May 2009, Vol. 21, No.5

SRF Funding Boost Includes Tight Deadlines For States, Recipients


The American Recovery and Reinvestment Act appropriates billions of dollars in funding for the Clean Water and Drinking Water State Revolving Fund programs, providing a long-awaited boost in federal support for water and wastewater infrastructure. Read more 


Signed into law by U.S. President Barack Obama on Feb. 17, the American Recovery and Reinvestment Act (ARRA) appropriates billions of dollars in funding for the Clean Water and Drinking Water State Revolving Fund (SRF) programs, providing a long-awaited boost in federal support for water and wastewater infrastructure. However, the legislation includes tight deadlines and new requirements that could prove challenging for states administering the SRF programs and utilities seeking a portion of the windfall.

All told, ARRA provides $4 billion for the Clean Water SRF and $2 billion for the Drinking Water SRF. Compared to recent annual appropriations for the SRF programs, the funding levels provided by ARRA represent a sizeable increase. For example, the amount allotted to the Clean Water SRF is nearly six times more than the fund received for fiscal year 2009.

To speed the process by which the funds are disbursed, the U.S. Congress waived the usual matching or cost-share requirements associated with the SRF programs. In another noteworthy change from the normal SRF process, Congress directed the states to allocate at least half of the funding to recipients as “additional subsidization” in the form of forgiveness of principal, negative interest loans, grants, “or any combination of these,” according to the legislation. (By contrast, recipients of SRF funding normally receive loans that must be paid back, albeit at interest rates that are lower than market rates.) Furthermore, states are expected “to target, as much as possible, the additional subsidized monies to communities that could not otherwise afford an SRF loan,” according to the conference report issued by the House and Senate conferees who produced the final version of ARRA.

The boost in SRF funding and the new focus on subsidization portend favorably for smaller communities that frequently cannot afford to participate in SRF programs, said Mike Keegan, analyst for the National Rural Water Association (Duncan, Okla.). These revisions represent a “noticeable change from the status quo” and render the SRF money provided by ARRA a “much richer source of funding to communities,” he said. Smaller communities that might be unable to secure a typical loan from the SRF program would benefit greatly from grants or more favorable loans, he said. “If you want people to have affordable water rates, they often need grants to comply with the federal rules,” he said.

Timing Is Everything
Ultimately, timing might prove to be the greatest factor in determining which projects receive SRF funding. The law stipulates that projects receiving SRF funding from ARRA must be “under contract or construction” within 1 year of the date of the enactment of the legislation — that is, by Feb. 17, 2010. Therefore, the legislation directs the U.S. Environmental Protection Agency (EPA) to reallocate SRF funds from projects not meeting this deadline to states in which all such projects are in compliance with the requirement.

For these reasons, ARRA instructs the states to give priority to projects “that are ready to proceed to construction within 12 months” of the law’s enactment. Meanwhile, another provision of the law requires that recipients of ARRA funding “give preference to activities that can be started and completed expeditiously, including a goal of using at least 50 percent of the funds for activities that can be initiated not later than 120 days after” the legislation’s enactment. Citing this requirement, EPA, in a March 2 guidance document, directs states to select projects that “appear most likely to be able to start construction by June 17, 2009.”

As a result of these deadlines, the first 4 months following the enactment of ARRA are a key point for states looking to disburse the funding expeditiously and for municipalities seeking to beat the 12-month deadline, said Linda Eichmiller, executive director of the Association of State and Interstate Water Pollution Control Administrators (Washington, D.C.). “The next 120 days is the real critical time,” Eichmiller said shortly after the passage of ARRA in mid-February. Communities need to know within that timeframe if they will receive SRF funding so that they can conduct the process of seeking bids and awarding contracts before the 12 months are up, Eichmiller said. Otherwise, “it’s going to be very difficult” to meet the deadline, she said.

Because states must disburse the SRF funding quickly, communities looking to receive a portion of the money would do well to foster a strong relationship with state officials overseeing the process, said Tim Williams, managing director for government affairs at the Water Environment Federation (Alexandria, Va.). “The best advice for a municipality is to be in close communication with a state’s SRF managers,” Williams said. Moreover, municipalities must ensure that “their ducks are in a row in terms of the requirements for applying for funds,” he said.

