by Ellen Kriz
January 29, 2019
That America’s water and wastewater infrastructure is aging past its useful service life is hardly news to major pipe suppliers. The American Water Works Association’s estimate that $1 trillion is required to rehabilitate and expand drinking water infrastructure over the next 25 years points to major opportunities for water pipe companies. And new threats that place pressure on wastewater systems – such as rising sea levels – point to untapped growth prospects for sewer pipe suppliers.
The problem is that public funding for water and sewer pipe projects is challenging to secure. These projects are subsidized by state and local governments and are often put off until something goes wrong – a water main bursts or a sewer line backs up or, in the case of Flint, Michigan, dangerous levels of lead are found in the drinking water.
Federal funds play a relatively minor role in updating pipe networks, but the America’s Water Infrastructure Act (AWIA) of 2018 marks a small step forward. The new law, which President Trump signed in October 2018, authorizes or reauthorizes funding for water and wastewater infrastructure projects and spells out the government’s priorities for infrastructure improvements.
The America’s Water Infrastructure Act reauthorizes funding for two key federal loan programs that can be used by communities to help finance the installation of new or replacement pipes, including:
The Drinking Water State Revolving Fund is often used for local projects, while WIFIA funds are reserved for largescale water and wastewater projects of regional or national significance.
In April 2018, the EPA announced up to $5.5 billion in WIFIA loans made available by the Consolidated Appropriations Act, 2018, and received a record number of letters of interest. Requests totaled over $9 billion, demonstrating an urgent need for infrastructure improvements, strong growth prospects for pipe suppliers, and the deficiency of current funding to meet national needs.
The provisions under the AWIA will likely be met with similarly high levels of interest, but will not lead to concrete opportunities unless the authorized funds are appropriated with additional legislation at a later date. If funds are secured, the DWSRF and WIFIA programs will remain the main avenues through which the federal government supports new public contracts for water and sewer pipe suppliers.
When it comes to securing a contract for a limited number of public projects, pipe suppliers compete on the basis of a pipe material’s performance and installation attributes.
According to The Freedonia Group’s Pipe: Products & Markets study, demand for plastic pipe is outstripping traditional materials such as ductile iron and concrete in both potable water and sewer applications. Advantages of plastic pipe include lower material costs and easier installation with trenchless techniques.
However, plastic has yet to overcome one major obstacle: public opinion. Government officials have been slow to adopt plastic pipe – especially for drinking water systems – because they are concerned about potentially negative health effects.
While plastic pipe industry associations insist that these doubts stem from a lack of education about the longevity and safety of plastic pipes, the fact remains that in many communities across the United States, producers of plastic pipe cannot submit competitive bids for contracts.
In Flint, for example, the government ignored JM Eagle’s offer to supply free PE pipe to replace all of the city’s contaminated service lines and instead chose to install copper service lines for 5,000 homes. However, PE is still under consideration for the nearly 20,000 homes in Flint that need new lines, with talk of installing plastic pipe in a pilot area.
In addition to the authorization of funding, the AWIA also clarifies Congress’ stance on the future of water infrastructure, supporting new sales opportunities for pipe manufacturers in more indirect ways.
For instance, Section 2004 of the law states that access to reused non-potable water for industry should be incentivized to relieve potable water shortages in some areas of the country. Non-potable water reuse requires the installation of PVC pipes that are dyed purple to indicate their use for recycled water (i.e., “purple pipe”).
The law also formally authorizes the EPA’s voluntary WaterSense program, which encourages development of water-efficient products and other means of conserving water. The program incentivizes use of low-flow toilets, for example, which require larger, higher value sewer pipes to handle higher solids content. The WaterSense Program may also support growth in demand for purple pipe in landscape irrigation and other systems.
While the AWIA’s support for water and wastewater infrastructure is minimal in light of the enormous scope of work to be done, the new law demonstrates that the government has at least refocused its attention on the problem. For the pipe industry, it’s a small step in the right direction.
For more information on the pipe industry, see The Freedonia Group’s recent report Pipe: Products & Markets, a comprehensive industry study that includes demand forecasts by pipe material and market.
Ellen Kriz is an Industry Analyst at The Freedonia Group, where she covers US construction markets.
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