September 20, 1978
Page 30339
Mr. MUSKIE. I want to begin by complimenting the chairman of the subcommittee for his diligent effort in keeping this conference report within the targets established by the budget process while finding ways to include funds for some badly needed program increases in the environmental area. The bill represents a significant improvement over some, of the stark budget years faced by EPA in the recent past. As is usually the case, there are areas that need increases that do not receive additional funds in this conference report.
My interest in environmental protection programs has a long history. I have had to scrutinize that interest carefully under my responsibilities as chairman of the Senate Budget Committee. I have reviewed the items which fund environmental programs in this bill with particular care. They are clearly within the targets established by the budget process, and there is even room for additional increases beyond those made by the conference.
The Environment and Public Works Committee made an intensive effort to identify the needs of the programs under its supervision this year and to cut those requests to the bone in its report to the Senate Budget Committee. It is that report that I have used in assessing the actions taken by the conference.
Five members of the Environment and Public Works Committee appeared together before the Subcommittee on HUD-Independent Agencies of the Senate Appropriations Committee on Thursday, April 27, to reiterate our support for carefully selected increases in the EPA appropriations. The recommendations on April 27 had been cut back slightly from the March 15 report in order to keep it consistent with the first concurrent resolution.
The product of the Environment and Public Works Committee deliberations on the fiscal year 1979 budget was not a "wish list." In writing the March 15 report to the Senate Budget Committee, the Environment and Public Works Committee forced itself to take a serious look at optimum funding levels, competing program needs, and scarce Federal resources. After beginning with a fairly comprehensive statement of program potentials, the committee produced a realistic, but genuinely constrained, estimate of budget requirements for fiscal year 1979. This is the budget process working as it should.
There are a number of pluses in the conference report before the Senate today. There is $25 million in this bill for grants to local governments to carry out the processes that will lead to new control programs in the areas of the country with the worst air pollution problems. This money is badly needed. An additional $29 million is available for the administration to use in either solid waste or air planning. I urge the administrator to use this for air planning. The Clean Air Act Amendments of 1977 authorized $75 million for this program. There is no doubt that the $29 million will accomplish a great deal. Yet, without full funding, States with serious air problems will be severely crippled in providing creative solutions to solve the clean air crisis. I would have preferred that the conference report contain all the funds in the Senate bill.
The increase of $5 million provided for State air control agency grants will bring these grants to a total of $80 million in fiscal year 1979. This will provide funds to State agencies to further implement the Clean Air Act Amendments of 1977. Only 2 years ago, the funding level was approximately $55 million. The Federal Government has gone considerable distance in fulfilling its obligation to assist States in this area.
In the area of solid waste, where the chairman of the full Environment and Public Works Committee (Senator RANDOLPH) has worked so diligently, the Conference Committee has approved the President's budget. This includes $15 million for facility planning and feasibility studies — section 408(a) (2) and $11.2 million in program support grants for State and local governments to develop solid waste plans. It would be my hope that the States would use some of these funds to assist small communities. It is unfortunate that funds were not included for section 4009 of the Resource Conservation and Recovery Act, and the rural community program.
This would have been useful in assisting with the phase out of open-burning dumps, which is required under section 4009 and under some State plans for clean air implementation. But the funds available under section 4008 are broad enough to be used for some aspects of this purpose.
The Senate Appropriations bill provided a $50 million increase beyond the President's budget for State and local government air quality and solid waste planning efforts — $35 million more for air quality planning grants under section 175 of the Clean Air Act and $15 million more for solid waste planning grants under section 4008(a) (1) of the Resource Conservation and Recovery Act. Regrettably, the conference bill provides only $29 million extra for these two functions together.
This will probably slow the accomplishment of these important and worthwhile goals.
In water pollution, the Senate provided a restoration of some of the cuts made by the House Appropriations Committee in the regional planning programs under section 208 of the Clean Water Act. The House cut $25 million, and the Senate bill restored $14 million of that cut. The conference agreement provides for an $18 million cut from the President's request of $50 million. My preference would have been to see the full cut restored, but I appreciate the efforts of the Senate Committee in restoring a portion of the cut.
