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Food & Water Watch

By Elizabeth Schuster

Monday, I participated in a meeting hosted by the White House Council on Environmental Quality and the Environmental Protection Agency on financing water infrastructure.  

Photo courtesy of Shutterstock

Although I applaud the administration’s efforts to convene a discussion about the enormous need to invest in our nation’s aging infrastructure, I was discouraged that much of the meeting focused on promoting public-private partnerships and attracting more private financing for public water systems.   

Throughout the meeting, a misleading notion was continually raised that using private capital to fund water systems somehow constitutes an innovative approach to financing. This couldn’t be further from the truth. Time and again, municipalities and consumers have suffered under privatized water systems.  

As if attempting to package and sell privatization as a new trendy approach isn’t alarming enough, the chief financial officer of American Water, the nation’s largest water company, added insult to injury when she asked about the status of the company’s proposal that the Internal Revenue Service modify its rules to allow companies that take over privatized municipal water systems to retain public tax benefits on the system’s existing debt. 

Why not just give private companies like American Water the same tax-exempt status on bonds as public utilities? That’s actually another proposal out there these days. Apparently, this so-called “innovative” private financing requires government tax breaks and special treatment to compete with traditional public financing.

This is not the first time American Water has floated this proposal to the federal government. In response to a Freedom Of Information Act request filed by Food & Water Watch in November 2012, we learned that American Water’s proposal had made it to the Treasury Department in September. Then in March of this year, the company included its proposal in testimony submitted to the House Appropriations subcommittee. Talk about persistence.  

Modifying the tax code to allow private companies like American Water to receive the same tax benefits on its financing as our public, local governments would not level the playing field.  It would give companies an unfair and unjustified advantage. Worse, unlike with local governments, there is no guarantee that lowering the borrowing costs for private companies will result in greater investments in our water systems or lower water rates for consumers. The companies could just pocket most of the savings, using the lower debt costs to rationalize higher returns. That means we would sacrifice tax revenue to pad the profits of the water privatization industry. 

We have to keep tabs on their next moves and continue to protect our water systems. At the end of the day, privatizing our public water systems is not an innovative approach to delivering clean, safe, affordable water to U.S. communities. Instead, we should stick to a tried and true method—keeping water in public hands. If we want to talk actual innovation, why not establish a steady source of federal funding for community water systems so no municipality ever has to entertain the notion of privatizing its water. 

Visit EcoWatch’s WATER page for more related news on this topic.

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Food & Water Watch

As public backlash against shale gas development and fracking gains momentum nationwide, the oil and gas industry has gained an ally in investor-owned water utilities. New research released Dec. 8 by the national consumer advocacy group Food & Water Watch shows that private water companies are increasingly positioning themselves to profit from the expansion of shale gas development in the U.S., while simultaneously downplaying its myriad environmental, public health and economic risks.

Why the Water Industry is Promoting Shale Gas Development finds that in the first half of 2011, American Water sold 115 million gallons of water to a dozen gas-drilling companies, making $702,000 in revenue. The company also discounted the price of the water for drillers, charging them an average of 45 percent less for water than residential customers. Similarly, in September 2011, Aqua America agreed to invest $12 million to build and operate an 18-mile pipeline to supply fresh water to Marcellus Shale gas producers. These companies are also expanding service to areas of the U.S. with active shale gas plays such as Pennsylvania, Ohio and Texas.

According to Food & Water Watch, investor-owned utilities are also complicit in obscuring the potential dangers of shale gas development. Tests conducted by companies such as Pennsylvania American Water on water supplies near plants that treat fracking wastewater were used to downplay the risks posed to drinking water sources by fracking wastewater.

“Shale gas development squanders and pollutes water, so a potential multi-billion dollar market is now emerging to address the industry’s insatiable thirst,” said Food & Water Watch Executive Director Wenonah Hauter. “Investor-owned water utilities are providing services to the shale gas industry in order to justify costly new treatment plants and other projects that allow them to raise rates and boost profits.”

In polluting drinking water, shale gas development can also generate new customers for investor-owned utilities. When the process pollutes one source of water, those customers may be forced to obtain their water from a system owned by a private utility.

In Dimock, Pa., the local water supply has been so compromised by shale gas development that eleven local families there can no longer drink from their wells. On Nov. 30, the Pennsylvania Department of Environmental Protection granted Cabot Oil & Gas’s request to stop providing an alternative water supply to the families, leaving some homes without access to safe water, and prompting some activists to truck water to Dimock from New York City’s watershed. American Water has agreed to provide potable water in the interim but will charge these households the same amount as their other residential customers, without supplying such services as piping the water to the homes or customer support.

Today, the future of Dimock’s water supply remains unclear. Late last year, the state Department of Environmental Protection authorized a $12 million grant to American Water to connect the township to the company’s nearby water system in Montrose. American Water is the dominant water provider in the area, and there is no publicly operated water system from which residents of Dimock can reasonably obtain water.

Why the Water Industry is Promoting Shale Gas Development is available by clicking here.

For more information, click here.

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