Background

The National Office is pleased to provide you with this Legislative Alert, which contains an analysis and overview of S. 3036, the Climate Security Act of 2008, introduced May 20 by Sen. Barbara Boxer (D-Calif.), chair of the Senate Environment and Public Works (EPW) Committee.   The legislation seeks to reduce by 70 percent greenhouse gas emissions from high-emitting industrial sources by 2050 through a cap-and-trade program.  The Senate EPW had reported out the Climate Security Act of 2007 (S. 2191), introduced by Sens. Joe Lieberman (I-Conn.) and John Warner (R-Va.), in December of 2007.  The full Senate has begun debate on the substitute amendment June 2.

While the substitute substantially revises the earlier version of S. 3036, the bill still caps emissions of six greenhouse gases (GHGs): carbon dioxide (CO2), methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs) and uses the term “CO2 equivalent” to refer to the common unit of measurement.

Entities covered by the substitute include facilities that use more than 5,000 tons of coal; natural gas processing plants and producers; manufacturers of petroleum-based liquid or gaseous fuel, petroleum coke, or coal-based liquid or gaseous fuel; and "any entity that in a year manufactures more than 10,000 carbon dioxide equivalents on non-HFC greenhouse gas in the United States."  Publicly owned treatment works (POTWs) are not likely to be regulated under this bill, which defines   “manufactures” as “make [GHGs] for sale or distribution through the application of technology and industrial processes. . . .”  POTWs generally are not making GHGs for purposes of sale or distribution at the level of 10,000 carbon dioxide equivalents per calendar yearand it seems that one key Association goal — to ensure POTWs are not inappropriately covered by this legislation — has been met.  NACWA will follow up with congressional staff to ensure that this reading of the term “manufactures” is accurate.

Additionally, the substitute amendment goes much further than the earlier version of the bill to address water resource issues and contains other provisions of interest to the clean water community.  NACWA has met regularly over the past few months with Senate EPW staff to push for federal funding for public clean water agency adaptation and mitigation needs in S. 3036.  The Association also wrote or signed onto numerous letters urging support for programs that would benefit water quality, including federal funding for research, adaptation, and mitigation needs.  NACWA’s advocacy was guided by Climate Change: Emerging Issues for Clean Water Agencies (PDF), the Association’s white paper outlining how water resources might be affected by climate change.

Substitute Takes Steps Toward Addressing Clean Water Agency Concerns

The revised bill takes some key steps toward addressing some of the concerns raised by the Association and others in the water sector.  And while this amendment represents an important first step in securing increased federal funding for clean water adaptation and mitigation needs, NACWA will continue working with members of both the House and Senate to further improve the legislation and ensure that real dollars follow.

Title I – Research

The substitute amendment contains provisions in Title I, Subtitle C (Section 131) calling for research into the effects of climate change on drinking water utilities.  The specific areas of research include probable impacts on water quality, groundwater supplies from carbon sequestration, and on infrastructure.  The bill also calls on the drinking water community to fund this work through its research foundation, the American Water Works Research Foundation.

NACWA will urge the committee to extend these provisions to cover research that will benefit wastewater utilities as well; an effort that is also supported by the water sector (PDF) as a whole. However, the Association does not believe water and wastewater utilities should have to fund the research into how their member agencies will be affected given that broad-based federal funding is already available for climate change related issues.

Title III – Reducing Emissions Through Offsets and International Allowances

Provisions found in Title III of S. 3036 encourage broad participation in the emissions reduction program by establishing categories of projects that would generate “offset allowances” for GHG emissions reductions that go below a specified “project baseline.”  Certified offset projects could then be sold for a profit in the emissions market.  The legislation directs EPA to promulgate regulations allowing covered facilities to use these offset allowances to meet up to 15 percent of their emission reduction requirements.  Certain mitigation efforts at wastewater utilities will likely be eligible as offsets.  In the original bill, eligible projects were largely limited to agricultural, forestry, and other land-use practices that involved the sequestration of emissions.  Section 313 (b)(4) of the revised bill goes further and includes in its list of eligible projects “methane capture and combustion at nonagricultural facilities; and … other actions that result in the avoidance or reduction of greenhouse gas emissions…”  While the bill does not go into more detail, NACWA believes this section provides opportunities for NACWA member agencies to create tradable offset allowances for some of their energy efficiency measures that involve the use of captured methane to fuel their facilities.  NACWA will continue to work with Members of the House and Senate to ensure that agencies processing biosolids for land application also have opportunities under this section of the bill.

