Revving up the Engine: Senate Prepares to Pass Landmark Bipartisan Infrastructure Legislation for Transportation, Broadband, Energy and Water Projects

Executive Summary

The Senate is rapidly concluding debate on the Infrastructure Investment and Jobs Act (IIJA), a bipartisan bill that pours $1.2 trillion into traditional and next generation infrastructure technologies, and represents the work product of 22 Republican, Democratic and Independent Senators who painstakingly negotiated the package in concert with the White House. While amendment debate remains ongoing, the legislation appears primed for passage as early as this weekend when the Senate reconvenes.

Senate passage of the IIJA would represent a substantial victory for President Biden and the “G22” members responsible for negotiating the legislative text. Many of the key provisions respond to foundational elements of the President’s American Jobs Plan, which the White House released on March 31 in an effort to infuse $2.3 trillion in federal funds to strengthen roads, bridges, and water systems while laying the foundation for deployment of a national electric vehicle (EV) charging network and broadband infrastructure in rural and underserved American communities.

In that respect, the IIJA represents a classic Washington compromise. The spending figure sits just between the more expansive elements of the American Jobs Plan the President and his progressive allies sought, and the more conservative preferences of Republican leaders eager to modernize traditional infrastructure without relying on debt financing.

The bill includes the following major components:

• Reauthorization of surface transportation programs first reported favorably, and on a unanimous basis, by the Senate Environment and Public Works (EPW) Committee through the Surface Transportation Reauthorization Act (S. 1931), including a funding patch for the Highway Trust Fund to help it remain solvent.
• $7.5 billion to deploy alternative fuel charging and refueling infrastructure, including $2.5 billion for installation of EV charging and alternative fueling infrastructure responsive to the Clean Corridors Act first introduced by EPW Committee Chairman Tom Carper (D-DE) and Congressman Mark DeSaulnier (D-CA), as well as $5 billion specifically targeting EV charging deployment along designated interstate corridors.
• More than $91.1 billion in guaranteed funding over the next five years for transit programs under the jurisdiction of the Federal Transit Administration.
• Transformative investments in clean energy transmission, EV, and hydrogen infrastructure through provisions incorporated in the Energy Infrastructure Act (S. 2377).
• A roughly $100 billion investment in drinking water, storm system, and wastewater treatment facilities, including $15 billion for lead service line replacement and $10 billion to address Per- and Polyfluoroalkyl Substances (PFAS) in drinking water and wastewater.
• $65 billion committed to deploy broadband internet infrastructure in rural, underserved and high-cost areas of the United States and subsidize broadband access; featuring a $42.45 billion authorization of funds to establish a deployment program under the Department of Commerce (DOC) in partnership with state, tribal and territory governments.
• Application of Buy America restrictions throughout the legislation, including provisions reflecting the Build America, Buy America Act (S. 1303), which would limit federal financial assistance to infrastructure projects (broadly defined to include broadband, electrical transmission and water projects, among others) that only use iron, steel, manufactured products, and construction materials.

Meanwhile, House dynamics surrounding the IIJA remain in flux despite the bipartisan nature of the Senate vote. Senior Democratic committee leaders, including House Transportation and infrastructure Committee Chairman Peter DeFazio (D-OR), contend that final infrastructure legislation should reflect their committee members’ ideas - particularly those that already received votes on the House floor. Some progressive leaders contend further that the Senate product does not fully address key elements of the President’s agenda. They would prefer to either amend the Senate bill and force a conference to resolve differences with the IIJA, or wait for the House to pass a budget reconciliation bill that could address the more expansive elements of the American Jobs Plan not reflected in the Senate bill.

On the other hand, there will be significant pressure on Speaker Nancy Pelosi (D-CA) to pass the Senate bill through the House without delay. The Speaker and her leadership team must carefully navigate these dynamics with a razor thin majority in the House in order to deliver a victory for President Biden on one his biggest domestic policy priorities.

Our advisory below examines all the major elements of the IIJA and provides context surrounding a number of highest priority items included in the text as it stands today. We anticipate changes will be made to the bill between now and final passage, however, after senators return to finalize the bill.

Division A & B—Surface Transportation Programs

The IIJA includes substantial funding for the transportation sector, including historic funding to stimulate deployment of EV charging and alternative refueling infrastructure. The foundation of the division includes reauthorization of surface transportation programs for a five-year period. To that end, $343 billion is provided as contract authority with an additional $39.7 billion provided in appropriations.

The bill distributes 90% of the total funding from the Highway Trust Fund to the states by formula. $105 billion of the funding would go toward Department of Transportation (DOT) competitive grants, giving Secretary of Transportation Pete Buttigieg authority to award funding. The bill also includes provisions related to federal-aid highway, transit, safety, and rail programs of the DOT. In particular, the bill extends FY 2021 enacted levels through FY 2022 for federal transportation programs and reauthorizes various surface transportation programs for FY 2023-2026.

The legislation also includes provisions to reduce climate change impacts in the transportation sector and identifies opportunities to enhance the resiliency of the surface transportation system.

Roads, Bridges, & Major Projects

The bill provides $110 billion for funding directed toward federal highway programs and funds directed to new and existing grant programs to replace and repair bridges. The legislative package preserves the 90/10 split of federal highway aid to states.

$55.48 billion of this funding is for increased contract authority. The remaining $55.52 billion is directed toward supplemental appropriations for surface transportation grant programs. The bill authorizes $303.5 billion out of the Highway Trust Fund to states over a five-year period.

While the bill keeps the existing gas tax structure in place to fund the federal Highway Trust Fund, it also includes a provision to borrow $118 billion from general revenue to ensure the Trust Fund remains solvent. In a nod towards the future, however, the bill also directs DOT to establish a pilot program to study and demonstrate a national motor vehicle per-mile user fee.

Passenger and Freight Rail

The bill authorizes $66 billion for rail transportation programs, including $16 billion in funding for Amtrak over a five-year period -- which would be the largest investment in passenger rail since the creation of the rail system -- and increased funding for freight rail and safety at rail-highway grade crossings. Intercity passenger rail would receive $36 billion, with $24 billion reserved toward federal-state partnership grants for Northeast Corridor modernization.

