Substantial PFAS Funding in Infrastructure Act Flows Towards Protecting Water and Wastewater Systems

The Infrastructure Investment and Jobs Act (“IIJA”) allocates $10 billion in new government funding to address per- and polyfluoroalkyl substances (“PFAS”) and emerging contaminants that increasingly challenge the nation’s water and wastewater systems.[i]

Ordinarily, such funding requires matching or cost-sharing from the state. But the IIJA’s PFAS funding is awarded as a grant, loan with the entire principal forgiven, or combination of the two. This grant funding provides states and water systems with additional resources to address PFAS impacts to their water sources

This third article in our series on the IIJA outlines which water providers and other communities are eligible for the Act’s new water-focused funds, how they can receive funding, and the implications of such funding.

Public water systems; public, private, and nonprofit entities developing water infrastructure projects; and privately- and publicly-owned community water systems can access this funding through their individual state programs. This funding distribution includes:

• $5 billion to address emerging contaminants for small and disadvantaged communities, distributed to improve drinking water quality under the Safe Drinking Water Act (“SDWA”);
• $1 billion for wastewater and stormwater infrastructure projects under the Clean Water State Revolving Funds (“Clean Water Funds”) under the Clean Water Act (“CWA”); and
• $4 billion for community water systems to upgrade drinking water treatment, distribution, and replacement of contaminated sources under the Drinking Water State Revolving Funds (“Drinking Water Funds”) of the SDWA.

This funding parallels the EPA’s goals in the PFAS Strategic Roadmap with a focus on safe drinking water.[ii] While the Roadmap outlines policy and regulation, the IIJA provides concrete funding to address PFAS impacts throughout the nation’s water systems, including impacts to both water supply, wastewater treatment, and stormwater management.

This distribution marks a significant increase in funding where the total allotment of previous general water-related funding in 2021 under these programs was roughly $2.7 billion.

While this appropriation is historic, it likely is not sufficient to address all PFAS contamination plaguing water providers nationwide, particularly given that the funding is effectively structured as one-time grants. The revolving funds will not be replenished for additional water infrastructure projects. Instead, states will have to triage which projects receive grant money based on recipients’ financial need; the severity of contamination to ground, surface, and drinking water by PFAS and other emerging contaminants; and the project’s ability to effectively address contamination and bolster necessary water infrastructure, especially for disadvantaged communities disproportionately facing environmental burdens.

Is it not yet clear how funding will be distributed at the state level, but EPA will likely issue guidance on which projects and recipients should be prioritized to assist state agencies in fielding applicants, according to the National Association of Clean Water Agencies.

$5 Billion for Small and Disadvantaged Communities to Improve Drinking Water:

$5 billion will be distributed to address emerging contaminants as part of Congress’ goal to expand access to clean drinking water with a focus on small and disadvantaged communities, which are disproportionately impacted by drinking water contamination.[iii] This emphasis on environmental justice echoes the PFAS Strategic Roadmap where the EPA plans to investigate how PFAS contribute to the pollution burden on communities disproportionately impacted by environmental issues.[iv]

The $5 billion funding is distributed under section 1459A of the SDWA in $1 billion annual increments from 2022 to 2026. Section 1459A authorizes EPA to award grants to states assisting small and disadvantaged communities that are otherwise unable to finance projects or activities required to comply with the SDWA.[v] This is a noncompetitive program. and any state can apply to EPA. Each state has an individual agency to manage the grant funding, such as the Washington State Department of Health, Office of Drinking Water.[vi]

These funds are not subject to general cost-sharing requirements under the SDWA, which ordinarily require an entity to pay at least 45% of the total costs of a project, provide land/reallocations to carry out the project, and pay 100% of any operation and maintenance costs.[vii]

Public water systems, water systems in Indian Country, or a state on an underserved community’s behalf are eligible to receive this funding.[viii] These entities must serve a community that is disadvantaged or may become disadvantaged if required to increase water rates after carrying out a project, or a small community with less than 10,000 people that is unable to incur debt sufficient to finance a project.[ix]

Each state defines the affordability criteria for a disadvantaged community.[x] For instance, Washington State defines a disadvantaged community as the service area where the proposed project will result in water rates that are more than 1.5% of the median household income of the service area or restructuring when one or more public water systems are having financial difficulties.[xi]

