National Arsenic Cost Review Workgroup

The Arsenic Cost Working Group of the National Drinking Water Advisory Council has completed its analysis for the cost of implementation of the arsenic rule. This report includes the group’s findings and recommendations. This chapter provides a brief summary of the report. Details of the findings and recommendations from this group can be found in chapters 3, 4, 5, and 6. A list of the members of the working group and a description of the deliberation process are included in chapter 2.

1.1 Working group’s charge and deliberation process

The charge of the National Drinking Water Advisory Council (NDWAC) Arsenic Cost Working Group was to review the costing methodologies, assumptions, and information underlying the system-size cost estimates as well as the aggregated national estimate of system costs of the Arsenic in Drinking Water Rule. As part of this review, the working group was to evaluate alternative costing approaches or critiques that may have a significant impact on the estimated system costs. In making this evaluation, the working group was charged to determine whether there is adequate supporting information upon which to evaluate the basis for the alternate approaches or critiques and note where there is not adequate supporting information. The final element of the working group’s charge was to develop, based on its review and analysis, a written recommendation to the NDWAC. Such recommendations are to be provided with the understanding that EPA will decide whether and how any revision of the arsenic rule's cost analysis will occur. The working group recognizes that the recommendations will be subject to review, and possible change, by the NDWAC, who will transmit the final recommendations to EPA for consideration should EPA decide to revise the arsenic national cost estimate or when it pursues other cost estimates. This group’s charge did not include the consideration of benefits, which is being addressed by the EPA Science Advisory Board Panel on Arsenic Benefits.

The working group conducted five 2-day meetings around the country between May 29th and August 3rd, 2001. In addition, there have been numerous conference calls, e-mails, and subgroup meetings to review, edit, and amend many details on a multitude of issues affecting the impact of a national cost analysis.

1.2 Overview of costing approaches

The national cost estimates are projected through computer modeling and construction of cost curves. These models are based upon available data and certain baseline assumptions. These baseline assumptions involve a number of factors that may have a significant affect on the final cost if they are changed. These key factors include:

• Number of systems and the total volume of water per system requiring arsenic treatment,
• Number of entry points into the distribution system,
• Type of technology selected,
• Method of disposal for residuals,
• Water quality characteristics of the source waters being treated, and
• Items and dollar amounts assumed under the unit costs of technologies.

1.3 Conclusions and recommendations

The working group believes that the U.S. Environmental Protection Agency (EPA) produced a credible estimate of the cost of arsenic compliance given the constraints of present rulemaking, data gathering, and cost models. Although there are considerable uncertainties in the development of national cost estimates, the working group agreed that if the recommendations in this report are implemented, the estimate will be improved for the purposes of rule making. The working group made a number of specific recommendations to improve the national cost estimate, which are described in this section. The working group acknowledges the usefulness of the AwwaRF study to evaluate the national cost estimate and recommends that any use of the AwwaRF estimation for system-level or national cost should also reflect the modified assumptions and recommendations stated in this report. Major conclusions and recommendations are organized below in the order of the topics covered in the main body of the report.

1.3.1 Use, value, and limits of the national cost estimates (Chapter 3)

The value of existing national cost estimates is now limited by the large uncertainty associated with the estimated outcomes. Reducing this uncertainty where possible will provide a higher value and confidence in the forecasting process.

Recognizing the uncertainties

• It is generally acknowledged that the current baseline data sets and input parameters have individual inherent uncertainties that will create a wide band of uncertainty for any forecast of national cost. To help clarify the issue, EPA should clearly explain the limitations of each estimate and quantify the uncertainty associated with the arsenic rule estimates and all such national cost estimates.

