Locke Lord QuickStudy: FHWA Guidance on Implementation of ‎Infrastructure Act Funding ‎Does Not Bode Well for New ‎Capacity Projects

Locke Lord LLP
December 30, 2021

Following the passage of the Infrastructure Investment and Jobs Act (“IIJA”) in November, ‎‎2021, there ‎was a flurry of optimism related to the new funding and how it might help to support ‎various types of ‎projects. What was missing was any definitive guidance on how the availability ‎of those funds would ‎be prioritized among different types of projects. With the release of a ‎Federal Highway Administration ‎‎(“FHWA”) policy memo on December 16, 2021 (“FHWA ‎Policy Memo”) some of that guidance began ‎to emerge, and it is clear that new and expanded ‎capacity projects will not be viewed very favorably in ‎light of other identified priorities.‎

Recall that the IIJA (also referred to as the “Bipartisan Infrastructure Law”) provided ‎funding for a ‎myriad of project categories (see the list at the conclusion of this article). While the ‎headlines referred ‎to the IIJA as providing $1.2 trillion in available funding, it is important to ‎note that only $550 billion ‎constitutes “new” funding. The remaining funds are a re-‎authorization of $650 billion for the ‎continuation of programs previously authorized under the ‎Fixing America’s Surface Transportation ‎‎(“FAST”) Act and other previous surface transportation ‎bills. Nevertheless there was reason to be ‎optimistic about $550 billion (over five years) in ‎additional funding for projects of various types.‎

The FHWA Policy Memo identifies policy objectives that will guide how funds will be ‎prioritized. The ‎guidance notes that projects that “align” with the IIJA include those that ‎improve the condition and ‎safety of roadways, make streets and other transportation facilities ‎accessible to all users and ‎compliant with the Americans with Disabilities Act, address ‎environmental impacts including storm-‎water runoff and greenhouse gas emissions, prioritize ‎infrastructure that is less vulnerable and more ‎resilient to climate change, advance emerging ‎technologies like electric vehicle charging stations ‎and renewable energy generation, promote ‎broadband deployment in transportation rights-of-way, ‎and which reconnect communities and ‎reflect the inclusion of disadvantaged and under-represented ‎groups in the project planning, ‎design, and selection process.‎

New Capacity Projects

With respect to new capacity projects, the FHWA Policy Memo provides that projects ‎that move people ‎and freight by “modernizing and increasing the operational efficiency of ‎existing roads and ‎highways” will be prioritized over projects “that expand the general purpose ‎capacity of roads and ‎highways.” Further expanding on this concept, the FHWA Policy Memo ‎states (emphasis added):‎

Consistent with this Policy, FHWA will implement policies and undertake actions ‎to ‎encourage—and where permitted by law, require—recipients of Federal highway ‎funding to ‎select projects that improve the condition and safety of existing ‎transportation infrastructure ‎within the right-of-way before advancing projects that ‎add new general purpose travel ‎lanes serving single occupancy vehicles.

Application of this Policy does not prohibit the construction of new general purpose ‎capacity ‎on highways or bridges, but in most cases Federal-aid highway and ‎Federal Lands funding ‎resources made available through the [IIJA] should be ‎used to repair and maintain ‎existing transportation infrastructure before making ‎new investments in highway ‎expansions for additional general purpose capacity.

Additionally, within the context of setting forth the policy objectives regarding new capacity, the ‎‎FHWA Policy Memo offers the suggestion that State departments of transportation (“State ‎DOTs”) ‎should “be mindful of their ability to transfer resources to support transit projects that ‎may be more ‎consistent with these priorities.” It will be worth examining the receptiveness of ‎such a suggestion ‎because while the transfer of resources to support transit projects may be ‎consistent with current ‎FHWA priorities, it has historically not been the priority of many State ‎DOTs.‎