Eligible activities include: (1) investments necessary for a public water system to comply with the SDWA, (2) assistance that directly and primarily benefits a disadvantaged community, and (3) programs to provide household water quality testing, including testing for unregulated contaminants.[xii] In 2021, small, underserved, and disadvantaged communities were granted $25.8 million to improve drinking water quality for projects such as treatment, transmission and distribution, storage, creating new systems, consolidation, household water quality testing, providing households access to drinking water services, and drinking water contamination response efforts.[xiii]

In 2021, the EPA allotted funding to states through a formula which included factors based on population below poverty, small water systems, underserved communities, and a 10% tribal allotment.[xiv] Under this formula, the EPA allotted $539,000 to Washington State in 2021 and a total of $949,000 for 2018/2019.[xv] Washington used the 2018/2019 funding for three consolidated projects, each serving a population of under 55 people to address arsenic, uranium, and total coliforms.[xvi] While this funding served fairly small communities in Washington, other states received funding for projects with larger populations, such as a Rhode Island project to address protecting over 300,000 people from possible exposure to lead in their water.[xvii]

The EPA will likely follow a similar process to distribute the $5 billion in IIJA funding.

$1 Billion for Wastewater and Stormwater Infrastructure:

$1 billion will be allocated to the Clean Water Funds under the CWA with $100 million available for fiscal year 2022 and $225 million available annually from 2023 to 2026.[xviii] The Clean Water Funds provide financial assistance to public, private, and nonprofit entities for a broad range of water infrastructure projects.[xix] Many such projects will focus on improving wastewater and stormwater infrastructure.

This funding departs from the typical matching or cost-sharing requirements for the Clean Water Funds and is intended to better meet the needs of small and disadvantaged communities without requiring an interest-bearing loan or requiring state matching funds. Ordinarily, states must contribute an additional 20% to match the federal grant and then issue low interest loans to eligible recipients for high priority water quality and infrastructure projects.[xx] The fund is typically replenished as recipients repay their loans and states reissue loans for new projects. But the IIJA mandates that the grant money will not be subject to matching or cost sharing requirements. A state will issue funds as assistance agreements with 100% principal forgiveness, grants, or a combination of both.[xxi] A 100% principal forgiveness loan (similar to the framework for PPP assistance to mitigate effects of the COVID-19 pandemic) means that the entire principal is forgiven, making it essentially a grant.

EPA provides capitalization grants to all 50 states and Puerto Rico, and the states are responsible for running their respective revolving funds.[xxii] EPA’s Assistant Administrator for Water, Radhika Fox, has confirmed that each regional EPA office will work closely with states to implement the Clean Water Funds. She emphasized that water-related funds would be channeled through existing EPA programs that have proven successful for communities in the past, such as the Clean Water Funds.[xxiii] The agency overseeing such funds varies by state.[xxiv]

There are 11 eligible project types to address emerging contaminants. Each has independent criteria and requirements.[xxv] Eligible uses include constructing municipal wastewater facilities, controlling nonpoint pollution sources, building decentralized wastewater treatment systems, creating green infrastructure projects, protecting estuaries, and funding other water quality projects.[xxvi] Since 1997, most funding assistance went to projects serving a population of less than 3,500.[xxvii]

Washington received a total allotment of $27.9 million in 2021.[xxviii] Eligible applicants for 2021 funding included counties, cities, and towns; water, sewer, port, conservation, and irrigation districts; quasi-municipal corporations, federally recognized tribes; and state institutions of higher education where the project was not included in the institution’s statutory responsibilities.[xxix] For state fiscal year 2021 including funding from the federal fiscal year 2020 appropriation, the Washington Department of Ecology received 146 applications, which it screened, rated, and ranked pursuant to state statutory requirements.[xxx] Ecology then issued binding commitments for 37 projects with 97% of the funds being used for wastewater projects and 55% of the projects for communities of under 3,000 people.[xxxi]

From 1997 to 2020, Washington spent most of its funding on centralized wastewater treatment and stormwater infrastructure, with some assistance going towards nonpoint source such as sewage treatment and agricultural best management practices.[xxxii] A previous water quality outcomes report from 2017 to 2019 found that six stormwater infrastructure projects in Washington State received a loan under the Clean Water Funds to provide runoff treatment and flow control with a total amount of $5.2 million.[xxxiii]

$4 Billion for Community Water Systems to Improve Water Treatment Systems, Transmission and Distribution, and Replace Contaminated Sources:

$4 billion will be allocated to the Drinking Water Funds under section 1452 of the SDWA to address emerging contaminants in drinking water with a focus on PFAS.[xxxiv] $800 million is available each fiscal year from 2022 to 2026. The Drinking Water Funds function virtually the same as the Clean Water Funds. The IIJA also provides that these funds are not subject to matching requirements and will be awarded as grants or loans with 100% principal forgiveness.[xxxv] In Washington, the Department of Health oversees the Drinking Water Funds, but the administering agency varies per state, as with the Clean Water Funds.[xxxvi]

Community water systems, which have at least 15 service connections or serve at least 25 year-round residents, are eligible for Drinking Water funding. These community water systems may be publicly or privately owned. Non-profit, non-community water systems (e.g., schools) are also eligible and may be government-owned.

Ineligible water systems include: federally-owned public water systems, for-profit non-community water systems, systems that cannot ensure compliance with the requirements of the SDWA (unless the assistance will ensure compliance long term), and systems undergoing or facing enforcement action under any primary national drinking water regulation (unless the assistance will bring the system into compliance or the assistance is unrelated to the non-compliance and the system is on an enforcement schedule ensuring compliance).[xxxvii]

These requirements for eligible and ineligible water systems mean more funding assistance for smaller population sizes. Since 1998, most projects were for populations with less than 100,000 people.[xxxviii] And since 1997, 35% of Drinking Water Funds assistance went to communities with populations of 10,000 or fewer. 75% of the 2019 funding was provided to these smaller communities. The emphasis on smaller communities also extends to loan principal forgiveness, where 44% of the 2019 funding for water systems serving populations of 500 or less received this forgiveness for the full loan amount.[xxxix]

There are six categories of eligible projects: installing or upgrading treatment systems, transmission and distribution improvements to prevent contamination, source development to replace contaminated sources, storage development, water system consolidation, and water system creation.[xl] Through 2019, assistance under the Drinking Water Funds focused on infrastructure projects to protect public health, such as improving drinking water treatment, fixing leaky or old pipes, improving the source of water supply, and replacing or constructing finished storage tanks.[xli] An EPA report found that states used nearly half of the Drinking Water Funds from 2019 for transmission and distribution projects with the rest of the funding going towards treatment, storage, and source.[xlii]

In accordance with this public health goal, Washington State’s objective was to provide greater public health protection by switching customers’ water supply to a system that could provide clean, safe, and reliable drinking water according to a 2015 analysis by the EPA. Washington used the funds to pay for water system connections fees, feasibility studies for systems considering consolidation, and pre-construction grants to cover some planning and design costs.[xliii]

In 2021, $1.1 billion was granted in funding, and Washington State received $24.5 million.[xliv] In 2020, Washington received a similar amount, which assisted projects on construction and included treatment, transmission and distribution, source, storage, and restricting.[xlv] Assistance in 2020 included 16 projects, with a total of 660 projects since the inception of the Drinking Water Funds.[xlvi] The most assistance and funding was spent on projects serving a population size of less than 501 people.[xlvii]

Conclusion

Water systems throughout the United States can request this PFAS and emerging contaminants funding through their respective state programs to improve public health and drinking water standards with a particular emphasis on small and disadvantaged communities. While EPA has yet to provide more guidance on the application process, water providers can glean information from past funding procedures on how to access this funding for investments to comply with public health requirements and improve water infrastructure systems.

If you are a water provider or other relevant community eligible for funding, contact Marten’s PFAS Team members, Jeff Kray, Jessica Ferrell, Martha Geyer, or Sara Cloon, to help navigate the state funding request process.

[i] H.R. 3684, 117th Cong. (2021) (enacted) (hereinafter “IIJA”); Pub. L. No. 117-58, Div. J, Title VI; Enrolled Bill at 973–74, ¶¶ (4)–(6) .

[ii] See Jessica K. Ferrell et al., EPA Announces Roadmap for PFAS Regulation with Nationwide Implications, Marten News & Insights (Oct. 20, 2021), https://www.martenlaw.com/news-and-insights/epa-announces-roadmap-for-pfas-regulation-with-nationwide-implications.

