomac Heights. It's about 15 miles south of the Beltway. It's a small community. They have 484 residences, 1,500 people, and they are primarily low-to moderate-income people. They have a median income of about $31,000 per household, and that compares to the median income in that area of $43,000.
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    The water system is 50 years old and badly in need of some improvements. The estimates are that these improvements are going to cost over $1 million to do, and if they have to use conventional 20-year financing to finance these improvements, you're talking about roughly $218 per year household costs.

    Now, these residents are presently paying $800 a year for utility service fees, so that would take them over $1,000. Now, if this revolving loan could bring that interest rate down to 3.5 percent, that would reduce the annual cost down to somewhere around $145, a $73 improvement per year.

    However, they have another problem. This small community badly needs to upgrade its wastewater system; so when you put that together, there's a question as to whether or not even the $145 is an affordable amount for this community.

    Basically what we're saying is that for the smaller systems that are most in need of financial help, there needs to be some kind of a grant program or negative interest or something to supplement that. Also for these smaller systems, we believe that the use of some of the funds for onsite technical assistance is very important. You know, small systems frequently need help and they really can't afford it. They've done a good job, we think, in maintaining excellent water quality, but they really don't have the technical resources—or the expertise, in some cases—to keep up with the constantly changing Federal regulations and new water technology.

    In the written testimony that I have supplied to you we have documented three examples, one in New York, one in Maryland, one in Pennsylvania, where onsite technical assistance resulted in significant cost savings. They also show that sometimes grant applications made without some outside assistance might be excessive, and even misdirected.
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    Finally I would like to talk about the emergency situation. We talked about flooding; Mr. Horn referred to it. As you know, we've had some flooding in Maryland in the last few weeks. Two of our people went into Port Deposit up in Cecil County; when they got there, they found the only licensed operator scurrying around, trying to deal with two problems. He had the wastewater treatment plant out because of electrical problems, and the water treatment plant was flooded with contaminated water. Our wastewater technician that was with him got the wastewater treatment plant back on line to get rid of the pollution, while the groundwater technician worked with the operator and the Maryland Department of the Environment to get the water system back up and supplying drinking water.

    That only happened because we in Maryland Rural Water were able to supply technical assistance to these small towns. We think there needs to be more of that. We think all three of these things are important to get the most out of this revolving fund that you've got in this bill: loans for towns with systems that can afford them, some grants for those that can't, and onsite technical assistance for all small systems that need it.

    Very few things are more important than safe drinking water. We think the bill offers a way to provide it. We'd like to see all three of these concerns addressed when the bill is finally passed.

    Thank you.

    Mr. BOEHLERT. Thank you very much.

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    It is my understanding that Mr. Kilby would just as soon defer until Mr. Wamp gets here, so we will proceed with questions of our panelists, and I will ask the first one of Mr. Finnegan.

    You know, the New York City model is sort of the first comprehensive watershed management program in the Nation, so all eyes are on what is happening there to instruct us and to guide us. Tell us a little bit about the dollars and cents, if you will, because when a State like New York comes forward and requests money of the Federal Government people sort of look and say, ''Gee, that's a lot of money; why should we do that?'' I mean, I can justify it, and I know you can, too, but I'd like you to share some of the figures, what we're going to do in cost avoidance and all that sort of thing.

    Mr. FINNEGAN. Mr. Chairman, the entire program is about $1.45 billion to $1.47 billion. The State and city governments have committed $1.35 billion, essentially, to the program.

    The most important part of it is that it contains many sort of innovative programs, including phosphorus offset programs, to ensure that development isn't completely stifled in the watershed: development of community septic treatment systems, construction of new wastewater treatment systems to state-of-the-art standards, well beyond where they had been before, and in fact beyond where Federal regulations had previously required them to be; and upgrading existing wastewater treatment facilities. The State of New York has agreed to commit resources to doing regional planning, to have a Watershed Inspector General to prosecute, criminally and civilly, people who violate the regulations in the future.

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    There is money to ensure that the economic development programs that the State is going to promote in the region are environmentally sensitive. There are worker training programs. There are programs through the economic development program in New York State to facilitate that.

    But the important component of it, and what we're asking for here, is $105 million to ensure that we are on the right track, that we haven't made some assumptions about the phosphorus offset program, which is the cornerstone of ensuring that growth can continue in an environmentally sensitive way. We need to be sure that it works. We need to ensure that the whole farm planning program, which is another innovative program developed in New York State in the watershed about 3 years ago, works; that in fact it doesn't continue further degradation of water quality and public health.

    The only way we can do that is develop what is really the best monitoring and testing system in the world. As I suggested in the summation of my testimony and in the written testimony submitted, what it really comes down to is public confidence. We're not sure, and the science is not existing at this point, to provide people with the public confidence that their water is going to be safe with the new regulatory scheme that we've provided.

    It is clear on its face that it allows for environmental protection and for watershed protection and water quality protection while preserving the economic viability of the region, but we need to ensure that that continues into the future.

    The baseline data does not exist in New York State, or anywhere, with regard to some of these programs. So what we do is of direct benefit not only in the New York City watershed, but any watershed across the country that has similar problems, filtered or unfiltered.
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    Mr. BOEHLERT. Well, it's just an amazing story, and I hope that as we proceed with the consideration of this legislation, my colleagues on the committee and the subcommittee will have an opportunity to have greater exposure to it, because it's sort of a ''modern miracle,'' if you will, of how things should be done, an example of how things should be done. The city of New York, the watershed towns, the environmental community, the Federal Government, the State government, Republicans and Democrats, everyone pulled together in this instance, and we've achieved dramatic progress. Once again, I say that all eyes are on this, because this is the first comprehensive watershed management program in America. And when you get into things like whole farm planning—I know Mr. Latham and some of my colleagues who are privileged to represent more rural areas will be interested in what we're doing.

    So I just want to thank you very much for your testimony and for being a valuable resource for this subcommittee.

    Mr. FINNEGAN. Thank you, Mr. Chairman.

    Mr. BOEHLERT. Mr. Horn?

    Mr. HORN. Thank you very much, Mr. Chairman.

    I just want to say that I've looked at your testimony, and you've all been very thorough. Obviously, the problems of the rural areas in particular are great when you have a small number of customers and a vast expanse, often, to serve those customers. Loan funds are one thing, if you can pay them back. Obviously, we would all like grant funds. How do you think that split ought to be? I mean, is there a mixture that should be involved in these individual projects, or what, given the state of the $5 trillion national debt?
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    Mr. ECKMAN. I'm very aware of that. Being a Mayor, I'm very aware of budgetary limitations in everything we do. We just have to make choices all along.

    I heard Mr. Perciasepe talking earlier about flexibility, and I think that's the answer. I think you have to look at a community's ability to afford things, and I think some kind of a mix of grant monies—the community I referred to actually has gotten some special grants; I think Congressman Hoyer put through a special grant for their needs because they just couldn't afford what they were doing. I think some kind of a mix of grant monies versus loan monies is the right solution to get the most benefit for the dollars that you have to spend.

    Mr. HORN. Would it be long-term loans that are stretched out beyond the current length of those loans?

    Mr. ECKMAN. I don't think that would be the answer, because the longer you increase the terms, the less reduction you get in annual debt service. It's kind of a self-defeating thing.

    Furthermore, the lifespan of many of these improvements—there needs to be a constant improvement. If we take a small system and lock it down for multi-years into the future, they're not going to be able to continue to maintain the system.

    Mr. HORN. Well, I think you make a very good point.

    I might say, your city would have been half the size of my county that I grew up in, so I'm used to rural America.
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    Thank you.

    Mr. BOEHLERT. Mr. Latham? Mr. LaTourette?

    [No response.]

    Mr. BOEHLERT. Well, I want to thank the panelists—wait, one more. I'm not going to let you off so easy. I'll get back to Mr. Finnegan.

    Now, the agreement for protecting the New York watershed, as I have said many times and I will repeat many times, is a model. I am concerned about the devastating flooding that the Governor and I saw the day before yesterday. A number of our counties, including Delaware County, have been declared disaster areas by the Federal Government.

    Do we have any problem in protecting the water quality of the New York City water because of this? Have we been able to analyze that quickly?

    Mr. FINNEGAN. Again, I don't want to come back to the same point, but today we have no means of assessing that. Obviously, when you see that the water is browner than it was 2 weeks ago, one would conclude that it's had some impact on water quality. But we don't have today the kind of monitoring and testing system from which we could give you any reliable results.

    Mr. BOEHLERT. So that's exactly why you're requesting the funding today?
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    Mr. FINNEGAN. It's part of the reason that we need this kind of a program.

    Mr. BOEHLERT. We're talking about a 7-year program. I don't want anybody to get nervous and think you're asking for it all in the first half-hour.

