SMALL SYSTEM COMPLIANCE PROBLEMS

Residents of rural areas need the same assurance as those living in large cities that their drinking water is safe. However, small public water systems have had the most difficulty in complying with drinking water regulations, primarily due to a lack of technical expertise and financial resources to devote to water treatment and monitoring.

Despite the relatively small portion of the population served, small systems account for a large proportion of the problems associated with SDWA implementation and compliance. For example, in 1992, 77 percent of "significant non-compliers" with SDWA requirements were very small systems serving fewer than 500 individuals. The problems facing small systems must be addressed for the Federal drinking water program to be successful.

Because of their small size, these systems often cannot take advantage of the economies of scale that are available to large systems. For instance, the average annual incremental household cost to comply with the requirements of the SDWA for systems serving 25 to 100 persons is $145. That compares to only $12 per year for households connected to systems serving between 100,000 and 500,000 individuals.

The reported bill addresses that needs of economically burdened small systems (serving a population of 10,000 or less) in several ways, including:

Allowing small systems to use lower cost small system technology if they cannot afford to install and operate conventional technology and if alternative water sources are not available; Allowing forgiveness of loans as needed to meet a State's affordability criteria;

Reducing monitoring requirements for certain contaminants; Increasing funding for State technical and management assistance to small communities; and

Authorizing an alternative standard for radon allowing less treatment for radon in drinking water where radon in indoor air is being addressed.

MONITORING

Many drinking water systems, especially small systems, are concerned with the high costs of monitoring to establish compliance with new standards for organic chemicals and pesticides. Testing costs for these chemicals can run between $2,000 and $5,000. In fact, the greatest compliance costs for many small systems are for monitoring, not treatment. If a contaminant is not found through testing, no treatment is required, and there are no further costs. Unfortunately, the existing authority for granting waivers from monitoring requirements has not been effectively used by many States, resulting in monitoring costs that are higher than necessary for many systems.

To respond to these concerns, the reported bill makes five changes in monitoring requirements. First, it allows States to submit alternative monitoring rules to EPA that would be used in lieu of the national requirement. This provision will allow States to design monitoring rules that take into account special circumstances

in the State, thereby allowing more efficient use of sampling and laboratory capacity and reduced cost to water systems.

Second, the bill provides the authority for small systems serving less than 10,000 persons to reduce testing frequencies for carcinogens from 4 times in a monitoring cycle to once, if no contaminants are found in the first test. This cuts monitoring costs for small systems by up to 75 percent. This authority was available to systems serving fewer than 3,300 persons during fiscal year 1993.

Third, EPA is directed to review no fewer than 12 of its national monitoring requirements within two years to determine if they should be modified, based on the latest occurrence and health effects data.

Fourth, the bill allows water systems implementing a source water protection program to qualify for reduced monitoring frequency.

Fifth, the bill requires States to conduct monitoring for unregulated contaminants for a representative sampling of small systems (serving 10,000 or less), thereby relieving the systems of these monitoring costs.

STANDARD SETTING

A major concern with the current law is that it does not allow the Administrator sufficient flexibility in setting drinking water standards. Since the maximum contaminant levels are set on the basis of feasible technology, there is concern that future standards can be made more stringent as technology improves, regardless of any health benefits which result. Current law also does not adequately address circumstances in which requirements to minimize one contaminant (such as disinfection byproducts), can lead to an increase in another contaminant (microbiological organisms).

The reported bill responds to these concerns in several ways. The Administrator is authorized to establish a standard for a carcinogen at a level that is less stringent than is feasible, provided the new level would result in substantial cost savings and would provide essentially equivalent public health protection. This gives EPA the flexibility to take into account less costly technology when setting a standard.

In addition, EPA cannot establish a standard for a carcinogen that is more stringent than necessary to protect against a one in a million lifetime risk of cancer. This prevents increasingly stringent standards from being established in the future as detection and treatment technologies improve.

To address the tradeoffs present when regulating some combination of contaminants, the bill specifically authorizes the Administrator to establish a level less stringent than feasible provided the new level minimizes the overall health risk from the combination of contaminants. In this way, EPA can avoid creating a problem while solving another.

SELECTION OF FUTURE CONTAMINANTS FOR REGULATION

Nearly every comment received by the Committee recommends repealing the current law requirement that EPA regulate 25 new contaminants every three years. This requirement can lead to arbi

trary regulation even in the absence of information on the health effects and occurrence of contaminants in water supplies.

The reported bill deletes this requirement and establishes a process to identify contaminants for future regulation consisting of:

Monitoring to determine the occurrence of both regulated and unregulated contaminants;

Research to gather more information, if needed, on the health effects of unregulated contaminants; and

Periodic decisions whether or not to regulate a new contaminant based on its health effects and its occurrence in public water supplies.

These provisions will allow the EPA Administrator to exercise discretion in the regulation of future contaminants while avoiding a lapse into inattention and inaction. Furthermore, the bill limits the size of the unregulated contaminant monitoring data base.

RADON

Radon is a naturally occurring contaminant of serious concern in many ground water systems. It is an even more serious problem in indoor air, which accounts for most human exposure to radon. Proposed regulations for radon in drinking water have been viewed by many as overly stringent and costly.