I regret the Senate position restoring the funds for the construction grant program, which were cut by the House, was not maintained in conference. Among other pressing needs, there is a need for greater attention to the advanced waste water treatment program. Eliminating $300 million in funds is not an appropriate way to accomplish that objective. I am disturbed by the language of the report directing the Administrator to review all project proposals with effluent limitations more stringent than secondary treatment. First, it should be stressed that this direction adds nothing to existing law. Such review is already within the Administrator's discretion. Further, it is important to clarify that advanced waste water treatment projects are still eligible for funding up to the treatment level required by State water quality standards. Also, the provisions of this bill cannot alter the provisions of the Clean Water Act giving States primary administrative responsibilities for making grants under title II of that act.
However, I am pleased to see that $2.5 million has been placed in the bill to review application and conduct analysis relating to ocean outfall applications under section 301(h) of the Clean Water Act of 1977.
America's wetlands have been disappearing at an alarming rate. The $2.5 million and 60 positions added by the Senate Committee and maintained in conference to implement section 404 of the Clean Water Act will be very useful.
In the research and development area, the $8 million cut made by the House Appropriations Committee in anticipatory research would have done substantial damage, particularly to the acid rain program. I appreciate the efforts of the Senate Appropriations Committee in restoring $2 million of those cuts, but the Environment and Public Works Committee recommendations are still far above those established in this conference report.
The administration has requested $4 million in fiscal year 1979 to begin the activities of the National Commission on Air Quality. This body was established in the Clean Air Act Amendments of 1977 which were signed into law August 7 of that year. The Commission will play an important role in evaluating air pollution problems and strategies for cleanup over the next 2 to 3 years.
Unfortunately, the Commission is getting started almost a year after the enactment of the law, and this will necessarily delay the reports due from the Commission. It is necessary to provide the funding to help the Commission begin its activities immediately. The administration requested $4 million and both committees allocated $2 million for this purpose. There may be a need for a supplemental in the future if the Commission does begin moving rapidly to catch up for the time that has been lost.
There are some programs that still need increases in funds, and those increases are not contained in this legislation. Let me briefly touch on some of those.
I am disappointed that there are so few resources available to implement the basic regulatory programs required under the Clean Water Act. The 1977 amendments were signed after the President's budget was completed; therefore, that budget needs to be increased. EPA needs more money and manpower to do an adequate job in producing rigorous and scientifically sound regulations. There is a large effort needed in developing regulations to control the discharge of toxic pollutants, and the Environment and Public Works Committee recommended a $20 million increase in this area. The committee also recommended $30 million for additional money and manpower in abatement, control, and enforcement. This is not contained in this bill.
The statement of Senator CULVER before the Appropriations Subcommittee details a number of increases needed in ecological effects, water quality research, and research in toxic pollutants, radiation, and noise. I will not repeat those requests here, but the funds are needed and are not contained in the legislation.
One issue of particular concern relating to research and development is the proposed transfer of some of EPA's program to the Department of Energy. That action stands contrary to the law that created the Energy Research and Development Administration and which has now become part of the Department of Energy. The transfer is contrary to the congressional intent associated with that legislation. It is contrary to the actions taken by the Senate Environment and Public Works Committee and the Senate Energy Committee this year. I have communicated frequently with the administration on this subject and reiterate once again that the EPA programs must be left intact and cannot be transferred to the Department of Energy. This is the sense of H.R. 11302, the conference bill which was reported to the House and Senate this week. That bill specifies that all funds appropriated in this bill for energy related pollution control technology shall be spent by EPA.
The House and Senate reports accompanying this appropriation bill contain negative statements regarding the safe drinking water regulations to control organic chemical contaminants. These regulations have been proposed by the Environmental Protection Agency. The Subcommittee on Environmental Pollution held 2 days of oversight hearings on the Safe Drinking Water Act in late July. Those hearings satisfied me that this regulatory program should go forward. The control strategy of using granular activated carbon filtration to control organic chemicals that may produce long-run health effects, such as cancer, seems basically sound. The technology has been used in Europe for many years and has been used in American industrial processes. We will learn ways of improving onthe technology as it is adopted, but in most cases, it is better to proceed with the application of the technology than to wait years for small improvements in the technology.
