Water Infrastructure Stimulus & Jobs Package

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I n n o v a t i o n & Reallocation for Economic Growth

STIMULUS PACKAGE

FOR THE NATION’S AILING WATER SUPPLY INFRASTRUCTURE TECHNOLOGICAL INNOVATION & CAPITAL REALLOCATION FOR ECONOMIC GROWTH LYLE BRECHT JANUARY 9, 2009

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Stimulus Package For the Nation’s Ailing Water Supply Infrastructure Today’s U.S. national water supply infrastructure is in need of repair About 12.5% of the freshwater we use each year is for public water supply.1 In 1950, about 60% of U.S. population obtained its freshwater from public supply; today about 85%. Between 1950-2000 public water consumption tripled. There are 74,400 water systems in the U.S.2 For some water systems, only about 60%-70% of the treated water reaches the customer.3 Real losses occur from leaks and line breaks. Also, not all the water that reaches the customer is properly measured or paid for as revenue losses occur from old, inaccurate meters. Water systems are under increasing pressure to improve aging treatment technology to deliver safe water to the public. Community and non-community water systems will need to invest $276.8 billion over the next 20 years to meet deferred maintenance on aging water distribution systems and water treatment plants, and for supply augmentation.4

TVA Kingston plant coal ash spill - Dec. 22, 2008

Atlanta reservoir - 2007 100-year drought

Dec 23, 2008 water main break, Bethesda, MD

U.S. annual freshwater use in 2000: 39.7% irrigation; 39.4% thermoelectric power; 12.5% public supply; 5.4% industrial; 3.0% self-supplied domestic, livestock, aquaculture, mining. “Estimated Use of Water in the 1

United States in 2000,” USGS (rev. February 2005). For example, there are 484 active community pubic water systems and approximately 500 non-community public water systems in Tennessee. Approximately 133 of the community systems buy their water from an2

other water system. Of the 351 community water systems with their own water supply, 148 use surface water, 158 use underground aquifers and 45 use ground water that is influenced by surface water. 3

AWWA Water Loss Control Committee, “Applying Worldwide BMPs in Water Loss Control,” AWWA Journal

95:8 (August 2003), 65-79. ‘2003 Drinking Water Infrastructure Needs Survey and Assessment,” USEPA, released in 2005, is based on data collected from utilities in 2003. EPA found that the nation's 53,000 community water systems and 4

21,400 not-for-profit non-community water systems will need to invest an estimated $276.8 billion between 2003 and 2023. L y l e B r e c h t - J a n u a r y 9 , 2 0 0 9

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Sufficient potable freshwater is a basic requirement for economic growth. Today, the nation’s water supply is in distress because: (1) climate change alters rainfall patterns and sometimes makes droughts more frequent, more intense, and longer-lasting; (2) pollution reduces clean water from aquifers and surface waters; and (3) efforts to privatize and commodify water sometimes reduces supplies available for the public good. New supplies of freshwater are becoming more scare and more expensive and some watersheds’ have a reduced ability to supply freshwater due to development pressures. Industrial farming practices may result in depletion of the many of the nation’s aquifers. Many of the nation’s rivers, streams, and lakes remain polluted from industrial wastes, runoff from urban areas, and the dumping of raw sewage into these freshwater sources. Many aquifers are being depleted faster than they are being recharged. Pollution from mining, agricultural chemicals, and industrial wastes and saltwater intrusion can remain for generations in groundwater Some streams are still polluted by agricultural fertilizers, pesticides, and industrial and municipal wastes. Sometimes one drop of a hazardous substance can pollute thousands of liters of water. Increasing demand and more persistent drought due to climate change are drying up many lakes. Freshwater demand for all uses increases each year. Results: four of five fastest growing metro areas in U.S. have experienced water shortages in past few years: Atlanta-Sandy Springs-Marietta, GA; Phoenix-MesaScottsdale, AZ; Dallas-Fort Worth-Arlington, TX; and Riverside-San Bernardino-Ontario, CA. It has been the driest in almost 500 years in the U.S. southwest. The West’s biggest river, the Colorado, with an average flow of 13 million acre-feet a year in 1950, from 1999-2003 averaged 7 million acre-feet, lower than the 1930s dust-bowl years. In 2002 the flow was 3 million acre-feet. This flow is consumed and oversubscribed as withdrawal permits were issued during the time of the Colorado’s maximum historical flow. Humankind’s three fixes to freshwater scarcity: impoundments, diversions, and desalination are frequently no longer an affordable sole solution. Conservation, pollution control, and watershed protection should also be considered to keep costs of water supply infrastructure affordable. Bringing the nation’s aging water treatment infrastructure up to present environmental standards of the EU and other industrialized countries is important for the health of the nation’s communities. Chlorine alone sometimes does not kill all waterborne protozoa, such as cryptosporidium oocysts that sickened 400,000 people in Milwaukee in April 1993; 4,000 were hospitalized, 100 people died. Another issue is attending to aging water distribution systems to avoid the possibility of untreated or contaminated water entering the system. L y l e B r e c h t - J a n u a r y 9 , 2 0 0 9