Safety

The bill provides $11 billion to address infrastructure safety requirements and implement new safety requirements among all transportation programs. The bill includes $2.24 billion for increased contract authority for the Federal Motor Carrier Safety Administration and the National Highway Traffic Safety Administration and $8.27 billion for other safety programs.

Airports

The bill includes $25 billion for the Airport Improvement grant program and funding for a new Airport Terminal Improvement program.

Electric Vehicle Infrastructure

Overall, the bill invests $7.5 billion in EV and other alternative fuel infrastructure technology to establish a national network of EV charging infrastructure, including a state formula program for EV charging infrastructure deployment, as noted below.

Clean Corridors Program

The bill provides $2.5 billion to establish a clean corridors competitive grant program to deploy electric vehicle charging, natural gas, propane fueling, and hydrogen fueling infrastructure projects along designated alternative fuel corridors of the National Highway System. The language arises from legislation originally introduced by EPW Committee Chairman Tom Carper (D-DE) and Rep. Mark DeSaulnier (D-CA), and included in the Senate EPW Committee’s legislation to reauthorize surface transportation programs earlier this year, and in July of 2019.

Eligibility. Eligible applicants include (1) states; (2) city planning organizations; (3) local governments; (4) public transportation authorities; (5) Indian tribes; and (6) US territories. Grant applications must demonstrate how funding will be used toward public accessibility of charging infrastructure and how the grantee will engage collaboratively with stakeholders to foster enhanced public-private investments in EV charging infrastructure.

Grants will be awarded to entities who can improve alternative fueling networks by converting corridor-pending corridors to corridor-ready corridors or provide redundancy to meet excess demand for charging and fueling infrastructure and reduce congestion at existing charging and fueling infrastructure. In awarding the grants, the Secretary of Transportation must also consider how the applicant will enable or accelerate the construction of charging and fueling infrastructure and meet the demands of the current market. Finally, the bill also instructs the Secretary to consider geographic diversity among grant recipients to ensure charging and fueling infrastructure is available through the US.

Private Sector Involvement. Funds may only be used to contract with a private company to acquire and install publicly accessible alternative charging or fueling infrastructure. The Secretary may request the private company that contracts with an eligible entity to submit an audit of recent financial statements and confirm the company has experience in installing charging or fueling infrastructure. Grantees may use a portion of funds to acquire and install traffic control devices to provide directional information.

Grantees may enter into a cost-sharing agreement with contracted private entities to share the revenue collected from the charging or fueling infrastructure. Any revenue collected must be used toward a project eligible under the federal-aid highway title of the bill.

Community Set-Aside. There is a $1.25 billion set-aside for Community Grants to install EV charging and alternative fuel in public locations, prioritized for rural and low-income communities. Funding under the set-aside may also be used for development phase and preconstruction activities. Project locations include any public road or other publicly accessible locations. Grants awarded under this program may not exceed $15 million.

Requirements. The bill requires the Secretary to update and redesignate existing alternative fuel corridors 180 days after enactment of the bill, and also requires DOT to establish a recurring process to regularly update and redesignate the corridors.

The Secretaries of Transportation and Energy must develop guidance and standards to deploy, operate, and maintain the charging infrastructure. The funds may be used for the following: (1) acquiring or installing EV charging infrastructure; (2) operating and maintaining costs for the infrastructure, for a period up to 5 years; (3) acquiring or installing traffic control devices; and (4) installing on-premises signs.

National Electric Vehicle Program

Outside of the Clean Corridors program, the bill provides $5 billion to establish and deploy a national electric vehicle charging infrastructure network that only includes funding for EV charging.

Funding. Funding is directed toward acquiring and installing EV charging infrastructure and to connect and facilitate data collection, access, and reliability. The bill directs funding to be used to operate and maintain EV charging infrastructure and to share data about EV charging infrastructure to ensure success in long-term investments.

Like the Clean Corridors program, funds under this section can cover up to 80% of project costs and may be used to contract with a private company to acquire and install publicly accessible alternative charging or fueling infrastructure.

Requirements. The bill requires the Secretary of Transportation to submit a report on state plans to establish a national EV charging infrastructure network no later than 120 days after the bill is enacted. The Secretaries of Transportation and Energy must also develop guidance to deploy the charging infrastructure. The guidance must consider: (1) distance between public EV charging infrastructure; (2) connections and impacts to the electric grid; (3) proximity of travel centers, retailers, and businesses; (4) need for EV charging infrastructure in rural and disadvantaged communities; (5) long-term operation and maintenance of charging infrastructure; (6) existing EV charging infrastructure programs and incentives; (7) fostering public-private partnerships; (8) meeting current EV charging infrastructure demands; and (9) any other factors deemed necessary by the Secretary.

The Secretary must designate national EV charging corridors that identify the short and long needs for EV charging infrastructure to support the movement of freight and goods along major national highways.

Additionally, the section acknowledges that EV infrastructure deployment priorities exist beyond the interstate system. To facilitate community charging, funds may be used to deploy EV charging infrastructure on any public road or publicly accessible location, but only if the Secretary determines alternative fuel corridors are built out in a state.

Joint Office of Energy and Transportation. The bill reserves $300 million for the Joint Office of Energy and Transportation to study, plan, and address issues of concern between the two agencies including: (1) technical assistance to deploy EV charging infrastructure; (2) data sharing on installation, maintenance, and utilization; (3) a study on national and regional EV infrastructure needs; (4) development and deployment of training and certification programs; (5) establishment of a program to promote renewable energy generation, storage, and grid integration; (6) a study on high-voltage distributed current infrastructure; (7) review of how to mitigate climate change in existing DOT and DOE programs; and (8) development of a streamlined utility accommodations policy for high-voltage and medium-voltage transmission. The bill also requires a 10% set-aside to provide additional assistance to states to deploy an EV charging infrastructure network.

Electric Vehicle Working Group

The bill directs the Secretaries of Transportation and Energy to establish an EV working group to provide recommendations on how to adopt and deploy EV vehicles into the transportation and energy sectors.