The Environmental Protection Agency is charged, under the Safe Drinking Water Act, with the responsibility of protecting drinking water. The regulations dealing with organic chemical contaminants seem to be a useful step in fulfilling that obligation. Because of the strong interest in this regulation, I have added a supplement to my statement which elaborates the issues and includes the regulations in question.
Mr. President, I am concerned that the Senate committee report on page 35 criticizes EPA for sending out questionnaires to a number of companies, both large and small, for the purpose of receiving financial data. This information-gathering process is provided for under section 308 of the Clean Water Act and is essential to the proper operation of the act. I do not believe that committee's criticism is justified. I am pleased that the conference report omits any reference to this matter.
EPA is required by sections 301 and 304 of the act to promulgate uniform national effluent guidelines for major industrial dischargers. In 1976, the U.S. District Court for the District of Columbia in the case of NRDC, et al. v. Train ordered the EPA to develop or revise best available technology economically achievable effluent limitations (BAT) for at least 21 major industrial categories covering 65 classes of toxic pollutants.
In order to develop appropriate BAT guidelines, EPA must determine what is "economically achievable." This is done by gathering the necessary financial information from affected industries. Without this information, the guidelines might not adequately reflect the financial capability of a particular industry, and an unfair burden could be placed on that industry. Also, EPA must be able to justify each BAT guideline, and that would be difficult without a complete financial picture of each particular industry.
The agency has taken a number of precautions to see that any information submitted will be kept confidential and has established detailed rules and regulations governing protection of this type of data. In addition, EPA has indicated that industries with many small businesses will not have to produce as much detailed information as that required of larger industries.
Several months ago, the Office of Management and Budget reviewed EPA's requests for information under the Federal Reports Act and officially approved the necessity for this information. There is some question whether OMB approval was needed at all since the financial information was required by the law and a court decree. OMB's regulations under the Federal Reports Act do not require review under such circumstances.
Based on the mandates of the Clean Water Act, EPA had no choice but to collect financial information from affected industries. I think the record clearly shows that the requests for information were proper and in the best interests of all the covered industries to respond as completely as possible.
I will ask unanimous consent to place in the RECORD a letter from Thomas C. Jorling, assistant administrator for Water and Hazardous Materials, describing the information-gathering process and the OMB clearance request and notice of action approving the EPA plan of data collection. Hopefully, this letter will clear up any confusion which has arisen.
In summary, the Appropriations Committee has increased the EPA programs in some areas and has stayed well within the budget targets established in the first concurrent resolution. I commend them for that and hope that the Senate will support this legislation. The chairman of the subcommittee (Senator PROXMIRE), the ranking Republican (Senator MATHIAS) and the chairman and ranking member of the full committee (Senators MAGNUSON and YOUNG)
are all to be commended for their work on this bill. Their efforts are appreciated.
Finally, Mr. President, I ask unanimous consent that there be printed at this point in the RECORD certain materials to which I earlier referred relevant to the fiscal year 1979 appropriations for the Environmental Protection Agency.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
ATTACHMENT A — SAFE DRINKING WATER
One of the major factors which influenced the passage of the Safe Drinking Water Act of 1974 was the detection of organic chemical contaminants in drinking water. The Act, and the Committee Report which accompanied it, stressed the significance of organic chemical contamination of drinking water, and the concern of Congress can be found in Section 1442(a) (9) of the Act:
"Not later than six months after the date of enactment of this title, he (the Administrator) shall transmit to the Congress the initial results of such study (of organic chemical contamination), together with such recommendations for further review and corrective action as he deems appropriate."
In the debate that has ensued since the Environmental Protection Agency (EPA) proposed a regulation to control synthetic organic chemicals in drinking water, the National Cancer Institute and the National Academy of Sciences have supported the basic health premises of this regulation, as have the Food and Drug Administration, Occupational Safety and Health Administration and Consumer Product Safety Commission. In developing the proposed regulations in drinking water, EPA has gathered, from every known source, all of the information available on health risks, effectiveness of treatment methods, potential hazards associated with treatment methods, and economic impacts. While the background data are more than adequate in quantity and significance, it is always possible to carry out more research and to acquire more data and indeed this is continuing. In this regard, the U.S. Court of Appeals for the District of Columbia Circuit in the case of EDF v. Costle has stated:
"In light of the clear language of the legislative history, the incomplete state of our knowledge regarding the health effects of certain contaminants and the imperfect nature of the available measurement and treatment techniques cannot serve as justification for delay in controlling contaminants that may be harmful."
