EPA Announces $7.5 Billion in Water Infrastructure Loans

The U.S. Environmental Protection Agency (EPA) on Sept. 6, 2024, announced the availability of $6.5 billion in Water Infrastructure Finance and Innovation Act (WIFIA) funding and $1 billion in State Infrastructure Financing Authority (SWIFIA) funding.

WIFIA and SWIFIA Programs

Established in 2014, the WIFIA program allows the EPA to provide credit assistance to vital drinking water, wastewater and stormwater infrastructure projects on an ongoing basis, allowing for year-round access and a rolling selection process. While the priorities guiding loan selections may change, the underlying principle of strengthening the nation's infrastructure remains. In line with that mission, eligible entities can apply for loans aimed at repairing, rehabilitating, replacing and creating new infrastructure projects that span from water treatment to storage. The following entities are eligible for funding:

• local, state and Tribal government entities
• partnerships and joint ventures
• corporations and trusts
• Clean Water and Drinking Water State Revolving Fund (SRF) programs

The WIFIA program also oversees distribution of State Infrastructure Financing Authority (SWIFIA) funds that provide funds solely to state infrastructure financing authority borrowers. Both programs require prospective borrowers to finance at least 51 percent of the eligible project costs, meaning each dollar invested spurs at least $1 in outside investment. Eligible project costs include project development, construction and acquisition of real property.

The rolling selection process allows the EPA to take an iterative approach to priority setting. For the Sept. 6, 2024, round of funding, the EPA identified the following priority areas:

• increasing investment in disadvantaged communities and improving health and livability
• making rapid progress on lead service line replacement
• addressing per- and polyfluoroalkyl substances (PFAS) – known as "forever chemicals" – and emerging contaminants
• strengthening climate resilience in the water sector
• supporting water innovation and resilience

These priority areas will guide the EPA in distributing funds for the WIFIA and SWIFIA loans, as applicants must describe how their projects would fulfill one or more priority areas. Letters of interest will be evaluated using a scoring scale measuring project impact with respect to how well the project would address priority areas. Municipal, state and regional priorities are also considered to some degree, although national priority areas carry more weight.

PFAS Opportunities

In the latest WIFIA funding announcement, the EPA identified addressing PFAS as one key priority for this round of funding, seeking projects that reduce exposure to "forever chemicals" from drinking water, wastewater and stormwater systems. The funding announcement also prioritizes investment in economically stressed communities, soliciting projects that improve health and livability for economically stressed or disadvantaged communities. While not directly mentioned in the funding announcement, the priorities of addressing PFAS contamination and improving health in disadvantaged communities heavily intersect. Data published the White House's March 2023 PFAS Report found that low-income households are 15 percent more likely and people of color are 22 percent more likely to live within a 5-mile radius of an area exposed to PFAS. Given the prevalence of PFAS contamination in economically stressed communities, these issues are intertwined, but in the application process, applicants can receive credit for addressing two priorities, thus increasing their project impact score in the evaluation process.

In addition to public health benefits, this funding comes as water systems across the nation seek to comply with the National Primary Drinking Water Regulation that set Maximum Contaminant Levels (MCLs) and MCL Goals for six PFAS compounds in drinking water. Many water systems have expressed concerns about their ability to comply with these rules, given the high costs associated with both PFAS monitoring and treatment technologies. The funding made available through the WIFIA loan programs will allow water systems to apply for funding and potentially finance the upgrades required for compliance without passing the financial burden onto their constituents. Projects seeking to offset the costs of PFAS mitigation for consumers may also be eligible to claim credit for fulfilling multiple priorities, as projects will be scored on "the extent to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non-economically stressed communities."

Given the ways PFAS contamination and mitigation are interconnected with infrastructural, economic, environmental and public health issues, WIFIA loans are an excellent opportunity for financing PFAS mitigation projects. Applicants can leverage the sweeping policy implications of PFAS mitigation to strengthen their applications, improving their chances for WIFIA credit assistance.

To learn more about funding opportunities, please contact the authors or a member of Holland & Knight's Emerging Contaminants and PFAS Team.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.