    Mr. FINNEGAN. Seven years, $15 million per year. And I would just note that, again, we understand this is an era of scarce resources and we're not here asking that the Federal Government shoulder the burden for the State and city. We're not asking that you even join in in a very significant way in paying for this; $105 million out of a total program of $1.45 billion is not a lot of money, and we do think that it's something that will be of benefit across the country.

    Mr. BOEHLERT. And the Senate warmly embraced, the concept, in the bill that they passed.

    Thank you very much. I thank this panel very much.

    Mr. FINNEGAN. Thank you, Mr. Chairman.

    Mr. BOEHLERT. The third panel consists of Mr. Charlie G. Jordan, Director of Public Affairs at Denver Water Department, appearing on behalf of the Association of Metropolitan Water Agencies; Mr. Paul Marchetti, who is President and Director of Pennvest, Harrisburg, Pennsylvania, appearing on behalf of the Council of Infrastructure Financing Authorities; Ms. Elisa Speranza, President of Speranza & Company of Boston, appearing on behalf of the American Water Works Association; and County Executive Kilby, we'll get back to you as this panel concludes, and hopefully Mr. Wamp will be here.
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    Let's go in the order that you were announced.

    Mr. Jordan, you're up first.

TESTIMONY OF CHARLIE G. JORDAN, DIRECTOR, PUBLIC AFFAIRS, DENVER WATER DEPARTMENT, DENVER, CO, ON BEHALF OF THE ASSOCIATION OF METROPOLITAN WATER AGENCIES; PAUL MARCHETTI, PRESIDENT, COUNCIL OF INFRASTRUCTURE FINANCING AUTHORITIES (CIFA) AND EXECUTIVE DIRECTOR, PENNSYLVANIA INFRASTRUCTURE INVESTMENT AUTHORITY (PENNVEST), HARRISBURG, PA; ELISA SPERANZA, PRESIDENT, SPERANZA & COMPANY, BOSTON, MA, ON BEHALF OF THE AMERICAN WATER WORKS ASSOCIATION; AND TOMMY KILBY, COUNTY EXECUTIVE, MORGAN COUNTY, TENNESSEE

    Mr. JORDAN. Thank you, Mr. Chairman, members of the committee. I am Charlie Jordan; I'm the Director of Public Affairs of the Denver Water Department, but I'm also on the Board of Directors of the Association of Metropolitan Water Agencies, and I am appearing on their behalf here today.

    AMWA has a membership composed of the largest public water suppliers in America. Our membership is limited to public water supply agencies who serve a population of 150,000 or larger. I think, as I understand your bill and the revolving fund that it sets up, we are probably the least likely candidates to be recipients of some of these monies, and probably the least needy. It may surprise you that I'm here today in support of the bill, in support of the revolving fund concept.

    As you have heard testimony before, there are a lot of infrastructure needs in the drinking water area across the country. The amounts of money that you are proposing here and that have been asked for here are far from enough to address all those needs, and they should not be enough to address all those needs. It should come from local government, and we need to look at what the Federal role is in infrastructure needs and drinking water.
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    One of our concerns about the bill, and it is expressed more completely in the written testimony that I turned in, is that in linking that to the Federal interest, we think that a priority should be given under the revolving fund for compliance issues with the Safe Drinking Water Act. That really is the sort of unfunded mandates issue, where local government needs some help in addressing public health concerns across the country. It may be in some States that there are not enough compliance issues to use all of that money, but we think that's where the priority should be in this revolving fund.

    There are a few other points in the bill, and let me hit them quickly, that we believe deserve some additional attention.

    One is that it needs to be clear that the recipients of the funds are public water systems. We think that's implied throughout, but the language is a little confusing in places.

    Second, we would like to see it a little bit clearer—there is some language incorporated from the Clean Water Act. Part of that which was not incorporated is the provision for public involvement in the Intended Use Plans at the State level. We would like to see the public water suppliers have appropriate access in the process of putting together State Intended Use Plans. Again, we don't think that's inconsistent with the intention of the bill.

    Third, there is some language in the bill that indicates that for those successful applicants who receive loans, that their water rates must be designed in such a manner that the recipients of water service pay a proportionate share of the costs of that service. We're not clear on exactly what was intended by that language, but we are concerned that a strict reading of that language may cause significant interference in local ratesetting. There are rates in existence today in a variety of different communities that address water conservation incentives, that address lifeline rates. In my own community, we are a city agency of the city of Denver; our charter requires us to charge more for water that is served outside the boundaries of the city. Again, we think it's entirely appropriate that there be a requirement that applicants show that they are able to repay the loans, but not how we set our rates, in the bill.
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    There is also some language that suggests that rates from applicants need to address the most economical costs. Again, I think that language sounds a little like apple pie and motherhood, but we're not clear on just what it means. Does it mean, for example, that we can't go beyond the minimum requirements in health protection, if that's what's desired in our community? Does it mean that we have to not address job training programs or include things like that, that may be viewed by some as not the most economical use of funds?

    Finally, we would like to see some setaside in the bill for health effects testing. We believe that's another way, just like source protection, which is very valuable, for limiting the infrastructure costs that may be necessary.

    With that I will conclude, and I'd be glad to entertain any questions when you're ready.

    Mr. BOEHLERT. Thank you very much, and I appreciate those suggestions in your testimony.

    Mr. Marchetti.

    Mr. MARCHETTI. Good morning, Mr. Chairman and members of the committee. My name is Paul Marchetti; I am Executive Director of the Pennsylvania Infrastructure Investment Authority, otherwise known as PENNVEST, and am appearing before you as President of the Council of Infrastructure Financing Authorities, which I will refer to as CIFA.

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    CIFA is an entity of State programs that manage the SRF under the Clean Water Act. In some cases, such as Pennsylvania, we also manage State programs that fund drinking water projects, similar to wastewater projects under the existing SRF.

    What I would like to do is present some specific comments on certain provisions of H.R. 2747, but my fundamental point that I would like to make right off the top is to commend the committee for coming forward with this legislation. As a number of other people have said, there is a tremendous need for funding of drinking water systems in all States across the country. We have certainly found that to be true in Pennsylvania. This is a critically important piece of legislation for the States, and CIFA strongly supports the creation of an SRF for drinking water and has done so for many years.

    That having been said, I would like to comment briefly on a few of the specific provisions in the bill.

    First is the issue of State program authority. The bill specifies that the authority for administering the drinking water SRF should reside in the same State entity that manages the existing clean water SRF. We would suggest that the committee consider allowing the Governor of each State to decide what entity within the State is most appropriate for managing the drinking water SRF. In many cases, the result will be the same as what the bill suggests; that would certainly be true in Pennsylvania, but it may not be appropriate for all States, and we would suggest that the committee consider that flexibility.

    Second, under the general heading of gubernatorial discretion, we would suggest that the committee might want to consider some provisions that are similar to what exist in the Senate bill that recently passed on creating a drinking water SRF, one of which is to allow the Governor to shift funds between the clean water and drinking water SRFs. This so-called ''fungibility'' would allow the States to manage these funds in ways that they find most appropriate, and address demands as they see the needs arising. There should be a limitation on this, as there is in the Senate bill. We would suggest that some flexibility along these lines be considered.
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    In addition, CIFA would like to see the States have the ability to ''cross-collateralize.'' By that we mean that States be able to pledge loans from the drinking water SRF, as well as the clean water SRF, to a common series of revenue bonds. For those States that leverage, that would preclude the States from having to issue two separate series of revenue bonds, one limited to drinking water projects and one limited to clean water projects; rather, we would prefer to be able to ''cross-collateralize'' the loans from both funds to one series of bonds.

    The State match provision—the bill currently requires that the States put their 20 percent match into the SRF before the date on which the grant payment is made. We would suggest that this be deferred for 2 years; not that it be eliminated, not that the State match be reduced, but for those States that aren't ready to bring forward the State match at the moment, a deferment would allow the program to go forward in those States that aren't ready to come forward with their match right away. It would not reduce the total State contribution to the SRF.

    The bill also provides for special loan subsidies in some cases where the State decides that that is appropriate. We would suggest a couple of revisions to that. One is to make it clear that this be limited to disadvantaged communities, that determination being made by the State, rather than everyone being eligible for this. Second, we would suggest that the committee might want to consider allowing the States to extend loan terms up to 30 years, which is an additional way to reduce repayments on loans, in addition to these grants.

    Finally, we want to commend the committee for limiting this to 50 percent. We in Pennsylvania, as well as CIFA, have found that some combination of grant and loan money is what is most workable.
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    Under technical assistance, we support the setaside for technical assistance to small communities and suggest that this be limited to 2 percent of the capital grant in order to prevent too great a diversion of loan funds to this purpose.

    Under equivalency, the bill seems to reference the equivalency requirements in the Clean Water Act, and we would hope the committee would not want to burden the SRF with those requirements. We suggest that if your intent is not to do so, you might want to clarify that in the language.