[iii] Fact Sheet: The Bipartisan Infrastructure Deal, The White House (Nov. 6, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/; Laurel A. Schaider et al., Environmental Justice and Drinking Water Quality: Are There Socioeconomic Disparities in Nitrate Levels in U.S. Drinking Water?, BioMed Central (Jan. 17, 2019), https://ehjournal.biomedcentral.com/articles/10.1186/s12940-018-0442-6 (finding higher levels of nitrate contamination in low-income and minority communities); Maura Alaire et al., National Trends in Drinking Water Quality Violations, Proceedings of the National Academy of Science of the United States of America (Feb. 27, 2018), https://www.sciencedaily.com/releases/2018/02/180212170017.htm (stating that low-income and rural regions were most vulnerable to water quality issues); Kristi Pullen Fedinick et al., Watered Down Justice, National Resources Defense Council (Mar. 27, 2020), https://www.nrdc.org/resources/watered-down-justice (National Resources Defense Council, Environmental Justice Health Alliance for Chemical Policy Reform, and Coming Clean found that the rate of drinking water violations increased for low-income and minority communities).

[iv] See Ferrell, supra note ii.

[v] 42 U.S.C. § 300j-19a.

[vi] Small, Underserved, and Disadvantaged Communities State Grant Program Contacts, EPA, https://www.epa.gov/dwcapacity/small-underserved-and-disadvantaged-communities-state-grant-program-contacts (last updated Oct. 4, 2021).

[vii] 42 U.S.C. § 300j-19a(g).

[viii] 42 U.S.C. § 300j-19a(c).

[ix] 42 U.S.C. § 300j-19a(c).

[x] 42 U.S.C. § 300j-12(d)(3).

[xi] WAC 246-296-020(9).

[xii] 42 U.S.C. § 300j-19a(b)(2).

[xiii] WIIN Grant: Small, Underserved, and Disadvantaged Communities Grant Program, EPA, https://www.epa.gov/dwcapacity/wiin-grant-small-underserved-and-disadvantaged-communities-grant-program#basicstate (last updated Oct. 25, 2021).

[xiv] Id.

[xv] Anita M. Thompkins, Memorandum: Final Allotments of FY 2021 Appropriations for the Assistance to Small and Disadvantaged Communities Grants, Authorized under Section 1459A of the Safe Drinking Water Act, as amended by Section 2104 of the Water Infrastructure Improvements for the Nation Act, EPA, 2 (July 7, 2021), https://www.epa.gov/system/files/documents/2021-08/fy2021-initial-state-allotment-memo.pdf; Anita M. Thompkins, Memorandum: Final Allotments of FY 2018 and FY 2019 Appropriations for the Assistance to Small and Disadvantaged Communities Grants, Authorized under Section 2104 of the Safe Drinking Water Act Infrastructure Improvements for the Nation Act, EPA, 2 (Apr. 29, 2019), https://www.epa.gov/sites/default/files/2019-04/documents/wiin_2104_allotment_memo_april_2019.pdf. .

[xvi] Small, Underserved, and Disadvantaged Communities Program Grantees, EPA, https://www.epa.gov/dwcapacity/small-underserved-and-disadvantaged-communities-program-grantees (last updated Oct. 4, 2021).

[xvii] Id.

[xviii] IIJA, Enrolled Bill at 973 ¶ (4).

[xix] Learn about the Clean Water State Revolving Fund (CWSRF), EPA, https://www.epa.gov/cwsrf/learn-about-clean-water-state-revolving-fund-cwsrf (last updated July 3, 2021).

[xx] 33 U.S. Code § 1382(b)(2); Overview of Clean Water State Revolving Fund Eligibilities, EPA, 3 (May 2016 ), https://www.epa.gov/sites/default/files/2016-07/documents/overview_of_cwsrf_eligibilities_may_2016.pdf.

[xxi] IIJA at 973.

[xxii] Id.

[xxiii] Hannah Northey and Arianna Skibell, Biden Admin to Staff Up Due to Infrastructure Deal, E&E News (Nov. 11, 2019), https://subscriber.politicopro.com/article/eenews/2021/11/09/biden-admin-to-staff-up-due-to-infrastructure-deal-283035.

[xxiv] Water Quality Grants and Loans, Washington Department of Ecology, https://ecology.wa.gov/About-us/Payments-contracts-grants/Grants-loans/Find-a-grant-or-loan/Water-Quality-grants-and-loans (last visited Nov. 22, 2021); State CWSRF Program Contacts, EPA, https://www.epa.gov/cwsrf/state-cwsrf-program-contacts (last updated Oct. 22, 2021).