Going for the Green
In a bid to make water and wastewater practices more environmentally sustainable, Congress stipulated that at least 20% of all SRF funds from ARRA be dedicated to “projects to address green infrastructure, water or energy efficiency improvements or other environmentally innovative activities,” according to the legislation. This funding could amount to a “big shot in the arm” for so-called “green projects,” Williams said. “Twenty percent of $6 billion is a lot of money to be devoting to these types of projects,” he said. “I think this helps a lot to mainstream” efforts that previously might have been viewed as “boutique” projects, he said.

In its March 2 guidance document, EPA elaborates on the types of projects that may qualify for this 20% of the SRF funding that the agency terms the “Green Project Reserve.” For example, the guidance defines “green infrastructure” as a “wide array of practices at multiple scales that manage and treat stormwater and that maintain and restore natural hydrology by infiltrating, evapotranspiring and capturing and using stormwater.” Examples of green infrastructure include such practices as constructing green roofs or installing porous pavement, disconnecting downspouts, and initiating retrofit programs that reduce the amount of runoff entering sewer systems, according to the guidance.

A certain amount of overlap seems to exist between the “green infrastructure” and “environmentally innovative” categories. The EPA guidance defines the latter as projects demonstrating “new and/or innovative approaches to managing water resources in a more sustainable way, including projects that achieve pollution prevention or pollutant removal with reduced costs and projects that foster adaptation of water protection programs and practices to [address] climate change.” Examples of environmentally innovative projects include low-impact development stormwater projects, wetland restoration and constructed wetlands, “decentralized wastewater treatment solutions to existing deficient or failing on site systems,” and “water reuse projects that reduce energy consumption, recharge aquifers or reduce water withdrawals and treatment costs,” according to the guidance document.

Under ARRA, states may devote less than 20% of their SRF funding to these sorts of projects if they certify that they lack sufficient applications. To ensure that states conduct a “thorough search” for green projects, EPA is requiring that states spend at least 180 days seeking such projects before certifying that they are unable to meet the 20% requirement, said Michael Shapiro, EPA’s acting assistant administrator for Water. If EPA accepts a certification, the state may devote its unallocated portion of the Green Project Reserve to traditional projects.

Certain factors could complicate efforts by states to locate eligible green projects, Williams said. For example, such projects “may not have already been on the states’ waiting lists for SRF money,” he said.

At the same time, project participants may not be familiar with procedures for applying for SRF funding, while SRF managers in a particular state may not be familiar with these types of projects. For these reasons, concern exists as to whether states can meet their 20% goals, Williams said. However, the broad spectrum of projects available for such funding should help to offset any complications, Williams said.

Avoiding Other Hurdles
Other possible roadblocks to meeting the 1-year deadline for contracting or constructing SRF-funded projects include a so-called Buy American provision in ARRA, which mandates that “all of the iron, steel, and manufactured goods used in” a project funded by the law be “produced in the United States.” However, ARRA allows a federal agency to waive such requirements if they “would be inconsistent with the public interest,” if the items in question are not manufactured in the United States in sufficient quantity or quality, or if their inclusion “will increase the cost of the overall project by more than 25 percent.” Despite these limitations, the requirement represents a “potential impediment” to timely implementation of the SRF program, Williams said.

Another potential hurdle is the need by certain states to harmonize the existing requirements of their SRF programs with ARRA, Shapiro said. “Some states may need some legislative changes within their state law in order to permit the funds to use the money in the ways that are envisioned in the statute,” he said. Although “doable,” such efforts will require further work on the part of the states, Shapiro noted.

EPA and the states doubtless will have their hands full implementing ARRA’s provisions regarding the SRF programs, Eichmiller said. “The states and EPA are going to be working long hours,” she said.

However, EPA is prepared to get the job done, Shapiro said. “We’re very confident that we can get the state grants in place very quickly,” he said, so that states can begin entering into agreements with project recipients at the local level.

Evaluating Other Funding Sources
ARRA offers other funding possibilities for water and wastewater utilities besides SRF funding. For example, the legislation includes $1.38 billion for the Rural Utilities Service within the U.S. Department of Agriculture (USDA). Administered by USDA offices within each state, the program provides grants and loans to water and wastewater agencies in small communities.

