American Water Works invests in shareholders, not infrastructure

Every month, American Water Works (WV American Water’s parent company) provides financial information to institutional investors.

In addition to teaching us about how American Water Works is “20x better than industry average for compliance with drinking water quality standards,” this month’s presentation reveals some interesting information about American Water Works’ investment priorities.

As this graph shows, American Water Works has been increasing the dividend paid to its shareholders every year for the past 6 years.
Back in February 2009, American Water Works had 160 million shares of stock outstanding, so it was paying out quarterly dividends of $32 million. Today, American Water Works has 178.7 million shares of stock outstanding, so it is paying quarterly dividends of $50 million.

Money that American Water Works pays to its investors is money that American Water Works is not re-investing in its infrastructure. In other words, over the same period that the leakage rate for their WV system increased from 22% to 28% (with the Kanawha Valley district up to 37%), American Water Works’s shareholders have gotten an extra $72 million per year.

WV DEP invites you to participate in storage tank emergency rules process

WV DEP has taken a big step in the development of its emergency rules on above ground storage tanks.  On April 10, DEP Secretary Randy Huffman sent a letter to a limited number of people inviting them to provide comments for the rules that DEP is required to develop under the recently passed SB 373 regulating above ground storage tanks in WV.  Although this letter went to only two representatives of citizens’ groups, Sec. Huffman made it clear that he wanted to rules process expanded to everyone who has a stake in clean water in WV.  Here is a link to Sec. Huffman’s letter.

Sec. Huffman invites initial comments on the development of rules by May 15.  If you want to make suggestions for what goes into the first draft of the rules, you need to submit them in less than a month.  Your suggestions should be based on the specific authority that DEP was granted in SB 373 and should provide specifics about what should be done.  A number of organizations will be submitting initial comments.

If you are not an expert, as I am not, your big chance will come later in the summer once DEP has a draft of the rules.  Here is Sec. Huffman’s explanation:

Because this will be a new program within DEP, and because of the myriad of interests at stake, we are going to approach this rule differently than we do others. First, we would like your input before we actually draft the rule. We would like for you to provide us with a list of things (in either bulleted list or paragraph form) you would like to see addressed in the rule and the way you would like to see them addressed. DEP will use this information, in addition to the information that will be provided on the tank registration forms, to prepare a fust draft of the rule. We need this information from you no later than May 15, 2014. You can provide that information to us via email at or regular U.S. mail addressed to:

Scott G. Mandirola, Director
DEP Division of Water & Waste Management
60 I 57th Street, SE
Charleston, WV 25304

Once we finish the first draft of the rule, which we anticipate will be around mid-July, we will send it to you for review and further comment. We will then schedule a stakeholders’ meeting to discuss and debate the draft. You may send written comments at any time during the process. After we have processed these comments, we will revise the draft rule accordingly and officially file it with the Secretary of State as an emergency rule no later than December 2014. At that time, we will also put it out to public notice and comment, which includes a process by which the public can submit written comments, as well as a public hearing.

As Sec. Huffman says, this invitation to all of us to participate in rule making is a new step for DEP.  We need to help them make it a success by providing our thoughtful and constructive help.  Who knows, if it works in this case, they may be encouraged to open up all their rules processes to the public like this.

As we learned from Gov. Tomblin’s secret meeting with industry lobbyists back in January, we need complete transparency as we develop these emergency rules.  When you send Mr. Mandirola your email or letter requesting that he put you on the mailing list for the emergency rules process, you should also tell him that you would like all rules comments posted publicly on the WV DEP Web site.  We don’t want any secret industry comments coming in the back door.

Even if you don’t intend to file any comments, registering to get notices and draft rules is a good way to follow what is going on in the process.  So contact Mr. Mandirola and tell him you want to be put on his “stakeholder” list, along with your request that they post all comments on the DEP Web site.  If you care about clean water in our state, you need to participate in this process.  One thing is certain, the coal, oil/gas and chemical industry lobbyists will participate, and they aren’t there to protect your interests or your water.

So far, Sec. Huffman has lived up to his promise to open up the rules process.  Here is what he told Charleston Gazette reporter Ken Ward last week:

“If you want to be a stakeholder, you can be a stakeholder,” Huffman said. “We want it to be as open a process as possible.”
Let’s help out Sec. Huffman and make sure the process stays that way

House Committee considering bill to weaken chemical regulations

The House Energy & Commerce Committee is currently considering the “Chemicals in Commerce Act.” The Chemicals in Commerce Act (CICA) is supposed to be an attempt to reform the Toxic Substances Control Act which, as we have already noted, has proven ineffective at regulating toxic chemicals. According to the Safer Chemicals, Healthy Families coalition,

Among its many problems, the Chemicals in Commerce Act would:

  • Annul laws in Maine, Washington, California, Minnesota and several other states that provide most of the information on toxic chemicals in consumer products.
  • Continue the legal standard and other hurdles in current TSCA that prevented EPA from taking action on asbestos.
  • Make it nearly impossible for EPA to require health information for new chemicals before they end up on the market and in the products we bring into our homes. (This is one of the few areas where EPA currently has some authority.)
  • Significantly roll back EPA’s authority to restrict the use of existing toxic chemicals in products.
  • Contradict the recommendations of the National Academy of Science and the American Academy of Pediatrics for how chemical safety should be reviewed.
  • Require EPA to weigh the economic benefits of a chemical- like whether it leaves streaks on your windows- against whether it causes birth defects, cancer, autism, or infertility.

