By Kevin Westerling,
The consulting engineering firm’s newly-named water lead sets the tone with insight on utility operations, technology development, infrastructure funding, and more.
Who are the most influential people in the water and wastewater industry? You might suggest municipal managers, the heads of industry organizations, or perhaps legislators and regulators. But what about consulting engineers? These are the experts who are called in when important water decisions need to be made, particularly when it comes to treatment plant construction and improvements.
CH2M (formerly CH2M HILL) is among the leaders of this influential class, with a brand new voice at the top. Peter Nicol was recently named president of CH2M’s water business after serving 35 years with the company. His position and experience are indicative of deep industry knowledge — a level of insight I tapped for the following Q&A, wherein Nicol offers solutions (as consulting engineers do) to present-day and imminent water concerns.
As you begin your tenure as president of CH2M’s water business, what do you consider a good measuring stick for success, and what water issue is closest to you personally?
An obvious indicator will be that our staff is happy and challenged, and that our clients are very satisfied. Another clear measure will be meeting our 2016 business plan. The global water industry continues to face tough economic challenges, where all clients, both public and private sector, are required to be more efficient in addressing their issues while minimizing the financial impact on their stakeholders.
Personally, I’m committed to making clean water and sanitation available to people in every corner of the world. Just last month, the White House announced a new water innovation strategy that challenges the public and private sector to work together to boost water sustainability and long-term water security by increasing use of water-efficient and -reuse technologies. I see now as an opportune time for CH2M to continue to lead the industry in water reuse application and innovation and make a big impact on a water-secure future.
Public-private partnerships are increasingly seen as a solution for municipal water issues, but the P3 model remains under-utilized. Do you predict a tipping point for widespread adoption?
I don’t envision a P3 “tipping point” in the U.S.; there are too many unique stakeholders given the fragmented nature of both the municipal and industrial water structure. A major tipping point would require dramatic intervention by the federal and state governments and, although we see some movement, I don’t see unanimous agreement occurring among all these groups in the near term. However, I expect to see P3 continuously evolving in the U.S. as new models are adopted and successes are realized. Ultimately, I believe P3 will become an established, viable delivery option, and it will be considered in conjunction with design-bid-build, design-build (DB) and design-build-operate (DBO) on a project by project basis.
What are the drivers and roadblocks for public-private partnerships?
The P3 drivers in the U.S. are pretty straightforward: aging infrastructure is reaching, or has eclipsed, its useful life and the rate of assets reaching this point continues to escalate. Traditional delivery methods can’t keep up with the demand for replacement and expansion, thus new delivery approaches will evolve to meet this demand. Drivers include:
- Fiscal pressures – Not only in water/wastewater municipalities, but across the board in our cities and municipalities, fiscal pressures will most likely get worse when interest rates rise. Rate increases, or any tax-like increase for that matter, are being highly scrutinized, questioned, and often opposed.
- Aging work force – The municipal water/wastewater workforce is aging and qualified new staff is not entering at the needed rate. Finding solutions to this will require some new staffing solutions that P3 can offer.
- Risk transfer – Where implemented appropriately by a municipality, DB and DBO projects are realizing significant risk transfer efficiency between public and private sectors, ultimately resulting in more efficient delivery solutions for the rate payers. P3 provides a platform for even more risk transfer efficiency on appropriate projects.
I don’t see true "roadblocks" because P3 is not the sole goal or solution. However, the following factors can certainly disrupt P3 implementation.
- Public and private sector knowledge of P3 — A successful P3 requires extensive communication and education on both sides; the private side needs to fully understand the concerns, challenges, and politics of the public side, and the private side needs to commit to partner with the public sector and stakeholders to ensure a complete understanding of the P3 model.
- State procurement processes — Some states have yet to approve P3 delivery. This is an obvious impediment. On the other hand, many states have P3-enabling legislation, and while some have a proven process and implementation approach, others are vague and/or silent on process, which can be even more of an impediment to P3 success.
- Tax-exempt versus taxable debt spreads — The most solid pressure against a P3 solution continues to be the fact that public debt is cheaper, and this is a viable argument, hence the reason I believe P3 is not the sole solution, rather a delivery option in certain situations.
P3s are very complex delivery solutions that can provide multiple layers of efficiency, so each opportunity must be evaluated across the full spectrum of potential efficiencies and compared against the other delivery methods to arrive at the best answer for each municipality’s unique situation.
Is the design-build model (or even design-build-operate) friendlier toward technologies with lower life-cycle costs, though they may be more expensive up front?
The answer is absolutely yes, and we see the driver for lower life-cycle costs as a primary reason that utilities use DB with whole-life criteria as a strategic procurement method. We’ve had concrete examples on our own DB and DBO projects where high-efficiency equipment drives up initial capital cost, which gets offset quite quickly by a significant reduction of operations and long-term maintenance costs.