Other potential funding sources receiving additional monies from ARRA include the Community Development Block Grants administered by the U.S. Department of Housing and Urban Development and the Energy Efficiency and Conservation Block Grants administered by the U.S. Department of Energy.

Looking Ahead
Despite the financial boon afforded by ARRA, there is concern that the largesse could prompt congressional “pushback” against efforts to secure future increases in water and wastewater funding, Williams said. In particular, the recent round of funding, together with the current economic downturn, might “make it even easier” for Congress to avoid the politically tricky question of whether to create a clean water trust fund financed by new taxes, Williams said.

Jay Landers, WE&T


Phosphorus Sources Peaked Out?

Forget global warming and economic meltdowns. We may have a potentially even bigger problem on our hands. The world may be running out of phosphorus.

“Phosphorus is an essential nutrient for life,” said Tim Evans, an independent soil scientist based in Ashtead, England. “We can’t survive without it. And once we’ve used up what’s here, it’s gone. There is nothing to replace it.”

On that fact, scientists agree. Exactly how much phosphorus remains, how long it will last, and the role the wastewater industry plays in conserving it for future generations, however, are still the subject of considerable debate.

Reason for Concern — or Panic?
Talks of shortages and fears that global phosphorus production had peaked have grown during the past year, due largely to skyrocketing phosphate rock prices, according to Michel Prud’homme, executive secretary of the Production and International Trade Committee of the International Fertilizer Industry Association (Paris).

Between 2007 and 2008, the average U.S. price for phosphate rock more than doubled to $125/Mg ($113/ton), according to the U.S. Geological Survey (USGS). In other parts of the world, prices spiked even more. In North Africa, 2008 phosphate rock prices approached $550/Mg ($500/ton) — nearly five times 2007 prices.

Higher prices, however, don’t necessarily equate to a crisis, said Steve Jasinski, a mineral commodity specialist at USGS.

As of 2008, USGS estimates that global reserves of readily available phosphate rock totaled about 14 billion Mg (15 billion ton). An additional 29 billion Mg (32 billion ton) of difficult-to-access or low-grade phosphate deposits are also known to exist worldwide.

At a current global production rate of 152 Mg/yr (167 million ton/yr), this translates into an approximately 90-year supply — or up to a 300-year supply if all the marginal and subeconomic sources are factored in.

This projection assumes that these reserve numbers are accurate and that we continue consuming phosphorus at current rates. On both counts, Prud’homme isn’t so sure. The International Fertilizer Industry Association is involved in a program to assess world reserves, which Prud’homme believes may be larger than current estimates suggest. “There’s a lot of information that’s circulating that is not based on facts or valid data,” he said.

There is also some disagreement among scientists regarding the projected future demand for phosphate.

“If you look back 25 years, you’d see the predictions for phosphorus use today were much higher than they are in reality,” Jasinski said. “Likewise, today’s estimates don’t take into account future advances in recovery technology.”

On the other hand, Evans said, new efficiencies may be more than offset by the increased demand created by a growing world population, which the United Nations reports will swell from the current 6.8 billion people today to 9 billion in 2050.

Then again, whether the world has enough phosphorus to sustain life for 70 years or 300 may be beside the point. “Even if we do a much better job of conserving what we have, future generations are eventually going to find themselves in a real sticky place,” Evans said.

A Problem Few Know Exists
A major problem, according to James Barnard, a global practice and technology leader at Black & Veatch (Kansas City, Mo.), is that most people have no idea they should even be concerned about phosphorus depletion.

“The media focus a great deal of attention on global warming,” Barnard said. “But what we should be talking about is using fertilizer more sparingly and taking advantage of opportunities to recycle it.”

According to Jasinski, 95% of the phosphate rock mined in the United States is used in fertilizers and animal feed supplements. Much of it moves next into the food supply before it is excreted by the humans and farm animals that consume it.

That’s how most phosphorus eventually finds its way into the world’s wastewater systems. “From there,” Barnard added, “it is either discharged into waterways or it ends up in … landfills.”

The message to wastewater utilities: It’s time to stop wasting the phosphorus entering their systems. “More attention needs to be focused on removing and recovering the phosphorus from the wastestream,” Barnard said.

