Source: Detroit Free Press, March 6, 2016
Posted on: http://www.advisen.com
The ripple effects of the city of Flint’s tainted drinking water crisis could eventually prompt water suppliers to spend more than a quarter-trillion dollars on infrastructure upgrades faster than anticipated, a leading rating agency said Friday.
Fitch Ratings said in a note that utilities are stepping up education efforts to bolster public confidence while also evaluating their existing treatment protocols to ensure water quality. Significant investment in service line replacement could be coming soon, particularly if the federal Environmental Protection Agency quickly alters existing rules to make them more stringent in the wake of Flint, the rating agency said.
More than 6 million lead service lines exist across the country, according to estimates cited by Fitch. Many of these are located in the Northeast, Midwest and older urban areas.
“We believe the capital costs to replace these lines could exceed $275 billion,” Fitch said.
The EPA’s latest survey estimated the entire sector needs $385 billion in water infrastructure improvements through 2030, and this estimate includes the costs to only partially replace lead pipes, according to the rating agency.
Fitch Ratings noted that if those costs are spread over a sufficient amount of time, they could be manageable. However, if those changes need to be implemented faster, it could cause financial stress for some water utilities. Those costs could eventually be passed on to consumers, said Andrew DeStefano, director for U.S. public finance at Fitch.
In its report Friday, Fitch cited a number of lawsuits filed against Flint and other government officials allege that the water residents were using was unsafe as a driving factor for potential regulatory changes. The city had changed water sources in mid-2014, and the lawsuits argue that the newer source had higher corrosive properties that eroded the pipes, leading to highly elevated lead levels in the water. The city has been under a federal state of emergency since January.
The Free Press previously reported that Flint’s water crisis has prompted the filings of a number of lawsuits that could cost Michigan taxpayers hundreds of millions of dollars in damages.
At least a dozen lawsuits have been filed in local, state and federal courts on behalf of Flint residents who drank lead-tainted water for nearly two years. The complaints name a long list of state and local agencies and officials, from Gov. Rick Snyder to Flint city employees.
Some of the suits seek to hold Snyder and others personally liable for damages. Some defendants could also face criminal charges as state and federal prosecutors investigate how Flint’s water was poisoned. Snyder has hired two outside attorneys in connection with the Flint drinking water crisis, including a criminal defense attorney retained to serve as “investigatory counsel,” a Snyder spokesman has confirmed.
Lawyers in two cases say they’re seeking multimillion-dollar awards. One seeks $100 million from a Flint hospital for victims of Legionnaires’ disease, and the other seeks at least $500 million from an engineering company Flint hired to put its water treatment plant into operation using Flint River water. The suit, which states the company was aware the water would be dangerous without proper anti-corrosive treatment, seeks damages for diminished property values.
The remaining suits seek everything from replacement of the pipes that leached lead into Flint’s water supply to long-term medical monitoring and health care, a court-ordered monitor to oversee the city’s water operations, cancellation of all water bills since April 2014, when lawyers argue Flint’s water supply became unfit to drink, and punitive damages against the state and other defendants.
Some legal experts have said the best solution for the state would be to do what BP did after the Deepwater Horizon oil rig exploded in 2010: Finance a victims’ compensation fund.
Separately, certain Chicago residents filed suit against the city, alleging that repairs by Chicago to its water system allowed dangerous levels of lead to enter the drinking water supply and that the city did not sufficiently notify residents that they may have been exposed.
The EPA currently regulates drinking water exposure to lead based on its Lead and Copper Rule, which seeks to minimize lead in drinking water primarily through corrosion control of lead pipes. If corrosion control is not effective, the rule can require water quality monitoring and treatment, corrosion control treatment, the removal of lead lines and public education.
Federal environmental protection officials are considering trying to strengthen the rule sometime later this year or in 2017.
“In light of these lawsuits and the heightened public focus on possible lead contamination, Fitch expects any proposed rule revisions will likely move the industry toward removing all lead service lines,” the rating agency said Friday. “Reprioritizing and accelerating lead pipe replacement would add significant additional capital needs to the sector and could compete with other critical infrastructure projects, including developing sufficient long-term water supplies and replacing aging infrastructure components other than lead lines.”
On Friday, the city of Flint kicked off its $55 million Fast Start initiative to replace all the lead service lines in Flint and restore safe, clean drinking water as soon as possible. A construction crew replaced lead lines with new copper pipe at the home of a Flint couple expecting a child later this year, according to the office of Mayor Karen Weaver.