    We support the provision for source water quality protection and only want to caution that that be clarified, that that not be an additional source of grant funds.

    Finally, we suggest that the eligibility be extended to private entities. We have found in Pennsylvania, and I am sure it is true in other States, that many of the drinking water systems are privately owned but nonetheless are still equally in need of assistance from the SRF.

    Thank you.

    Mr. BOEHLERT. Thank you very much.

    Ms. Speranza.

    Ms. SPERANZA. Good morning, Mr. Chairman and members of the subcommittee. My name is Elisa Speranza and I am here today representing the American Water Works Association. We want to thank the Chairman and the members and staff of the subcommittee for providing us an opportunity to present our views on the bill today. We also would like to commend you on your leadership for introducing H.R. 2747 and recognizing the need for Federal assistance for many communities to improve their public water systems.
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    AWWA has prepared a written statement, which I ask be entered into the record of this hearing.

    Although I am now a private consultant, until a few weeks ago I was the Deputy Director of the Massachusetts Water Resources Authority in Boston. The MWRA is responsible for drinking water and wastewater facilities in Boston and the surrounding area, including the Boston Harbor Project.

    Since MWRA was forced to raise its wholesale water and sewer rates by over 500 percent to comply with Federal mandates, I am painfully familiar with the need for Federal funding for water infrastructure. Your fellow full committee member, Congressman Peter Blute, has been on the front lines of that battle and he knows firsthand what our ratepayers are up against.

    In the Boston area, after spending over $3 billion to comply with Clean Water Act mandates, ratepayers are now faced with over half a billion dollars in expenditures for Safe Drinking Water Act mandates, and that's in addition to another $900 million or so in capital needs to fix a 100-year-old system of pipes and pumps, many of which look like this, which deliver water to our customers.

    The Commonwealth of Massachusetts estimates there is over $3.8 billion worth of drinking water projects alone, Statewide, on the horizon. Our State has had an authorization in place since 1989, waiting for the Federal Government to fund a drinking water SRF, and now—hopefully—the time has come.

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    The drinking water SRF as proposed in the bill before you and in other proposals, while certainly not enough to address all of our needs, will certainly help leverage local resources and provide some measure of relief, much as the wastewater SRF has already done.

    As you are well aware, cities, towns, small communities, and other public water systems in this country face a daunting task in complying with many Federal environmental statutes. We believe among the most critical of these challenges is ensuring the provision of clean and safe drinking water.

    Drinking water systems have not received the extensive level of Federal support historically available for other infrastructure programs through the Highway Trust Fund or the Wastewater Construction Grants and SRF Program. Some of the Nation's drinking water systems are aging and in need of substantial capital improvements to comply with present drinking water regulations, and as more regulations are implemented, the need for public water system improvements grows ever larger.

    AWWA has developed some criteria which we believe are necessary for an SRF to effectively address these challenges and equitably bring public water systems into compliance. We have summarized those criteria in our written statement, and we believe they would ensure that SRF funds are used to support Safe Drinking Water Act objectives.

    We strongly believe that the funding of a drinking water SRF is necessary to further those objectives, and we hope that it is an integral part of a reauthorized Safe Drinking Water Act.

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    In the bill before you, the emphasis on source water protection is particularly welcome. As you have noted, Mr. Chairman, pollution prevention is the first—and perhaps the most important—component of bringing safe drinking water to our customers. We watched with interest this morning; it was nice to see Mr. Finnegan here this morning. He has been a particular hero of ours in Massachusetts, since we have gone through almost an identical situation as the second largest unfiltered surface water supply in the country. We have also had a successful conclusion to our negotiations, and we are inspired by your success in New York.

    As has been mentioned, there is a Senate bill with a similar SRF provision. The House Committee on Commerce is also drafting a Safe Drinking Water Act bill with an SRF provision, and we did manage to get to the one yard line last year with H.R. 3392, which also had an SRF in it. So we hope that whatever comes out of Congress this year will include an SRF.

    We respectfully urge that those differences between the bills be worked out among the various parties in Congress so that we can see a speedy implementation of reauthorization of the Safe Drinking Water Act.

    On behalf of AWWA's 55,000 members, the guardians of America's drinking water, I want to thank you for this opportunity to present our views. We would be happy to answer any questions you might have.

    Thank you.

    Mr. BOEHLERT. Thank you.

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    The Chair recognizes the Vice Chair of the subcommittee, Mr. Wamp.

    Mr. WAMP. Thank you, Mr. Chairman. I really appreciate your flexibility and patience here this morning. I just arrived in Washington; if you will, allow me to apologize. My youngest child turned 7 years old yesterday, so we had a bunch of pretty little first grade girls at my house last night, so I really needed to stay there for that birthday celebration.

    I want to thank you for allowing me the opportunity to introduce an outstanding young East Tennessean, a Democratic County Executive from Morgan County, Tennessee, Tommy Kilby. Two years ago Mr. Kilby and I were both in the commercial real estate business; he was an appraiser and a real estate broker, and I was a real estate broker in the south end of East Tennessee. He was in the north end of East Tennessee. We came to know each other, and in this time of a need for bipartisan cooperation, this young executive and I have worked very well together since I was elected and he was elected, and we continue to work well together.

    He brings today local examples of how critical these water needs are in rural counties all across the country, particularly in the Appalachian region, which is where we reside. He is not only one of the youngest County Executives in the State of Tennessee; he is one of the youngest County Executives in the Nation, and he has done an outstanding job and enjoys bipartisan support from within his region. He is very active in industrial development activities in East Tennessee and is a critical player in our team for the East Tennessee Technology Corridor for Morgan County.

    It is with great pride that I bring to you and to our committee the County Executive from Morgan County, Tennessee, Tommy Kilby.
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    Mr. Kilby?

    Mr. BOEHLERT. Mr. Wamp, I want to thank you for that very warm introduction of your colleague and friend.

    I want to say that we understand why you were a little bit late getting here, because I think you have your priorities right. I think a birthday party for a 7-year-old is a lot more important than most things in life, so I commend you for your values.

    I also want to acknowledge the fact that you are commending the Chair for its flexibility. As a member of the rather mild and tame freshman class, I would hope that you would tell your colleagues in that class that flexibility sometimes serves a very valuable purpose.

    County Executive Kilby?

    Mr. KILBY. Chairman Boehlert, Congressman Wamp, I appreciate this opportunity to be here, and I echo the Chairman's desire in his opinion that the Congressman has his priorities straight.

    When I was elected County Executive in 1994, soon after that our Congressman Zach Wamp was elected, and one of the first things that I asked him to help our district and my county with was the expansion and extension of water lines in our county. I would like to bring to you not statistics but true accounts of how this affects people on an everyday basis.
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    The vast majority of the households in my county that do not have public water are contaminated by organic bacteria or have been damaged by oil, gas, and coal exploration. On a daily basis I am confronted with these folks that have these unbearable conditions, and I want to just give you quick examples of this. I'm not long-winded, so I probably won't take up all of my time.

    These examples include a lady who came to my office less than a month ago who had a toe amputated because she's allergic to sulphur. Her water is highly contaminated with iron and sulphur.

    In the Sunbright area of my county, which is a small city of about 600, there have been approximately 10 people in the past 10 years that have died from cancer. I look at these pipes in front of me, and I strongly contend that probably those deaths could be attributed to an unsafe water supply.

    So this bill that you have before you, this legislation, would certainly help give funding to replace those lines that are approximately 25 years old.

    People are continually bringing to me water samples that do not look like they came from a kitchen sink, but from a mudhole in the yard. These folks have a terrible situation. I was stopped in the courthouse just the other day with people who were catching rainwater for the purpose of bathing and for washing their clothes.

    I have a grandmother who is 90 years old and one who is 83, who have told me stories about carrying water and living through the Depression and many hard times that I have not faced. But I think that as we approach this next century, the 21st century, that we ought to be able to get good water to these folks.
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    I would also contend that I understand the budget problems that we have—not on the scale that you do, Mr. Chairman, but on a smaller scale that you have already alluded to when you were a County Executive. We have so many problems, and we have to address each of those problems. In a time when our own citizens are doing without water, I think it is more important to make sure that they have water, maybe than it is to help someone in a foreign land.

    I would close my remarks with this. As I heard the other comments that were made, I didn't come here to try to change this legislation, but Mr. Horn asked a question about the grant situation. I would like to see a 100 percent grant so that we could get water to my people. But the important thing is that this legislation, even though it does give a loan—I'm not trying to say that I'm not appreciative of what you're trying to do, but on that note of providing grants, I think that would help my area because our people have a per capita income of about $10,000 a year. I think a grant/loan mixture with some local input would be very appreciated.

    Thank you, Mr. Chairman.

    Mr. BOEHLERT. Well, thank you. Let me tell you, the Chair is very sympathetic to your plight. As a former County Executive, I know what happens. You get the mandates on high from the State capitol and from the Federal Government, but so often you don't get the resources to do what you're told you have to do. It's a little bit easier for us up here; we just call down and get the printing presses going and print some more money up.

