LEGISLATIVE UPDATE
The Recently Enacted Transportation and Energy Bills and Other Federal Legislation Updates
by Ben Patrick and Christopher D. Montez
In this legislative update, we focus on federal legislation affecting the construction industry, including bills that recently became law and pending legislation.
Analysis of SAFETEA-LU
On August 10, 2005, the president signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). SAFETEA-LU replaces two previous federal transportation bills: the Intermodal Surface Transportation Efficiency Act (ISTEA), passed in 1991, and the Transportation Equity Act for the 21st Century (TEA-21). Total guaranteed funding for SAFETEA-LU will be at least $244.1 billion, of which $193.2 billion will be allocated to the Federal-Aid Highway Program. SAFETEA-LU changes the existing law in several ways that are relevant to lawyers who are involved in transportation construction.
Shortened Period for Legal Challenges to Projects
Under ISTEA and TEA-21, legal challenges to federal highway and transit project approvals and permitting could be brought at any time within six years of the challenged decision. Under SAFETEA-LU, such challenges must now be brought within 180 days of the challenged decision.1 This change is in keeping with the overriding philosophy of SAFETEA-LU: enhancing flexibility and efficiency by streamlining the project approval process.
Pilot Programs for State Management of Federal Projects
SAFETEA-LU establishes a pilot program pursuit to which five states (Alaska, California, Ohio, Oklahoma, and Texas) can apply, on any given project, to assume all duties that would ordinarily be assumed by USDOT on projects within those states. However, should a state take over management of a project, the project must continue to be managed in accordance with the applicable federal rules; even though the state DOT would administer the project, the administration would be in accordance with federal regulations, and not the regulations of the state DOT.2
Elimination of Project Size Requirements for Design-Build Projects
Under ISTEA and TEA-21, design-build delivery could be used only on projects larger than $50 million. That limitation is eliminated entirely in SAFETEA-LU.3 Other limitations set by ISTEA, TEA-21, and the USDOT remain unchanged. This change is further evidence of the growing trend toward design-build delivery on public projects. This regulation should open design-build work to smaller contractors.
Revised Funding Mechanism
The lion’s share of funding for federal transportation projects comes from the Highway Trust Fund, which is financed by federal taxes on gasoline. Arguments over the distribution of Highway Trust Fund money were at the core of the almost-two-year debate over SAFETEA-LU. “Donor” states (those that pay more in taxes than they receive in project spending)4 and “recipient” states argued over the proper formula for distributing Highway Trust Fund money through project expenditures. Under the new distribution formula, donor states will be guaranteed a return of at least 90.5 percent of all taxes paid. That number will increase during the lifetime of SATETEA-LU so that by 2008 donor states will be guaranteed a return of at least 92 percent. This increase comes at the expense of several states that will see their rates of return decrease.5 SAFETEA-LU also expands bonding authority for private activity bonds and expands eligibility for participation in the Transportation Infrastructure Finance and Innovation Act’s credit assistance program.
Individual Projects and State Allocations
SAFETEA-LU identifies twenty-five “Projects of National and Regional Significance,” thirty-three “National Corridor Infrastructure Improvement Projects,” 465 “Transportation Improvements,” and 5,130 “High Priority Projects.” All of these projects have funds earmarked for their completion. Nationwide, Arizona, Colorado, Minnesota, and the District of Columbia will see the largest relative increases in spending.6 Continuing a long-standing trend, gross expenditures will be highest in California, Florida, Georgia, Illinois, Ohio, Pennsylvania, New York, and Texas.7
Industry Impact
Although SAFETEA-LU will certainly have a positive effect on the heavy highway construction industry, gauging the impact can be difficult. SAFETEA-LU’s six-year authorizations represent a 38 percent increase over the preceding six-year statute, TEA-21. However, when adjusted for inflation, the funding increases in SAFETEA-LU average only 1.6 percent per year, compared to TEA-21’s average adjusted annual increase of 6.1 percent. At a minimum, SAFETEA-LU should benefit the heavy highway industry by bringing stability to the sector. TEA-21 expired at the end of September 2003. Since that time, Congress has enacted twelve interim funding measures without agreeing on another comprehensive funding mechanism. SAFETEA-LU will enable government project managers to plan projects knowing that funding is, and will remain, in place.
Key Provisions of the Energy Policy Act of 2005
On August 8, 2005, the president signed H.R. 6, the Energy Policy Act of 2005 (the Energy Bill). The Energy Bill contains a number of provisions that will affect favorably the construction industry.