• An approach based on aggregated county, regional, or state costs, coupled with extensive individual case analysis would yield significantly better results than current procedures. However, the working group recognizes the practical limitations and the need for authority, resources, and cooperation from other entities in implementing this approach. Water systems are complicated: significant non-treatment options are available in many cases and standard definitions of best available technology (BAT) will not apply in all cases. No cost estimating system can be precise, as discussed above, but the group believes that new effort should be made to establish a better system and that the extra cost of administering such a system will pay dividends and should be considered for inclusion in appropriate budgets.
• To achieve this in the future EPA should evaluate the feasibility of developing a more representative methodology to assess compliance cost. This evaluation should consider the most recent Community Water System Survey information, describe specific data acquisition needs, provide a set of common criteria to be used in data gathering, and a schedule for obtaining data. The resources expended in implementing this new approach to a national cost estimate should be commensurate with the relative economic impact anticipated from a proposed drinking water rule.

• The difference in the EPA national cost estimate and the AwwaRF study estimates was explained predominantly by differences in the input assumptions regarding the selection of arsenic control technologies (i.e., compliance forecasts) and unit cost models developed for selected technologies. While differences were found in the estimates of the numbers of affected systems and the flow conditions assigned to systems of various sizes, the differences in these two factors offset each other so that their net effect explained little of the difference between the cost estimates. All of these factors explained differences in the cost estimates as summarized in table 4.4
• The unexplained differences (table 4.4) are attributable to the noted differences in residual handling and disposal assumptions, non-quantitative effects from the compliance forecast assumptions, and the approaches used for national cost methodology.
• The working group’s review focused on a methodology that could be applied to any of the MCLs being considered for arsenic.

Taking into account the discussion above, the working group makes the following recommendations for the arsenic national cost estimate:

• Continue to use the most representative data bases available for community and non-community water systems when determining national arsenic occurrence.

• For each population size category, a distribution of flows should continue to be applied rather than a unique flow (e.g., the mean or median flow) to represent the category.
• Due to significant uncertainty associated with EPDS determination, EPA should reexamine the sources of information used to determine the number of EPDS per system size category and use up-to-date and representative information (e.g., Community Water System Survey, AWWA Large Groundwater-using Utilities Survey (Stratus Consulting, January 2000), Water Industry Data Base (WIDB), WATER:/STATS, and Intra-Site Six State database) in its calculation.
• Mixed systems (i.e., those treating both surface water and ground water) should continue to be classified as groundwater systems if more than 50 percent of the water they distribute is ground water.
• For entry points with arsenic concentrations above the current regulatory level of 50 m g/L, only the incremental costs of treating from 50 m g/L to the level of the new standard should continue to be considered in the cost.
• The approach and results used to estimate what percent of a water system’s EPDS will exceed a given MCL should be carefully explained.

The working group believes that the technologies utilized by EPA are, in general, the appropriate technologies for arsenic removal; however, the working group recommends some important changes in the costing approach used by EPA for these technologies.

• The technologies available now are changing rapidly, and EPA should include new technologies in the revised national cost estimate if they are feasible as defined in the SDWA – 1412(b)(4)(D) and 1412(b)(4)(E).
• The working group also recommends that land costs be included for all technologies even though land may not be a major cost driver and poses certain difficulties of estimation. This may be done as a percentage figure of 2 to 5% of total unit capital cost.
• The working group reviewed the cost of the key components for several technologies (e.g. AA). Based on its review, the working group recommends that EPA reevaluate, update, and validate the design and cost of the components in order to develop the cost curve for different technologies. In addition, the working group recommends that example line item tables (example formats shown in tables 5.1 and 5.2) for representative flow categories be included for each technology in the revised Technologies and Costs document (preferably for two community sizes).
• The group also discussed the capital cost multipliers that were used in the previous national costing approach to convert the process costs to capital costs. The working group recommends a multiplier of 2.5 for systems serving populations of 10,000 or smaller and 1.8 for systems serving populations larger than 10,000. In the future, EPA should carefully reevaluate the assumptions involved in developing capital cost multipliers.
• The working group recommends that EPA should reexamine the labor cost estimates to include process monitoring and routine maintenance of the treatment system. These costs should include administration, analytical, sampling and sample delivery costs associated with this monitoring.
• The group recommends that pumping be adequate to overcome the head loss through the adsorbent media and be a single stage pump when the treatment system is extracting groundwater.
• EPA should revise the capital costs to include on-site pilot testing of all technologies.
• Small systems that will be affected by the arsenic rule will now be required to operate sophisticated treatment technologies. These systems may require a higher level of trained and certified operator. To accomplish this, states may be required to expand training and certification requirements to meet these needs. The working group recommends that EPA reevaluate what costs related to operator training and certification were included in the national cost estimate and make adjustments if necessary.

