Mr. Chairman, NAWC commends you and your Subcommittee for conducting these oversight hearings on the implementation of the 1996 Amendments to the Safe Drinking Water Act (SDWA), the second such hearings by your Subcommittee in as many years. With its emphasis on public participation and right to know, and the requirements for sound science and cost-benefit analysis in the regulatory process, the 1996 Act represents a new paradigm for environmental legislation of which this Committee and Congress can be justly proud.
Although our statement expresses some concerns over current and future issues regarding the Act and the drinking water industry, NAWC believes that overall EPA has made a good faith effort to comply with the letter and spirit of the Act. In particular we wish to commend EPA for its timely implementation of the Consumer Confidence Reports (CCR) rule; its efforts to seek increased funding for scientific research through the FY 2001 appropriations process; its positive response to complaints about its SDWIS compliance database (although much still needs to be done); and its efforts to implement the new Drinking Water State Revolving Loan Fund (DW-SRF) in an equitable manner.
Areas of concern that we wish to address today include the proposed radon rule, the proposed arsenic rule, MTBE contamination of drinking water sources, inequitable implementation of the DW-SRF by some states, the threat to national drinking water standards posed by tort litigation, and drinking water infrastructure needs.
EPA's Proposed Radon Rule NAWC does not believe that EPA's proposed MCL of 300 pCi/L, or any level below 1000 pCi/L, can be justified by cost-benefit analysis, especially for small companies. NAWC's California chapter, the California Water Association, has prepared a statement that documents in detail the deficiencies of EPA's cost estimates, and we would like to submit CWA's statement for the record of this hearing.
The cost differences between compliance with the proposed alternative MCL (AMCL) of 4000 pCi/L and 300 pCl/L can be huge. NAWC's largest company, American Water Works Company, estimates capital costs of $1.3 million for a treatment level of 4000 pCi/L compared with $134 million for a treatment level of 300 pCi/L, a 100-fold difference.
NAWC supports state-sponsored Multimedia Mitigation (MMM) programs as the most cost-effective way to achieve substantial health benefits through reduction in exposure to radon in indoor air. Furthermore, we believe that the prospect of water systems implementing local MMM programs in the absence of state programs is unrealistic. It is highly doubtful that the nation's public water systems, especially small systems, will have sufficient resources to achieve the goals of multimedia mitigation by themselves without state assistance. Tracking new home construction and remedial venting of existing homes is far removed from the chartered objectives of community water systems, not to mention the added burdens that would be placed on water ratepayers.
In summary, NAWC believes that nationwide implementation of effective state MMM programs is essential for the Radon Rule to achieve its intended goals. Otherwise systems will be faced with the very unattractive alternatives of implementing local MMM programs or meeting a very costly MCL which cannot be justified by cost-benefit analysis. We urge Congress to consider legislation that would place the requirements of the MMM program in EPA's air program where it belongs and to provide states with sufficient resources to implement it. Effective MMM programs implemented in every state plus a drinking water AMCL of 4000 pCi/L will provide far greater public health benefits at a more reasonable cost than a drinking water MCL of 300 pCi/L standing alone.
EPA's Proposed Arsenic Rule
NAWC agrees with the National Academy of Science that the current arsenic standard of 50 ppb needs to be revised in accordance with the provisions of the 1996 SDWA Amendments. However we are not convinced that EPA's proposed standard of 5 ppb, announced June 22, 2000, can be justified. · Earlier this month, in a preliminary draft report, the Drinking Water Committee of EPA's Science Advisory Board (SAB) concluded that the available scientific evidence on health effects could justify a standard of 10 ppb or even 20 ppb. · The World Health Organization has an arsenic standard for drinking water of 10 ppb. · According to the AWWA Research Foundation, the cost of compliance with a standard of 5 ppb is 2 1/2 times that of compliance with a standard of 10 ppb.
NAWC urges EPA to reconsider the available body of scientific evidence and to consider a final standard of no less than 10 ppb.
MTBE Contamination of Drinking Water Sources
The use of Methyl tertiary butyl ether (MTBE) as an oxygen additive in reformulated gasoline has created a significant and unacceptable risk to drinking water surface and groundwater sources in many areas throughout the United States. Recently EPA recommended that Congress amend the Clean Air Act to significantly reduce or eliminate the use of MTBE as a fuel additive.
On May 4, 2000, NAWC joined three other drinking water Associations in urging Congress promptly to consider legislation that would: · Amend the Clean Air Act to significantly reduce or eliminate the use of MTBE in gasoline. · Ensure that air quality gains are not diminished as MTBE use is reduced. · Require adequate research to be conducted on any replacement fuel additive to ensure that such a replacement will not contaminate drinking water sources. · Provide assistance to public water systems that have MTBE contaminated sources for treatment or for alternative water supplies.
We urge Congress to take swift action to resolve this threat to our nation's drinking water supplies in accordance with these principles.
State Revolving Loan Funds
When NAWC testified before this Subcommittee in March, 1999, we observed that 19 states had declared privately owned drinking water systems to be ineligible for DW-SRF assistance through their constitutions, statutes or official policies. This unfortunate consequence is a clear, and in many cases deliberate, violation of Congressional intent that SRF loans should benefit customers of all public water systems, regardless of ownership. In fact, this intent was made explicit in this Committee's report accompanying the 1996 Amendments. Unfortunately, the most recent data from EPA reveals that, 15 months later, the numbers of states ignoring Congressional intent has been reduced by only two.