    [Laughter.]
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    Mr. BOEHLERT. So thank you very much for your testimony. I really appreciate it. You lived up to your advance billing from our colleague, Vice Chairman Wamp.

    Let me start by asking a question of Mr. Marchetti. You recommend that the 20 percent non-Federal matching requirement be deferred for 2 years, and I can understand that. But we didn't do it with the Clean Water Act when we established the SRF in 1987. That seemed to work OK. Do you have any indication that we need this deferral? Or is it just something that you have a hunch might be more convenient?

    Mr. MARCHETTI. In our discussions with other State members, we know that not all States are ready to go forward with legislation, for instance, that would authorize within the State an entity to use the SRF money for drinking water, and not all States would have the money to go forward. That's not just a hunch on our part; that results from discussions with in CIFA and with some of our State members. And, of course, that's not true in Pennsylvania, but it's true in other States that they just don't have the money available right now.

    Mr. BOEHLERT. I have to believe that Governor Ridge would be ready to go in a hurry.

    Let me ask Mr. Jordan, on page 3 of your testimony you recommend that the bill be amended to clarify that public water systems are the entities eligible for funding. How about elaborating a little bit on that? Let me ask you this: if certain private entities—and Ms. Speranza might want to address this—if certain private entities own or operate a system that provides water to the public, do you believe funds should be made available to them?
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    Mr. JORDAN. Actually, I didn't bring this up to try to distinguish between public and private, but to ensure that it is the water supply entities that in fact can do it, that this is not money to clean up oil spills from the highways and so forth, that it's aimed toward drinking water. That was the thrust of my comment.

    Mr. BOEHLERT. OK. So you are not trying to distinguish between one and the other.

    Ms. Speranza, do you want to comment on that?

    Ms. SPERANZA. We agree with that, that private water companies and public companies should be able to access the money.

    Mr. BOEHLERT. All right, fine.

    How about you, Mr. Horn? Do you have any questions?

    Mr. HORN. You have taken the questions and received brilliant answers.

    [Laughter.]

    Mr. BOEHLERT. Mr. Poshard?

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    Mr. POSHARD. Thank you, Mr. Chairman. I also apologize for having arrived late and for not having heard some of the testimony.

    I am wondering what's going on in your individual States with respect to building an economy of scale around regional water distribution systems that might be interconnected to supply people water at a lower cost than if every village maintains their own water treatment system at high expense, trying to come into compliance with all the new Federal restrictions that are imposed upon us. Are there any attempts in your States to do that? I know that in Illinois we're going through a massive program of regional distribution of water, in the rural areas especially. I'm just wondering if that's being considered as a viable option where you live. I'm talking about costs here; not just cleaning the water, but distributing the water in an economical way.

    Mr. MARCHETTI. In Pennsylvania we've had a drinking water program for about 8 years now. We, not being a regulatory entity, don't force people to consolidate, but on the other hand it's a regular part of our review when we get loan applications, that we deal very closely with the regulatory agency as well as the public utilities commission to make sure that we're not funding a project or an entity that could better be done in a consolidated way. We just simply refuse to fund projects that are not cost-effective, but we don't force people to consolidate.

    Mr. POSHARD. Mr. Jordan, you had indicated in your testimony, as I was reading it, that you sort of take the old Jeremy Benthum philosophy of the greatest good for the greatest number. You obviously feel that the SRF funds should be dedicated more to the larger areas with more population, and Ms. Speranza seemed to give a different view of that.
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    How do you reconcile the differences between both of you?

    Mr. JORDAN. That's not true.

    Mr. POSHARD. It's not true?

    Mr. JORDAN. Our membership is the large cities, but we recognize that the funds are going to go primarily to the small systems, and we think that's appropriate. There's a financial need criteria in the bill; we're not arguing with that at all, and we think that it should be there. We would like for the large entities to have access to it, as they do, under this bill, but we recognize that we will not get a preponderance of the funds.

    We do think, by the way, there has been a lot of interest in surcharges to water rates to help fund compliance problems throughout the water infrastructure, and it needs to be recognized that that is a transfer of payments from the cities to the small areas because we are not going to get the benefits from those. For the most part we have the funds and we have the ability to maintain our own systems. We also have the population. Our 110 to 120 members in AMWA serve 40 percent of the customers in this country on public water supplies, and they're well taken care of.

    Mr. POSHARD. Thank you.

    Ms. Speranza, do you want to react to that at all?

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    Ms. SPERANZA. I could just comment quickly that our experience on the wastewater side has been that the States do a pretty good job of prioritizing where the grant/loan money should be going. Even though I'm from a large system, we have always supported the money going to do the greatest good.

    Mr. POSHARD. Thank you.

    Thank you, Mr. Chairman.

    Mr. BOEHLERT. Thank you.

    Mr. LaTourette?

    Mr. LATOURETTE. Thank you, Mr. Chairman.

    Mr. Marchetti, I have some questions for you.

    Before I ask them, Mr. Kilby, how old are you? I'm just fascinated by the introduction by Mr. Wamp.

    Mr. KILBY. Thirty-three.

    Mr. LATOURETTE. OK. That is young.

    Mr. Marchetti, I want to talk to you about the fungibility issue that you addressed, and I have to confess to a certain amount of ignorance with the Senate bill, where you talked about some limitations on fungibility between SRF funds. What is your understanding of the limitations that the Senate puts on the transfer of those funds?
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    Mr. MARCHETTI. It allows that up to 50 percent of the funds that would go into the drinking water SRF could be shifted over to the clean water SRF, and a like amount of money could be shifted from the clean water SRF to the drinking water SRF.

    Mr. LATOURETTE. OK. Like you, I think—if I understood your testimony correctly—I think that that's a good thing, when we talk about flexibility, be it by the Chairman or the freshman class, in how we deal with the SRF. So I think that providing the States and the Governors with that flexibility is a good thing, and I think you agree with that in your testimony, that that's a good thing.

    Particularly, as a new member of this committee, I think that this committee made a strong statement in the Clean Water Amendments of 1995 in terms of a commitment to an increase in the SRF program. Unfortunately, I think that what we found is that when it got to the appropriators, that commitment wasn't as strong, so it began authorizing legislation for a clean drinking water SRF. Again, it is a strong statement by this committee; maybe we can impose upon our friends who serve on the Appropriations Committee to have a like view.

    If that flexibility is maintained and if that discretion is given to the Governors, and if States have the ability when they go out for bond authority to pool those two resources—first of all, how many States are you aware of that are already engaged in that practice? And do you think, overall, that is going to be more beneficial to the States than less?

    Mr. MARCHETTI. I'm not sure which practice you're referring to. You mean in terms of cross-collateralizing?
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    Mr. LATOURETTE. Right.

    Mr. MARCHETTI. Not very many. We do it in Pennsylvania under our State program. I think there are two or three other States that have drinking water programs, but they are not able to cross-collateralize because their only source of funding for wastewater is the Federal SRF. I think—I don't know that there are any others. There may be one or two other States that have wastewater money from their State, and they are allowed to do that. But there are very few.

    Mr. LATOURETTE. One of the things that I've noticed is that there are always two sides to every argument. There may be some who come forward and say, ''Wait a minute. We have an SRF that deals with wastewater treatment problems; now this is designed and should be designated solely as a drinking water SRF, and they need to be kept separate and apart, and if you permit States to cross-collateralize or you have fungibility between the two funds, you're going to damage the safe drinking water program to the benefit of the wastewater treatment program.'' How would you answer someone who leveled such a charge?

    Mr. MARCHETTI. I would first distinguish between the fungibility question—that is, the shifting of funds back and forth—and the cross-collateralization. You can do one without the other. In particular, if you cross-collateralize, the funds could be set up so that they were distinguishable entities within a single fund, but you could still pledge loans in each fund to a common series of revenue bonds. So that's one distinction we should keep in mind.

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    Second, I think that danger is always there. CIFA's point of view is that that's a State flexibility issue, and that a certain amount of flexibility should be delegated to the States to make those decisions for themselves.

    Mr. LATOURETTE. Thank you very much, Mr. Marchetti.

    Thank you, Mr. Chairman. I yield back.

    Mr. BOEHLERT. Thank you, Mr. LaTourette.

    Mr. Barcia?

    Mr. BARCIA. Yes. Thank you very much, Mr. Chairman.

    I do have a statement that I would like to submit for the record, but I won't take the time of the committee and the panel to read through that.

    Mr. BOEHLERT. Without objection, so ordered.

    [Mr. Barcia's prepared statement follows:]

    [Insert here.]

