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May 2, 2025
Key Takeaways:
Caption: Wastewater treatment plant in Lynch, Kentucky. Photo by William R. Major, courtesy of LiKEN.
In mid-February 2025, central Appalachia experienced its second record-breaking flood in as many years. The United States in general is expected to experience increased flooding over the next decades due to changes in weather patterns caused by climate change, with heightened year-round precipitation most likely across the Northeast and Southeast.
The devastating impacts of flooding are most visible from the surface, but underground water infrastructure can be an overlooked victim of these disasters. Floodwaters do not only contain rain, but pollutants and sewage overflow as well. Polluted floodwater easily contaminates wells and springs, which are sometimes the only source of affordable drinking water for rural households that are not connected to a town or county system. For more centralized systems, flooding can quickly overwhelm drinking water plants located next to rivers and lakes.
Extreme weather events of all kinds greatly affect the water and wastewater treatment access of rural Americans, who make up 20% of the nation. A 2024 report coauthored by the Pacific Institute, Livelihoods Knowledge Exchange Network (LiKEN), and the Rural Community Assistance Partnership explains that drought causes the loss of snow packs, which normally replenish the groundwater that household wells depend on. Wildfires can also damage pipes or drinking water and wastewater facilities, or cause heavy metals from burnt structures to enter the water supply.
A significant population of Americans are not connected to an underground public wastewater or drinking water treatment system and instead rely on systems that are more exposed to the elements. Additionally, when a decentralized system fails (e.g., a well runs dry or a septic tank springs a leak), it is solely the responsibility of the (often low-income) household to repair the system. Even for rural residents who are connected to municipal drinking water and wastewater systems, these systems may be poorly funded or understaffed, especially if the area population is on the decline, draining local tax revenue.
Caption: An old drinking well in a hollow or “holler” of the Appalachian Mountains in West Virginia. Credit: Hannah Wilson-Black.
Private v.s. Public Water Systems
In rural areas where there are community-wide water and wastewater systems, large private water companies may sell the water itself, but they are unlikely to be responsible for the infrastructure and do not have a strong incentive to fund repairs to pipes, reservoirs, and treatment plants. Meanwhile, the local water board or public service district that controls the infrastructure and delivers the water is likely to have a small, low-income customer base whose payments do not provide a sufficient fund for emergencies or big repairs.
State and federal funding—which complements local tax revenue—is vital to fill in the gap between the infrastructure needs of rural communities and what residents can afford. Deborah Thompson, impact director for the Livelihoods Knowledge Exchange Network (LiKEN), a “link-tank” for communities based in Lexington, Kentucky, explained that rural systems may be passed over for infrastructure funding because investments in urban areas serve more people.
"Granting agencies and funders for water systems want more bang for their buck,” Thompson said. “So they tend to go for an urban system, because they say, ‘Wow, we can serve 50,000 people here, whereas if we give the same amount of money there, we’re only serving 500.’” Without specified funding sources, rural residents may not receive safe and adequate water and wastewater services.
Caption: Wastewater treatment plant in Benham, Kentucky. Photo courtesy of LiKEN. Taken by William R. Major.
At the federal level, the U.S. Department of Agriculture (USDA) and Environmental Protection Agency (EPA) administer a variety of grant, loan, and technical support programs that endeavor to assist rural municipalities, federally-recognized tribes, and nonprofits seeking to construct or repair water infrastructure. For instance, the EPA-administered Drinking Water State Revolving Fund (DWSRF) and its counterpart for sewage treatment, the Clean Water State Revolving Fund (CWSRF), have both been a backbone of water infrastructure upkeep throughout the nation for almost three and four decades, respectively.
2025 Continuing Resolution Cut Rural Water Earmarks
The continuing resolution budget measure passed on March 14, 2025, cuts $1.4 billion in earmarked funding (designated for specific community projects) from the State Revolving Fund (SRF) programs and $117 million in earmarks from the USDA Rural Water and Waste Disposal assistance program. The lost Rural Water and Waste Disposal earmarks made up 20% of the total fiscal year 2024 funding of that program; for the SRF programs, the lost earmarks represented 34% of their total funding.