This factsheet provides more details.

The bill is currently before the House Energy & Commerce Committee, of which WV Representative David McKinley is a member. Representative McKinley can be contacted through his website. See the “Take Action” page for a sample letter and/or add your name to this petition.

Morgantown Utility Board learns lessons from Charleston’s water crisis

On Friday, the Morgantown Utility Board (owned and operated by the City of Morgantown) announced a new initiative to go above and beyond the requirements of SB 373. MUB is partnering with Downstream Strategies on an expanded sourcewater protection program. MUB’s general manager stated, “What occurred in Charleston made us take a harder look at both our readiness and response capabilities. We … want a program that goes further than the measures required by newly enacted legislation.”

MUB’s new sourcewater planning initiative will include “not only identifying threats to raw water sources but doing other things such as mapping those threats, creating a threat matrix that considers toxicity and proximity, developing an extensive watershed monitoring program, cultivating relationships, determining realistic approaches to real-time water quality monitoring, improving communications, and making the plan a true living document.” MUB is also evaluating the feasibility of building in more redundancy to its system by increasing its raw water storage capacity.

Based on WV American Water’s response to the water crisis to date, I cannot see them voluntarily offering to exceed any regulatory standard.

Yet, that is exactly what needs to happen.

Just the first four days of the chemical spill cost local businesses $61 million. The longer-term impact – in terms of residents and businesses leaving, and fewer people coming to Charleston for conferences and tourism – is unknown. And this longer-term impact will depend on the narrative that is created around the water crisis: will Charleston continue to be known as the city that poisoned its water supply, or will it become known for its response to this crisis? Can Charleston become known for having some of the cleanest water in the country, by creating a state-of-the-art water system with real sourcewater protection?

This is what declining federal infrastructure investment looks like

As I mentioned in my previous post, the U.S. is facing a serious problem of under-funded infrastructure. The recent water crisis – which involved 300,000 people on a water system that lacks redundancy and has limited ability to deal with a contamination event – is just one manifestation of this problem.

Much of our water and sewer infrastructure was built many decades ago and has not been replaced. While we are paying more in maintenance on these increasingly aged systems, we are not making sufficient capital investments needed to replace them. This has been a problem for well over two decades. The result is a growing gap between the amount of revenues that water utilities receive through current rates and the expenditures needed to keep up with maintenance and re-capitalizing the infrastructure.

The American Society of Civil Engineers estimates that we need to invest at least $13 billion more per year in drinking water infrastructure in the US. A 2000 report noted that this level of investment, if funded through water rates alone, would lead to doubling or tripling of water rates – or more, in rural areas.

Yet, despite this growing problem, federal funding for water infrastructure has been declining. A 2000 report noted that federal investment in water and wastewater infrastructure declined more than 70% from 1980 to 1994:
Federal funding has declined further since 1994; federal drinking water and wastewater infrastructure investment amounted to only $1.38 billion per year from 2008-2012.

We have seen this policy play out in West Virginia, with small rural water systems unable to keep up with the rising cost of maintaining old infrastructure, let alone replacing it. The result has been greater consolidation of water systems, greater risk to consumers, and poorer service.

Nobody is talking about infrastructure

One issue that has largely been absent from the discussion of the Elk River spill thus far is infrastructure funding – or, more accurately, the lack of federal infrastructure funding.

We know that WV American Water was able to develop its large, centralized system by buying out smaller, locally owned water systems that could not afford to maintain their systems. And, this past week, the PSC has shown its continued support for this policy, even though WV American Water itself now has huge deferred maintenance problems. As I mentioned in a previous post, WV American Water’s Kanawha Valley system has a leakage rate of 37% — more than double what it was a decade ago.

Under-investment in infrastructure is a problem that is not confined to water systems. The PSC found, in response to the 2012 derecho, that our electric utilities had been under-investing in maintenance of their lines and right-of-ways. And anyone who has driven around on southern West Virginia’s roads knows that there are some serious deferred maintenance problems there too.

Nor is this issue unique to West Virginia. For many years I have seen reports about the ever-growing debt that we owe to future generations in under-funded infrastructure. A recent report from the American Society of Civil Engineers gave the U.S. a “D” for drinking water infrastructure investment. Many drinking water systems were built more than half a century ago, and we are simply patching old and increasingly fragile infrastructure, putting off the growing need for replacing pipes.