S. 3036 would require EPA to issue and periodically revise a list of all eligible projects and then certify that a non-covered facility wishing to sell an offset has actually done something to either reduce the number of CO2 equivalents that the facility otherwise would have emitted in that calendar year or has increased the number of CO2 equivalents that the facility would have captured from the atmosphere and stored in that calendar year.  Section 313 (c) specifies procedures and standards that EPA must use in certifying these facilities and enforcing offsets.  The offset market in the U.S. alone is estimated to raise more than $1.02 trillion through 2050.  NACWA will continue to work to make POTW eligibility to participate in the offsets program more clear.

Title VI – Partnerships with States, Localities, and Indian Tribes

The partnership provisions found in Subtitle B, Section 625 of the substitute amendment call for the allocation of free allowances valued at $566 billion through 2050 to state and local governments based on historical investments and achievements in reducing GHG emissions and increasing energy efficiency.  The legislation states that funds can be used to “fund rural, municipal, and agricultural water projects that are consistent with the sustainable use of water resources,” and to reduce impacts to communities, “including by accommodating, protecting, or relocating affected communities and public infrastructure.”  It is critical to note that there are a myriad of activities in Title VI which compete for the stated funds and, although the legislation is not clear on how these pots of money would be distributed, wastewater agencies would be eligible to access a portion of these funds.   NACWA will continue to work with members in both the House and Senate to include language in S. 3036 that clearly defines what is meant by “water resources” and, more specifically, explicitly includes wastewater and drinking water utilities and the funding available to them under this section.

Subtitle C calls for the allocation of free allowances valued at $253 billion through 2050 to state and local governments for adaptation needs, including those affecting water resources.  Section 632 allocates 40 percent of the total allowances under this section to coastal states, which include those bordering the Great Lakes.  Proceeds from these allowances can be used for projects intended to address shoreline erosion; increased storm frequency or intensity and “to identify public facilities and infrastructure, coastal resources of national significance… or public water uses located in the coastal watershed that are affected by climate change, including the development of plans to protect, or, as necessary or applicable, to relocate the facilities or infrastructure.”  Funding under this section would also be used to conduct research on potential impacts, including those relating to changes in shorelines, habitat loss, and changes in ecosystems.  These provisions are relevant to many NACWA members who have clean water facilities located in areas that would be affected by sea level rise and changing shorelines.

Subtitle C, Section 633, allocates free allowances valued at $64 billion, or a quarter of the total allowances allocated under Section 631, to states facing “the earliest and most severe impacts on the availability of freshwater and on agriculture.”  The money from these allowances could be used for research into the impacts of climate change on water resource planning and to develop and implement adaptation strategies.

Finally, emission allowances with an estimated value of $136 billion through 2050 are distributed under Section 624 of Subtitle B to the Energy Efficiency and Conservation Block Grant Program established within the Department of Energy by the Energy Independence and Security Act of 2007.  Municipal projects addressing “water resource problems” are eligible to receive funding raised through the sale of these credits.

Outlook for Passage

S. 3036 is scheduled for floor debate in the Senate on June 2, but supporters will have to overcome an inevitable filibuster from Sen. James Inhofe (R-Okla.), ranking member of the EPW committee, and concern from both sides of the aisle regarding the bill’s potential impact on the nation’s economy, in particular those states that depend on coal-fired plants for electricity generation.  At this time it does not appear likely that Boxer will get the 60 votes needed to proceed.

Sen. George Voinovich (R-Ohio) has also indicated that the floor debate will merely be a ‘prelude to next year’ when a new Congress and president will have a more viable opportunity to pass legislation.  NACWA’s continuing advocacy efforts have, however, laid important groundwork for improving the legislation both this year and next helping to define climate change as a water resource issue.

NACWA Seeks Member Input

As we proceed, please provide any strategic input or comments to Byron Deluke at This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or (202) 833-4655.  Please also bring your thoughts with you to NACWA’s Summer Conference in Anchorage, Alaska.