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Many utilities still use distribution pipes that leak badly and are 50-100 years old. Some public health experts believe between 4 and 16 million cases of acute gastrointestinal illness (AGI) per year result from drinking inadequately treated water.5 Assessment: Addressing the infrastructure needs of the nation’s water systems may require, in tandem, legislation that: •

Restores the people’s trust in community water supplies through increased regulatory oversight of the waters of the nation and the imposition and enforcement of regulations that require the protection of headwaters and watersheds from degradation due to development, and industrial and farming activities.

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Restructures clean water policy to add a small surcharge on freshwater withdrawals and waste stream producers as a means to correct market mispricing of potential threats to the nation’s water supply;

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Provides economic stimulus that encourages innovation and reallocation of skilled labor and capital towards strategic water supply infrastructure projects as a means of creating millions of new, longer-lasting jobs.

Stimulus Package Recommendations Regulatory Reform (1) Establish a fusion center within the Office of Information & Regulatory Affairs, the Regulatory Information Center, whose mission is to: (a) analyze economic conditions for various water-use markets; and (b) to proactively recommend changes to policy, regulatory oversight, and enforcement for regulatory agencies overseeing the protection of the nation’s waters and Congress. The objective of this fusion center is to gather and analyze market information related to water-use to develop proactive measures important for economic growth. (2) Implement Cost Adjustment Surcharges on the withdrawal of freshwater from surface waters and ground water for residential, electricity production, industrial, commercial, and irrigation purposes. The objective of Cost Adjustment Surcharges is to encourage conservation and efficient use. Offer refunds of this surcharge for each kgal (1,000 gallons)

Journal of Water and Health (July/August 2006) available at http://www.epa.gov/NHEERL/articles/2006/ waterborne_disease.html. 5

L y l e B r e c h t - J a n u a r y 9 , 2 0 0 9

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of water returned to the same source in substantively the same or better quality than what was withdrawn.6 (3) Implement Waste Stream Escrow Fees for waste stream producers. Offer return of this escrow fee when waste stream producers eliminate the volume and toxicity of their waste stream and/or storage.7 Strategic Infrastructure Investments (1) Invest economic stimulus funds in conservation and supply augmentation projects. Conservation initiatives can be undertaken before or concurrently with stimulus funding for water supply augmentation projects: •

Provide $50 billion in Water Conservation Incentives for water systems to implement demand management programs (plugging distribution leaks, metering water use), implementing conservation pricing (increasing block rates that charge the full cost of providing water), and establishing water conservation education programs.8

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Provide Energy Conservation Incentives for electric utilities of one billion dollars per new 1000-MW (megawatt) of energy produced through residential, commercial, institutional,