What is CH2M's approach to recommending new, potentially cost-saving alternatives to familiar, “tried and true” technologies?
We recommend new technologies by first doing our desktop homework, including becoming familiar with the technology’s fundamental mechanisms of performance, CAPEX [capital expenditures] and OPEX [operating expenditures], and other non-monetary evaluation criteria such as carbon footprint, physical footprint, and installed reference facilities for comparison to existing available and proven technologies. If the technology looks promising from the desktop view, then we will visit the existing facilities and perform our own bench-top and pilot-scale evaluations to further assess and verify or deny our desktop evaluation assumptions and preliminary conclusions. Lastly, if our evaluations yield positive outcomes, we will look for client project opportunities where the technology can offer maximum benefits for the cost. In addition, we will generally look for client project application on a smaller scale before pursuing larger-scale opportunities.
What are the keys to narrowing the funding gap between critical needs and dollars to address them?
Without question, we are facing serious water infrastructure needs and sparse resources available to meet them.
There is substantial evidence that U.S. water infrastructure, a backbone of the American economy, is in need of a cash infusion. The average age of the 84,000 dams in the U.S. is over 50 years old, and more than 2,000 dams are rated as deficient high-hazard dams. Addressing this problem is estimated to cost more than $20 billion. Additionally, an estimated 240,000 water main breaks occur each year and a major overhaul would easily cost in the hundreds of billions. Significant capital investment needs to be made for the nation’s wastewater and stormwater systems, estimated to total nearly $300 billion over the next 20 years.
Since it is clear that the public sector does not have the financial breadth or political support to dedicate the necessary resources, a set of more complicated solutions is necessary. A number of solutions exist which have bipartisan backing, including a greater reliance of public-private partnerships tools. The U.S. Army Corps of Engineers, for example, is actively looking at these partnerships for selected civil works projects for the first time. These partnerships are not a fit for every municipality, and each project presents a unique set of circumstances, but it is possible to take some large projects out of the existing backlog if they can find financing elsewhere. The emergence of “infrastructure exchanges” (also called “accelerators”) is unmistakable around America. These exchanges seek to provide municipalities the help and tools they need to make smart partnership decisions. We are also seeing more state-based infrastructure banks. While Congress continues to oppose the creation of a federal bank, momentum continues to build in that direction, and we may see a breakthrough in the next 10 years.
How are increasingly prominent water issues affecting the industrial sector? Is one industry or issue particularly noteworthy?
We’re seeing the impact of selenium as particularly noteworthy in the industrial sector. Implementation of federal and state industrial effluent limitations for selenium are now being rolled out and applied to most new National Pollutant Discharge Elimination System (NPDES) permits, cutting across many major industries. CH2M is seeing significant impact in the mining, oil and gas, chemical, and power industries.
Starting about four years ago, as surface coal mining companies renewed their NPDES permits, they were compelled to meet selenium limitations that required construction of treatment systems for surface water runoff to reduce selenium to local streams. More recently (November 2015), the U.S. EPA published Effluent Limitation Guidelines (ELGs) aimed at controlling a group of contaminants, and due to the uniqueness of selenium’s water chemistry, the impact of selenium is particularly prominent. CH2M estimates the ELG regulations will result in multi-million dollar retrofits at most existing coal-fired power plants over the next five to eight years.
What are the main regulatory or environmental imperatives for wastewater and drinking water plant improvements?
Nutrient removal and wet weather treatment are prompting the most upgrades and retrofits at municipal wastewater treatment plants, while at drinking water plants it’s dissolved organic carbon removal.
How can municipalities ensure that their new plant is ‘future-proofed’ to be resilient and efficient throughout its anticipated life span?
For drinking water: diversifying the water supply portfolio, providing additional storage, and providing multiple treatment barriers so failure or malperformance of one unit operation doesn’t lead to non-compliance.
For wastewater: industrial pretreatment, flow equalization, green infrastructure to decrease wet weather flows, and biosolids-to-energy to reduce dependence on the power grid.
As a leader in sustainability, how does CH2M advise others on getting started down this path?
In a nutshell, I’d say our advice is to start small, but have the policy in place to enable wider buy-in. It’s important for a company to set ambitious goals, but the company must also have achievable goals to garner early wins and enthusiasm for sustainability.
A culture of sustainability can’t be turned on with a switch. Like a garden, it can grow and evolve, but needs regular tending to establish deep roots. Every business can begin by asking two questions: What impact does this business have on the environment? What impact does the environment have on this business?
The art of sustainability lies in integrating opposites and making a case that makes sense. With any new management approach, it’s critical to create a program that people want to participate in, regardless of political inclination. The easiest way to do this is to align with and build upon existing company culture. Find what really gets employees excited and start there.