For both programs, the EPA distributes Congressional funding to U.S. states and territories, each of which must meet the funding with a 20% match. The states and territories use this funding to create a revolving loan fund, so named because state agencies loan capital to community drinking water and wastewater systems for infrastructure projects, and the systems pay back the loan into the “revolving” fund to be re-distributed to other projects. The revolving funds can also be funded with private capital, through the issuance of municipal bonds that are secured or repaid by the fund. The DWSRF funds projects related to protecting drinking water (improving storage, pipes, and treatment), whereas the CWSRF is focused on wastewater treatment and other non-potable water protection (e.g., preventing pollution in estuaries).
CWSRF Projects from Pennsylvania to Virginia
To learn more about the types of projects the CWSRF funds, check out EESI’s briefing, Cities Leading the Way on Nature-Based Solutions, which highlights stormwater improvements in Pennsylvania, pollution reduction in Virginia, and more CWSRF-funded water infrastructure projects.
Caption: A visual representation of the flow of capital through the CWSRF program. Credit: EPA. This image is from our briefing “Cities Leading the Way on Nature-Based Solutions.” Presenter slides and video can be found here.
The USDA Rural Development’s office of Water and Environment Programs (WEP) administers additional water infrastructure grants and loans specifically for rural areas, including a grant for communities recovering from or preparing for disasters. A USDA spokesperson told EESI, “By investing in rural infrastructure, including rural water and wastewater systems, the agency helps protect public health, create jobs, and expand economic opportunities.” For rural communities in states with a relatively small tax base or states whose legislatures chronically underfund rural water infrastructure, the EPA’s SRF programs are vital. In a public statement [link], the National Rural Water Association, which supports small water utilities, confirmed that “WEP is instrumental in helping rural America increase economic opportunities, protect public health, maintain affordable water access, and ensure their communities are sustainable.”
The combined impact of EPA and USDA grants and loans can be seen in the small-town sewage system of Iaeger, West Virginia. Iaeger, which had a population of 257 at the last census in 2020, has never been connected to a public sewage system. Left without much choice, residents ran sewage lines straight into the nearby Tug Fork River, according to a Bluefield Daily Telegraph article reproduced in a press release from Sen. Shelley Moore Capito (R-W.Va.). The resulting sewage backups caused unsanitary and unpleasant conditions for residents and local businesses trying to appeal to tourists visiting the nearby Hatfield-McCoy Trails. In October 2024, McDowell County’s Public Service District broke ground on the first stage of a sewage project after securing grant funding from seven different agencies totaling $13.4 million. Of that total, $1.5 million is administered through the CWSRF and allocated by the bipartisan Infrastructure Investment and Jobs Act (P.L. 117-58). Another $1.4 million came from USDA Rural Development’s Water and Waste Disposal Loan and Grant Program.
In a video from the West Virginia Department of Environmental Protection highlighting the project, Mavis Brewster, McDowell County Public Service District’s general manager, explained that the jurisdiction had been trying to get all-grant funding for the project for almost 13 years.
According to Brewster, “It’s extremely important to [secure grants] because it impacts the residents when you have loan debt and you have to have a lot of high payments, and their rates are going to go up.” Some rural communities with a higher population or stronger tax base may be better suited for loan programs. But in Iaeger’s case, the project serves only 120 customers, hence Brewster’s concern about the burden of loan repayment on ratepayers.
Call-out box: The American Society of Civil Engineers’ 2021 Infrastructure Report Card1 notes that public utilities’ concerns about loan debt can increase the cost of their projects as they delay work to secure grants. More grant availability would ensure that public utilities finish their projects sooner and more affordably. The report states: “Some publicly-owned utilities prefer to delay projects while attempting to secure grant funding in order to avoid debt. Oftentimes this can result in holding [water and sewage] rates to low levels while the cost of needed improvements escalates due to inflation, which increases the future needs of funding from state and federal agencies.”