The working group will be composed of the Secretaries and 25 other appointed members. The working group must include at least one representative of various industries, including EV manufacturers and owners or operators of EV charging equipment. The group must consult with other existing federal interagency working groups on fleet conversion. The working group must submit a report on the status of EV adoption and recommendations for how to improve the deployment of EVs and EV infrastructure. The Secretaries must develop a strategy based on the report to overcome barriers to EV adoption and identify opportunities for research and development.

EV Charging Eligible for STBGP

The bill makes EV charging eligible for funding through the Surface Transportation Block Grant Program (STBGP) and allows for the purchase of zero-emission vehicles in the Congestion Mitigation and Air Quality Improvement Program.

EV and Zero-Emission School Buses and Ferries

The bill authorizes $7.5 billion for the production and acquisition of EV and low-emission school buses and ferries, which includes hydrogen fuel cells, liquefied natural gas, and other alternative fuel technologies.

The bill authorizes and appropriates $5 billion over a 5-year period to implement the Clean School Bus Program to reduce carbon emissions by purchasing low-and-zero-emission school buses. 50% of funding is authorized for EV school buses and the remaining funding is directed toward low-emission (LNG, natural gas, hydrogen, propane, and biofuel) and zero-emission buses. Funds may be used to refund up to 100% of the costs of the bus, and will be prioritized for rural or low-income communities. The remaining $2.5 million is directed toward passenger ferry grant programs to replace existing ferries with electric and other low carbon ferries.

Port Infrastructure Development Program

The bill establishes a $2.3 billion port infrastructure development program which includes port electrification and electric vehicle and fuel cell electric vehicles (FCEV) and infrastructure.

Reduction of Truck Emissions at Ports

The bill includes $150 million to reduce carbon emissions at ports. Funding may be used toward EV and FCEV infrastructure.

SMART Grants

The bill dedicates $500 million toward projects eligible for the Strengthening Mobility and Revolutionizing Transportation (SMART) grant program, which includes integrating EVs into smart grids.

Division C—Transit

The IIJA provides $39.2 billion in funding for the Federal Transit Administration (FTA) to improve and expand public transit assets. The funding provided by the IIJA, in combination with baseline contract authority from the Highway Trust Fund, provides the FTA with more than $91.1 billion in guaranteed funding over the next five years. This represents an 83% increase in transit funding as compared to current funding levels in the Fixing America’s Surface Transportation (FAST) Act.

Capital Investments Grants

The bill provides $8 billion to support the development of new and expanded high-capacity rail and bus services through the Capital Investments Grants (CIG) program. The bill adjusts the Small Starts threshold under the CIG to make any transit expansion project with less than $400 million in capital costs eligible for the program. It also extends the Core Capacity project eligibility timeframe by 5 years to give applicants more time to demonstrate capacity needs.

Electric Vehicle Transit Grants

The bill provides $5.3 billion for the Low-No Program for state and local governments to purchase or lease zero- or low-emission transit vehicles. Additionally, the bill increases the minimum allotment for states to purchase transit vehicles from $1.8 million to $4 million. At least 25% of the funds made available to states under the Bus and Bus Facility Grant programs must be used to purchase or lease low-emission vehicles.

State of Good Repair Grants

The bill provides $4.8 billion for grants to support maintenance, replacement, and rehabilitation of rail transit systems and public transit buses. The DOT estimates 40% of these assets are currently in disrepair.

Public Transportation Innovation

The bill encourages the Administrator of the FTA to develop a long-term research strategy to conduct testing, evaluation, and analysis of zero- and low-emission vehicles to accelerate the shift toward electric public transit fleets. Additionally, the bill directs the Administrator to utilize advanced digital systems to more efficiently maintain and expand transportation infrastructure assets.

Division D—ENERGY

The IIJA makes substantial investments in clean energy transmission and EV infrastructure; US energy research and development, particularly with regard to hydrogen; and attempts to rebalance challenging supply chain issues, especially critical minerals and batteries.

The cornerstone of the Energy Division arises from provisions incorporated in the Energy Infrastructure Act, which advanced 13-7 out of the Senate Energy and Natural Resources (ENR) Committee on July 14.¹ That bill contained the substantive basis of many of the provisions adopted in the IIJA and offered a bipartisan framework for the IIJA energy title.

Critical Minerals

Minerals such as copper, lithium, and cobalt are critical for the development and deployment of electric vehicles and advanced renewable energy generation and storage. The supply chain extracting and delivering these materials in the United States, however, remains underdeveloped. According to the International Energy Agency, “the energy sector’s overall needs for critical minerals could increase by as much as six times by 2040, depending on how rapidly governments act to reduce emissions.”²

These challenges led the Biden Administration to order a review of the critical mineral supply chain within the first 100 days of his term.³ The resulting report recommended that the US should “incentivize domestic and foreign production, processing, and recycling of strategic and critical materials, ensuring that they adhere to strong environmental standards, meaningful community consultation including government-to-government consultation with Tribal Nations, and strong labor standards.”⁴

During the consideration of the Energy Infrastructure Act, Chairman Joe Manchin (D-WV) emphasized that the legislation would “build out our domestic supply chains for clean energy technologies – from the sourcing of minerals to recycling of batteries.”⁵ The provisions included in the IIJA respond to these trends.

In particular, the legislation authorizes $320 million for an Earth Mapping Resources Initiative to “complete an initial comprehensive national modern surface and subsurface mapping and data integration effort” that would prioritize mapping and assessing critical minerals. The legislation also authorizes $167 million for a US Geological Survey (USGS) research facility to support energy and minerals research, expanding on existing programs at the USGS focused on critical minerals.

Further, the legislation creates a rare earth elements demonstration facility at the Department of Energy (DOE), providing $140 million for FY 2022 to demonstrate the feasibility of a full-scale integrated rare earth element extraction and separation facility and refinery. This contemplated program responds to USGS research seeking to strengthen domestic clean energy supply chains and provide environmental benefits through the reuse and treatment of waste material.⁶ Building on earlier work by Senator Lisa Murkowski (R-AK), the legislation also seeks to improve the federal permitting process for critical mineral production.⁷

Finally, the legislation authorizes significant federal investments in critical minerals mining and recycling research, providing $400 million to establish a critical mineral mining, recycling, and reclamation research and development grant program within the DOE and create a grant program for pilot projects that process, recycle, or develop critical minerals. The legislation also authorizes $75 million to support the Critical Minerals Supply Chain Research Facility authorized in the Energy Act of 2020.⁸ Eligible entities for the grant program would be institutions of higher education, national laboratories, nonprofit organizations, and consortia of these entities including collaborations with private industry.