    Mr. BARCIA. We do have extensive problems in Michigan in the 5th District and across our State, very, very similar to what I've heard from our County Executive from Tennessee. I know that each of us could probably elaborate on local communities that don't have access to safe and palatable water because of the lack of financial resources at the local level. So I will just confine my questions this morning to two individuals.
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    The first would be to Ms. Speranza. In your testimony, as I understand it, you feel that the Governors ought to be able to make the decision at the State level in terms of which communities would receive financial assistance under this legislation. I guess my initial reaction is, don't you think that you would be politicizing to a tremendous extent the process in terms of which communities, regardless of the need or the financial ability to get that—obviously there's not going to be enough money to go around to help every community across the country. And by placing the authority to make the decision in the hands of the Governor, don't you think that is unnecessarily politicizing the process?

    Ms. SPERANZA. I guess what I would point to is my own experience with the wastewater revolving loan fund program, where the State has been delegated that authority to set the priority list. And in general, it is done in collaboration with EPA, depending on which communities are under consent orders, for example, or are in extreme violation of the law and need to have their needs addressed first.

    At least in my own State, we have not seen any problems in that regard, and in general the communities that are in the most financial need are first in line, especially if they are under a court order or consent order for flagrant violation of the law, where their own citizens are—where the public health has been endangered. So I guess we can go by the example of the wastewater SRF.

    Mr. BARCIA. So as a follow-up question, do you think that—for example, some of my communities have had extensive mining which has occurred, as I'm sure you've seen in Tennessee. They have problems with arsenic, barium, and particularly visible iron, which is a real problem for laundering clothing, as well as the taste and the odor of the water. Do you think that the State governments would determine that that is a sufficient threat to public health? I know it's hard for you to do that, but—I guess what I'm trying to say is this. In my communities, I have one township in Iosco County, Alabaster Township, which has seen extensive gypsum mining, and other communities where there were extensive coal mining operations. It has just made the water almost undrinkable. People actually have to bring in water for their own drinking purposes; of course, they put up with the problems of erosion of their faucets and their sinks, and of course, the diminished quality of the cleansing of their clothing in the laundering process.
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    Ms. SPERANZA. I guess I would say—AWWA, in our testimony, has suggested some criteria for the distribution of the SRF funds, and this is also why we think it's so important to couple that with the reauthorization of the Safe Drinking Water Act, to revise some of the ways we set our standards based on the most serious threat to public health. I think the two go hand in hand.

    Mr. BARCIA. Thank you very much.

    The second question—I guess my time has expired. Thank you.

    Mr. BOEHLERT. Vice Chair Wamp?

    Mr. WAMP. Thank you, Mr. Chairman.

    As I open, let me ask unanimous consent to submit extraneous materials for the record.

    Mr. BOEHLERT. Without objection.

    Mr. WAMP. As well, I want to welcome the publisher and editor of the Oak Ridger, one of the finest daily newspapers in the Nation, Peter Esser, the publisher, and Ron Bridgeman, the editor, who just happen to be with us today. Welcome.

    Mr. Kilby, I have a follow-up question, primarily because as we prepare to create the legislation for safe drinking water, the EPA, through Mr. Perciasepe, has stated that State revolving fund dollars for safe drinking water ''should not be used to support local objectives.'' Now, if you take that to the fullest extent, it would cripple the ability of counties like yours, for health and safety concerns, to actually extend drinking water to the very people that you've come to testify today have a serious health dilemma, and that is that they don't have access to safe drinking water.
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    Do you see that—and does Don Painter, who is the local director of your utility district, who has complained to me recently that he's got two problems: one is that he can't extend the water lines any further because there's no money, and No. 2, your county, which now has a little better unemployment rate than it used to have, is now not on the ''poor county list'' for other Federal programs like the Appalachian Regional Commission and EDA, so you are crippled both ways, and you are looking to these State revolving fund dollars for the flexibility for some of those dollars to be used to extend new water lines, water service, for safe drinking water. Is that your perspective?

    Mr. KILBY. Congressman Wamp, you have hit it right on the head. In Morgan County, both the public health priorities and the economic growth situation work hand-in-hand because many of the areas in my county where we need this water are areas that can grow, which will help us economically, and in return they will give us a better economy with which to help ourselves. And I think that's what we're all trying to get to, where we're not solely relying on the Federal Government, but rather to help ourselves. But we need some help right now to get to that point.

    One good illustration of that is in the Rugby community, which attracts about 70,000 people to it each year in a county that only has a population of 18,000. If it had public water in that area, you can imagine what the growth would be and how much more we would be able to help one another.

    Also along the same lines, I'm sure Mr. Painter has addressed to you about the Pine Orchard community where there is a need for water because of the coal mining that the other gentleman referred to. There are also industries in that area that are needing that water.
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    So I think it all works hand-in-hand.

    Mr. WAMP. Just a quick follow-up, too, Mr. Chairman.

    The coal mining situation in East Tennessee now, they have about $800 million in the trust fund for mine reclamation and they won't let any of that money go to reclaim these mines. So we've basically got a double whammy here, with no ability to reclaim the mines and try to keep that groundwater from working its way into the drinking water, and likewise then, no access and not enough State flexibility to come and extend these water lines. So I think that's really the compromise that we're seeking today as we prepare to create this legislation.

    I yield back.

    Mr. BOEHLERT. Thank you very much.

    I want to thank all the panel for your testimony and for serving as a valuable resource to this committee.

    Mr. County Executive, thank you.

    Our fourth and final panel of the day consists of—Mr. Ewing, would you like to present the first panel member for Panel IV?

    Mr. EWING. Thank you, Mr. Chairman.
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    I have a constituent here on this panel from Bloomington, Illinois. He is from the GROWMARK Corporation. Earl Kingman is a resident of Bloomington, Illinois, and works for a major ag co-op organization in Illinois, and will be here testifying and presenting, I think, a very important view from a very important segment of industry. Ag co-ops are of course, very interested, in having adequate, safe and clean water supplies, but they also know how important it is that this subcommittee's actions be reasonable and responsible.

    So I welcome Earl to the panel, and thank you for your testimony and for coming to Washington.

    Mr. BOEHLERT. Well, thank you very much, and Mr. Kingman, welcome.

    We also have on this panel, representing the Natural Resources Defense Council, Erik Olson; representing the National Utility Contractors Association, Claudia Cowart, who is President of Southwest Utility Systems in Ft. Myers, Florida; and represented the Associated General Contractors of America, Mr. Phillip Becker, who is President of Utilities Consolidated, Inc., out of San Antonio, Texas. I should have added that Mr. Olson is a Senior Attorney, a well-respected attorney here in Washington, D.C.

    We will go in the order of introduction. Mr. Kingman, you are up first.

TESTIMONY OF EARL KINGMAN, MANAGER, TECHNICAL SERVICES, CROPS/SEED DIVISION, GROWMARK, INC., BLOOMINGTON, IL, ON BEHALF OF THE NATIONAL COUNCIL OF FARMER COOPERATIVES; ERIK D. OLSON, SENIOR ATTORNEY, NATURAL RESOURCES DEFENSE COUNCIL AND STEERING COMMITTEE COORDINATOR, WASHINGTON, D.C., ON BEHALF OF THE CAMPAIGN FOR SAFE AND AFFORDABLE DRINKING WATER; CLAUDIA COWART, PRESIDENT, SOUTHWEST UTILITY SYSTEMS, INC., FT. MYERS, FL, ON BEHALF OF THE NATIONAL UTILITY CONTRACTORS ASSOCIATION; AND PHILLIP F. BECKER, PRESIDENT, UTILITIES CONSOLIDATED, INC., SAN ANTONIO, TEXAS, ON BEHALF OF THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA
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    Mr. KINGMAN. Mr. Chairman and members of the subcommittee, my name is Earl Kingman, and I am Manager of Technical Services for GROWMARK, a farmer-owned cooperative headquartered in Bloomington, Illinois. We are owned by and serve over 200,000 farmers in Illinois, Iowa, Wisconsin, and Ontario, Canada.

    I am pleased to testify today on behalf of the National Council of Farmer Cooperatives and share our views on provisions related to the source protection provision of H.R. 2747.

    NCFC believes that any new Federal provision related to drinking water source protection, particularly as it affects agriculture and rural America, should encourage voluntary, locally driven partnerships; be incentive-based, facilitating access to technical and financial assistance; and focus limited resources on solving problems that would otherwise necessitate action under the Safe Drinking Water Act.

    We believe that landowners in source water areas will be responsive when approached by their neighbors with a defined drinking water problem that could reasonably be addressed through source water protection efforts, and invited to participate in a voluntary, incentive-based partnership.

    NCFC is supportive of the approach undertaken to source protection in H.R. 2747. As you will see on the corrected signature page, Exhibit 2, which you should have in hand, a number of other agricultural organizations are also supportive.

