Feb. 26 (Bloomberg) -- President Barack Obama’s budget would increase Environmental Protection Agency spending by 34 percent, with much of the new money going to clean-water programs.

The increase, among the largest proposed for any federal agency in percentage terms, would expand EPA spending from $7.8 billion to $10.5 billion and tax certain oil and chemical producers to pay for cleaning up hazardous waste.

Environmental protection advocates applauded the EPA plan and other parts of Obama’s proposed budget, which includes programs to curb carbon emissions and increase taxes on fossil fuels.

“The era of dirty energy is coming to an end,” said Carl Pope, executive director of the San Francisco-based Sierra Club.

The EPA spending plan for the fiscal year that starts Oct. 1 includes $3.9 billion to fund about 1,700 drinking and wastewater treatment projects nationwide. The request, which the Obama budget describes as “historic” in scope, more than doubles the spending in fiscal 2008.

The water programs provide money to state revolving funds that make infrastructure loans to communities. The budget outline estimates that every federal dollar invested in the programs generates $2 for local water needs through state matching funds.

Superfund Excise Tax

The EPA budget proposal would restore excise taxes on oil and chemical producers to replenish the Superfund Trust Fund for hazardous-waste cleanup. The Superfund tax, which expired in 1995, would be reinstated sometime after 2011 “after the economy recovers,” according to the budget request. It would raise an estimated $6.6 billion by 2014.

The EPA request includes $475 million to create a Great Lakes restoration program to control pollution and attack damaging invasive species that populate the lakes.

Jeff Skelding, director of Healing Our Waters, a Great Lakes advocacy group, said the Obama budget provides the largest amount any president had committed to the lakes.

The agency would get $19 million to start building a greenhouse-gas emission inventory, an early step necessary for creating a carbon cap-and-trade system.

“We are no longer faced with the false choice of a strong economy or a clean environment,” EPA Administrator Lisa Jackson said in a written statement. “It should be overwhelmingly clear that EPA is back on the job.”

The agency funding increase would be on top of the $7.2 billion in EPA-administered projects included in the economic stimulus package Obama signed into law last week.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net.

Last Updated: February 26, 2009 16:37 EST