ENVIRONMENT
BUDGET HIGHLIGHTS
FY 2004 REQUEST

February 26, 2003

Analysis prepared by the Democratic staff of the Committee on Energy and Commerce

Overview

The President’s Budget for the Environmental Protection Agency (EPA) would reduce actual spending by $500 million dollars from the FY 2002 enacted level (including the supplemental appropriation) -- dropping from $8.1 billion to $7.6 billion. In terms of maintaining purchasing power at the FY 2002 enacted level, the President’s budget is a reduction of $800 million or 9.5%. The budget will be felt in a variety of areas, including reduced enforcement and inspections, less money available than needed for safe drinking water, inadequate funding for cleanups of superfund sites and leaking underground storage tanks, and fewer brownfields grants than authorized by the new law.

Enforcement and Inspections

The Bush Administration’s budget will result in about 5,000 fewer inspections than were conducted in FY 2000 to detect violations of the environmental laws administered by the EPA to ensure clean air, clean water, safe drinking water, and responsible treatment, storage and disposal of hazardous waste.

Overall, the Bush Administration’s FY 2004 budget for civil enforcement personnel remains 124 full-time equivalents (FTE’s) below the enacted levels in the FY 2001 operating plan and 52 FTE’s* below the levels enacted in the Consolidated Appropriations Resolution, FY 2003 (P.L. 108-7). The key program areas of compliance monitoring and civil enforcement account for 85 FTE’s of the shortfall between the budget request for FY 2004 and the enacted levels for FY 2001.

Personnel Resources (FTE’s)

*Based on a proportional allocation between Compliance Monitoring, Civil Enforcement and Compliance Assistance of the $15.2 million increase above the budget request in the "Consolidated Appropriations Resolution, FY 2003."

Safe Drinking Water Act

Based upon EPA’s own analysis of the resources required for safe drinking water across the country, the President’s budget plan fails to meet the needs for safe drinking water across the country.

Public water systems must invest in infrastructure improvements to ensure that they can deliver safe drinking water to consumers. In February 2001, the EPA released the results of a comprehensive survey of our Nation’s infrastructure needs. The key finding of the survey is that "$102.5 billion is needed now to ensure the continued provision of safe drinking water" and a total of $150.9 billion over the next 20 years. The EPA budget justification for FY 2003 explicitly recognized the large gap between the budget request and the needs of our public water system as follows:

"According to the Agency’s 2001 Drinking Water Infrastructure Needs Survey, the total 20-year national infrastructure needed is $150.9 billion, $31.2 billion of which is needed to ensure the provision of safe drinking water under existing and recently proposed regulations. The need is even more pressing in the face of the projected increases of population growth and the subsequent increase in demand for safe drinking water over the next several decades."

Since the submission of the FY 2003 Budget, two additional reports have supported the need for tens of billions of dollars of additional drinking water infrastructure funding.

In April 2002, the Congressional Budget Office (CBO) testified before the Subcommittee on Environment and Hazardous Materials that their mid-point estimate of the gap between what public water systems are now spending and what needs to be spent annually over the next 20 years is $4 billion a year or $80 billion over 20 years. This testimony was reaffirmed in a CBO Report issued May 24, 2002, entitled "Future Investment in Drinking Water and Wastewater Infrastructure."

On September 20, 2002, the EPA released a Clean Water and Drinking Water Infrastructure GAP Analysis which found that for drinking water the funding gap between projected spending, assuming no growth in revenues, was $265 billion for the 20-year period from 2000 to 2019. Assuming a 3% annual real growth in revenues the report indicates that the gap on the drinking water side could possibly be reduced to $53 billion dollars.

The huge funding needs documented in the EPA and CBO reports compares to the $850 million budgeted in FY 2004 by the Bush Administration for the drinking water state revolving loan fund. Local governments, states, drinking water suppliers, and the EPA all agree that there is a tremendous resource gap – which will continue to grow – for drinking water infrastructure funding necessary to protect the public health. The Bush budget freezes this important program with no adjustment for inflation at a level that is $150 million less than the amount authorized by Congress.

Leaking Underground Storage Tank Program

(dollars in millions)

By spending just 40% of the $180 million collected in fuel taxes to pay for clean up of petroleum releases from abandoned gas stations, groundwater contaminated by MTBE, and other petroleum releases from leaking underground storage tanks, the Administration’s budget will leave thousands of sites in need of cleanups.

The Leaking Underground Storage Tank (LUST) Trust Fund was created by Congress in 1986 and is financed by a 0.1 cent a gallon tax on motor fuels. The LUST Trust Fund was specifically created to address contamination from leaking underground storage tanks at gas stations and other facilities. These tanks are often the source of MTBE and petroleum contamination in groundwater and it is estimated that many old gas stations are brownfields sites. The budget acknowledges that there is a "backlog of Underground Storage Tank sites with confirmed releases waiting to be addressed." Nationwide there are an estimated 143,000 such releases with more confirmed each year. In FY 2001, the EPA failed to meet its goal of 21,000 LUST cleanups nationwide, falling short by 1,924 cleanups. In FY 2002, the goal was 21,500 cleanups but only 15,728 were completed. This program is also responsible for enforcing the 1998 Underground Storage Tank leak detection and upgrade standard.

At the end of FY 2003, there will be a surplus of $1.9 billion in the Trust Fund which is expected to grow under the Bush Administration’s budget to $2.16 billion at the end of 2004. Nevertheless, the Bush budget requests funding for this program at the same level as last year. The budget request represents only 40% of the $180 million which is estimated to be collected annually from the fuel tax. Overall, the amount being requested in the budget is less than five percent of the amount currently in the LUST Trust Fund. In FY 2003, more money is being collected from interest on the LUST Trust Fund than is being requested to be appropriated by the President’s budget for FY 2004.

