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PURPOSE

BACKGROUND

WITNESSES

The Water Resources and Environment Subcommittee is scheduled to meet on Wednesday, February 16, 2005 at 2:00 p.m. in 2167 RHOB, to receive testimony from the Environmental Protection Agency (EPA), and the National Oceanic and Atmospheric Administration (NOAA) on their proposed budgets and program priorities for FY 2006.

Similar to other budget hearings held by the Subcommittee, this hearing is intended to provide Members with an opportunity to review both the FY 2006 budget request, as well as Administration priorities for consideration in the Subcommittee’s legislative and oversight agenda for the first session of the 109th Congress.

The President’s budget request for the Environmental Protection Agency is $7.571 billion, $188 million less than the FY 2005 request of $7.759 billion, and $449 million less than the FY 2005 enacted level of $8.02 billion.

Clean Water State Revolving Loan Funds – The Clean Water State Revolving Loan Fund (SRF) program is a highly successful program administered by States to provide capital to make wastewater infrastructure improvements around the country and to address other water quality needs. To date, Congress has provided nearly $22 billion in grants to help capitalize 51 Clean Water SRFs. With the 20% State match and the fact these funds earn interest, receive loan repayments, and are used to secure State bonds, the return on this Federal investment has been more than 2 to 1. Through 2004, the $22 billion in Federal capitalization grants has resulted in SRFs with over $52 billion available for loans for wastewater infrastructure.

For FY 2006, the President’s budget is requesting $730 million to further capitalize these funds. This is $120 million less than the FY 2005 request and $361 million less than the FY 2005 enacted level of $1.091 billion.

For many years, budget documents of both this and the prior Administration have stated that it was the goal of the federal government to capitalize the Clean Water SRFs sufficiently to provide approximately $2 billion in assistance per year. Over the course of several hearings over several years, this Subcommittee has been unable to find any person who could explain the origin of that goal, or what analysis it was based on. The FY 2004 budget documents changed the stated goal of SRF performance from $2 billion a year in loans to $2.8 billion a year in loans. This year, the budget documents state that the budget request of $730 million will result in a long-term average revolving level of $3.4 billion annually by 2015. This level of funding is reached by limiting the total Federal funding for the Clean Water State Revolving Funds from 2004 to 2011 to $6.8 billion ($850 million a year on average) and discontinuing Federal capitalization grants after 2011.

As far as the Subcommittee has been able to determine, none of these goals are established based on clean water infrastructure needs, analysis of what amounts can be financed independently by State and local governments, or analysis of what amounts will need to be funded through SRF loans. Capital needs for wastewater are expected to be as much as $400 billion over the next 20 years, and the current rate of capital investment of approximately $10 billion a year will leave an approximately $200 billion gap. To close the gap between current spending and needs, capital investment over the next 20 years will have to double.

In its September 2002 Clean Water and Drinking Water Gap Analysis, EPA states that if local governments increase their capital investment in wastewater infrastructure by 3% a year, above the rate of inflation, then the gap will be reduced to $31 billion. EPA’s analysis does not identify the source of those increased capital funds, or what percentage of those funds will come from SRF loans. Clearly, however, under the performance goal established by the President’s budget, the availability of SRF loans and the ability of SRFs to help close the infrastructure funding gap will decrease, not increase. In FY 2004, $5.2 billion was available for loans from the SRFs. Achieving the stated goal of ensuring that $3.4 billion a year is available from these funds for clean water infrastructure investments represents a 35% reduction from current levels of available funding.

During the 108th Congress, the Water Resources and Environment Subcommittee approved H.R. 1560, the Water Quality Financing Act of 2003. This legislation would have authorized $4 billion in Clean Water SRF capitalization grants for FY 2006, and $20 billion over a five year period. The Subcommittee intends to address this issue again in this Congress.

Special Purpose Grants – The President’s budget requests $69 million in special purpose wastewater infrastructure grant requests for FY 2006, $21 million less than the FY 2005 request. This total includes $50 million for US/Mexico Border wastewater infrastructure projects, the same as the FY 2005 request and slightly more than the FY 2005 enacted level. The total includes $15 million for Alaska Native Villages, $25 million less than the FY 2005 request and $29.6 million less than the FY 2005 enacted level of $44.64 million. The budget also requests $4 million for the Sergio Cuevas treatment plant in San Juan, Puerto Rico, which was also requested in FY 2005 but was not funded.

Non-Point Source Funding - For Section 319 state program grants to fund activities to address non-point sources of pollution, the President’s budget requests $209.1 million. This is the same as the FY 2005 requested amount of $209.1 million and $1.8 million more than the enacted level of $207.3 million.

Regional Programs – The President’s Budget requests $50 million for the Great Lakes Legacy Act, an increase from the FY 2005 requested level of $45 million and $27.7 million greater than the FY 2005 enacted level of $22.3 million. The authorized funding level for this program is $50 million.

The Chesapeake Bay Program request is $20.746 million, less than the FY 2005 request of $20.8 million and $1.9 million less than the enacted level of $22.6 million. The authorized funding level for this program is $40 million.

The Long Island Sound program request is $477,000, the same as the FY 2005 request, and over $1.82 million less than the enacted level of $2.3 million. The authorized funding level for this program is $40 million.

The Lake Champlain request is $955,000, the same as the FY 2005 request, and $1.53 million less than the FY 2005 enacted level of $2.48 million. The authorized funding level for this program is $11 million.

