Army Corps Prepares New Loan Program for Dams

The U.S. Army Corps of Engineers is nearing the launch of a new program to provide low-interest federal loans to upgrade and fix some of the tens of thousands of aging, nonfederal dams around the country.

In a key preliminary step, the Corps on June 10 published a proposed regulation outlining its plans for implementing the Corps Water Infrastructure Financing Program. Comments on the proposal are due by Aug. 9.

The new Corps program has a narrow focus. It is limited by the Infrastructure Investment and Jobs Act and the 2021 omnibus appropriations package to safety projects for dams that are owned by non-federal entities.

Charles Thompson, president of the Association of State Dam Safety Officials, said, “Most dams in the United States are privately owned, leaving owners solely responsible for financing dam upkeep and upgrades.”

He said the new Corps program will help with the backlog. Thompson also is chief of the dam safety branch in the Office of the State Engineer in New Mexico.

The program has had a long gestation period. It was authorized by Congress in 2014, as part of WIFIA. But Caroline Sevier, American Society of Civil Engineers’ director of government relations said via email, it was not until 2020 that Congress started to provide appropriations for the program.

Since then, Congress appropriated $96.4 million for the Corps program, to cover the cost of the federal loan subsidies and administrative expenses.

The most recent funding was $75 million over five years from the IIJA, which became law last Nov. 15, and $12 million in the omnibus spending measure, which was signed into law on March 15.

The potential need is great. The Corps says that of the 90,580 dams in the National Inventory of Dams, nonfederal dams account for about 87,000. More than 14,000 of the nonfederal dams are designated as having a “high hazard potential.”

Sevier noted that “’high hazard’ is not an indicator of the dam’s condition; rather it means that, due to its location and scope, failure of the dam would result in significant property damage and/or loss of life.

The Association of State Dam Safety Officials, in a March report, estimated that it will cost $75.7 billion to rehabilitate the more than 80,000 nonfederal dams, up from $65.9 billion in 2019.

Addressing high-hazard nonfederal dams would cost about $24 billion, compared with $20.4 billion in 2019, the association says.

The Corps states in its proposed rule, “Funding requirements are only projected to increase as infrastructure continues to age, risk awareness progresses and design standards evolve.”

The minimum size of an eligible project for the upcoming loan program is $20 million. Loans from the program generally will not exceed 49% of a project’s cost, but that could increase on a case-by-case basis, the proposal states.

Projects receiving a Corps program loan must comply with such federal requirements as the use of domestically sourced iron and steel and Davis-Bacon Act prevailing-wage standards.

The Corps says the program’s goal is “to enable local investment in projects that enhance community resilience to flooding.” It further states that priorities for the new loans are “projects serving small rural communities and economically disadvantaged communities and projects serving tribal communities.”

There are several types of other federal funding for dam projects, including WIFIA, the EPA Drinking Water State Revolving Fund and the High Hazard Potential Dam program—which the Federal Emergency Management Agency administers.

But the Corps says that these funding sources do not meet the state dam safety officials association’s estimates.

The Corps adds that the new loan program “helps to bridge that gap by providing nonfederal entities with an additional means to invest in dam safety infrastructure, which will help communities withstand future weather and climate events.”

Story updated on 6/17/2022 with comments from Association of State Dam Safety Officials