The largest sources of federal financial assistance for wastewater and drinking water infrastructure projects are the State Revolving Fund (SRF) programs of the Clean Water Act (CWA; 33 U.S.C. 1251 et seq.) and Safe Drinking Water Act (SDWA; 42 U.S.C. 300f-300j-26). Traditionally, these programs have focused on so-called "gray" infrastructure solutions to water quality problems, that is, engineered solutions that often involve concrete and steel. Increasingly, however, the SRF programs have also embraced approaches utilizing green or soft-path practices to complement and augment hard or gray infrastructure, including practices that reduce the environmental footprint of water and wastewater treatment, collection, and distribution systems.
Under both laws, Congress appropriates capitalization grants as seed money to support the SRFs, and states provide matching funds equal to 20% of the federal grant. States, in turn, provide loans from the SRFs to communities for water infrastructure projects. Over the long term, the loan programs are intended to be sustained through repayment to states, enabling states to build up a source of capital for future investments. The SRF capitalization grants are appropriated through the Environmental Protection Agency's (EPA's) State and Tribal Assistance Grants account (in the Interior and Environment Appropriations bill) and are allocated among the states according to formulas.
Congress encouraged the expansion, or "greening," of the SRF programs, beginning with the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5). Among its provisions, ARRA provided supplemental appropriations for the clean water and drinking water SRF programs totaling $6 billion. Congress required that states allocate at least 20% of these funds as a Green Project Reserve (GPR) for projects addressing water and energy efficiency or other environmentally innovative approaches. The ARRA requirement was intended to accelerate incorporation of "green" and sustainable concepts into wastewater and drinking water projects. Subsequently, Congress extended the 20% reserve for green projects in EPA's regular FY2010 and FY2011 appropriations acts. Since FY2012 (including FY2016), Congress has modified the requirement, specifying that, to the extent there are sufficient eligible applications, states allocate not less than 10% of their clean water SRF capitalization grants for green projects and giving states discretion to use a portion of their drinking water SRF grants for such projects.
EPA has issued guidance for determining project eligibility under the four categories that comprise the GPR.
Since 2009, states have exceeded the statutory targets for investing in "green" water infrastructure projects, having allocated 26% of their SRF capitalization grants to such projects (see Figure 1). Overall, states have allocated 37% of GPR funds to energy efficiency projects and 35% to water conservation projects. States have allocated $1.5 billion in GPR funding for drinking water projects, with the largest portion—61%—for water conservation projects, especially installing new water meters in previously unmetered areas, according to EPA. They have allocated $3.9 billion for clean water projects, with the largest portion—43%—for energy efficiency projects such as wastewater treatment plant upgrades with high efficiency motors and pumps and installation of solar panels and wind turbines at treatment facilities.
(Billions of Dollars)
Source: Compiled by CRS from EPA data.
EPA officials believe that inclusion of the GPR in the SRF programs has yielded environmental benefits through states' investments in projects that have rarely or never been funded before, as well as energy savings from efficiency improvements at treatment plants. EPA reported on the GPR requirements under ARRA in 2012 but has not issued an evaluation since then.
Questions have been raised about implementation and oversight of the GPR. A 2010 report by EPA's Inspector General (IG) found that a lack of clear EPA guidance on the ARRA green requirement caused confusion and disagreements as to which projects were eligible for green funding. Similarly, the Government Accountability Office reported in 2011 that several states said that achieving the 20% green project goal in ARRA was difficult. According to GAO, at least one state official suggested that green projects be encouraged without setting a fixed percentage of program funds (a change that Congress has incorporated for drinking water SRF funds since FY2012, described above). A second review by the EPA IG, issued in May 2016, criticized EPA for not collecting benefits information after project completion to improve the oversight of investment of public funds. EPA and state officials responded to the IG that collecting benefits information would be an administrative burden for states and loan recipients.