Sen. Manchin’s approach to dealing with the Elk River spill on the federal level has mainly been to propose a federal aboveground tank regulation bill. He could do a lot more for WV by diverting federal money into rebuilding our drinking water infrastructure.

Should the WV PSC be encouraging WVAW to take over more of WV’s water system?

Yesterday, the WV PSC ordered WV American Water to continue with the “public/private” line extensions that the company had committed to and then tried to back out of.

In light of the company’s decision to knowingly release contaminated water into its customers homes, its promulgation of bad “flushing” advice and questionable billing practices in the past four months, is the expansion of WV American Water really such a good idea?

The PSC’s order indicates that the PSC is committed to business as usual when it comes to building safe public water systems in WV.  Shouldn’t the PSC be studying a wide variety of solutions for WV water systems, including strengthening public ownership of WV’s water, instead of putting more and more public resources in the hands of holding companies based far away from our state?

If taxpayer money (that’s the “public” in “public/private”) is going to be spent to expand water systems, why does the PSC support giving our money to a privately owned company such as WV American Water?  Why can’t the PSC support spending public money on publicly owned water systems that deliver a public resource?

Gov. Tomblin signs SB 373

On Tuesday, Gov. Tomblin signed Senate Bill 373 into law.  This is not huge news, because the bill could become law without his signature, but now it’s official.

In his story, the Charleston Gazette’s Eric Eyre pointed to the real issue before us now:

Lawmakers left many significant decisions — such as the details of tank safety standards — for the state Department of Environmental Protection to hash out by writing rules. Those rules are required to be written for legislative review during the 2015 regular session.

DEP Secretary Randy Huffman said last week that he plans to set up a process that would allow for more public involvement in those rule than as typical for most agency rules.

Normally, DEP writes a proposed rule and accepts public comments on those rules before submitting a final version to the Legislature for its review.

“We want to do more than that,” Huffman said.

Huffman said he wants to hold meetings with various industry and citizen groups interested in the rule to get their input. He said he had not yet decided if those meetings would be open to the general public or the media.

This was the major problem with SB 373.  Legislators left most of the details of implementation in the hands of the WV DEP, an agency kept chronically underfunded by the coal industry dominated Legislature and whose lack of regulatory oversight contributed to the probability of a spill like the one at Freedom Industries.

Citizens were heavily engaged in the Legislative process.  Sen. Unger, the bill’s original sponsor, acknowledged this fact:

Sen. John Unger, D-Berkeley, said the bill “got progressively better” as it moved through the Legislature.

“Truly, it became the people’s bill,” he said.

The question remains – Will the rules to be developed by the DEP over the next year be the people’s rules, or will lobbyists and their friend DEP Secretary Huffman make it the industry’s rules?

Volunteers needed for help with Health Department survey

The Kanawha-Charleston Health Department will be conducting a phone survey on the economic and socio-psychological impact of the spill. Volunteers are needed to help with this survey this weekend, starting at 9am on April 5th and 6th. If you are able to volunteer, please call 304-348-6494 by 2pm tomorrow, Friday April 4th.

MCHM odor threshold and the Safe Drinking Water Act

Just how low is the odor threshold of MCHM in water? We’ve known for awhile that the licorice smell persists below 1 ppm (parts per million), but two studies released recently provide additional insight. A research group at Virginia Tech studied pure 4-MCHM and found its odor threshold to be 7 ppb (parts per billion). And the WV TAP project has previously found the odor threshold of crude MCHM to be 0.15 ppb.

These findings suggest that MCHM can still be detected at concentrations hundreds to thousands of times lower than the 1 ppm standard developed by the CDC and promoted by WV American Water. Does this matter? The leader of the Virginia Tech research group explains:

“The toxicity aside, annoying odors have a psychological burden,” Dietrich said. “Let’s hope this chemical doesn’t have any toxicity and the CDC is right. But if people are living with it for two or three months, it imparts a fear and a reminder, and it’s a psychological burden. If you can smell it, it’s still around.”

And the federal Safe Drinking Water Act also recognizes that drinking water shouldn’t smell. The “National Secondary Drinking Water Regulations” established under the Safe Drinking Water Act set standards that “are not Federally enforceable but are intended as guidelines for the States.” These secondary standards “represent reasonable goals for drinking water quality.” The maximum contaminant level for odor-bearing compounds is three times their odor threshold. Under these guidelines, the maximum level of MCHM in drinking water should probably be around 20 parts per billion – or less.

The Public Service Commission requires water utilities to provide “pure, wholesome, and potable” water, and many WV American Water customers would agree that their water didn’t, and perhaps still doesn’t, meet that standard. But there are no guidelines or regulations specifically for MCHM. Is water “pure, wholesome and potable” with an MCHM concentration of 1 ppm – or something much less?

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