America’s Water Infrastructure Is in Need of a Major Overhaul

The current crisis in Flint, Mich., over potentially toxic levels of lead in the city’s water could serve a larger purpose if it draws attention to the nation’s aging water infrastructure. By some estimates, more than $1 trillion in upgrades are needed to the vast system of mostly underground pipes.

Most Americans are fortunate to be able to turn on the tap and get the water they need each day with no issues. This is made possible by more than 156,000 public water systems that provide drinking water to about 320 million people through more than 700,000 miles of piping criss-crossing the U.S.

Despite the aging nature of this complex system, the quality of drinking water in the U.S. remains high. Even though pipes and mains are frequently more than 100 years old and in need of replacement, disease outbreaks due to drinking water are rare.

But experts say concerns over the aging U.S. water infrastructure can no longer be ignored. According to some estimates, about 1.7 trillion gallons of water are wasted every year due to lack of pipe replacement and broken and leaky pipes.

“In this country, 44% of America’s water infrastructure will be considered poor, very poor, or life elapsed,” notes Susan Story, President and CEO of American Water Works (NYSE:AWK).

The American Society of Civil Engineers (ASCE), which released a report on America’s Infrastructure in 2013, believes much of our drinking water infrastructure is nearing the end of its useful life.  And it certainly won’t come cheap to overhaul.

Assuming every pipe would need to be replaced, the cost over the coming decades could reach more than $1 trillion, according to the American Water Works Association (AWWA), and the ASCE as well. The Environmental Protection Agency (EPA) pegs costs for the endeavor at well over $650 billion.

Water Main Breaks Adding Up

Water pipes will inevitably break down over time as age and other factors such as shifting geology and corrosive soils take their toll.

The ASCE says there are an estimated 240,000 water main breaks per year in the United States.

“There will always be water main breaks throughout the infrastructure system in the U.S., and this will make life uncomfortable at times for many, but an overall breakdown of the system is highly unlikely,” says Michael Gaugler, Managing Director at Janney Montgomery.

Nonetheless, when a water main break does occur, substantial damage can result.

For example, in February of 2015, the Hollywood Hills section of Los Angeles experienced a significant episode.

It was reported that over 100,000 gallons of water leaked into area streets. Cars were submerged for hours and many homes were flooded. The culprit was aging water mains. Apparently, the cast-iron pipe that broke dated back to 1926.

How Vulnerable Could You be to Infrastructure Issues?

“Water pipe infrastructure could be a problem for any city that has budget issues, such as places like Chicago or Detroit,” notes Gaugler.

“The water infrastructure is much different from the electricity grid in this country as it really isn’t all interconnected. And that could be a blessing and curse, it’s a very regional issue in the water system, you don’t have interconnections,” states Story.

She points out that if you have a major metropolitan issue, you won’t see cascading impacts like a large electrical grid would. “Nonetheless, there are multiple challenges with 52,000 providers of water in the country, especially because there are so many varying degrees of sophistication, so multiple outages could certainly occur,” says Story.

“Interestingly, 40 out of 50 state water managers believe they will have some type of water supply issues over the next 10 years according to the Government Accountability Office (GAO).”

And vulnerability can come in many shapes and sizes as evidenced by the current crisis affecting the people of Flint.

Trouble started for this financially-strapped City when they decided in October of 2014 to cease receiving tap water from Detroit’s water system and thought accessing water from the nearby Flint River was the most prudent way to save money.

This decision was ill-fated and Flint has returned to using water from Detroit’s system less than a year later after it was discovered there were above-average levels of lead found in the blood stream of many children.

As of late January 2016, this decision has turned out to be disastrous, and many want the Governor of Michigan to be held accountable and resign.

So, Who Should Pay for the Aging Pipes?

Overall, Gaugler believes water infrastructure should be funded at the local level as the water system is an integral part of a specific municipality. He also thinks the drinking water industry should be privatized and given over to the likes of utilities such as American Water Works and  Aqua America (NYSE:WTR).

“The cost of operating and maintaining local water systems is mostly and ultimately paid for by local rates and fees. Small federal or state grants may be available, primarily for small or rural systems, but not on a large scale,” says AWWA Legislative Director Tommy Holmes.

Story says one of the pressing problems with repairing and replacing infrastructure is how to pay government taxes. “Well for us [public utilities], we go to public service commissions, as we try to keep a low impact on customer rates, with the goal of keeping them happy,” she noted.

“One concerning issue is that most water systems are so small (catering to 500 or less customers) that we [utilities] don’t have the wherewithal, but that’s where Federal funds do help,” she said.

Steps Taken to Confront Water Infrastructure Dilemma

Congress is aware of the problem and taking steps to remedy the situation.

In FY 2016, the EPA announced that it was requesting $2.3 billion for the Clean Water and Drinking Water State Revolving Funds, continuing the funding levels provided in FY 2015. The agency’s FY 16 budget includes $50 million in technical assistance, training, and other efforts to help communities and states to plan and finance drinking water and wastewater infrastructure improvements.

The EPA also reported that to “help ensure water is safe to drink and to address the aging drinking water infrastructure, $1.186 billion for the Drinking Water State Revolving Fund will support new infrastructure improvement projects for public drinking water systems in FY 2016 and beyond.”

In addition, The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA) authorizes financing for water-related infrastructure of national or regional significance and authorizes the EPA to provide federal credit assistance to eligible entities. In FY 2016, the agency budget includes $5 million to begin developing the information necessary to lay the groundwork for a WIFIA program.