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    Section 7 of the bill allows use of up to 10 percent of SRF funds to provide technical and financial assistance for source protection efforts addressing nonpoint source pollution. The bill responds in a productive, targeted way to a growing recognition that communities sometimes may find it more cost-effective to invest in source protection as either a compliment to, or substitute for, treatment technologies as a way of complying with the Drinking Water Act standards. We hope this alternative will encourage communities to try to work with their upstream neighbors as partners.

    Importantly, the legislation specifically avoids imposition of any new regulatory authorities in the name of source protection.

    While the ongoing effort in the New York City watershed provides an outstanding example of such constructive efforts, there are many less prominent success stories that are just as vital to the localities involved. For example, in our own region, the town of Pittsfield, Illinois recently addressed a water quality problem by working closely with agricultural interests to modify atrazine use practices.

    In brief, we would offer several recommendations to focus and clarify the source protection provision.

    First, make it clear that such SRF grants for source water protection may not be used by States or localities to enforce mechanisms imposed upon source water entities.

    Second, if SRF funds may be used for land acquisition or restrictive easements for source protection, NCFC recommends that such purchase or easement must involve willing landowners.
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    Third, source protection efforts should be made eligible under the 50 percent grant provision, which is currently restricted to infrastructure loans.

    According to a national survey commissioned by NCFC, American consumers place a high level of trust in American farmers as good stewards of the environment. Eighty-nine percent of respondents indicated that they believe that most farmers are committed to protecting the environment. Furthermore, 85 percent indicated they would support measures to reduce the costs and burdens of Federal regulations on farmers, provided adequate safeguards remain to protect the environment.

    Based on my own extensive professional experience in working with farmers, I can confidently state that our community will continue to work hard to live up to the high level of trust expressed by our fellow citizens. As highlighted by many examples cited in our testimony, agriculture already has a proven track record of moving aggressively in the right direction from a water quality perspective. I am particularly excited about the promise that emerging precision farming technologies hold as we in cooperatives work with farmers toward the goal of ''farming by the foot.'' In closing, NCFC stands ready to work with the Chairman and members of the subcommittee and the full committee to ensure that the source protection provision provides financial incentives to help address NPS problems without creating or fostering any regulatory approaches that would impact adversely upon American agriculture.

    I would be pleased to respond to questions.

    Mr. BOEHLERT. Thank you very much, Mr. Kingman.
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    Mr. Olson.

    Mr. OLSON. Thank you, Mr. Chairman. I am a Senior Attorney with the Natural Resources Defense Council, and I am also appearing as the Coordinator of the Campaign for Safe and Affordable Drinking Water, which is an alliance of over 300 public health, consumer, environmental, religious, labor, environmental justice, HIV-AIDS, and other organizations, and we have joined forces to seek stronger and more efficient protection of the Nation's precious resources, and one of the most precious resources is our drinking water.

    We would like to commend the subcommittee and the Chairman of the subcommittee for your leadership in trying to put together bipartisan support for the urgent need to upgrade the Nation's drinking water infrastructure. We feel there is a very strong need for it, and the American public certainly overwhelmingly recognizes the need for strong drinking water protection. Polls indicate that about 80 percent of the public thinks that Federal drinking water standards should be strengthened or maintained, and these same polls, including industry polls, indicate that just 2 to 3 percent of Americans believe that drinking water protections are too strict.

    This demonstrated public concern is well founded because CDC scientists, among others, have estimated that each year 900,000 Americans get sick, and 900 die, due to microbial contamination in our tap water, as well as 10,000 Americans who get cancer every year that is associated with certain tap water contaminants.

    The Drinking Water Act has had some notable successes, but it needs to be strengthened, and there are some needs for midcourse corrections. We believe that the compromise House legislation that passed unanimously in 1994 was an imperfect but a reasonable accommodation of those competing demands.
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    One of the needs that was identified in that unanimously passed legislation and in H.R. 2747 was an increasingly clear necessity for major investment in infrastructure for tap water. According to surveys by State, local and Federal experts, billions of dollars in investments are needed over the next several years to head off a serious crisis. We strongly support the creation of an SRF to spur drinking water infrastructure investment, and we believe that this investment really has to be targeted wisely. The funds should be tied to State program improvements and shouldn't prop up nonviable systems that aren't ever going to be able to comply over the long run with the drinking water standards.

    Thus, while we support the concept of H.R. 2747, we can't support the bill unless it is amended to include certain provisions in the bill that already passed the House unanimously. Those four provisions are:

    One, an assurance that SRF capitalization grants to States are dependent upon State implementation of adequate viability programs, and that those programs are funded. Our concern is that we not spend good money after bad on systems that simply will never be able to supply water safely; Second, we support requiring a review and a determination as to whether the system that is seeking funds is viable and can achieve compliance through restructuring or tapping an alternative water supply because if you don't have those reviews, again, you may be wasting your money; Third, we feel strongly, as several witnesses have testified earlier, that we need to target for priority those systems that are experiencing compliance problems or that may be posing public health risks; and Finally, we would like to see adequate authorizations and clearly adequate appropriations under those authorizations.

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    While we oppose reopening the whole bill that passed unanimously, if the bill is reopened, we would support certain amendments, including the inclusion of a provision from the Senate bill that just passed that would reserve adequate funding for health effects research and for monitoring unregulated contaminants and small system technical assistance. The bill would also be improved by requiring assurances for water conservation measures, and we believe it should be clarified that lifeline rates, which are very important in many large cities, are encouraged and by no means prohibited by some of the language that is in the bill that could be read to suggest that you couldn't have lifeline rates.

    Moreover, it is important that the final source water protection provisions include groundwater and not just surface water, as some of the previous witnesses have suggested.

    We also would like to work with this committee and the Commerce Committee to achieve a reasonable piece of legislation which in our view would track the 1994 unanimously passed House bill.

    While we support moving legislation that addresses the SRF and the Drinking Water Act generally, we would oppose any effort to reopen it or to weaken it.

    Finally, we urge the committee to oppose any efforts to weaken the currently agreed-to House bill that passed in 1994. If the bill is reopened, we would support amendments both on consumer right-to-know and pollution prevention.

    Thank you, and we would be happy to answer any questions.
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    Mr. BOEHLERT. Thank you very much. I do appreciate it.

    Ms. Cowart.

    Ms. COWART. Good morning, Mr. Chairman and members of the subcommittee. I am Claudia Cowart, President of Southwest Utility Systems. My company is located in Ft. Myers, Florida, and I specialize in large water line and sewer line installation. I have actively run the business for 13 years and I am a contractor.

    I am pleased to appear before you today on behalf of NUCA, the National Utility Contractors Association. I serve on their Board of Directors.

    I am here to tell you that drinking water infrastructure needs in the United States are tremendous in terms of the investment required for construction and rehabilitation. These are my pipes; these are examples that we have brought from our members from all over the country. As you can well see, this is what I'm here to talk about.

    Too often we forget that the pipes don't last forever. The photographs and the actual pipe sections I've brought are proof of this fact. As the Past President of the entire State of Florida Underground Utility Contractors, I can testify that my contractors see these pipes every day in their work.

    No region of the country is immune to this problem and the costs associated with this aging infrastructure are tremendous. In my hometown of Ft. Myers we recently built a brand-new $7 million water treatment plant. We put out state-of-the-art water, the best water in the country. Unfortunately, that water goes through pipes like these. They are over 50 years old. The Chairman has a good example that we will pass around during the discussion, that we've put into lucite.
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    The residents routinely encounter discolored water and low water pressure. You can see that that would happen with these pipes. The discolored water results when water travels through clogged, calcified, and tuberculated pipes. Tuberculation also reduces water pressure. In some parts of the system there are pencil-thin holes that exist in the pipes. We have some families that begin at 4 p.m. to fill their bathtubs for their children to take a bath at 8 in the evening, and I have a city councilman and also the Mayor and several people that I work with in utility departments who testify to this, so I want to bring that story to you.

    The restricted water flow means that many homes and businesses are without adequate fire protection, which is also a problem. The citizens in our community with this brand-new state-of-the-art $7 million water treatment plant would be better served going down to the treatment plant with a bucket rather than receiving the water through these pipes.

    The point of this example is that regulatory standards governing water treatment are just one factor that drives this investment. Regardless of the standards, water distribution infrastructure must be maintained, rehabilitated, and replaced on a regular basis. It is not uncommon in these days for cash-strapped communities to patch the leaks and stretch the infrastructure to unsafe limits for lack of financial resources. Hundreds of other NUCA contractors could appear before you today and tell similar stories.

    Federal and State water programs have contributed significantly to public health protection in the past decades. At the center of our efforts is to provide a safe drinking water infrastructure. Despite its importance, we have a long history of underinvesting in the water supply infrastructure development and maintenance. In 1990, a study commissioned by my organization, NUCA, estimated that $2 billion in annual drinking water infrastructure deficit existed, above and beyond what States are spending currently for capital improvements. It has been estimated that the current level of investment will have to double to meet the States' Drinking Water Act requirements. If the treatment requirements are not responsible for the majority of the capital infrastructure needs, the larger share of the capital needs is in the existing water supply and the distribution infrastructure.
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    The return on investment for this infrastructure is significant and widespread. Without question, our public health and our future well-being depend on the availability of safe drinking water.