For example, adding a $0.10/kgal (per 1,000 gallons) surcharge for freshwater withdrawn and offering a refund of this surcharge for each kgal of water returned to the source in substantively the same or better 6

quality of water than what was withdrawn. Because of the pollution problems created by the extraction of freshwater from sea water, the surcharge for withdrawals from sea water might be priced at a multiple of freshwater extractions, say $0.20/kgl. Unfortunately under present processes of desalination, the water returned to the sea would not qualify for a rebate. An example is the December 22, 2008 spill of 5.4 billion cubic yards of coal ash from the TVA Kingston coal electricity plant into the Emory River and across 300 acres in Roane County, Tennessee. One means of pay7

ing for such spills would be to impose a $0.05/gallon ($10.09/cubic yard) escrow fee on all coal ash storage and ongoing waste streams, as a fee for remediation, restitution, and waste stream reduction. Lawsuits often tie up final clean up efforts for years as cleanup costs mount and capital is diverted for lawyer fees (e.g. the Inez, KY coal ash sludge spill in 2000 or the 1972 spill in Logan County, WV that killed 125 people, injured 1,000 others, and left 4,000 people homeless). The Waste Stream Escrow Fee intent is to provide incentives for producers of waste streams to reduce or eliminate such waste streams and to provide safe storage. One measurement metric might be the reduction in ADD (Average Day Demand) per ERU (Equivalent Residential Unit). Conservation could result in producing an increase in the nation’s water supply for less than 8

relying solely on supply augmentation (impoundments, diversions by way of pipelines and desalination) to produce new supply. L y l e B r e c h t - J a n u a r y 9 , 2 0 0 9

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and industrial conservation measures and electricity generation from renewables (e.g. wind, solar, geothermal, algal and nonfood biomass).9 (2) Issue Climate Change Preparedness Bonds to fund State water augmentation infrastructure and other water infrastructure projects with half of the money coming from the Federal government, half the money from pension funds and other longer-term investors:10 •

Criteria for project funding include: (a) does this project encourage technological innovation and reallocation of capital and labor for producing economic growth; (b) will it produce net new, longer-term jobs; (c) is there a sufficient business case to expect that these funds can be paid back to the U.S. Treasury over a sufficient period?

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To pay for water infrastructure projects, issue 250 billion dollars of non-callable bonds at a nominal 3.45% interest rate in 10, 20, 30, and 40-year tranches, principle and interest guaranteed, triple tax-free, with a one percent (1%) guarantied real return over the term of the bond.

Author Lyle Brecht: I served as an elected Water Commissioner for the Sewanee, TN Utility District for two years (2007-2009). I produced two films on national water management issues for the USEPA and wrote a regional Water Quality Management Plan for Martha’s Vineyard, MA. My expertise is sustainable business development and environmental systems dynamics, as applied to capital decision making. I developed and published AmericaReport in 1994, a business-style annual report of the Federal budget. Report users: Executive Branch offices of federal government (e.g. Treasury, GAO, etc.); House and Senate Budget Committees; economic think tanks; multinational corporations; Financial Executives Institute (14,000 chief financial officers, treasurers, controllers).

Water systems are the largest single category user of electricity in the world, accounting for between two and ten percent of electricity use in a country. In the U.S., water systems account for about three percent of 9

electricity consumed annually (about 75 billion kWh). About 39% of freshwater use in the U.S. is used for thermal electric energy production. See AWWA Water Loss Control Committee, “Applying Worldwide BMPs in Water Loss Control,” AWWA Journal 95:8 (August 2003), 75 and U.S. Department of the Interior, U.S. Geological Survey, http://ga.water.usgs.gov/edu /wupt.html (accessed 5/1/08). 10

The moral hazard of free money from the Feds is large as it sometimes discourages accountability and the

proper vetting of potential infrastructure projects and their potential long-term costs to the community. L y l e B r e c h t - J a n u a r y 9 , 2 0 0 9

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