Exclusive Federal Jurisdiction for Disputes Involving the Approval of New Liquefied Natural Gas Production Facilities The Energy bill gives exclusive jurisdiction over siting disputes for liquefied natural gas (LNG) production facilities.8 This is true even if the lawsuit seeks review of a decision of a state administrative body. The federal court, which is granted jurisdiction pursuant to the Energy Bill, is also instructed to handle the matter as an expedited case. Congress’ obvious intent is to streamline the process for obtaining construction permits.
Expanded Exemptions from Environmental Study Requirements
The Energy Bill also expands the types of facilities that are exempt from detailed environmental studies pursuant to the National Environmental Policy Act.9 The exemption is rebuttably presumed to apply to:
1. Individual surface disturbances of less than five acres;
2. Drilling an oil or gas well at a location at which drilling has occurred within the last five years;
3. Drilling an oil or gas well within a developed field that passed NEPA review within the last five years;
4. Placement of a pipeline in an approved right-of-way, so long as the corridor was approved within the last five years; and
5. Maintenance of a minor nature.
Tax Advantages for Facility and Infrastructure Construction
The Energy Bill provides a number of tax incentives for expanding existing facilities and developing infrastructure. Electric transmission property10 and natural gas distribution lines11 are now treated as fifteen-year property, and natural gas gathering lines are treated as seven-year property.12 Additional inducements are also available for facilities producing fuel from nonconventional sources.13 A variety of incentives are available for energy-efficient new construction.14 Significant credits also apply to the construction of clean coal and gasification facilities.15 There also are inducements for the construction of new nuclear power plants.16
Likely Impacts on the Construction Industry
The Energy Bill contains incentives that should affect construction industry participants regardless of size. Although major contracts for generation facility expansion and new construction likely will continue to be awarded to industry mainstays, credits for transmission facility construction should generate smaller-scale development, which will be constructed by local companies. Exclusive federal jurisdiction over LNG siting disputes, combined with expanded environmental study exemptions and a proposed federal-state cooperative permitting process,17 should streamline the approval process and decrease total project time, a significant incentive in itself. Most of the programs apply to construction commenced after the third quarter of 2005, so the incentives already are in place, and owners who have been contemplating construction should begin moving forward in earnest.
Homeland Security Update
In September 2005, the Department of Homeland Security’s Secretary Michael Chertoff announced that he will exercise the authority provided to him by the Homeland Security Act of 2002 and REAL ID act of 2005 to expedite the construction of a fourteen-mile border security system, or what the DHS refers to as the Border Infrastructure System (BIS), near San Diego, California, by waiving certain legal requirements.18 The BIS is designed to be built in two phases of construction. Phase I provides a roadway with security barriers and lighting within the middle of the project.19 Phase II extends this roadway system west through the Tijuana Valley Regional Park to the Pacific Ocean and east to Ohay Mountain.
FEMA Contracting and Related Legislation in the Wake of Hurricane Katrina
FEMA has contracted with four of the nation’s major construction corporations to expedite emergency relief to Gulf Coast families displaced by Hurricane Katrina.20 Those corporations are Bechtel, CH2M Hill, Flour Enterprises, Inc., and Shaw Group; there are potential subcontracting opportunities with each of these firms.21 In the areas affected by Hurricane Katrina, FEMA has direct contract opportunities for a variety of commodities and services, including, but not limited to, mobile homes, travel trailers, trucks, generators, portable bathrooms, rental equipment, shower units, mobile hospitals, and tents.22
In September 2005, the president ordered that the Davis-Bacon Act wage rates will not apply to federally funded construction projects in the rebuilding of the Hurricane Katrina-affected areas of Louisiana, Mississippi, Alabama, and Florida.23 But, in the following month, the administration retracted this position and announced that the suspension of the Davis-Bacon Act would be revoked no later than November 8, 2005.24 Senators Jim DeMint (R-S.C.), Pat Roberts (R-Kan.) and Larry Craig (R-Idaho), however, have introduced S. 1817 in the U.S. Senate (the Senate), which is a bill entitled the “Cleanup and Reconstruction Enhancement (CARE) Act.” If enacted, it would suspend the Davis-Bacon Act for a period of one year for any area in the United States that received an emergency disaster declaration by the president of the Unites States.25 Representative Jeff Flake (R-Ariz.) introduced a companion bill in the U.S. House of Representatives (the House), H.R. 3684, which would establish a similar suspension of the Davis-Bacon Act during times of emergency disasters.26 Senator DeMint introduced S. 1817 to the Senate on October 4, 2005, and then the bill was referred to the Senate Committee on Health, Education, Labor, and Pensions.27 H.R. 3684 was introduced in the House in September 2005 and then referred to the House Subcommittee on Workforce Protections the following month.28
