Welcome to “What’s Up With Water,” your need-to-know news of the world’s water from Circle of Blue. I’m Eileen Wray-McCann.

The United Nations has released its latest report on the science underpinning the climate crisis. The UN’s climate panel focused on costs and benefits of reducing carbon pollution. The assessment outlined several strategies for keeping the global temperature from rising 1.5 degrees Celsius above pre-industrial times. That’s the point at which the impacts of a warming planet become increasingly difficult to manage. Water-related strategies included a focus on green infrastructure in cities, to reduce carbon pollution and protect against flooding and urban heat waves. The report’s authors, however, warned that some temperature mitigation strategies require careful tuning, because they could threaten water supply and quality if not applied correctly. Those strategies include growing crops to burn for fuel and removing carbon directly from the air. This is the UN climate panel’s third report in its sixth assessment cycle. The first two reports in the cycle focused on the physical science of climate change and adaptation strategies and vulnerability.

Russia’s war against Ukraine is exploding food prices and worsening hunger crises elsewhere in the world. The UN food agency reports that its global food price index reached its highest level since the index began in 1990. Russia and Ukraine are two of the top exporters of wheat and maize, and prices have soared since the February invasion. Cereal prices climbed 17 percent between February and March. Wheat and maize prices rose by 19 percent in that month. The price spike coincides with an existing hunger crisis in the Horn of Africa. Severe drought has decimated harvests and livestock herds. Aid agencies are warning that areas of Somalia face the risk of famine in the coming months. The UN Food and Agriculture Organization said that higher food prices are making the response more difficult.

Food is not the only sector in which rising prices are causing pain. This week, Circle of Blue reports on how inflation is affecting U.S. water utilities.

Bacon. Gasoline. Lead pipe replacements. Just like at the grocery store and service station, a dollar for U.S. water utilities does not buy as much as it did a year ago. Inflation is inflaming the cost of labor, materials, and equipment, and water leaders fear that rising prices will hamstring the lofty aims of a historic federal investment in the nation’s water and sewer systems.

Kelly Green hears about the financial turmoil almost daily. Green is in charge of water infrastructure financing for Michigan’s environment agency. Lead service line replacements that were expected to cost about $5,000 per line are coming in several thousand dollars more than that. Some communities are now having to reduce the scope of their projects, a downgrade that means some toxic pipes will remain in use longer. Green told Circle of Blue “Maybe they were thinking of removing 300 service lines, and now they’re going to remove 150 service lines instead.” Almost everyone has been sidetracked by higher prices. Green said “I have not heard of any community that is on target with what they originally budgeted.”

That is not what Congress had in mind when it offered a windfall for the nation’s water systems. When it was approved in March 2021, the American Rescue Plan Act sent $350 billion to state, local, and tribal governments. Those funds could go toward repairing water and sewer infrastructure, and states have already allocated at least $10 billion for that purpose. Then in November 2021, President Biden signed the Infrastructure Investment and Jobs Act, a bill he touted as a “once-in-a-generation investment” in the nation’s public works. The act provides $50 billion over five years for a range of critical water infrastructure needs: from replacing lead pipes and removing PFAS chemicals to long-needed repairs for water treatment plants and sewers.

The influx of federal money, however, is colliding with an economy where that money increasing buys less. Prices are rising faster than any time since the Reagan administration. Brian Jordan, vice president at the engineering and consulting firm Tetra Tech, said that cost pressures vary from project to project based on what’s involved.  For example, stainless steel is part of many water systems. Nickel is a component in stainless steel. Russia is a major producer of nickel, and so its invasion of Ukraine has caused a spike in stainless steel prices. Jordan says that right now it’s not unusual to see price increases of 10 to 50 percent per project. Things are more expensive, from labor, to equipment to materials.

The money problems in Michigan are shared nationwide. The Council of Infrastructure Financing Authorities represents state agencies that administer funds for water infrastructure loans. Deirdre Finn, the organization’s executive director, said that water projects in every state are seeing increased costs. Finn told the story of one utility that was stymied by current economic conditions. A small community in North Carolina put a water project out for bid. When the response from an engineering firm came back last fall, the bid was 40 percent over the utility’s budget. The utility, Finn said, decided to pause the project.

Some utilities are willing to pay higher prices, if only out of necessity — or fear that prices might climb even higher. Finn said other utilities are breaking projects into phases, doing a little work at a time once funds are available. Some state agencies are increasing loan amounts to ensure that work is completed.

The pressure is not just for capital projects. The Los Angeles Department of Water and Power told Circle of Blue that certain materials and services — things like microchips, chlorine, and other treatment chemicals — have increased between 15 and 20 percent.   Back in Michigan, Kelly Green said that inflation means hard choices for water utilities – especially with replacing lead service lines. The process will slow as communities evaluate their priorities and needs, trying to maximize the value of their shrinking buying power.  Tetra Tech’s Brian Jordan said that the speed and severity of today’s inflation caught utilities by surprise. When asked how utilities react to bids that are much higher than expected, he compared it to moving through the stages of grief.

Sue McCormick is the former CEO of the Great Lakes Water Authority, a regional service provider. She told Circle of Blue that utilities – and the public – need to be realistic about what’s achievable right now under the pressures of inflation. “As much as we had hoped would be accomplished,” she said, “ it’s going to be impacted by today’s costs.”

And that’s “What’s Up With Water,” from Circle of Blue, where water speaks. More water news and analysis await you at This is Eileen Wray-McCann – thanks for being here.