The good news is that there are chemical and biological processes for removing phosphorus, some of which have been used in the United States and elsewhere for decades.

“To help control algae growth, wastewater treatment plants that discharge into the Great Lakes have been mandated by the [U.S. Environmental Protection Agency] to remove phosphorus from the effluent since the 1970s,” Barnard said. The same is true of plants in the Washington, D.C., area that discharge into the Potomac River.

Barnard thinks 2% to 3% of the phosphorus in wastewater effluent can be recovered. Evans believes the percentage is considerably more.

“Humans and animals excrete more than 90% of the phosphorus they consume,” Evans said. “Advanced wastewater treatment should allow us to recover 95% of that.”

The easiest methods of removing the nutrient are chemically based. “Phosphate is very easily precipitated,” Barnard explained. “By adding chemicals, you might produce aluminum phosphate or ferric phosphate … which can then be used as fertilizer.”

Not everyone, however, likes the idea of using biosolids in agriculture.

“Some of the larger food companies in particular don’t want to buy crops from land that’s been treated with biosolids,” Evans said. “They realize there are no real objective health hazards but worry about associating their brand with something derived from wastewater.”

If the phosphate load in the solids is too high, it also can leach into the groundwater, Barnard added.

This is one reason Barnard prefers biological methods of phosphorus removal. “With biological methods, you can actually recover the phosphorus for recycling,” he said.

Wastewater entering a treatment plan usually contains 4 to 6 mg/L of phosphorus, Barnard explained. Using biological methods, it is possible to reduce the load to 1 mg/L or less — recovering the rest for reuse. 

“Around the country, we’re treating billions and billions of gallons of wastewater each day,” Barnard said.

“A large plant that treats 550 mgd [2 million m³/d] could potentially recover up to 110,000 pounds [50,000 kg] of phosphorus a year.”

On a much smaller scale, Barnard points to Clean Water Services, a wastewater and stormwater utility serving Portland, Ore., that uses a biological treatment system to recover more than 90% of the phosphorus, along with magnesium and ammonia, entering the plant. The process then converts this ammonium magnesium phosphate — also known as struvite — into slow-release fertilizer that can be sold to golf courses and nurseries, among other businesses.

A New Revenue Source?
Barnard said he believes it’s only a matter of time before more U.S. wastewater treatment plants recognize the value of the phosphorus and begin recovering and selling it.

One group of entrepreneurs, Barnard said, is offering to set up its phosphorus recovery process in U.S. wastewater treatment plants, recovering the phosphorus and then selling it themselves. “Some utilities are balking at this idea,” he said. “But I believe that, as competition heats up, this will become a profitable business in the next 5 years.”

Elsewhere in the world, efforts are already under way to recover phosphorus from wastewater for recycling, according to Barnard. He said Japanese companies have developed several processes for removing struvite, and a Dutch company uses a process to precipitate calcium phosphate. In one Swiss city, he said, scientists are recovering urine — also high in phosphorus — and using it as liquid fertilizer.
Jasinski said we shouldn’t expect any similar undertakings in the United States anytime soon. Nor does he — or any of the scientists interviewed — suggest that the burden for addressing this problem falls solely on the shoulders of the wastewater treatment industry.

“As current phosphate resources are depleted, there will be efforts to exploit other sources that aren’t economic right now,” Jasinski said. “There are millions of tons of low-grade phosphate that we will someday be able to recover.”

“In the face of a looming shortage, I’m convinced that the mining and processing industry will put all the technology available to recover every last marginal ton,” Prud’homme added.

Meanwhile, Barnard predicts fertilizer costs will continue to rise. “Right now, about half of the world’s population can’t afford fertilizer,” he said. “So they grow what they can with what they have.” To understand what’s ahead, he draws parallels to the oil industry. “The time will come,” he said, “when a few countries control the phosphorus.” The United States, which in 2008 produced approximately 18% of the world’s phosphorus, may or may not be among them.

“Throughout history, civilizations have disappeared because resources ran out,” Barnard said. “The best we can do is to be more careful with our consumption. But there is no question, we are leaving our children a huge deficiency.”

Mary Bufe, WE&T

©2009 Water Environment Federation. All rights reserved.