Senator John Thune (R-S.D.) introduced S. 1761, which is a bill entitled the “Gulf Coast Recovery Act.” If enacted, this legislation would give the federal government jurisdiction in all causes of action in which a plaintiff makes a claim for loss of property, personal injury, or death allegedly caused by a government contractor that was performing the following specific tasks: searching for survivors, demolition services, cleanup and removal of debris, and dewatering of flooded property.29 Also, punitive damages would not be recoverable in these claims.30 Representative David G. Reichart (R-Wash.) introduced H.R. 3717, which is a related bill, in the House; it is entitled the “Good Samaritan Protection for Construction Volunteers Act.”31 If enacted, H.R. 3717 would provide construction contractors with qualified immunity from liability for negligent acts when providing services or equipment on a volunteer basis in response to a declared emergency.32 But H.R. 3717 would not provide immunity for gross negligence or willful conduct.33
Another noteworthy bill is the “Gulf Coast Infrastructure Redevelopment and Recovery Act of 2005,” which is pending in the Senate. It would establish a Federal Infrastructure Task Force to coordinate the federal government’s efforts to rebuild those areas of the Gulf Coast that were damaged by Hurricane Katrina.34 This legislation also would establish a National Levee Safety Program that would inspect all levees in the United States and determine which of these levees need repair.35
Brownfield Redevelopment and Legislation Regarding Water Resources
According to the U.S. Environmental Protection Agency (EPA), the term “brownfield” refers to “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.”36 The EPA believes that the redevelopment of brownfields “takes development pressures off of undeveloped, open land, and both improves and protects the environment.”37 In June 2005, the EPA awarded six organizations a total of $1.4 million in “brownfields training, research and technical assistance grants.”38 The purpose of these grants is to “focus attention on environmental and human health conditions in socio-economically disadvantaged communities to stimulate economic and beneficial uses of brownfields projects.”39
There are a number of bills pending in both the House and the Senate regarding brownfield redevelopment. They are: (1) H.R. 1237, which is entitled the “Brownfield Redevelopment Assistance Act of 2005,” and which would amend the Public Works and Economic Development Act of 1965 to provide assistance to communities for the redevelopment of brownfield sites;40 (2) H.R. 336, which is entitled the “Brownfields Improvement Act of 2005,” and which is similar to H.R. 1237 in its objective of making funds available for the redevelopment of brownfield sites;41 (3) H.R. 280, which is entitled the “Brownfields Redevelopment Enhancement Act,” and which would facilitate the provision of assistance by the Department of Housing and Urban Development for the cleanup and economic redevelopment of brownfields;42 (4) H.R. 1680, which is entitled the “Brownfield Cleanup Enhancement Act of 2005,” and which would amend the Internal Revenue Code of 1986 to expand the incentives for the environmental cleanup of certain contaminated industrial sites designated as brownfields;43 (5) H.R. 877, which is similar to H.R. 1680 in that it seeks to expand the expensing of environmental remediation costs, but it would eliminate the recapture of the expensing deduction upon the sale of the property;44 and (6) S. 398, which is similar to H.R. 877 and was introduced by Senator Rick Santorum (R-Pa.) in the Senate.45
This past summer, the House passed H.R. 2864, which is entitled the “Water Resources Development Act of 2005”. This bill is currently pending in the U.S. Senate; its purpose is to provide for the conservation and development of water resources in certain areas of the United States and other related areas by allowing the secretary of the army to build various construction projects for improvement of rivers and harbors.46 Although the bill was passed by the House before Hurricane Katrina struck the Gulf Coast, within the legislation is a directive to the secretary of the army to, among other things, “submit to Congress...within one year, a recommended framework for developing a long-term program that provides for the comprehensive protection [of]...critical resources, habitat, and [the] infrastructure in the coastal Louisiana ecosystem from the impacts of coastal storms, hurricanes, erosion and subsidence...”47 Regarding the status of H.R. 2864, in July 2005, the bill was received in the Senate, read twice, and placed on the Senate’s legislative calendar.48
Endnotes
1. See SAFETEA-LU section 6002. This rule will be codified as 23 U.S.C. section 139(k)(1)(1).
2. See SAFETEA-LU section 6002. This rule will be codified as 23 U.S.C. section 327.
3. See SAFETEA-LU section 1503, striking 23 U.S.C. section 112(b)(3)(C), defining “qualified projects.”
4. Arizona, California, Colorado, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas and Virginia.
5. Alaska, Connecticut, Delaware, Hawaii, Iowa, Kansas, Massachusetts, Minnesota, Nebraska, Nevada, New Hampshire, New York, Pennsylvania, and South Dakota.