As a result, large numbers of abandoned gas stations with petroleum releases and sites with groundwater contamination from MTBE and other petroleum products across the country will not be cleaned up.

Superfund

(dollars in millions)

During the last four years of the Clinton Administration, the Superfund program completed all construction activities at an average of 87 sites per year. The Bush FY 2002 and FY 2003 budgets called this "dramatic progress." In FY 2001, however, the Bush Administration completed construction at only 47 sites – a 46% reduction from the average in the last four years of the Clinton Administration and a 39% shortfall in the Agency’s goal for FY 2001.

The slowdown of Superfund cleanups will continue under the Bush budget because it attained 42 construction completions in FY 2002 and estimates 40 construction completions in FY 2003 and FY 2004. On May 10, 2001, Administrator Whitman stated that the EPA had a goal of reaching almost 900 construction completions by the end of FY 2002 and estimated "the Agency will achieve construction completions at 897 NPL sites by the end of FY 2002." Unfortunately, cleanups had been completed by the end of FY 2002 at only 846 sites – a shortfall of more than 50 from the Administration’s goal.

The President’s budget justification states that "since the beginning of the program, the Agency has averaged 42 construction completions per year." This statement is misleading at best in that for the first 12 years of the program a total of only 149 sites completed construction. During the eight years of President Clinton’s tenure of the Superfund program 608 sites completed construction or an average of 76 per year. During the 14 years under Presidents Reagan, Bush (I) and Bush (II), a total of 238 sites completed construction or an average of 17 per year. (See attached chart.)

As of October 1, 2002, there were 1,500 final sites on the Superfund National Priorities List (NPL). Of these, 171 are federal facility sites, including 131 sites of the Defense Department. There are 1,329 non-federal sites. Almost 61% (809) of the non-federal sites have attained construction completion while only 22% (37) of the federal sites have reached construction completion. Funding for cleanup at federal sites comes from the federal agencies budgets.

The President’s budget acknowledged that "funding was not available in FY 2002 for seven construction projects that were ready to start, with a cumulative estimated cost of approximately $100 million." The EPA Inspector General also documented other NPL sites that did not receive the necessary long-term response funding or were only partially funded in FY 2002. To begin to address the backlog of sites that were ready to go to cleanup in FY 2002 and FY 2003 but lacked adequate funding, the FY 2004 budget requests an extra $150 million for remedial action projects in FY 2004 to initiate cleanups at 10 to 15 sites in FY 2004.

Under the polluter-pays principle, Congress imposed taxes on industry, including the petroleum and chemical industries, to provide revenues to the Superfund Trust Fund to cleanup toxic waste sites. Each year since 1995, when the Republican-led Congress allowed the Superfund taxes to expire, President Clinton and the EPA sought to have the taxes reauthorized. President Bush’s budget, however, does not propose reauthorization of the Superfund taxes. Since 1995, industry taxpayers have saved over $9 billion due to the expiration of the Superfund taxes, approximately $4 million per day. Thus, the burden to fund cleanups is increasingly being shifted to the general public. In the President’s FY 2004 budget, $1.1 billion – about 80% of all Superfund expenditures – will come from general revenues. The President’s Budget estimates that there will only be $159 million in the Superfund Trust Fund at the end of FY 2003 and $36 million in the Superfund Trust Fund at the end of FY 2004.

Brownfields

(dollars in millions)

The Small Business Liability Relief and Brownfields Revitalization Act signed into law on January 11, 2002, authorized funding in the amount of $200 million for brownfields grants for site assessment, remediation, and revolving loan funds. The eligible recipients of these grants are:

1. Local governments;
2. Land clearance authority operating under supervision and control of local government;
3. Government entity created by state legislature;
4. Regional councils or group of general purpose units of local government;
5. Redevelopment agency sanctioned by a state;
6. States;
7. Indian tribes;
8. Alaska Native Regional Corporation; and
9. Non-profit organizations for remediation grants.

Brownfields are abandoned, idled, or underused industrial and commercial properties and are not traditional Superfund sites. Economic changes over several decades have left thousands of communities with these contaminated properties and abandoned sites.

In December 2002, the EPA received 962 applications seeking 1,200 grants for brownfields funding under Section 104k. The President’s budget request would only fund approximately 200-250 brownfield grants leaving a high pent-up demand without funding to redevelop brownfield sites. This is exacerbated by the $30 million reduction from the President’s budget request in the Brownfields grant program received in the Consolidated Appropriations Resolution, FY 2003. As a result, only about 150 grants can be issued in FY 2003.

The President’s budget for FY 2004 requests a total of $149.5 million for brownfield grants for which local governments, redevelopment agencies, non-profits and states are eligible. This is $50 million less than Congress authorized under the Small Business Liability Relief and Brownfields Revitalization Act.

In addition, the new legislation that authorizes $50 million annually for states and Indian Tribes to establish or enhance their response programs. The states and tribes can also use the money to capitalize revolving loan funds or purchase insurance or develop a risk sharing pool. The President’s budget for FY 2004 requests an additional $10 million for state grants which exceeds by $10 million the amount lawfully authorized under Section 128.

In addition, the new legislation that authorizes $50 million annually for states and Indian Tribes to establish or enhance their response programs. The states and tribes can also use the money to capitalize revolving loan funds or purchase insurance or develop a risk sharing pool. The President’s budget for FY 2004 requests an additional $10 million for state grants which exceeds by $10 million the amount lawfully authorized under Section 128.

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