EPA has carefully analyzed the costs of compliance with the proposed regulations and estimates the total capital cost at $616– 831 million. Although there is still some disagreement with the industry about the unit costs of treatment, the range of estimates is much narrower than the Senate Report suggests. The water supply industry estimates of$4–5 billion are based on an incorrect assumption that all or most of the 390 water systems exceeding 75,000 population covered by the regulations would be required to install granular activated carbon. However, the proposed regulations set out a process whereby the States (or EPA where the State has not assumed primary under the Act) would make a case-by-case decision as to which system needs the treatment. EPA estimates that only about 60 systems will be required to install the added treatment. EPA has also analyzed the ability of cities to finance the capital costs and concluded that there would be a significant problem only in a few cases; in these cases, the system could obtain an exemption under the Act.
The added costs of treatment, in those cities which do install granular activated carbon, would amount to a rate increase of only $10-$20 per family per year in most cases. EPA has judged this to be a reasonablecost for the health benefits obtained. Its acceptability to the public is indicated by the fact that many consumers are now paying much higher amounts for bottled water or for home treatment devices of unknown effectiveness. These expenditures are estimated to be about $300 million per year and rising rapidly.
The proposed regulations are currently open for public comment. Eight public hearings have been held around the country where almost 300 witnesses have been heard. In addition about 500 written comments have been received so far and more are expected by the September 1 close of the comment period.
During this period, EPA is soliciting suggestions, data and constructive comment on all aspects of the control or organic chemical contaminants in drinking water including alternative regulatory approaches. The information gained will be evaluated and where applicable, utilized in the development of final regulations. Meanwhile EPA research and development efforts on the health, technology and economic aspects are continuing.
There has been a great deal of misinformation disseminated about this regulation. There is no question about the potential risks involved from drinking water contaminated by organic chemicals. There is also no real dispute as to the effectiveness and safety of granular activated carbon systems. Finally, as indicated above, the cost to the individual consumer will be quite small and health protection bought will be large.
The Safe Drinking Water Act is a preventive health statute. This regulation definitely carries out the purposes of that Act. It is premature to question the utility of this regulation.
EPA has prepared a white paper discussing all aspects of these regulations. It answers many of the questions raised in the Committee report. I ask unanimous consent that excerpts from this paper, which have appeared in the Federal Register, be placed in the RECORD.
EXCERPTS
THE HEALTH BASIS OF THE PROPOSED REGULATIONS
EPA has received many comments questioning whether enough information on health effects of organic contaminants exists to justify the proposed regulations. These comments have generally accepted the fact that chloroform and other compounds present in some drinking water have caused tumors in laboratory tests when fed to animals at high doses, but they do not agree that this information forms a valid basis for reducing the levels of these compounds beyond the already low levels that occur in drinking water.
A frequent comment is that the National Academy of Sciences, in its report, "Drinking Water and Health," recommended against the establishment of a maximum contaminant level (MCL) for trihalomethanes and instead urged that further research be done. EPA believes this is a misinterpretation of the report. While the Academy did identify research needs, it clearly felt that the available information on chloroform (which forms the bulk of the trihalomethanes) was sufficient of justify regulation. After the Academy summarized this data, it concluded (p. 717) :
... it is suggested that strict criteria be applied when limits for chloroform in drinking water are established.
The health basis for the proposed standards has been fully supported by Federal agencies experienced in dealing with environmental carcinogens. These agencies include the National Cancer Institute, the National Institute of Environmental Health Sciences, the Food and Drug Administration, and the Occupational Safety and Health Administration. The approach EPA is taking in the drinking water proposal is consistent with the approach which these and other health-concerned agencies have taken in regulating human exposure to carcinogens, that is, to reduce human exposure to the extent feasible, provided the costs are reasonable.