Activated Alumina (AA)

• Based upon the information presented, for purposes of developing the national cost estimate, the working group agrees with the assumption of using disposable activated alumina rather than the regenerable activated alumina.
• Based upon the information presented, for the purposes of developing the national cost estimate, the working group agrees with the assumption of using two columns in series (i.e., roughing and polishing columns with a third standby column). The working group also recommends the media costs for the stand-by column be included in the capital costs for AA technology or any other similar treatment technology using a standby column.
• The contactor and media cost analysis should be updated with the most recent additional information to reflect realistic contactor and media costs (to be determined by averaging costs obtained from at least four independent suppliers).
• The empty bed contact time (EBCT) for the AA design should be such that the media life is at least three months for the lowest bed volume assumptions.
• The capital and O&M cost associated with adequate pumping capacity, which is needed to overcome the head loss through the adsorbent media, should be included.
• EPA should reexamine its unit cost development and curve-fitting technique to ensure that the unit cost equations represent appropriate economies of scale.
• The working group recommends EPA reevaluate spent media disposal cost estimates, including appropriate capital and/or O&M costs (labor, transportation, landfill fees, on-site storage facilities, etc.).

• No changes are recommended for the process design of the enhanced coagulation and filtration process assuming ECF is to be used only in systems that currently have sedimentation basins. However, if ECF is to be used in ground water systems that treat for iron and/or manganese reduction, it may be necessary to add sedimentation basins and cost them accordingly.

• Due to lack of time, the working group was not able to perform an exhaustive evaluation of the unit cost curve development for the coagulation-assisted microfiltration process. The group, therefore, recommends that EPA reevaluate and revise the unit cost curves as necessary.

• EPA should revise the unit costs using the latest figures of capital and operation and maintenance costs.

• After updated unit costs are developed, EPA should continue to use the existing thirteen listed technologies and others as appropriate in its decision tree analysis. In its compliance forecast EPA should continue to use the same approach with the modified assumptions recommended herein regarding the selection of technologies based on system size, type of water supply, arsenic levels, source water quality, existing treatment scheme, and lower cost of the technology.
• Simple treatment technologies (e.g., disposable media adsorption processes without pH adjustment) should be used for systems serving a population of 3,300 or fewer persons where possible.
• Consider expanding the use of POU option to larger size categories if the new cost evaluations show a significant advantage and if the access question and other issues identified in section 5.9 and appendix C are resolved. If issues associated with implementation are not resolved, the working group understands its application will be limited.

• Based on the presentations made, the working group recommends that EPA determine whether the granular ferric hydroxide (GFH) process meets the requirement for "feasible technology" as defined in the SDWA – 1412(b)(4)(D) and 1412(b)(4)(E). If the GFH process meets these criteria, the group recommends that EPA include it in the compliance forecast.
• EPA should evaluate the use of direct filtration technology particularly for systems with high iron content.