[xxv] Interpretive Guidance for Certain Amendments in the Water Resources Reform and Development Act to Titles I, II, V and VI of the Federal Water Pollution Control Act, EPA, 8-9 (Jan. 6, 2015), https://www.epa.gov/sites/default/files/2015-04/documents/water_resources_reform_and_development_act_guidance.pdf.

[xxvi] Overview of Clean Water State Revolving Fund Eligibilities, supra note xx at 3.

[xxvii] 18-20, https://www.epa.gov/sites/default/files/2021-02/documents/us20.pdf.

[xxviii] FY 2021 CWSRF Allotments: $1,638, 826,000, EPA, https://www.epa.gov/sites/default/files/2021-03/documents/2021_cwsrf_allotments.pdf (last visited Nov. 22, 2021).

[xxix] Funding Guidelines State Fiscal Year 2021 Water Quality Financial Assistance, Washington Department of Ecology, 43 (Aug. 2019), https://apps.ecology.wa.gov/publications/documents/1910032.pdf.

[xxx] See Chapter 173-98 WAC.

[xxxi] Shelly McCurry, Annual Report Washington’s Clean Water State Revolving Fund (CWSRF), Washington Department of Ecology, 9-11 (Oct. 2021), https://swefcsrfswitchboard.unm.edu/resources/washington/2021/2021%20WA%20CWSRF%20AR.pdf.

[xxxii] Clean Water SRF Program Information for the State of Washington, EPA, 22-25, 27-29 (Nov. 30, 2020), https://www.epa.gov/sites/default/files/2021-02/documents/wa.pdf.

[xxxiii] Water Quality Financial Assistance 2017-2019 Biennium Outcomes Report, State of Washington Department of Ecology, 17 (May 2020), https://apps.ecology.wa.gov/publications/documents/2010013.pdf.

[xxxiv] Id. at. 974.

[xxxv] Id.

[xxxvi] Drinking Water State Revolving Fund (DWSRF), Washington Department of Ecology, https://www.doh.wa.gov/CommunityandEnvironment/DrinkingWater/WaterSystemAssistance/DrinkingWaterStateRevolvingFundDWSRF (last visited Nov. 22, 2021).

[xxxvii] Drinking Water State Revolving Fund Eligibility Handbook, EPA, 8-9 (June 2017), https://www.epa.gov/sites/default/files/2017-06/documents/dwsrf_eligibility_handbook_june_13_2017_updated_508_version.pdf.

[xxxviii] Drinking Water SRF Program Information National Summary, EPA, 13-15 (Nov. 16, 2020, 10:01 am), https://www.epa.gov/sites/default/files/2020-11/documents/national_summary_0.pdf

[xxxix] 2019 Annual Report Drinking Water State Revolving Fund, EPA, 9 (Oct. 2020), https://www.epa.gov/sites/default/files/2020-10/documents/2019_annual_report_final_508compliant.pdf.

[xl] DWRSF Eligibilities, EPA, https://www.epa.gov/dwsrf/dwsrf-eligibilities (last updated Nov. 17, 2020); State DWSRF Website and Contact(s), EPA, https://www.epa.gov/dwsrf/state-dwsrf-website-and-contacts (last updated Oct. 27, 2021).

[xli] How the Drinking Water State Revolving Fund Works, EPA https://www.epa.gov/dwsrf/how-drinking-water-state-revolving-fund-works#tab-1 (last updated July 15, 2021).

[xlii] 2019 Annual Report Drinking Water State Revolving Fund, supra note xl at 9.

[xliii] Analysis of the Use of Drinking Water State Revolving Fund Set-Asides, EPA Office of Water, 31 (Oct. 2017), https://www.epa.gov/sites/default/files/2017-10/documents/final_dwsrf_2017_report_508compliant.pdf.

[xliv] 2017-2021 Allotment of Federal Funds for States, Tribes, and Territories, EPA, https://www.epa.gov/dwsrf/2017-2021-allotment-federal-funds-states-tribes-and-territories (last updated Apr. 9, 2021).

[xlv] Id.; Drinking Water SRF Program Information for the State of Washington, EPA, 18 (No. 16, 2020, 10:00 am), https://www.epa.gov/sites/default/files/2020-11/documents/washington2020.pdf..

[xlvi] Id. at 21.

[xlvii] Id. at 15.