The remainder of this section briefly summarizes the scientific basis of this approach and particularly of the judgment that even very low exposure to carcinogens poses a risk to public health. Since this basis applies equally well to all exposure routes, most of the discussion is general and does not refer specifically to the contaminants found in drinking water. Ample documentation of the occurrence of synthetic organic chemicals in drinking water and of the toxicological and epidemiological studies of them is contained in the preamble to the proposed regulations and the supporting materials referenced therein.
Several important scientific conclusions about the nature of cancer have played a role in this approach. First, there is the simple fact that exposure to some chemicals can cause cancer. The first evidence of chemical carcinogenesis in humans dates back to 1775, when Percival Pott noted that there were high rates of scrotal cancer in men who had been exposed to soot as chimney sweeps. During the 20th century, a number of industrial chemicals, such as benzedine, asbestos, and vinyl chloride, has been shown to produce cancer in workers exposedto high levels. In addition, it is generally agreed that cigarette smoking and excessive exposure to sunlight can cause lung and skin cancer, respectively.
Second, there is evidence that environmental rather than genetic factors are causing a significant amount of human cancer. A classic epidemiological study was done of Japanese immigrants to the United States and their descendants. Japan has higher rates of stomach cancer and lower rates of colon cancer, compared to the United States.When the Japanese immigrated to the United States, their rates of stomach cancer fell and their rates of colon cancer increased. Among their children, the difference was even more marked: closer to the U.S. pattern and further from the Japanese pattern.
Something about the U.S. diet, lifestyle, or environment produces lower rates of stomach cancer and higher rates of colon cancer, while the same factors in Japan produce the opposite pattern. We don't know what these causative factors are but we can presume that it is something in the environment, since there was little change in the genetic makeup of the populations studied. A similar pattern has been observed in other studies. (The term "environment" in this context refers to everything humans are exposed to, including such things as cigarette smoking, food, and sunlight, as well as the results of environmental pollution in the usual sense.)
Third, scientists have developed methods for testing suspected carcinogens in laboratory animals. Since studies of cancer patients have only led to the identification of a small number of human carcinogens, usually in cases where there was a well-defined group exposed to high levels, and since we as a society do not allow intentional testing of humans with suspected carcinogens, some means was necessary to test the many thousands of chemicals used in our society and the new ones that are constantly being developed to determine their potential for harmful effects on humans.
Although the differences between humans and test animals (rats and mice) introduce an element of uncertainty in the use of animal data, the test results have been well confirmed: Of the known human carcinogens, all but a few also cause tumors in laboratory animals. Therefore, it is reasonable and prudent to place significant weight on animal data showing carcinogenic effects. These tests have been criticized for using doses much higher than those actually encountered by people. The high doses are necessary to produce a statistically valid response in enough of the animals so that conclusions can be reasoned without requiring many thousands of animals be tested. Additionally, the size of the dose is less important than its effect: If the result is cancer and not simply an over-burdening of the animal's system, there is reason for concern. In view of the conclusion discussed below that even very small doses of carcinogens carry some risk, the animal tests at high doses are valid for indicating the presence of a cancer risk and the relative potency of the chemical tested.
In the case of organic contaminants in drinking water, there are also a series of human epidemiological studies that have attempted to relate human cancer rates to indicators of such contamination. This research has generally shown such a relationship. Such studies are difficult to interpret because other factors which may be related to cancer rates are also likely to be present in the large cities where high levels of organics have been found in drinking water. However, the research tends to reinforce the concern resulting from the presence of substances known to cause cancer in animal tests. They therefore serve as valid additional support for EPA's proposed regulations.
Finally, and perhaps the most controversial, is the conclusion that there is no safe level for a carcinogen and that any exposure, no matter how small, will result in some risk of cancer. This conclusion is based on the best available and generally accepted scientific knowledge concerning cancer and its causes. Cancer is believed to be the result of a small number of discrete events in the structure of a single cell which transform it into a cancer cell that can evade the body's defenses and grow in an uncontrolled way ultimately producing death. Very little is understood about how a chemical carcinogen interacts with a cell's DNA to cause the transformation, but it is believed that any case of chemical carcinogenesis is the result of a single molecule (or a small number of them), interacting with a single cell. It follows that exposure to a small amount of a carcinogen produces some small risk of cancer.