    Drinking water infrastructure also generates substantial economic benefit. Before the development of homes and businesses, a dependable drinking water delivery system and treatment system must be in place. Not only does the public investment in drinking water facilities stimulate overall demand for goods and services, but it provides necessary support for public sector production and growth. In 1992, a study released by NUCA concluded that as many as 57,000 jobs are created for every $1 billion invested in water supply and wastewater treatment. Over half of these jobs are permanent.

    To reduce the drinking water investment shortfall, my organization supports the creation of the State revolving loan funds. NUCA makes the following recommendations on H.R. 2747.

    Increase the authorization level; $2.25 billion over 3 years will not adequately capitalize the State programs. I think our recommendation would be closer to $5 billion over 3 years.

    No. 2, require that construction projects be contracted out to ensure the best quality at the best price.

    Three, make technical assistance grants available only to the smaller systems who have difficulty meeting the application requirements and accessing the SRF financing.
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    No. 4, ensure that individual water supply projects undertaken with SRF funds will provide water supply services at the best costs.

    Five, make grants from SRF interest proceeds available only to the neediest small systems. NUCA generally opposes the use of grants under the SRF mechanism because grants erode the corpus of a revolving fund over time.

    Six, require that source protection projects comply with the same cost-effective criteria as do infrastructure projects. And furthermore, the bill should prevent water SRF funds from duplicating wastewater SRF funds, and Section 319 grants for nonpoint source control.

    Finally, lower the 5 percent administrative setaside to 4 percent. EPA estimates that the administrative costs for a well-established fund run between 2 and 4 percent, so we would recommend 4 percent.

    Mr. Chairman, thank you very much, and all the others who are here, for allowing me the chance to speak. I appreciate the opportunity and I would be happy to answer any questions.

    Mr. BOEHLERT. Thank you, Ms. Cowart.

    Mr. Becker.

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    Mr. BECKER. Good morning, Mr. Chairman and members of the subcommittee. My name is Phil Becker. I am President of Utilities Consolidated, Inc. We are based in San Antonio, Texas, and I am a contractor.

    We have completed a variety of utility projects for States and municipalities. Today I am representing Associated General Contractors of America. AGC is a national trade association whose member firms are actively engaged in the construction of the Nation's waterworks facilities, waste treatment facilities, dams, and water conservation projects.

    I appreciate this opportunity to appear before the subcommittee regarding the Water Supply Infrastructure and Assistance Act of 1995, H.R. 2747, and to commend the subcommittee for its diligent efforts to move this legislation forward. H.R. 2747 does several important things. Over the next 3 years, this measure establishes a $2.25 billion State revolving fund. Upon establishment of an SRF, States will be authorized to enter into construction contracting agreements for improving water quality. Further, H.R. 2747 recognizes the ability of the States to prioritize construction and modernization projects for the improvement of water supply systems.

    With the Federal budget under constant scrutiny, the concept of the State revolving loan fund uses those resources efficiently. This increases the ability to efficiently plan and implement water and wastewater projects. The increased capacity and modernization of facilities nationwide will protect Americans from water contaminated with harmful bacteria and high levels of regulated contaminants. This legislation places responsibility on the States to create and monitor programs for water quality. By providing funding, the Federal Government increases the efficiency of water quality protection programs without enlarging its participation.
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    Most importantly, this money will be aimed at fixing problems with the construction and rehabilitation of water supply systems through the modernization and expansion projects.

    Achieving established water quality standards requires a lot of money. Low population densities in rural areas have fewer commercial financing options to meet these standards. These systems simply cannot achieve the established standards due to the lack of capital for needed improvements and expansion. The SRF method allows these areas to borrow money, repay the State, and replenish the fund for further future investment, this ensuring that citizens in rural areas have the same opportunity for maintaining water quality as do citizens in more populous communities.

    H.R. 2747 authorizes funding for continuing needed improvements to water supply systems. AGC estimates that over $150 billion in capital improvements to the Nation's water infrastructure is needed. Priorities include replacing equipment and meeting anticipated expansion demands of population growth nationwide.

    Investing in infrastructure improvements creates efficient systems. It also reduces the cost of maintaining a healthy water supply.

    I call your attention to an article in The Washington Post on Monday describing the 1860's infrastructure of our Nation's Capitol. Lack of investment in the infrastructure has made it difficult to replace these pipes. Communities all around the country share the same problem. AGC endorses the State revolving fund concept as an answer to the nationwide problem. Quick adoption of the Water Infrastructure Act is needed to allow States to begin implementation of construction and modernization projects. Investment in America's infrastructure preserves public health, protects the environment, and creates a healthy economy.
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    I ask that my written statement and the news article be submitted for the record.

    From the State of Texas and the land of the Cowboys, I thank you, Mr. Chairman.

    [Laughter.]

    Mr. BOEHLERT. Thank you very much. I thank all of you very much, and I appreciate that.

    Mr. Kingman, let me start with you. In outlining the framework for effective source water protection measures, you in fact described the major components of the whole Farm Planning Program being advanced by the State of New York, and I think you are somewhat aware of that.

    I would like to see the New York model adopted nationwide. Could you discuss the potential, nationwide, for farmer participation in programs like New York State, the whole Farm Planning Program?

    Mr. KINGMAN. I think that whole Farm Planning can be a very effective method for dealing with NPS problems, providing that farmers are involved in the process. I understand that was the case——

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    Mr. BOEHLERT. It certainly is in New York, yes.

    Mr. KINGMAN. So it can be a very effective mechanism for dealing with that problem. But I think that it is critical that farmers be involved in the process of planning, that they be involved in initiating it and implementing it, and that the Government's role would be one of advisement and a partner in the process.

    Mr. BOEHLERT. Thank you very much. I'll tell you, many years ago as a young man in this business, I came to work for a Congressman on his staff. He put his arm around me and he said, ''I'll tell you how to deal with problems involving farmers. Anytime you find three farmers that agree on anything, do it.''
    [Laughter.]

    Mr. BOEHLERT. I am now in my 31st year, and I have yet to find the three that agree.

    But I agree that farmers have to be partners in the effort. It is very important that we have an active outreach program. It is working in New York and I think it can work elsewhere. We have to understand that the Government is not the enemy. The Government sometimes doesn't understand as much as it should about agricultural needs and practices, but if we work together I think we can accomplish a great deal.

    Ms. Cowart, let me refer to your testimony. In your testimony you speak of families having to begin drawing their children's baths at noon in order to have sufficient water for a bath, and you speak of insufficient water pressure in some fire hydrants, even to extinguish a small fire. You also speak of high electricity costs associated with pumping water through these clogged pipes that you show us.
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    Do you have any sort of an estimate on the cost savings that might be expected in operating expenses if new drinking water systems were put in place?

    Ms. COWART. I think our utilities director has estimated it at approximately half, that they would be reduced by approximately half.

    Mr. BOEHLERT. Isn't that amazing?

    Ms. COWART. The situation is unbelievable. They have appropriated as they can afford, neighborhood by neighborhood, but some of them are still, again, in this shape.

    Mr. BOEHLERT. So if we go forward we might not have to have much of an increase in water rates at all if we do it in the right way?

    Ms. COWART. No. I think that's why we agree wholeheartedly with the State revolving loan.

    Mr. BOEHLERT. OK. Thank you very much.

    Mr. Horn?

    Mr. HORN. Thank you, Mr. Chairman We've heard a lot of good recommendations from you on this panel, as well as other panels. If you had one thing you wanted to change in the current act that has somehow annoyed you over the years, what would that be? Ms. Cowart, do you want to start?
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    Ms. COWART. Under the current act, the Safe Drinking Water Act? The amount of regulation, not only on us as contractors but on the supply side. I would rather see more people be able to receive water at a certain quality level than to work on the quality for fewer people. Less restrictions from the EPA.

    Mr. HORN. So it is primarily the regulations as drafted by the Environmental Protection Agency? Or is it what we have put in language that they have an excuse to write the regulations the way they do?

    Ms. COWART. Well, that's a good question.

    Mr. HORN. Well, we are often a part of the problem, the bureaucracy. Sometimes agencies, since we don't agree to be specific, they just go off and do several interpretations.

    Ms. COWART. I think that's it. I personally believe that their interpretations may be taking off to the extreme.

    Mr. HORN. Can you give me an example that you're familiar with?

    Ms. COWART. Being from the construction side of it, some of the examples that we encounter with the EPA have to do with how we install the pipe and the quality of the pipe that goes in the ground. I think sometimes those standards are too high.

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    Mr. HORN. In what sense? I mean, the pipe won't last, or the pipe lasts too long?