• The working group recognizes that the disposal of residual solids generated by arsenic treatment facilities will impact the cost to comply with the arsenic MCL. Based on existing federal requirements EPA has determined that these arsenic contaminated residuals will not be classified as hazardous wastes. This assumption conforms to federal guidelines for developing national estimates. Therefore, the working group agrees that the national cost estimate for residuals disposal under the arsenic rule needs to be based on this assumption. However, the working group also acknowledges that under more stringent state hazardous waste requirements, such as those already existing in California, these residuals may be designated as hazardous wastes, which could lead to higher disposal costs. Such disposal costs are, however, a result of state-by-state decisions, rather than a direct requirement of this federal rulemaking.
• The working group was presented with information about the technique to determine whether a waste is hazardous (this is called the toxicity characteristics leaching procedure (TCLP) test). Based on the information presented, this test may underestimate the toxic characteristics of these residuals. Therefore, the working group recommends that the EPA reevaluate the effectiveness of TCLP test for hazardous characteristics determination.

• The working group recommends that EPA reevaluate the additional administrative costs to states that will be required to implement a stricter arsenic standard.

• The working group recommends that the final report of the revised national cost estimate include tables (as shown in appendix B of this report) that indicate the total capital and annual operation and maintenance costs, as well as the number of systems affected for each of the eight system size categories. A separate table shall be used for each arsenic MCL being considered (e.g., 3, 5, 10, and 20 m g/L).

• The working group recommends that the economic analysis be reevaluated with the latest figures of capital and operating costs to clearly mark the line in terms of the size of community where cost alone would indicate the desirability of using the POU option for arsenic reduction. Consider expanding the use of POU option to larger size categories if the new cost evaluations show a significant advantage and if the access question and other issues identified in section 5.9 and appendix C are resolved.
• Because the working group is concerned about the ability of all communities to achieve 100 percent access, the group recommends that EPA specify steps to be taken by communities to achieve compliance. For example:

1. Provide details of ordinances that state, regional, and local governmental bodies may wish to pass for use by the communities.
2. Provide a description of recommended customer outreach programs and education efforts to reach maximum participation by the residents. These may include initial town hall meeting to define the program along with the costs of alternate approaches and frequency of entry into each household for monitoring and maintenance.
3. Include in the rule a general statement allowing the use of this option by the community when all the required efforts have been taken but some residents still do not allow access to their homes.

• EPA’s national cost estimate has estimated that 4 to 7 percent of communities requiring treatment to comply with the standard (10 m g/L) with a population of less than 500 people will use the POU option. If the new cost evaluations show a significant advantage to all small systems, the working group recommends that higher percentages (as shown below) be considered, if it can be shown that it is appropriate and practical.

• The cost associated with pilot testing must be taken into account in estimating the overall cost of using the POU option in each community.
• Because of the certification by third parties and the conservative field evaluations, it is recommended that sampling and monitoring of the individual units be done by testing a certain percentage of units each year and visiting all households at least once a year. The working group agrees with EPA’s approach of sampling 25% the households each year. It may, however, be necessary to visit all households once a year to examine the units, especially the working of the warning feature of the devices. Any cost associated with such visits should be included in the cost evaluations.

The working group discussed affordability issues surrounding the EPA and AwwaRF cost estimates, based on current cost data, and recognizes the inseparable link between cost and affordability. Affordability considerations are an integral part of the EPA’s national cost methodology in that how affordability is measured and the affordability threshold selected may directly impact the treatment technologies and treatment trains that could be included in EPA’s national cost estimate. In addition, the arsenic rule illustrates that national compliance cost estimates cannot be used to assess local challenges that may be faced by small water systems and their customers. There may be small water systems and populations that will be unable to afford compliance with the arsenic rule and with future rules under the SDWA. Although the working group did not develop a solution, the group did discuss various tools and approaches that could be considered as potential solutions, both partial and permanent, for system affordability and rate payer affordability as listed in appendix A.

• The working group recommends that a sustainability fund that would be designed to assist small systems that have demonstrated no feasible alternatives to keep water users’ fees within the limits of affordability be created.
• The working group recommends that the NDWAC convene a working group to review EPA’s methodology and assumptions for determining national affordability for regulations.

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