In addition, none of us is exposed to just one chemical or just one set of conditions, but rather many different chemicals and situations every day. The combined effects of many factors and chemicals may ultimately produce a cancer, so it is unrealistic to think of risks in terms of just one chemical.
The "no safe level" conclusion has important consequences. It means that exposures of large numbers of people even to very low levels of carcinogens are still a matter of concern, even if the risk to any particular individual appears negligible. For example, if everyone in the United States had a 1-in-100,000 chance of getting cancer as a result of such an exposure, certainly a very small risk, that would still mean 2,200 or so additional cases of cancer nationwide. It also means that the animal tests are valid bases for inferring human risk even with the very high doses which must be used in those tests for technical reasons. Although the environmental exposures are usually orders of magnitude lower than those used in the animal tests, the number of people exposed is orders of magnitude higher.
It should be noted that there are reputable scientists who do not accept the "no safe level" conclusion. Neither school of thought can be said, as a matter of scientific certainty, to have proven its case, and the disagreement is not likely to be resolved in the foreseeable future. Nevertheless, the regulatory agencies have found it prudent, as a matter of public policy, to take the conservative position of accepting the "no safe level" conclusion, since this position is more protective of public health and the preponderance of scientific opinion supports it.
To summarize, we know that a great deal of human cancer is caused by unknown factors in the environment. We also know that certain chemicals which cause cancer in animals are found in low levels in air, food, and drinking water and have reason to believe that low levels of animal carcinogens pose a risk to humans. These chemicals, and others which have not yet been tested, must be presumed to contribute to the total incidence of cancer, although the magnitude of the impact of each is unknown. They therefore warrant regulatory control to minimize long-term adverse effects on human health.
Since exposure to any amount of a carcinogen carries some risk, regulatory decisions cannot be based on determination of a safe level. But in many cases, complete elimination of the chemical from the environment is not feasible or has costs that society would be unwilling to pay. EPA and other regulatory agencies have therefore evolved the approach of minimizing any human exposure to carcinogens: Provided, The costs are reasonable. This is the approach that has guided the development of the proposed regulations to limit organic contaminants in drinking water.
EPA's evaluation of the health risk has been endorsed by the Director of the National Cancer Institute, Dr. Arthur C. Upton, and the Director of the National Institute of Environmental Health Sciences, Dr. David P. Rall. The texts of their letters to EPA Administrator Douglas M. Costle are reprinted in Appendix A.
Additional information on these and. related issues may be found in the preamble to the Occupational Safety and Health Administration proposed regulations on Identification, Classification and Regulation of Toxic Substances Posing a Potential Occupational carcinogenic Risk (42 FR 54148-83, Oct. 4, 1977), which is hereby incorporated by reference in this notice.
Further discussion is contained in the comments made to OSHA by Arthur C. Upton, Marvin A. Schneiderman, William Lijinsky, Richard R. Bates, Umberto Saffiotti, Richard Peto, and Samuel S. Epstein (OSHA Docket No. 090), which are also incorporated by reference in this notice.
ECONOMIC IMPACT OF THE PROPOSED REGULATIONS
Since the U.S. Environmental Protection Agency (EPA) proposed a regulation for the control of organic chemical contaminants in drinking water in February 1978, the Agency has received a number of comments regarding the costs and financial feasibility of compliance with the regulations. This notice presents the results of an 8-week reassessment of the economic analyses prepared in 1977 as the regulation was being developed. These results are fully documented in a report entitled "revised Economic Impact Analysis of Proposed Regulations on Organic Contaminants in Drinking Water," available on request.
The focus has been on the costs and financing of granular activated carbon (GAC) treatment systems. Although not the only treatment technique available for reduction of THM, GAC is the most expensive treatment technique contemplated under these regulations and the one on which the greatest number of public comments has been received thus far in the public comment period.