Battery Supply Chains

In a closely related policy area, the IIJA also directs federal investments to strengthen battery supply chains, processing, and manufacturing. In particular, the legislation creates a Battery Material Processing Grant Program within the DOE to ensure the US has a viable battery materials processing industry. The bill also directs DOE to establish a battery manufacturing and recycling grant program to support and sustain a North American battery supply chain.

As part of this effort across the DOE, the bill also provides more than $6 billion for grants for battery recycling research, development, and demonstration, and state-level battery collection, recycling, and reprocessing programs. In particular, the program will fund one or more demonstration projects in the US for the processing of battery materials and construct one or more new commercial-scale battery material processing facilities in the United States. Funds will also be available to retool, retrofit, or expand one or more existing battery material processing facilities in the US.

In addition to grants and other funding, the legislation directs the Energy Information Administration (EIA), in partnership with the USGS, to develop a plan for the modeling and forecasting of demand for energy technologies, including for energy production, transmission, or storage purposes, that use critical minerals. The plan, in particular, is to produce forecasts of energy technology demand over a one-year, five-year, and ten-year period, to assist in aligning demand with an assessment of where the minerals are produced.

DOE would also receive $1 billion to expand an existing program for research, development, and demonstration of EV battery recycling and second-life applications under the legislation. Key objectives under the program would be to make electric vehicle batteries more easily recyclable and establish alternative supply chains for critical materials.

The legislation also provides $500 million for Energy Storage Demonstration Projects and Pilot Grant Program and the Long-Duration Demonstration Initiative and Joint Program. Congress created both programs in the Energy Act of 2020 to expand energy storage research.⁹

Electric Vehicles

The Energy Division also continues the IIJA theme of addressing President Biden and Democratic leaders’ EV infrastructure and battery leadership goals through a combination of energy regulatory objectives and infrastructure spending. The Division would, for instance:

• Require the EIA to collect data with respect to electric vehicle integration with the electricity grid;
• Direct states to consider measures to promote greater electrification of the transportation sector including the establishment of rates that promote affordable and equitable electric vehicle charging options, improve the customer experience associated with EV charging including reducing wait times, accelerate third-party investment in public electric vehicle charging, and appropriately recover the marginal costs of delivering electricity to electric vehicles and electric vehicle charging infrastructure;
• Require the Secretary of Energy to conduct a study on the cradle to grave environmental impact of electric vehicles, and, with the Secretary of State, on the impact of forced labor in China on the electric vehicle supply chain; and
• Create an Energy Jobs Council to conduct a survey of employers in the energy, energy efficiency, and motor vehicles sectors and perform analysis of the figures and demographics in those sectors to be made publicly available.

Hydrogen Infrastructure

Support for development of a hydrogen energy economy has gradually been growing for several years, and the IIJA responds to this surge of interest by carrying over a number of provisions from the Energy Infrastructure Act to stimulate investment in the US hydrogen economy and create a “clean hydrogen strategy and roadmap for the United States.” To that end, the legislation establishes targets to “address near-term (up to 2 years), mid-term (up to 7 years), and long-term (up to 15 years) challenges to the advancement of clean hydrogen systems and technologies.’’

In addition, in order to streamline access to the hydrogen programs created under the legislation, the IIJA establishes that “hydrogen” as well as “clean hydrogen” mean “hydrogen produced in compliance with the greenhouse gas emissions standard established under section 822(a), including production from any fuel source.’’ As part of this definition, the legislation establishes an initial standard for the carbon intensity of clean hydrogen, “equal to or less than 2 kilograms of carbon dioxide-equivalent produced at the site of production per kilogram of hydrogen produced.” The Secretary must also develop a methodology, together with the EPA Administrator and outside stakeholders, to adjust the standard after five years, accounting for technological and economic feasibility.

In general, the legislation significantly expands hydrogen programs at the DOE to advance the demonstration and commercialization of clean hydrogen production, processing, delivery, and end-use application technologies. A key aspect of this effort is the provision of $8 billion for DOE to create of “hydrogen hubs,” defined as a “network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity.” Under the legislation, DOE will establish at least four regional clean hydrogen hubs to demonstrate the production, processing, delivery, storage, and end-use of clean hydrogen. The hubs will demonstrate feedstock diversity, end-use diversity, geographic diversity, and other factors for the production and utilization of hydrogen.

The bill also tasks DOE with a number of priorities to develop the US hydrogen economy. For instance, the bill directs DOE to (1) develop a national strategy and roadmap to facilitate a clean hydrogen economy; (2) institute a clean hydrogen manufacturing and recycling program to support a clean hydrogen domestic supply chain, funded at $500 million across FY 2022 to FY 2026; (3) create a $1 billion demonstration, commercialization and deployment program to decrease the cost of clean hydrogen production from electrolyzers, based on legislation authored by Senator Martin Heinrich (D-NM);¹⁰ and (4) instructs the National Energy Technology Laboratory, the National Renewable Energy Laboratory, and Idaho National Laboratory to collaborate in carrying out the new regional clean hydrogen hubs and clean hydrogen manufacturing and recycling programs.

DOE Loan Office Update

The legislation also updates some of the authorities for the Department of Energy’s Loan Program Office, in particular clarifying the “reasonable prospect of repayment” criteria for both the Title XVII Innovative Energy Loan Guarantee (Title XVII) Program and the Advanced Technology Vehicle Manufacturing (ATVM) Program and expanding the factors the Secretary may consider under both programs. The legislation also expands the Title XVII Program to include projects increasing the domestic supply of critical minerals, as well as the ATVM program to include medium and heavy duty vehicles, trains, aircraft, maritime vessels, and hyperloop technology. Finally, the legislation allows for loan guarantees for certain Alaska natural gas transportation projects and systems.