6. Spending will increase as follows: Colorado, 46.8 percent; Minnesota, 46 percent; Arizona, 40.7 percent; and District of Columbia, 40 percent.
7. Spending will be as follows, in billions of dollars: California, 17.15; Texas 14.47; Florida, 8.68; New York, 8.42; Pennsylvania, 8.23; Ohio, 6.55; Georgia, 6.38; and Illinois, 6.18.
8. H.R. 6, section 313.
9. Id., section 390.
10. Id., section 1308.
11. Id., section 1325.
12. Id., section 1326.
13. Id., sections 1321 and 1322.
14. Id., sections 1331-1337.
15. Id., section 1307.
16. Id., section 1306.
17. Id., section 392.
18. San Diego Border Infrastructure System Cleared for Expedited Completion, at www.dhs.gov/dhspublic/display?content=4814 (accessed on October 25, 2005).
19. Id.
20. Hurricane Katrina Emergency Subcontracting Information at www.dhs.gov/dhspublic/interapp/editorial/editorial_0726.xml (accessed on October 10, 2005).
21. Id.
22. Hurricane Katrina Emergency Contracting Information—FEMA Direct Contracting Opportunities at www.dhs.gov/dhspublic/interapp/editorial/editorial_0727.xml (accessed on October 10, 2005).
23. Proclamation by the President: To Suspend Subchapter IV of Chapter 31 of Title 40, United States Code, Within a Limited Geographic Area in Response to the National Emergency Caused by Hurricane Katrina at www.whitehouse.gov/news/releases/2005/09/20050908-5.html (accessed on November 6, 2005).
24. David Hammer, Bush Administration to Reinstate Prevailing Wages on Katrina Contracts, at http://news.findlaw.com/ap/o/51/10-27-2005/lcee001e038338b8.html (accessed on November 6, 2005).
25. Newsline—Senate Bill Would Allow Immediate Year-Long Suspension of Davis-Bacon Act During Disasters, at www.abc.org/wmspage.cfm?parm1=5097 (accessed on October 27, 2005); and Bill Summary & Status for S. 1817, at http://thomas.loc.gov/ (accessed on October 30, 2005).
26. Id.
27. Bill Summary & Status for S. 1817, at http://thomas.loc.gov/ (accessed on October 30, 2005).
28. Bill Summary & Status for H.R. 3684, at http://thomas.loc.gov/ (accessed on October 30, 2005).
29. Bill Summary & Status for S. 1761, including the text of the bill at http://thomas.loc.gov/ (accessed on October 30, 2005).
30. Id.
31. Bill Summary & Status for H.R. 3717, at http://thomas.loc.gov/ (accessed on October 30, 2005).
32. Id.
33. Id.
34. This Week in Washington: New Katrina Legislation Introduced in Senate, at www.asce.org/pressroom/news/grwk/event_release.cfm?uid=3026 (accessed on October 25, 2005).
35. Id.
36. EPA Brownfields Homepage, at www.epa.gov/brownfields/ (accessed on October 26, 2005).
37. Id.
38. EPA, EPA Press Release: Six Brownfields Training, Research, and Technical Assistance Grants Announced, at http://yosemite.epa.gov/opa/admpress.nsf/02026b527e93blaf852570180055b9b9/25bb43e2db53121b8525702a0067438f!OpenDocument (accessed on October 26, 2005).
39. Id.
40. Bill Summary & Status for H.R. 1237, at http://thomas.loc.gov/ (accessed on September 14, 2005).
41. Bill Summary & Status for H.R. 336, at http://thomas.loc.gov/ (accessed on September 14, 2005).
42. Bill Summary & Status for H.R. 280, at http://thomas.loc.gov/ (accessed on September 14, 2005).
43. Bill Summary & Status for H.R. 1680, at http://thomas.loc.gov/ (accessed on September 14, 2005).
44. Bill Summary & Status for H.R. 877, at http://thomas.loc.gov/ (accessed on October 30. 2005).
45. Bill Summary & Status for S.398, at http://thomas.loc.gov/ (accessed on October 30, 2005).
46. Bill Summary & Status for H.R. 2864 and text of bill, at http://thomas.loc.gov/ (accessed on October 25, 2005).
47. Id.
48. Id.