The National Estuary Program is funded at $19.448 million, more than the FY 2005 request of $19.229 million, and $5.4 million less than the FY 2005 enacted level of $24.8 million. The authorized funding level for this program is $35 million.

State Management Programs – The President’s budget requests $231.9 million for Section 106 state water pollution control grants, an increase of $9.5 million over last year's request of $222.4 million and an increase of $23.58 million over the FY 2005 enacted level of $208.32 million. However, the President’s budget proposes to set-aside $24 million of that amount for probabilistic monitoring of water quality. Probabilistic monitoring is useful to establish a baseline of water quality and to track changes in water quality over time but are of little use for daily program management or for making water quality management decisions, such as establishing total maximum daily loads.

The President’s budget requests $20 million for state wetlands program development, the same as the FY 2005 request and an increase of $5.1 million over the FY 2005 enacted level of $14.88 million.

The President’s budget requests no money for State water quality cooperative agreements, although $20.5 million was requested for FY 2005 and $16.8 million was enacted in FY 2005.

The President’s budget requests $15 million for an Environmental Protection Agency watershed program to protect and restore watersheds through competitive grants. This is $10 million less than the FY 2005 request of $25 million, and $2.8 million less than the FY 2005 enacted level of $17.8 million.

The President’s Budget request also recommends authorization and appropriation of $23 million for grants to States, tribes, and interstate agencies for projects that demonstrate public health and/or environmental benefits. The same request was made in the FY 2005 budget, but no authorization or funding was provided.

The total Superfund request is $1.279 billion. This is $102 million less than the FY 2005 request of $1.381 billion, and $29 million more than the FY 2005 enacted level of $1.25 billion. Under the President’s budget request, all of this funding will be derived from a payment from general revenues into the Superfund Trust Fund.

Superfund Response Actions – The President’s budget requests the following amounts for Superfund response actions: $599.4 million for Superfund remedial actions, $125.6 million less than the FY 2005 request of $725 million; and $198 million for Superfund removal actions, $3 million less than the FY 2005 request of $201 million.

Superfund Enforcement – The President’s budget requests $164.3 million for Superfund enforcement activities. This is $17.8 million more than the enacted level of $146.5 million. In addition, $27 million is requested for transfer to the Department of Justice to fund its Superfund enforcement activities, less than the FY 2005 enacted level of $27.1 million.

The President’s budget requests $76.024 million for the Agency for Toxic Substances and Disease Registry, $17,000 less than the FY 2005 enacted level of $76.04 million. The President also requests $80.3 million for the Superfund-related activities of the National Institute of Environmental Health Sciences, less than the FY 2005 enacted level of $80.5 million. These amounts are not included in the EPA budget request for the Superfund program. Since FY 2002, these programs have been funded out of separate accounts for these two agencies.

The President’s Budget proposes $210.1 million for brownfields programs. Of this total, $60 million is requested out of the State & Tribal Assistance Grants (STAG) account for grants to States to fund State voluntary cleanup programs (authorized at $50 million annually), and $120.5 million is requested out of the STAG account to fund grants and loans for brownfield site assessments ($29 million), cleanup revolving loan funds and grants ($41.5 million), petroleum site assessment and cleanup ($30.3 million), job training ($2.5 million), and training, research and technical assistance ($14.2 million). In addition, $29.64 million is requested out of the Environmental Program and Management Account to fund contracts and 123 full-time equivalent employees (FTEs), 14% of total brownfields funding.

In FY 2005, Congress provided $49.6 million for State voluntary cleanup programs, $89.3 for brownfield site assessments, cleanup, job training and technical assistance, and $24.8 million for contracts and EPA FTEs, totaling $162.7 million. The President’s budget proposes to extend by one year grant eligibility for bona fide prospective purchasers who purchased property before the date of enactment of the Small Business Liability Relief and Brownfields Revitalization Act of 2001.

The Oil Spill Response program funds EPA's Clean Water/Oil Pollution responsibilities. The President’s budget requests $15.86 million, less than the FY 2005 request of $16.4 million and the FY 2005 enacted level of $15.87 million.

The Subcommittee has jurisdiction over various NOAA programs and activities, including responsibilities under the Clean Water Act, the Coastal Zone Act Reauthorization Amendments, the Marine Protection, Research and Sanctuaries Act, Superfund, the Oil Pollution Act, the Nonindigenous Aquatic Nuisance Prevention and Control Act, the Harmful Algal Bloom and Hypoxia Research and Control Act, and the Estuary Habitat Restoration and Partnership Act of 2000. Issues involving the National Ocean Service, such as coastal water pollution and natural resource damages, are of particular interest.

The President’s budget requests $414.73 million for the National Ocean Service for FY 2006, $254.57 million less than the FY 2005 enacted level of $669.3 million. Of that amount, no funding is requested for implementation of coastal nonpoint pollution programs under section 6217 of the Coastal Zone Act Reauthorization Amendments, which was funded at $2.96 million in FY 2005; $17.594 million is requested to fund natural resource trustee and other activities under Superfund and the Oil Pollution Act, an increase from the enacted level of $10.5 million in FY 2005; and $8.9 million is requested to fund activities under the Harmful Algal Bloom and Hypoxia Research and Control Act.

The NOAA budget also requests $7.9 million for the Office of Oceanic and Atmospheric Research for activities under the National Invasive Species Act of 1996. The FY 2005 enacted level included $5 million. This funding is for the purpose of addressing the proliferation of exotic species in marine environments in the North Pacific, funding ballast water demonstration projects, and for invasive species prevention and control.