Advanced Energy Manufacturing and Recycling Grant Program

The legislation provides $750 million between FY 2022 and FY 2026 in grant funding for small- and medium-sized manufacturers to support new or retrofitted manufacturing and industrial facilities. To be eligible, these facilities would produce or recycle advanced energy products in communities where coal mines or coal power plants have closed. An “advanced energy product” is broadly defined, including renewable energy generating property, fuel cells or energy storage components, equipment to capture and sequester carbon, property that would produce energy conservation equipment, and a host of other technologies. The Secretary of Energy would have authority to modify and update the list of eligible property as necessary.

Division E—Water Infrastructure

The IIJA invests a significant funding to upgrade the country’s existing water infrastructure and provide clean and safe drinking water, including $55 billion to reauthorize Safe Drinking Water Act programs, $43.4 billion for the Drinking Water State Revolving Fund (DWSRF) and Clean Water State Revolving Fund (CWSRF), $15 billion for lead service line replacement, and $10 billion to address PFAS in drinking water and wastewater. The bill also provides $3.5 billion to support water infrastructure in tribal communities including investments in resiliency and sanitation facilities.

Drinking Water and Clean Water State Revolving Funds

Of the $43.4 billion appropriated for the DWSRF and the CWSRF, $23.4 billion is directed toward the DWSRF, which provides loans and grants to fund water infrastructure improvements. Almost half of this funding must be administered as grants or fully forgivable loans. The bill also makes the Buy America requirement for DWSRF permanent. The bill authorizes $11.4 billion for the CWSRF and provides additional flexibilities to states such as forgiving grants and other loan forgiveness through buying, refinancing, or restructuring debt.

Addressing Per- and Polyfluoroalkyl Substances

The bill authorizes $10 billion for the cleanup of emerging contaminants, including PFAS. Funds related to PFAS are disbursed through three programs: (1) $4 billion to address PFAS in drinking water through the DWSRF; (2) $5 billion for small and disadvantaged communities to address emerging contaminants, including PFAS; and (3) $1 billion to address emerging contaminants, including PFAS, in wastewater through the CWSRF.

Environmental Remediation and Superfund

The bill provides $21 billion for environmental remediation, including $3.5 billion over a five-year period to invest in the Hazardous Substance Superfund remediation program. The bill also reinstates Superfund excise taxes at twice their prior levels, and would raise chemical excise taxes to a range of $0.44 to $9.74 per ton. Reimposition of this tax would expire on December 31, 2031.

Lead in Drinking Water

The legislation authorizes a historic $15 billion investment through the DWSRF to replace lead service lines through a combination of grants and forgivable loans. This commitment will not be sufficient to completely replace all lead service lines in the US, but it represents a substantial down payment towards potential further investments that may be provided through the budget reconciliation process. Structurally, the bill requires the funds authorized for the replacement of lead service lines must be granted only to states that express need and used only for that purpose.

The bill also authorizes $400 million to reauthorize the EPA’s lead reduction projects grant program that replaces any lead service line and prioritizes these grants for disadvantaged communities. Eligible entities must cover the entire cost of lead service line replacement for low-income homeowners.

Resiliency

The bill authorizes $200 million to create a drinking water system infrastructure resilience and sustainability program. The program will assist mid-size and large water systems with resiliency efforts through the promotion of water conservation, creation of desalination facilities, and implementation of resiliency measures in response to natural hazards, cybersecurity, and extreme weather events. The bill requires the development of a Prioritization Framework that identifies vulnerable public water systems in consultation with the Director of the Cybersecurity and Infrastructure Security Agency and EPA. The bill also provides $100 million to create a Clean Water Infrastructure Resiliency and Sustainability Program that allows publicly-owned treatment works operators to address threats to infrastructure caused by climate change.

Investment in Public Water Systems

The bill authorizes $75 million for technical assistance to public water systems and $140 million to provide communities that encounter public water system emergencies with proper resources (including cybersecurity events). The bill also provides $200 million for the creation of an operational sustainability program for small public water systems that improves water infrastructure system response and permits the use of technology to support operational sustainability.

Investment in Technology to Address Stormwater Issues

The bill authorizes $20 million for research institutions, nonprofits, and institutions of higher education to conduct research on emerging stormwater control technology, establish a Center of Excellence for stormwater control infrastructure, and publish the research results online. The bill also provides $40 million to create a grant program to fund the development of standards, trainings, and educational materials for stormwater, with a non-federal cost share of 20%.

The bill requires the EPA to conduct a study on existing and potential technology to address cybersecurity, water, and wastewater treatment threats. The bill also authorizes $40 million to establish a grant program for public water systems that service disadvantaged or small communities to identify and deploy drinking water infrastructure technology, noting that a single grant cannot exceed $500,000.

Investment in Small, Disadvantaged and Rural Communities

The bill authorizes $510 million towards the reauthorization of the Assistance for Small and Disadvantaged Communities Program that provides grants to assist communities with compliance regulation, water quality testing, and per-household assistance. Importantly, as part of this program, the bill also allows grant funds to be used for the purchase of filters and filtration system in small and disadvantaged communities.

Wastewater and Stormwater

The bill authorizes $80 million to create a program to assist publicly-owned treatment works to improve waste-to-energy systems through sludge collection systems, anaerobic digester, methane capture, or transfer of other technologies. The bill also provides $100 million for the reauthorization of alternative water source project grants that are used to engineer, design, construct, or conduct testing on alternative water sources for critical water supply needs. Finally, the bill authorizes $280 million to reauthorize the sewer overflow and stormwater reuse municipal grants program used for construction and design of treatment works sewer overflow, sanitary sewer overflow, or stormwater.

Division F—Broadband

Broadband Equity Access and Deployment Program (BEAD)

The bill instructs DOC to establish the BEAD program, which will provide grant funding for the construction and deployment of broadband infrastructure networks in rural, underserved and unserved communities.

The bill authorizes $42.45 billion for this purpose, with $4.2 billion allocated for areas considered to have high costs. The $4.2 billion will be distributed to states through a formula that divides the number of unserved locations in high-cost areas in each state by the total number of unserved locations in high-cost areas in the US. The bill requires a minimum floor of $100 million available per state and $100 million to be split among four territories. The remaining funding that is not specific to high-cost areas will be split among states using a similar formula, dividing the total number of unserved locations in a state by the total number of unserved locations in the US.