Rural infrastructure has long been neglected, and federal funding is essential to filling in the gaps. However, current funding levels are insufficient to meet the full need of rural communities. According to the American Society of Civil Engineers’ 2021 Infrastructure Report Card1, West Virginia’s drinking water systems were in need of roughly $302 million worth of upgrades in 2020, with a $12.7 billion need for wastewater systems. That year, the state received $11 million from the DWSRF (with the state providing a 20% funding match), $55 million from the CWSRF, and $49.7 million from the USDA Rural Development’s WEP office. In other words, between the EPA and USDA, the state received approximately $115.7 million in federal drinking water and wastewater loans and grants, compared to a combined need of about $13 billion.
Caption: Wastewater treatment infrastructure in Benham, Kentucky. Photo courtesy of LiKEN. Taken by William R. Major.
Congress is aware of these challenges. For instance, Sens. Jeanne Shaheen (D-N.H.) and Thom Tillis (R-N.C.) have reintroduced the Assistance for Rural Water Systems Act (S.783). This bill would allow the USDA to provide further low- and zero-interest loans for water and wastewater system repairs, along with loan forgiveness and refinancing for existing borrowers. One goal of the legislation is to offer new long-term financing options for communities so that residents do not see their utility bills shoot up due to their systems’ loan payments.
Sens. Cindy Hyde-Smith (R-Miss.) and Catherine Cortez Masto (D-Nev.) have also introduced a bipartisan water infrastructure bill, the Rural Water System Disaster Preparedness and Assistance Act (S.1019), to create a new USDA technical assistance program that would help rural water and wastewater systems prepare for and respond to disasters. This could include mapping the water system and creating disaster protocols for staff—vital work for building resilience against disasters like floods and hurricanes.
Deborah Thompson of LiKEN also explained that there are improvements to rural drinking and waste water systems that can be made without federal intervention. For instance, some small systems with a shrinking customer base may choose to merge, a process called regionalization. Many systems are simply in need of training for utility employees or volunteers to make sure that systems have capital improvement plans instead of “bandaid” fixes, as Thompson put it. Systems from neighboring towns or cities can also share major equipment like bulldozers to save costs. Lastly, fighting erosion with natural climate solutions can prevent silt buildup issues around water pumps, while improvements in leak detection technology (namely, ground-penetrating radar) may make problem identification more efficient and affordable.
Large government grants, at both the state and federal level, are only as useful as they are accessible. Many small rural communities do not have a full-time mayor or administrative staff of any kind. Local government administrators may be part-time workers with limited experience in applying for funding. Grant management is a hefty responsibility that requires ample time and familiarity with grant- and planning-related language—an all-volunteer government in a small locality is unlikely to have either. Additionally, grants that require a full-time local government or a nonprofit to “sponsor” a jurisdiction’s funding application can remain out of reach for small rural areas.
LiKEN has suggestions for federal and state agencies administering grants, as well as local water districts. What residents are most often seeking, Thompson explained, is transparency—for instance, clarity about how the grant or loan money will be spent and over what period of time. Engagement with local groups such as LiKEN can bolster smooth and effective communication between agency liaisons, water districts, and local communities.
Caption: One page of a glossary given to residents of Harlan County, Kentucky, ahead of a meeting with the EPA and USDA Rural Development, intended to make the discussion about grants more accessible. Credit: LiKEN.
For communities seeking water and wastewater funding—whether at the federal level or from philanthropic organizations, faith-based organizations, or a regional Community Development Financial Institution—the EPA Water Finance Clearinghouse is a good place to start. Applicants can specify what funding source they would prefer, the nature of their project, the scope of the project, and what kind of entity they are (county government, rancher, homeowner, educational institution, etc.).
There are many organizations researching and reporting on rural water challenges, from the National Rural Water Association to the Rural Community Assistance Partnership. The Pacific Institute and partners are compiling a new report on solutions to common rural water infrastructure issues, which will follow from their March 2025 report addressing climate change, water, and sanitation issues in frontline communities. Their aforementioned 2024 report Water and Climate Equity in Rural Water Systems in the United States, also a collaborative effort, covers climate change impacts on rural water systems and proposes a framework for resilience for small rural communities and their water systems going forward.
Author: Hannah Wilson-Black
1 The national 2025 Infrastructure Report Card is now available, though many 2025 state reports, including West Virginia’s, are still forthcoming.
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