June 2026 Vol. 81 No. 6
Washington Watch
Trump wants drastic cuts in water infrastructure funding
By STEPHEN BARLAS, WASHINGTON D.C. EDITOR
Federal water infrastructure spending is on the cutting block as Congress starts to work on fiscal 2027 appropriations bills. The Trump administration has proposed drastic cuts to the Clean Water and Drinking Water State Revolving Funds, $1.5 billion and $970 million, respectively, starting Oct. 1, 2026.
The two SRFs have been buoyed financially between fiscal 2022-2026 with funding from the Infrastructure Investment and Jobs Act (IIJA). That funding was in the form of grants, otherwise known as earmarks, sponsored by a member of Congress. Those grants – commonly known as community project funding/congressionally directed spending (CPF/CDS) – never made it into each state’s Clean Water and Drinking Water revolving fund. Those earmarks, therefore, did not generate future income and loans for the SRFs from past loan repayments.
The CPF/CDS infrastructure funding constituted 27 percent ($443.6 million) of the CWSRF appropriation in fiscal 2022, rising to 54 percent ($892.8 million) in fiscal 2026. For the DWSRF, the percentages were 35 percent ($397.8 million) in fiscal 2022 and 64 percent ($715.4 million) in fiscal 2026.
The Trump administration Environmental Protection Agency budget request for fiscal 2027 makes no effort to replace those evaporating CPF/CDS funds. Instead, it proposes to fund the CWSRF at $155 million, down from $1.632 billion (which included the earmarks) in fiscal 2026. That is a loss of $1.5 billion. The DWSRF would be funded at $150 million, down from $1.12 billion in fiscal 2026, a decrease of $970 million. The White House has argued that the two SRFs should have ample funding based on loan repayments from local water utilities, which earlier received SRF loans.
The SRF funding reductions are unlikely to be approved by Congress in its fiscal 2027 budget. At hearings on April 27, 2026, in the House Interior, Environment and Related Agencies Appropriations Subcommittee, Chairman Mike Simpson (R-ID) said, “We likely cannot accept those steep cuts to tribal and state water infrastructure programs.”
But whether House and Senate Appropriations Committees actually approve SRF levels of prior years is a very open question.
Lee Zeldin, administrator of the EPA, testified at the hearing that “the SRFs would be flowing as a revolving fund if it wasn’t continually raided for earmarks and set asides.” Simpson agreed.
Also targeted for a sharp reduction in the Trump proposed EPA fiscal 2027 budget is the Water Infrastructure Finance and Innovation Act (WIFIA). Under the President’s plan, WIFIA would receive no new funding, aside from $7.8 million for EPA to administer the program. All new WIFIA dollars would come from fees paid by program applicants. Congress provided WIFIA with just above $72 million in total funds in FY26. These are not the only EPA programs under the knife; the administration wants to cut the entire agency budget by 50 percent.
In an April 16, 2026, letter to the Democratic and Republican chairs and co-chairs of the House and Senate Appropriations Committees, a coalition of groups wrote: “Communities remain challenged in securing affordable funding and financing for essential infrastructure upgrades and new treatment technologies. In fact, financing for capital improvements surfaced as a top challenge for utilities in 2025.”
The National Association of Clean Water Agencies (NACWA) made an additional point in a separate letter: “The SRF program's favorable interest rates and extended repayment terms are not replicable through private capital markets for most municipal borrowers.”
Some recent reports have heightened concerns about diminished SRF funding. For example, Beyond the Replacement Era, released recently by the American Water Works Association, contends that future costs of needed water infrastructure far exceed “earlier estimates tied solely to buried infrastructure. These pressures signal a structural shift in the cost of providing safe drinking water, not a temporary spike.”
Over the next 25 years (2026–2050), total drinking water infrastructure needs are projected at $2.1–$2.4 trillion in 2025 dollars, far exceeding earlier estimates tied solely to buried infrastructure.
GOOD AND BAD IN NEW PIPELINE SAFETY RULES
The federal pipeline safety agency published a raft of proposed rules – and separately one important denial of an important industry petition – leading to a split decision on pipeline safety issues. These proposed rules and petition denial from the Pipeline and Hazardous Materials Safety Administration (PHMSA) are generally a response to requests from pipeline industry for regulatory relief.
Probably the most noteworthy was PHMSA’s denial of a request from the Interstate Natural Gas Association of America (INGAA) to reconsider aspects of a final rule the agency issued in January 2026. It provided INGAA with a long-sought regulatory victory: adopting an integrity management (IM) alternative for addressing class location changes on gas transmission lines.
Instead of having to file for special permits, which are time consuming and expensive, PHMSA will allow pipelines to use an IM alternative to confirm the MAOP of eligible Class 3 segments by complying with a comprehensive set of initial and recurring programmatic requirements.
But after that rule was published last January – providing the class location rule reform the INGAA had sought for a decade – INGAA then submitted a petition citing certain “discrete issues” that, it claimed, render compliance with the final rule “impracticable,” “unreasonable” or “not in the public interest.” For example, INGAA wanted to limit the type of “in-service leaks” that are subject to certain exclusions in the final rule. PHMSA replied INGAA’s arguments are “not persuasive.” It rejected the petition wholesale.
Separately, PHMSA announced a raft of proposed rules, some of which provide INGAA, American Gas Association (AGA) and other gas industry sectors some of the regulatory relief they have sought. For example, INGAA wanted the agency to revise what seemed like a requirement to perform materials verification testing every time a pressure test is performed as part of a MAOP reconfirmation.
In the new proposed rule, PHMSA stated it only intended operators to perform materials verification testing in those circumstances if the required records were not available. With that in mind, PHMSA will, unless comments change its mind, remove the current, unnecessary requirement to perform materials verification tests of pipe cut out during the course of a pressure test when performing MAOP reconfirmation.
Another proposed rule would increase from $10 million to $20 million the monetary threshold for requiring an operator to notify PHMSA of certain construction activities on natural gas and hazardous liquid pipelines. It also increases from $200,000 to $300,000 the monetary threshold triggering the requirement to notify PHMSA when performing certain maintenance tasks on underground natural gas storage facilities.
AGA and the American Public Gas Association (APGA) requested that PHMSA change those thresholds to account for inflation, stating that ‘‘construction costs have increased to the point that a minor regulating station upgrade in a high-cost area such as [New York City] could easily result in costs that exceed the $10 million threshold.’’
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