The bill defines “unserved locations” as broadband-serviceable locations that have broadband speeds less than 25 Mbps for downloads and 3 Mbps for uploads, and “underserved locations” as broadband-serviceable locations that have broadband speeds less than 100 Mbps for downloads and 20 Mbps for uploads.

Eligible Applicants. All 50 states, Washington DC, Puerto Rico, and territories are eligible for funding. States must submit a letter of intent, a five-year plan, an initial proposal, and a final proposal, all subject to approval from the Assistant Secretary of Commerce for Communications and Information, detailing the planned use of the funding.

The letter of intent must include details on existing broadband programs and funding in the state and plans for additional data on broadband speeds. With the submission of the letter of intent, a state may request access to no more than five percent of their allocated funds for additional broadband research, publications, and training for employees of the state broadband program. If the Assistant Secretary approves this request, the state must also submit a five-year plan detailing their intended use of these funds. This five-year action plan must include investment priorities, propose solutions for the deployment of affordable broadband, identify unserved and underserved locations, and assess the amount of time buildout of universal broadband would take.

The initial proposal must outline the long-term objectives in closing the digital divide and deploying broadband, identify existing programs to use for broadband deployment, outline a coordinated plan with local and regional governments, and include a plan to competitively award subgrants. States will have access to 20% of the allocated funds once the initial proposal is approved.

Afterwards, the state is eligible to submit a final proposal for the remaining amount of allocated funding. Proposals must include a detailed plan on allocating grant funds to unserved and underserved locations, a timeline for implementation, a plan for oversight, and a description of coordination with local governments. States are required to have plans to address all unserved areas before they are able to fund deployment projects to underserved areas. After both are addressed, states may use funds for anchor institution projects.

Use of Funds and Subgrants. A state may use allocated funds to competitively award subgrants for the following activities: (1) unserved and underserved area service projects; (2) connecting community anchor institutions (such as public schools, libraries, and universities); (3) installing internet infrastructure within a multi-family residential building; (4) broadband mapping and data collection; (5) broadband adoption programs to provide affordable, internet-capable devices; and (6) any other use at the discretion of the Assistant Secretary.

Limitations. Subgrantees are required to adhere to quality-of-service standards established by DOC, must comply with cybersecurity and supply chain risk management practices, and may not use subgrant funding to purchase optical transmission equipment made in China or any other equipment listed under Section 9 of the Secure and Trusted Communications Network Act of 2019.

Speed Mandates. Subgrantees must deploy broadband at a speed of 100 Mbps for downloads and 20 Mpbs for uploads.

Cost Sharing Requirements. The bill includes a matching requirement for subgrantees of at least 25% of project costs, except for projects in high-cost areas. The matching funds may include funds provided under previous COVID-19 relief legislation, including the CARES Act and the American Rescue Plan Act of 2021.

Prioritization. The priority of awarding subgrants for broadband network deployment are as follows: (1) unserved service projects; (2) underserved service projects; and (3) community anchor institutions.

Local governments, nonprofits, and broadband service providers can challenge a state’s determination as to whether a location or community anchor institution is eligible for the grant funds, including challenging whether that area is unserved or underserved. The Federal Communications Commission (FCC) must address these challenges no later than 90 days after a challenge is completed.

Additionally, no later than 2 years after the bill’s passage, the Assistant Secretary, in consultation with the FCC, will create a website that allows consumers to determine if they are eligible for federal or state broadband subsidies or qualify for a low-income broadband plan.

State Digital Equity Capacity Grant Program

This section directs DOC to establish a grant program aimed at achieving digital equity, supporting digital inclusion activities, and building state capacity for broadband adoption. Grants must ensure states have capacity to promote achievement of digital equity and support digital inclusion activities. The program allocates funds to two distinct grants: State Planning Grants for states to develop a Digital Equity Plan for first two years of program, and State Capacity Grants for implementation of the plans following the first two years of the program.

Funding. The bill authorizes $60 million for grants under the State Digital Equity Plan Planning Grants. For State Capacity Grants, the bill authorizes $240 million for FY 2022 and $300 million per year from FY 2023 through FY 2026.

Grant funds would be distributed to states based on the following formula: (1) 50% of total funding is based on total population; (2) 25% is based on number of individuals who are members of covered populations; and 25% is based on the comparative lack of availability and adoption of broadband. The minimum award cannot be less than 0.5 percent of the total amount made available. State Digital Equity Plan Planning Grant funds must be spent in one year while State Capacity Grants must be spent within five years. At least five percent of total grant funds are reserved for tribal governments, Alaskan Native entities, and Native Hawaiian organizations, and at least one percent of total grant funds are reserved for four US territories.

Covered populations are defined as individuals who live in a household not making more than 150% of the federal poverty level, aging individuals, incarcerated individuals, veterans, individuals with disabilities, individuals with language barriers, racial and ethnic minorities, or individuals who live in rural areas.

Eligibility. State governors must select an administering entity for the state that is responsible for running the program. Organizations that are eligible to serve as administering entities include state agencies, native tribes, foundations, nonprofit corporations, or a coalition located in-state.

Digital Equity Competitive Grant Program

No later 30 days after the awarding of the State Digital Equity Capacity Grants, DOC must establish the Digital Equity Competitive Grant program with a similar purpose to achieve digital equity, support digital inclusion activities and build state capacity for broadband adoption. Grants may be awarded to the same entities as mentioned in State Digital Equity Capacity Grant program or to a partnership between eligible entities. The bill requires any applicant to submit a plan on how grant money will be spent, which must include plans that outline ways to increase internet access and the adoption of broadband among covered populations.

Funding. The bill authorizes $250 million for each of the first five fiscal years of the program. It also sets aside the same proportions of funding for tribal entities and territories as the State Digital Equity Capacity Grant program.

Use of Funds. Grantees must use the funds to develop and implement digital inclusion activities to covered populations (which are defined similarly as in the Digital Equity Capacity Grant program); facilitate broadband adoption for covered populations; and implement training programs and workforce development of covered populations. Grant funds also can be used to make digital technology and equipment available and upgrade or build public access computing centers. Grantees must spending their funding within four years after funding is awarded.

