Affordability for Small Drinking Water Systems

April 2, 2018

About the author: Robert B. Stewart is executive director of the Rural Community Assistance Partnership. He can be reached at 888/321-7227 or by e-mail at [email protected].


The U.S. Environmental Protection Agency (EPA) is considering a revision to the Safe Drinking Water Act’s (SDWA) affordability criterion for small system variances. When promulgating new rules for chronic drinking water contaminants, the SDWA requires the EPA to ensure there are affordable compliance technologies for small- and medium-sized drinking water systems (those serving 10,000 people or fewer). Yet, affordability was not defined in the SDWA. The EPA adopted its affordability criterion as 2.5% of median household income (MHI). This percentage is on a cumulative basis (not 2.5% for each new regulation). According to the SDWA, if affordable compliance technologies cannot be identified, the EPA must develop a list of affordable small system variance technologies that are still “protective of public health,” even though the mandated maximum contaminant level (MCL) is not achieved.

To date, using the 2.5% MHI criterion for four new rules for chronic contamination (arsenic, Stage 1 and Stage 2 disinfection byproducts and uranium), the EPA has found that affordable compliance technologies were available and, therefore, did not have to identify small system variance technologies.

The Rural Community Assistance Partnership (RCAP) believes that changing the currently adopted standards and procedures would jeopardize public health while providing little, if any, financial relief for small communities. Proposed changes would also create an unproductive administrative burden on states and small communities.

Recent federal actions

In March 2006, the EPA solicited comments on the idea of adopting an incremental approach to determine affordability with options of 0.25%, 0.50% and 0.75% of MHI. In addition, comments were requested regarding having an alternate “protective of public health” level of three times the MCL if the affordability threshold is tripped and a small system variance granted. The National Drinking Water Advisory Council, a panel of water sector experts convened by the EPA, had recommended that affordability be defined as 1% of MHI on an incremental, rule-by-rule basis and that all other measures be taken prior to any consideration of granting a variance.

The EPA’s new proposals were rejected by the National Drinking Water Advisory Council’s state drinking water administrator that responded, major national water associations, national consumer and environmental groups, equipment manufacturers, public health professionals, university-based researchers and hundreds of concerned consumers. Only a small group supported the proposals. In spite of overwhelming opposition, the Office of Management and Budget is now pushing the EPA to adopt these proposals.

Shortcomings of the proposals

Creation of a new MCL for contaminants—a “two-tiered” approach to public health. States would decide on a case-by-case basis if “the variance ensures adequate protection of human health.” This suggests that contaminant levels at three times the currently adopted MCL could be considered protective of human health; however, research does not support such a finding. The scientific justification would be left to the states to determine. The federal government must continue to develop a single, sound drinking water standard for each contaminant. Deeming acceptable a level that exceeds the MCL ignores the rigorous scientific processes used to determine the current levels that are required by the SDWA to protect public health.

A two-tiered system of public health protection, with one level of protection for customers of small utilities and a higher protective level for everyone else should not be considered. Issues such as the impact on consumers in an increasingly mobile society and the means for proper notification for all consumers also further erode any argument for a two-tiered system.

Small system variance technologies are not available. Much of the variance process is dependent on the EPA identifying a “variance technology … that is applicable to the size and source water quality conditions of the public water system.” Variance technologies have not yet been identified, but compliance technologies are promoted as affordable for all systems; this includes determinations made for arsenic, disinfection byproducts and uranium. The American Water Works Association has stated that such variance technologies do not exist. Further complicating any identification of variance technologies is the need to distinguish between the various sizes of small water systems and the variability of the quality of the source water.

Small system variance technologies create additional problems. Even if a variance technology is identified, further problems and issues could arise. A small water utility must optimize existing unit processes or install, operate and maintain new technology systems in accordance with EPA requirements. What will these variance technologies cost? How would that compare with the cost of the compliance technologies? Is the difference in cost reasonable or supportable in relation to the amount of contamination removed? Have the cost to be borne by the community in applying for the variance and the cost to the state in evaluating and monitoring the variance been considered? Will there be technical assistance and training in the use of these variance technologies? Small communities still might have to pay to install a new treatment technology that has less chance of improving public health protection than available compliance technologies.

