Tuesday, January 31, 2023

DEQ denied CFPUA’s $47 million Sweeney grant request. Here’s why, and what’s next

When CFPUA announced plans for the multi-million dollar upgrades, a state grant was proposed as a means to keep ratepayers from being on the hook for the cost.

Last October the Cape Fear Public Utility Authority applied for a state grant to cover $47 million in upgrades to the Sweeney Water Plant. (Port City Daily photo)
Last October the Cape Fear Public Utility Authority applied for a state grant to cover $47 million in upgrades to the Sweeney Water Treatment Plant. (Port City Daily photo / NCDEQ)

NEW HANOVER COUNTY — The North Carolina Department of Environmental Quality has rejected CFPUA’s $47 million grant request for upgrades to the Sweeney plant, citing a lack of regulatory guidelines for GenX and other PFAS that would necessitate the project, as well as incomplete application materials.

The Cape Fear Public Authority Utility (CFPUA) submitted the grant in late October of last year, requesting $46,855,725 to install new granulated activated carbon (GAC) filters at the Sweeney Water Treatment Plant. The upgrades are CFPUA’s response to GenX and other PFAS in the water; while the levels of been dramatically reduced since two years ago, dropping more than tenfold, CFPUA believes further reduction is in the interest of public health.

CFPUA has stated repeatedly that The Chemour Company and DuPont are responsible for PFAS contamination in the Cape Fear River and therefore should bear the financial burden on any water treatment efforts necessitated by their chemical production. CFPUA did not receive any funding as part of the recently amended consent order between DEQ and Chemours; it has filed its own lawsuit in federal court.

Litigation in federal court can take years, but CFPUA has already submitted plans for the upgrades and is planning to begin construction in November with the hopes of bringing the new treatment facility online by 2022.

CFPUA’s other option to avoid passing the cost of the upgrades onto ratepayers was a state grant. The state, however, gave the grant request low marks.

DEQ’s issues with the application

The Department of Environmental Quality did not agree with CFPUA when it came to scoring the importance of the Sweeney project. (Port City Daily photo / NCDEQ)
The Department of Environmental Quality did not agree with CFPUA when it came to scoring the importance of the Sweeney project. (Port City Daily photo / NCDEQ)

DEQ evaluates grant and loan requests using a point scale to rate the purpose, benefits, cost, and management of projects. Applicants rate their own project using the scale and DEQ reviews it; for the Sweeney project, CFPUA rated its application at 79 points but DEQ awarded it just 9 points.

Two major areas were the project lost points appear to be the absence of regulatory standards for GenX and other PFAS and ommissions in CFPUA’s application.

For the first issue, the problem is that CFPUA’s stated reason for the upgrades – removing PFAS from the drinking water – isn’t tied to a regulatory standard. The grant application allows for proposed regulations that aren’t official yet – called “promulgated but not yet effective regulations “ – but neither the state or federal environmental agencies have made it even that far.

CFPUA noted in its application that the EPA has been working towards new regulatory standards for GenX and other PFAS. In its response, DEQ simply stated “there are no MCLs (Maximum Contaminant Levels) for GenX or other PFAS under T15A NCAC 18C .1500,” and “PFAS and GenX has no promulgated but not yet effective regulations.” DEQ’s stance cost the project about 30 points.

The lack of state or federal regulations for PFAS has been a frustration for environmental and public health agencies for some time and, in many cases, has effectively prevented the NCDEQ from taking action despite public outcry.

The other issue appears less about the bureaucratic inability to get ahead of emerging contaminants and more about a technical issue with the application.

According to the DEQ’s response, CFPUA did not “discuss required elements” of an asset management plan – essentially a road map for planning, construction, and management of the upgrades. DEQ also stated that CFPUA failed to provide an “approval letter for Source Water Protection Plan or Wellhead Protection Plan.” The DEQ docked the application 15 points for these apparent ommissions.

In its application, CFPUA states the utility board approved a management plan in March of 2017, and notes that the utility has protection plans for both source water (surface water) and wellhead (groundwater). The issue appears to be only that they were not adequately documented in the application.

Reapply or wait and see?

This empty stretch of ground at CFPUA's Sweeney Water Treatment Plant is where the utility plans to build nearly $50 million in upgrades. (Port City Daily photo / Benjamin Schachtman)
This empty stretch of ground at CFPUA’s Sweeney Water Treatment Plant is where the utility plans to build nearly $50 million in upgrades. (Port City Daily photo / Benjamin Schachtman)

According to an email from Vincent Jude Tomaiono, branch head for the DEQ’s Drinking Water State Revolving Fund program, the state will reconsider CFPUA’s application “as is” for the Spring 2019 cycle (the DEQ doesn’t allow amendments or changes to existing applications).

The “as is” version seems unlikely to get funded, as it was the second lowest scoring drinking water project in the October 2018 round (only one project, in Lincoln County, scored fewer points). For context, the lowest scoring project that still received funding got 22 out of 25 points, the highest got 80 out of 82 points.

Also, CFPUA’s application is explicitly for a grant, only. Much of the DEQ’s funding is in the form of state or state-and-federal loans; while these feature low interest rates over long-term repayment periods they still, eventually, place the financial burden for the Sweeney upgrades on the ratepayers.

A new application could mean better luck.

It’s unlikely that the EPA or DEQ will put regulatory limits on PFAS in time for the spring application, so CFPUA’s application probably won’t gain any ground there. However, including the information about asset management and water source protection that was apparently missing from the October application could net CFPUA an additional 15 points, for a total of 24.

While that’s on the low end, it would have been enough to beat out Sampson County, which received around $900,000 in grant funding and a $900,000 state loan in this funding cycle.

According to CFPUA spokesperson Vaughn Hagerty, “We’ll be looking at whether we want to re-apply and, if we do, what changes we may want to make to the application.”

A big ask from a smaller fund

Regardless of what CFPUA does, it’s doubtful the utility will receive the full grant amount it requested – mostly because it is ten times more than the total amount the state has granted in recent cycles. The vast majority of what the state gives out is loans, only a fraction is grants. For example, the 2018 spring funding cycle saw $4.6 million in grant funding compared to nearly $100 million in loans. The most recent cycle saw just $900,000 in grant funds.

Asked if CFPUA realistically thought the DEQ would – or could – fund the Sweeney project Hagerty said, “We were seeking a grant for $46.9 million, but we – and I’m sure our customers – would have been appreciative of a smaller grant to help offset the costs.”

In the meantime, with no resolution in sight for CFPUA’s federal lawsuit, the ratepayers are likely to be on the hook for the cost of the project.

While CFPUA Executive Director Jim Flechtner again stated in a release this week that Chemours and DuPont should pay for the Sweeney project, the utility said its board would vote on whether to proceed with construction in the coming months.

“Revenue bonds would be sold to pay for construction. Financing these bonds and the additional operating costs are expected to result in an increase of $5 per month for the average CFPUA customer,” CFPUA noted in a release. That figure covers both the cost of the upgrades and the nearly $3 million annual operating costs, for a total of $215 million over the lifetime of the upgrades.

And if funding did come through, either from DEQ or a court settlement with Chemours, would customers see a refund? As Hagerty explained in a recent interview, it’s complicated.

Related: Are CFPUA ratepayers willing to pay $215 million for Sweeney upgrades?

Send comments and tips to Benjamin Schachtman at ben@localvoicemedia.com, @pcdben on Twitter, and (910) 538-2001.

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