Enabling Middle Mile Broadband Infrastructure

This bill establishes a $1 billion grant program under DOC intended to encourage the expansion of middle mile infrastructure, defined as broadband infrastructure that does not connect directly to end-user location. The goal of the program is to reduce the cost of unserved and underserved areas and promote broadband resiliency through network connection paths. Grants will be awarded on a technology-neutral, competitive basis to last-mile providers. Eligible entities include telecommunications companies, technology companies, electric utilities, and utility cooperatives. Funding would be available from FY 2022 through FY 2026.

Prioritization. The grant will prioritize applicants who connect middle mile infrastructure to last mile networks (defined as infrastructure connecting unserved and underserved areas), connect non-contiguous trust lands, or offer wholesale broadband for reasonable rates.

Requirements. Applicants must provide a buildout timeline, use data to prove their capability to support retail broadband service, and demonstrate the ability to connect to community anchor institutions with speeds no less than 1 gigabit per second for downloads and uploads. Applicants receiving grants to build middle mile projects using optical fiber technology must commit to connecting with public internet and physical interconnection networks and must disclose proposed interconnection, nondiscrimination, and network management practices.

The amount of the funding received through the grant cannot exceed 70% of the total project cost.

Broadband Affordability Provisions

This bill extends and modifies the Emergency Broadband Benefit program from the Consolidated Appropriations Act, 2021. This provision authorizes $14.2 billion to ensure low-income families have access to the internet through a $30 per month voucher for these families to use toward an internet service plan of their choosing. The bill changes the program name from “Emergency Broadband Benefit” to “Affordable Connectivity Benefit.” It also instructs the FCC to establish a mechanism in which a broadband provider in a high-cost area may provide an affordable connectivity benefit for internet service on tribal land.

The bill institutes a requirement to allow customers to apply this affordable connectivity benefit to any internet service offering and instructs providers, in collaboration with state agencies and nonprofits, to carry out public awareness campaigns to highlight the existences of the Affordable Connectivity Benefit program. The bill instructs the FCC to create a dedicated oversight process intended to protect consumers and investigate potential violations committed by providers. It also instructs the FCC to create rules to protect consumers from inappropriate opt-in requirements, upselling/downselling, and restrictions on consumers to switch internet providers or offerings.

Additionally, the bill institutes delayed changes to the Affordable Connectivity Benefit program, beginning when the FCC submits certification for the program or on December 31, 2021 (whichever is earlier). These changes include eliminating certain eligibility restrictions for households and eliminating COVID-19 specific language.

The FCC must issue final rules regarding the annual collection of data relating to the pricing and subscription rates of each participating internet service provider within one year after the bill’s enactment. The FCC will also make this annual data available to the public. Also within a year of the bill’s enactment, the FCC must to create regulations to require the display of broadband consumer labels that outline network performance, introductory rate information, broadband data collection use, and discloses commercial terms.

The comptroller general must submit a report evaluating the FCC’s actions on broadband affordability within a year of the bill’s enactment.

The bill also outlines the federal digital discrimination policy, which aims to ensure all broadband consumers benefit from comparable speeds, capacity, and latency within a broadband service area. It also instructs the FCC to adopt federal rules to facilitate equal access of broadband internet within two years of the bill’s enactment and develop model polices for states and localities to use.

Division G—Build America, Buy America

Build America, Buy America Act

The bill includes provisions reflecting the Build America, Buy America Act (S. 1303), originally introduced by Senators Sherrod Brown (D-OH), Rob Portman (R-OH), Gary Peters (D-MI), and Mike Braun (R-IN). The bill would limit federal financial assistance to infrastructure projects that only use iron, steel, manufactured products, and construction materials (not including cement and cementitious materials, or aggregates such as stone, sand, or gravel, or aggregate binding agents or additives) produced in the United States. The term “infrastructure” is defined broadly to include most projects addressed in the bill, including: (1) roads, highways, and bridges; (2) public transportation; (3) dams, ports, harbors, and other maritime facilities; (4) intercity passenger and freight railroads; (5) freight and intermodal facilities; (6) airports; (7) waters systems including drinking water and wastewater systems; (8) electric transmission facilities and utilities; (9) broadband infrastructure; and (10) buildings and real property.

Not later than 180 days after enactment, the Office of Management and Budget (OMB) must issue standards that define the term “all manufacturing processes” in the case of construction materials, which will require both the manufacture of the construction material and the inputs of the construction material to occur in the US.

A waiver may be granted if: (1) the domestic content procurement preference would be inconsistent with the public interest; (2) the types of iron, steel, manufactured products, or construction products are not produced in the United States in sufficient and reasonable available quantities or of a satisfactory quality; or (3) the inclusion of domestically sourced iron, steel, manufactured products, or construction materials would increase the overall cost of the project by more than 25%. Waivers must be made publicly available online and must provide at least 15 days for public comment.

Buy America Waivers

The bill requires the Secretary of Transportation to provide an abbreviated notice and comment period for proposed waivers for infrastructure projects. Specifically, at least 15 days before issuing a waiver, the Secretary must provide public notice of the proposed waiver, including reasons for the proposed waiver, and provide the public with an opportunity to comment. The bill also requires the Secretary to submit a report to the Senate EPW and House Transportation and Infrastructure Committees on the waivers issued annually.

Additionally, under Section 11513 in the Surface Transportation Title, the legislation amends 23 U.S.C. § 313 to add a new section authorizing the Secretary of Transportation to issue waivers to Buy America rules but only after providing a 15-day notice period, an opportunity to comment, and the reason for the waiver.

Buy American Regulations

The bill would require, within one year, the OMB Director, in consultation with the Federal Acquisition Regulatory (FAR) Council, to issue final regulations or guidance to standardize and simplify how federal agencies comply with, report on, and enforce the Buy American Act. This directive would not only apply to infrastructure projects funded by the legislation, but more broadly.