Creation of a public/consumer relations dilemma. Section 300-g-4(e)(7) of the SDWA Amendments of 1996, “Regulations and Guidance,” requires that consumers be informed if a variance is being proposed and requires a public hearing on the variance before it can be granted. This section also calls for identifying the financial and technical capability of the small system to operate the variance treatment system, including operator training and certification. The law further directs consultation between the EPA, the rural utility service and states to develop affordability criteria. Besides the cost, time and effort required for hearings to be held for every proposed community variance, imagine consumers’ reaction to proposals that could increase costs substantially while still allowing for a contamination level of three times what has been deemed protective of public health.

Viable solutions

There is no argument that new drinking water regulations financially impact small communities much more than larger communities. Economies of scale and the availability and access to resources make compliance for larger communities much more affordable. Without granting variances, what measures can be taken? First, the requirements or conditions contained in the SDWA must be met. Second, viable alternative approaches must be explored.

Using alternative sources of water supply. These sources must first be evaluated (§ 300-g-4(e)(3)) prior to considering a variance. This could include relocating groundwater pumps; accessing portions of the aquifer with better water quality; drilling new water wells in other locations; blending water with better sources; and purchasing water from other sources. States would have to ensure that all of these options and more were investigated prior to considering a variance. Many systems would fall into this category given proper application of the rule.

Restructuring or consolidation options. States must examine these options, required by the SDWA, prior to considering a variance. Many small water systems will remain nonsustainable, even if granted a variance. States have been reluctant or even refused to mandate restructuring or consolidation for existing small water systems that cannot meet SDWA requirements. Many of the systems that might violate new drinking water standards could be consolidated with nearby systems and operated more efficiently if managed by a larger entity that is responsible for multiple small utilities in the region. There are numerous examples of cities having consolidated operations by small utilities, or state or regional governmental entities having acquired or managed small systems on a regional basis.

Directing financial assistance through the Drinking Water State Revolving Funds (DWSRF). The EPA provides funds to states for drinking water improvements. The priority for these must be small communities that lack access to capital or need the low-interest loans or loan forgiveness available through the program. DWSRF funds should not be supporting large utilities that can access the private bond market at rates and terms that make loans affordable to large utility customers. Many states make few, if any, small systems loans through the DWSRF or do not have a disadvantaged community component built into its program.

Additional funding for the USDA Rural Development’s Water and Environmental Programs. These programs are specifically targeted to communities with a population of fewer than 10,000. Funding for these programs has not increased in recent years, as new regulatory requirements have been adopted; recent years’ funding levels have been approximately $900 million for loans and $300 million for grants. The documented backlog of applications exceeds $2 billion. In 2006, this agency funded 39 small community projects that corrected arsenic violations. Additional grant funding directed exclusively at correcting drinking water contamination issues for the smallest communities is needed; this alone would solve a large percentage of future violations.

Increasing use of exemptions. The SDWA provides for exemptions that can be issued to grant up to 11 additional years for compliance. This time period would allow for the use of the options above while not deeming the system out of compliance and subject to enforcement action. This would also allow additional time for developing appropriate, affordable compliance technologies for small systems.

Increasing training and technical assistance. Part-time or insufficiently trained staff frequently operate small systems. Technical assistance often directed at optimizing existing treatment facilities can reduce contaminant levels without capital expenditures. Financial and managerial assistance is needed to evaluate management options, develop appropriate rate structures and access grant and loan sources. The trend in the federal budget is a reduction for this type of assistance at a time when small water utilities need more assistance than ever. Because many states do not fund any technical assistance programs for water, this is the only funding available for more than 40,000 small- and medium-sized community water systems.

Following recommendations of the National Drinking Water Advisory Council and the Science Advisory Board. The recommendations of expert panels that reviewed the small system variance provisions should be adopted. Specifically, the affordability threshold should be established as 1% of MHI for any rule, evaluated for the median size system in each small system category. Also, all of the other tools available to achieve compliance—some of which were presented above—should be weighed prior to the consideration of variances.

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