The occurrence of radon in both drinking water and indoor air affords the opportunity to employ a multi-media strategy to achieve the greatest reduction in overall health risk at the least cost. The reported bill allows drinking water systems to meet a radon standard that is equivalent to the risk posed by exposure to randon in outdoor air if the system is located in a State that is implementing a program to reduce radon exposure in indoor air. If a State is not pursuing such a program, the system can still meet the new standard if it commits to implementing an education and testing program for radon in indoor air within its service area.

SOURCE WATER PROTECTION

Current law includes programs for protection of wellhead areas and aquifers which are sole sources of drinking water. Despite the cost effectiveness of pollution prevention measures in reducing the need for monitoring and future treatment of contaminated water supplies, these programs have had limited funding and effect.

The reported bill provides several incentives for localities to adopt source water protection plans. These include reduced monitoring frequency, financial assistance from the nonpoint pollution grant program and State loan funds under the Clean Water Act, and the requirement that Federal activities within the source protection area be consistent with the plan. States are only required to have a process to approve any local plans that may be developed.

STATE PROGRAM FUNDING

A major problem with the drinking water program is lack of sufficient funds to run the programs at the State level. All the States except Wyoming have authority to implement the law today. While current law provides for Federal grants to States to manage their programs, funding from Federal and State sources in fiscal year

1993 was slightly less than half the amount needed to implement effective programs. Unless more resources are devoted to the drinking water program at both the Federal and State levels, an effective program will remain an elusive goal.

To correct the funding shortfall and help States through the initial transition to the new program and allow them time to increase their own financial capacity, the reported bill increases the authorization for State grants from $40 million to $100 million annually. More importantly, the bill also authorizes States to use a portion of their SRF funds to administer the program during the first five years, when workloads are expected to be the greatest. While this provision would result in less funds being available for loans to systems, the ability of a State to implement the new authority for alternative monitoring programs, small system variances, technical assistance, and other provisions will result in overall better quality of drinking water and lower costs for small systems.

Finally, the bill authorizes the Governor of a State to transfer up to 50 percent of the funds in the Clean Water and Drinking Water SRFS between the two funds to help channel Federal assistance to the projects of greatest need in the State. This will allow States important flexibility in the use of the loan funds.

In conclusion, the reported bill attempts to fashion a consensus on the major issues concerning the design and operation of the Safe Drinking Water Act. It is largely consistent with the 10 recommendations for changes in the Act made by the Administration last fall. It reflects in many areas the testimony received from 13 witnesses at the hearing and from the many written and oral comments received since then and from discussions with numerous Senators and Administration officials over the past several months. In summary, the bill represents a sound, common sense approach to reducing regulatory burdens under the Safe Drinking Water Act while protecting public health.

SECTION-BY-SECTION SUMMARY

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; REFERENCES

Section 1 contains the bill title, the table of contents, and the references to title XIV of the Public Health Services Act (commonly known as the Safe Drinking Water Act).

SECTION 2. FINDINGS

Section 2 describes the findings of the Committee.

Summary

SECTION 3. STATE REVOLVING LOAN FUNDS

Complying with drinking water standards and maintaining the effective operation of drinking water systems is becoming increasingly expensive. The EPA has estimated that the cost of capital improvements to comply with drinking water standards is in excess of $8 billion. Many communities suggest that the costs of complying with the Act may be much higher.

Small systems have the most difficult time financing capital improvements needed to meet drinking water standards. These sys

tems have limited access to the bond market and limited financial management capabilities. In addition, because of limited economies of scale, the per household costs of a capital project can be very high and result in dramatic increases in water rates.

Section 3 of the bill provides general authority for grants to States to capitalize revolving loan funds to help finance drinking water projects. The new loan funds are modeled after the successful loan fund program now in place in the Clean Water Act. This section is generally consistent with the proposals for reauthorization of the Safe Drinking Water Act submitted by the President. Discussion

Section 1471 provides that the Administrator may enter into a capitalization grant agreement with a State where a State establishes a loan fund and agrees to conditions including providing a 20 percent State match, use of loans in compliance with an intended use plan, and proper financial management.

The authority to establish priorities for loans is to remain with the State agency implementing the drinking water program. A State may consolidate management of drinking water and clean water loan funds provided that funding remains separate.

A Governor of a State may transfer up to 50 percent of the Funds provided to the drinking water loan fund each year to the loan fund authorized under the Clean Water Act. Up to 50 percent of the funds available to the clean water fund in a State may also be transferred to the drinking water fund.

Section 1472 directs the Administrator to make capitalization grants to eligible States starting in fiscal year 1994. In fiscal years 1994 through 1997, funds are to be allocated according to the existing State drinking water program grant formula, including a minimum proportionate share for States that do not have primacy. In fiscal years 1998 through 2000, funds are to be allocated according to a new formula developed by the Administrator based on a survey of drinking water needs in each State.

In addition, 1.5 percent of funds are reserved for Indian tribes, and 0.5 percent for the District of Columbia and the territories. Indian tribes, territories, and the District of Columbia may receive direct grants.

States are authorized to reserve up to 2 percent of funds, or $300,000, whichever is greater, to provide technical assistance to water systems serving a population of 10,000 or less. Technical assistance may include financial management and planning and design of source water protection, system restructuring, or water treatment facilities.

Beginning in fiscal year 1998, the Administrator is to withhold. 50 percent of a capitalization grant to a State which does not have an approved State system viability program.

Section 1473 defines the projects eligible for assistance from the loan fund. Projects eligible to receive loan assistance are capital expenditures for

Compliance with national primary drinking water regula

tions;

Consolidation of systems and use of an alternative source of water supply;