Mr. Chairman, EPA's state-by-state allocation of SRF funding is based on infrastructure needs surveys that include the needs of all utilities regardless of ownership. Those 17 non-complying states are accepting federal funds based in part on the needs of privately owned utilities in their states while refusing to allow those same utilities to apply for SRF assistance. Plainly put, this is discriminatory not just against the companies but also against their customers, both of whom pay the taxes that make these funds available in the first place.
Some argue that privately owned companies, even those serving the public, should not receive federal assistance not even loans. Congress considered that argument in 1996, and concluded that regulation by state public utility commissions would assure that the interest savings from SRF loans would benefit customers not company shareholders. In fact the National Association of Regulatory Utility Commissioners (NARUC) has joined us in criticizing the failure of these states to comply with Congressional intent.
We have urged EPA to base its SRF allocations on the needs of those customers that the states are actually willing to help. The funds forfeited by those states that refuse to comply would be reallocated to those who do. If EPA cannot, or will not, take this step, we believe that Congress should intervene to end this discrimination.
Water Contamination Tort Litigation
NAWC continues to be concerned about a new kind of lawsuit which we believe seriously threatens America's drinking water industry and the regulatory system under which it has successfully operated for many years. In California, the plaintiff's bar has organized and commenced more than a dozen mass tort lawsuits against several community water systems (both public agencies and private companies) for allegedly delivering contaminated water, even though those systems claim to be in full compliance with state and federal standards. As you know, these standards have been developed by regulatory agencies over many years based on the health effects of contaminants, measurement capabilities, and technical feasibility. They are the product of extensive Congressional debate over both the need to protect the public health and the cost of treatment.
If twelve jurors conclude that these national standards are inadequate to protect the public health, water systems across the country will need to consider whether to comply with uniform national standards or the relatively arbitrary and unpredictable standards set by random juries. Furthermore, the costs of defending these lawsuits as well as increased insurance coverage will place upward pressure on water rates and charges. Ultimately, the substantial judgments that could result from these lawsuits could threaten the financial stability of water systems across the country.
In September 1999, a California appellate court that had consolidated 11 of these cases ruled that the complaints against regulated systems should be dismissed because they were preempted by the authority of the California Public Utilities Commission. However, the complaints against the public agencies were ordered to proceed. In December 1999, The California Supreme Court accepted petitions for review of the intermediate court's decision.
Regardless of the ultimate outcome in California, water systems all over the country remain vulnerable to the threat of this kind of litigation. Given the widely-acknowledged success of the SDWA since its enactment more than 25 years ago, we believe that it would be most unfortunate, if not potentially disastrous, if the heart of the Act uniformly enforced national drinking water standards were to be eroded or destroyed by litigation.
Accordingly we have been working with other drinking water groups to draft legislation that would: · Make compliance with drinking water standards a defense in civil lawsuits against water utilities. · Cover unregulated contaminants as well by requiring proof of negligence (as opposed to strict liability). · Give deference to compliance determinations by state primacy agencies (without requiring those agencies to go beyond current requirements). · Protect all utilities (public and private, large and small) from frivolous lawsuits which are expensive to defend. · Preserve, through a standard "savings clause," defenses already available under federal or state law.
Mr. Chairman, we look forward to working with the Members of this Committee as we proceed with this endeavor.
Drinking Water Infrastructure Needs
A 1997 EPA report estimated that the drinking water industry must invest $138 billion over the next 20 years to replace failing infrastructure. At that time, this amount actually exceeded EPA's total estimate of existing water industry assets. A recent analysis by the American Water Works Association estimated total infrastructure needs to be $385 billion. When wastewater needs are added, that number more than doubles.
The private sector stands willing and able to help with these infrastructure financing challenges. Creative partnerships should be encouraged and pursued so that municipalities can tap and pursue the private capital markets. If such partnerships were fully pursued, many cities and towns all across the country could successfully address many of their infrastructure financing shortfalls.
However, some have responded to this challenge by calling upon Congress to consider massive federal grant or trust fund programs. NAWC believes such a call to be, at best, premature. In addition, if the water industry cannot meet the infrastructure challenge substantially on our own over the long run, we will have admitted that our utility models are not self-sustaining. In other words, NAWC believes that the supply and delivery of potable water should be cost effective and should pay for itself as is the case with the electric, gas and telecommunication utilities. Consequently, we need to find solutions that will assure that water utilities are economically viable in the future, without subsidy.
In summary, if it is demonstrated that Federal assistance is warranted, NAWC will be prepared to support narrowly targeted solutions that: · Are economically efficient and equitable. · Include all water utilities regardless of size or ownership. · Support innovation. · Assure that utilities are self-supporting over the long term. · Provide special assistance to economically depressed areas based on consumer needs.
These are long-term challenges, and we look forward to working with this Committee to achieve long-term solutions that will allow the industry to stand on its own two feet.
In conclusion, Mr. Chairman, NAWC very much appreciates this opportunity to present our views, and I would be happy to respond to any questions.