    Ms. COWART. No. My specific example which I will bring up has to do with asbestos concrete pipe. As you may or may not know, a lot of the drinking water in this country goes through asbestos concrete pipe which often, when we replace water lines, is abandoned. And when we abandon it, the plans and specifications say, ''take it out of the ground.'' We take it out of the ground, and someone says the magic word, ''asbestos,'' and EPA goes crazy. But it is pipe such as this that water goes through every day to homes in America, and it is asbestos concrete pipe.

    They absolutely have a fit when we try to dispose of it. It is not friable under their standards, but many of them out in the field do not understand that. That's the kind of regulation that I live with as a contractor. It's not directly attributable to the Safe Drinking Water Act, but that's my one example that I can give.

    Mr. HORN. On that one point, is there evidence that it is harmful in any way to the water supply?

    Ms. COWART. No, sir.

    Mr. HORN. There is no evidence?

    Ms. COWART. Not to my knowledge.

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    Mr. HORN. OK. In discovering that pipe there, could you simply lay new pipe beside it and then keep it buried?

    Ms. COWART. Yes. They give you alternatives. You may bury it and fill it with concrete so that it is abandoned, or you may remove it and take it to an appropriate landfill.

    Mr. HORN. But you are saying there are difficulties in finding a landfill?

    Ms. COWART. No. Any landfill will take it. EPA's interpretation across the country has become difficult for us to make standard. It's been an interesting process.

    Mr. HORN. Mr. Olson?

    Mr. OLSON. I think that this subcommittee is identifying one of the major needs for the Drinking Water Act, which has been the lack of Federal assistance to communities, particularly to small communities that have a real need. So I would say that one of the things that we certainly would support would be some Federal assistance, both for infrastructure assistance and for source water protection. In my view, the biggest problem with the act has been the lack of protection, the up-front protection of the water, so we're not having to pay as much for the treatment.

    Mr. HORN. Very interesting.

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    Mr. Becker, what have you found are problems in the existing act that we ought to be worried about?

    Mr. BECKER. I would like to address the regulatory problems that we have, and a little bit more on what our NUCA representative here said pertaining to asbestos pipe.

    I believe AWWA has made studies that have shown that asbestos pipe is probably one of the best pipes for drinking water that there is, once it's installed, because you absolutely have no problems with contamination of your water due to corrosion, like these pipes here.

    We addressed the problem of removing the pipe and disposing of it. Due to the regulations that EPA imposes on the inspectors on the projects out here, just like we addressed, they have absolutely no training, and they just go completely berserk when you go into asbestos pipe, removing it out of the ground with a machine, and disposing of it. It is strictly regulations that create these problems. I believe there are areas where a common-sense approach needs to be taken. We run into regulations pertaining to excavated materials out of a trench. Nowadays it seems like just about everything you remove from a trench is hazardous material, and we have problems disposing of it.

    I believe that there should be variances on these materials that are removed from the trenches. I don't believe that asphalt mixed with dirt is a hazardous material. We have areas where the Government gets involved and says that you cannot put that back in the trench, and we have to dispose of it. This creates problems in your landfills; you have to have more landfills. This creates problems with bringing materials in to put into the trench. We have all kind of regulatory problems involving materials like this, excavated materials. EPA creates a lot of problems in that area.
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    Mr. HORN. I would like to get Mr. Kingman's answer to that question, then yield back my excess of time.

    Mr. KINGMAN. To be very candid, sir, my primary reason for being here today was to address the source water provisions in H.R. 2747, and I yield to the rest of the panel as far as the current law is concerned.

    Mr. HORN. OK.

    I wonder, Mr. Chairman, if the staff might look into some of these problems on the disposal of types of pipe which is found when they are putting in new lines or repairing old lines, and see just what is the situation on the regulations. Are we creating more unnecessary landfills that we don't have to create?

    Mr. BOEHLERT. So ordered.

    Thank you very much.

    Mr. LaTourette?

    Mr. LATOURETTE. Thank you, Mr. Chairman.

    Ms. Cowart, I made a note when you were talking to the Chairman about half the cost—was that half the electricity costs, or half of the water rates?
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    Ms. COWART. No, I think he was referring to the electrical cost of pumping and pushing the water to the end user.

    Mr. LATOURETTE. OK. Just as an aside, my kids would like it if it took 4 hours to draw a bath, even though I understand the problem.

    [Laughter.]

    Mr. LATOURETTE. Mr. Olson, I want to talk to you a little bit about your testimony. It's sort of laced with a fear that somehow this Congress is going to disturb some of the delicate compromises constructed by previous Congresses relative to the Safe Drinking Water Act. You talk about if in fact it is reopened, that the groups that you represent would like to see a ''polluter pays'' provision. Have your organizations drafted language that you would like to see installed in the Safe Drinking Water Act that would affect ''polluter pays''?

    Mr. OLSON. Well, we don't have any language that I can share with you right now, but we do have some principles that I would be happy to get to you or put in the record.

    The basic principle is that we believe strongly that it makes more sense for the people that are causing the pollution to pay for the upgrades and treatment that are necessitated by their pollution than it is for the ratepayers. We do have a set of principles that I would be happy to submit for the record.

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    Mr. LATOURETTE. If I could ask unanimous consent that he be permitted to do that, Mr. Chairman?

    Mr. BOEHLERT. Sure. Without objection.

    [The referenced material attached to Mr. Olson's prepared statement.]

    Mr. LATOURETTE. I would appreciate that, because I think that everybody on both sides of the aisle agrees with that basic concept, that those who cause the problem should clean up the problem. But I know that you are aware that this subcommittee is also working on the Superfund legislation, and sometimes that principle goes awry in how we write the law. I would appreciate any thoughts that you have on that.

    Mr. OLSON. One of the ideas that we have is to allow the water utilities themselves to bring those actions to have the polluter pay, rather than any member of the public. I think that would limit some of the concerns that many have had.

    Mr. LATOURETTE. I appreciate that.

    Then on page 3 of your testimony you used the words ''adequate viability'' a couple of times. Just for the uninitiated, what do you mean? What's the standard that we would use to determine if somebody qualifies for the SRF based upon ''viability''?

    Mr. OLSON. Well, this is a concept that was developed over many years, and it is embodied in the legislation that passed the House unanimously. The essential idea is that in order to give resources to an individual water system, they should be able to show that they have the ability to collect adequate revenue in order to support the continued existence of that facility, so that we're not propping up a system that basically is destined for collapse and doesn't have adequate revenue to support itself.
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    Mr. LATOURETTE. And who is going to make that call?

    Mr. OLSON. Under the House bill that passed, that call was made by the States, with basically just some Federal overarching guidance but no Federal review of individual decisions.

    Mr. LATOURETTE. And who engaged in it for the Federal Government? Was it the EPA?

    Mr. OLSON. EPA would issue general informational guidance, and the States would develop their own viability programs. Many States, I might add, already have a viability program, but some States don't. Our concern is that we might see the SRF depleted by spending money on small systems, for example, that can't really support themselves.

    Mr. LATOURETTE. OK. But it is your interpretation that under the previous legislation, EPA's role was only general guidance?

    Mr. OLSON. It was a general guidance role. They came up with guidelines that the States would use to develop their programs, and EPA would have an oversight role in making sure that those programs went forward.

    Mr. LATOURETTE. Could use, or had to use?

    Mr. OLSON. They were guidelines. The States would use them. All existing programs are grandfathered unless they are determined to be inadequate. I think the bottom line was that there would be some Federal assistance and insurance that the programs are meaningful, but it was explicit that these weren't going to be system-by-system reviews by the Federal Government.
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    Mr. LATOURETTE. OK. Do you see the situation in a viability review, regardless of who is conducting it, that a bias is going to exist toward the larger systems to the detriment of the smaller?

    Mr. OLSON. I don't believe so. In fact, most of the small systems currently would be considered viable under all of the State programs that exist. Generally, all of the viability programs that exist look at whether the system is in compliance. If they are complying now, and there isn't any projected big problem, then they wouldn't have to undergo a viability review. It's only if they were having compliance or health problems. So it's a relatively small number of so-called ''basket case'' systems that simply don't have the wherewithal to comply.

    Mr. LATOURETTE. Thank you, Mr. Olson.

    Thank you, Mr. Chairman.

    Mr. BOEHLERT. Thank you very much, and I thank all of our witnesses. I think it has been a very productive hearing and I appreciate your serving as valuable resources.

    Every time I look at these pipes I think of the water pressure problem, and I think of the monumental fire safety problem. This committee is committed to the proposition that we're going to move expeditiously on this important legislation. This will not be a case of Congress dragging its feet. We're going to get something out of this subcommittee, and I think out of the full committee, within weeks, not months.
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    Thank you so very much. The hearing is adjourned.

    [Whereupon, at 11:20 a.m., the subcommittee was adjourned, to reconvene subject to the call of the Chair.]

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