Environmental Review Process

The policy and preference for other than new and expanded capacity projects is further ‎reflected in ‎the observations made about the environmental review process for roads and ‎highways. The FHWA ‎Policy Memo notes that many of the types of projects to be prioritized ‎will typically meet the FHWA ‎and Council on Environmental Quality criteria for categorical ‎exclusions (“CEs”), while those ‎requiring “more than a minor amount of right-of-way or that ‎would result in any residential or non-‎residential displacements” may not be categorized as CEs. ‎Recognizing this difference and that a ‎more involved NEPA process will take longer than a CE, ‎the memo states that metropolitan planning ‎organizations, State DOTs, and other decision-‎makers will be “encouraged” to consider the timeline ‎for delivering projects as they are ‎programming funds made available under the IIJA. In other words, ‎new and expanded capacity ‎projects, which by their very nature require more extensive (and time-‎consuming) environmental ‎reviews, are not among those that the federal policy will encourage be ‎considered by state and ‎local decision-makers. ‎

Future FHWA Implementation of Policy Objectives

The extent to which FHWA intends to carry-forward the policy objectives articulated in ‎the FHWA ‎Policy Memo is reflected in the description of future actions anticipated to be taken. ‎The memo refers ‎to adopting and implementing laws and regulations, including the issuance of ‎guidance for “legacy” ‎programs impacted by the IIJA. Presumably this could change the criteria ‎for existing programs like ‎the Transportation Infrastructure Innovation and Finance Act ‎‎(“TIFIA”) which has helped to support a ‎number of major new and expanded capacity projects. ‎Additionally, FHWA is soliciting stakeholder ‎input on implementation of the IIJA through a ‎request for information, published in the Federal ‎Register on December 1, 2021‎.‎

Impacts on Texas

While there are clearly funds to be made available for transit and other beneficial projects, ‎the ‎general policy articulated in the FHWA Policy Memo will not be welcome news to many ‎Texas ‎communities. To be clear, the overall transportation funding gap in Texas includes the ‎need for both ‎new capacity and the need to maintain existing infrastructure, and prioritizing the ‎use of IIJA funding ‎for the repair, rehabilitation, reconstruction, replacement, and maintenance ‎of existing transportation ‎infrastructure will help in addressing those needs in Texas. However, ‎Texas continues to be the ‎fastest growing state in the country, and notwithstanding increases in ‎state funding during the past ‎decade, it continues to fall several billion dollars short each year in ‎meeting the aggregate need for ‎new and expanded roadways. Many communities are struggling ‎with the need for congestion relief, ‎including on corridors that are vital to that state and national ‎economies. Those that were hoping the ‎IIJA might solve the funding gap for new capacity may ‎need to continue to look for other funding ‎sources rather than rely on any hoped for support from ‎the IIJA.‎

Infrastructure Investment and Jobs Act Funding Categories

  • ‎$110 billion for repair, replacement, and reconstruction of roads and bridges (primary ‎‎emphasis on bridges)‎

  • ‎$66 billion for deferred maintenance for Amtrak, rail improvements in the Northeast ‎‎Corridor, and improving rail service and safety in other parts of the country

  • $73 billion to protect and improve the power grid, upgrade and modernize power lines, ‎‎prevent hacking of the power grid, and support clean energy

  • ‎$65 billion for states to implement increased broadband deployment, particularly in rural ‎‎areas and in low-income communities

  • ‎$55 billion for lead remediation and pipe replacement, chemical cleanup, and clean ‎‎drinking water in Tribal Nations and disadvantaged communities

  • ‎$50 billion to address flooding, wildfires, coastal erosion, and droughts, funding also ‎‎provided for cybersecurity and protecting critical infrastructure

  • ‎$39 billion for public transit, including addressing repair backlogs, creating new bus ‎routes, ‎and increasing accessibility for seniors and the disabled

  • ‎$25 billion for upgrades and expansions of U.S. airports, including runways, gates, ‎‎taxiways, control towers, control systems, terminals, and concessions

  • $21 billion to clean up Superfund and brownfield sites, reclaim abandoned mine land, ‎and ‎cap old and abandoned oil and gas wells

  • ‎$17 billion for port infrastructure and waterways, including coastal infrastructure, inland ‎‎waterway improvements, and land ports of entry

  • ‎$11 billion for highway and pedestrian safety, including investments in Safe Street ‎‎programs

  • ‎$7.5 billion to build out a nationwide network of electric vehicle charging stations

  • ‎$7.5 billion for electric school buses, primarily in low-income, rural, and tribal ‎communities

  • ‎$1 billion for reconnecting communities