The regulations or guidance must include, at a minimum: (1) guidelines on the circumstances under which the acquisition of articles, materials, or supplies mined, produced or manufactured in the United States is inconsistent with the public interest; (2) guidelines to ensure agencies base determinations of non-availability on appropriate considerations; (3) uniform procedures to make a list of granted waivers publicly available; (4) guidelines to ensure projects are not disaggregated to avoid applying the Buy America Act provisions; (5) an increase to the price preference for domestic end products and domestic construction materials; and (6) amendments to the definitions of “domestic end product” and “domestic construction material” to ensure iron and steel products are, to the greatest extent possible, made with domestic components.

This provision also contains a sense of Congress that the FAR Council should increase the domestic content requirements for domestic end products and domestic construction material to 75%, or in the event of no qualifying offers, 60%. This instruction aligns with an executive order President Biden issued on January 30, 2021, and reflected in a FAR Council notice of proposed rulemaking (NPRM) on July 30, 2021, which proposes to gradually raise the domestic content threshold from 55 to 75% over a five-year period. That NPRM is open for comment until September 28, 2021.

Finally, the legislation requires the FAR Council to amend FAR Part 25 regulations to define what constitutes an “end product manufactured in the United States,” including guidelines to ensure that manufacturing processes involved in production of the end product occur domestically.

Buy American Act Amendments

The bill would add special rules to the Buy American Act. Specifically, the bill would require all manufacturing processes involved in the production of iron and steel, from the initial melting stage through the application of coatings, to occur in the United States to be considered “manufactured in the United States.” This provision would also exclude all iron and steel articles, materials, and supplies used in contracts from the exception for commercially available off-the-shelf (COTS) items - an approach that departs generally from current law given the Buy American Act does not apply to COTS items.

Made in America Office

The bill would direct OMB to establish a Made in America Office. President Biden already established such an office pursuant to an executive order issued on January 25, 2021 and named Celeste Drake as the first Made in America Director in April. This provision would also direct the Made in America Director to, within 180 days, review the Department of Defense’s use of reciprocal defense agreements and memoranda of understanding to determine if domestic entities have equal and proportional access.

BuyAmerican.gov Act

The bill includes the BuyAmerican.gov Act (S. 732), originally introduced by Senators. Portman, Brown, Chris Murphy (D-CT), Lindsey Graham (R-SC), and Debbie Stabenow (D-MI). This provision requires the Secretary of Commerce, the United States Trade Representative, and the Director of OMB to assess, within 150 days, the impacts of all US free trade agreements, World Trade Organization Agreements on Government Procurement, and federal permitting processes on the operation of Buy American laws, including their impacts on the implementation of domestic procurement preferences. BuyAmerican.gov would contain information on all waivers and exceptions to Buy American laws that have been accepted, requested, are under consideration, or have been granted since the enactment of the bill.

The bill also makes clear that no changes are made to procurements subject to the Trade Adjustment Act by providing that, “amendments made by [the legislation] shall be applied in a manner consistent with the United States obligations under international agreements.”

Division H—REVENUE PROVISIONS

The legislation fully offsets its additional cost, stitching together roughly $590 billion in additional revenue, estimated economic expansion, sales of federal assets, and mandatory cost savings. In addition to finding the necessary additional revenues, the bill would also fill projected shortfalls in the Highway Trust Fund—which distributes funding to state and local departments of transportation and transit agencies via gas tax proceeds—by transferring $90 billion from general revenues to the highway account and $28 billion to the mass transit account.

To offset the cost of expanded Superfund remediation efforts, the legislation raises $14.5 billion in Superfund taxes. The elevated excise taxes are imposed on a variety of domestically produced and imported industrial chemicals and, under the legislation, will not expire until December 31, 2031. However, the bill leaves untouched the expired excise taxes on petroleum products and excise taxes on corporate incomes, both of which expired in 1995.¹¹ The tax on chemicals is retroactive, with the amendments made by this section taking effect on July 1, 2022.

One of the more controversial tax provisions is the imposition of reporting requirements on brokers of cryptocurrency. This provision is estimated to increase federal revenues by $28 billion during the next decade by encouraging greater tax compliance. Generally speaking, a broker—defined, in part, as person who (for a consideration) regularly acts as a middleman with respect to property or services—must provide the Internal Revenue Service (IRS) information about certain transactions involving third parties.¹² The legislation would expand the definition of “broker” to include “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”

This section is broadly drafted and already subject to criticism from some stakeholders in the cryptocurrency community and congressional leaders in the cryptocurrency space that contend the provision would implicate those who validate distributed ledger transactions (miners), those whose function is to control access to digital assets (validators) and those who develop digital assets and protocols (developers) and others who would not necessarily have any relevant data for the IRS.¹³ As a result, the provision is subject to an amendment sponsored by Senators Ron Wyden (D-OR), Pat Toomey and Cynthia Loomis (R-WY) to exclude from the definition of broker miners, validators, and developers; and a separate, less aggressive White House-backed amendment filed by Senators Mark Warner (D-WA), Rob Portman and Kyrsten Sinema (D-AZ).

The legislation extends and modifies the mandatory sequester, a budget provision providing for across-the-board reductions in spending, which would save $8.7 billion. The legislation also generates $6 billion in revenue from sales from the Strategic Petroleum Reserve, a frequent revenue raising provision in infrastructure legislation. In addition, the legislation finds $3 billion in savings by providing the Medicare program with manufacturer refunds for discarded medications stemming from the use of large, single-use drug vials. The legislation would raise $51 billion by delaying the Medicare Part D rebate rule.

The legislation makes a “finding” that there are $53 billion in amounts “Treasury originally estimated to be spent on unemployment insurance funds” from the CARES Act. This legislation repurposes those funds to these infrastructure investments. The legislation also extends the fees charged by Fannie Mae and Freddie Mac to 2031, raising $21 billion, and includes $20 billion from sales of future spectrum auctions and $67 billion from proceeds of the February 2021 C-band auction. Finally, the legislation assumes these investments earn an economic return, adding $56 billion in federal revenues.

The legislation also raises revenue in several other categories, including: (1) $6 billion raised by extending customs user fees for an additional year through September 30, 2031; (2) $3 billion from extending interest rate smoothing options for defined benefit pension plans--which would temporarily increase federal tax revenues; and (3) $8 billion from ending the employee retention credit on September 30, 2021, which is one quarter early.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.