Three specific subjects have been addressed in this review:
The capital and operating costs for granular activated carbon treatment installed at individual water systems.
The implications of changes in those unit costs for the economic impact of the proposed regulation at the national level and to residential customers of affected water systems.
The ability of water systems to raise the capital which would be needed to install GAC treatment.
The examination included five major activities. First, selected equipment manufacturers and carbon suppliers were again contracted to verify or supplement previous data. Second, GAC cost estimates submitted to EPA by some water utilities were analyzed. An effort was made to fully understand the basis of estimates developed by three cities which had prepared the most thorough projections: New Orleans, Indianapolis, and Louisville. In fact, two of them were visited in person and the third was contacted by telephone in this process. This effort was meant to supplement four case studies conducted in 1976 as a basis for the costing methodology.
A recognized consulting engineering firm, Gannett, Fleming, Corddry, and Carpenter, Inc., was engaged to visit New Orleans and to prepare an independent preliminary estimate of capital costs of GAC treatment at New Orleans. The purpose of this element of the review was to have a consulting engineering firm examine the specific costs encountered at one water system. It was felt that this would help reconcile differences between EPA and the industry in this instance and could provide some feedback on more general assumptions.
In the evaluation of national and customer level impacts of the revised cost estimates, the Temple, Barker & Sloane, Inc. computerized Policy Testing Model (PTM) of water utilities was again utilized. The model traces the effects of construction and operating cost impacts through the industry's financial structure to identify those economic effects.
Finally, to address the capital markets issues regarding the financing of GAC installations, EPA's consultants contacted representatives of Moody's Investors Service and two other financial institutions. These discussions identified the key financial ratios by which the financial investment community evaluates water utility bond issues. The project team then analyzed those ratios and the general financial condition of a sample of 27 water systems to determine the relative ease or difficulty such systems would have financing GAC installations at a range of costs.
The actual costs faced by a water system installing GAC would vary widely depending on a variety of factors. Perhaps most important is the quality of its raw water, which will be reflected in the contact time and regeneration frequency resulting from the pilot studies. Another is the layout of the existing treatment plant and the ease or difficulty of modifying it to accommodate the GAC equipment. Finally, each water system will have to make certain policy decisions concerning such matters as the amount of growth in demand to provide for, the amount of redundancy to allow in contactors and furnaces, etc. The cost estimates presented here reflect more conservative assumptions in all these areas. The Agency believes that, even with these more conservative assumptions, the final cost to the consumer is still of the same order of magnitude as the original estimates. The higher cost estimates presented here do not, therefore. change our judgment that the cost of GAC treatment, where required by the proposed regulations, is fully justified by its public health benefits.
The major findings of this review process are:
The unit costs for GAC installations are now being revised upward from the figures published in 1977. Capital costs are being increased generally by 50 to 80 percent, primarily to adjust for inflation, to allow for contingencies and higher design, legal and financing fees, and to incorporate somewhat more conservative design parameters. Operating and maintenance expense estimates remain at levels very close to the former estimates.
The range of technical assumptions has been narrowed somewhat in this review with a resulting impact on the change in the national cost estimates. The lower end of the previous cost estimate has been raised because a 6-month regenerations frequency is no longer included in these conservative estimates, although it may be enough in some cases. The higher end of the range has been reduced somewhat to reflect the estimate that 11 systems affected only by the THM regulation and 50 systems impacted by the GAC requirement, 61 systems in total would install GAC treatment. The national capital costs based on these assumptions and the December 1977 unit costs would be $352 to $585 million. The new unit costs presented in this report raise this range to $616 to $831 million.
The estimates of local residential costs for model water systems of GAC treatment have also been increased generally by approximately 30 to 50 percent and could be increased to cover the annualized capital costs and the O/M expenses associated with GAC treatment addition. Under the low cost scenario almost all could finance GAC with little or no difficulty, but under the high cost scenario about half of the systems would have some difficulty and would have to phase in their financing, suffer some decline in financial strength, and/or perhaps increase revenues more than just the amount required to cover GAC capital and operating costs. A small number of systems would have major difficulty in financing and probably would have to arrange special financing or apply for relief under the Safe Drinking Water Act.
The analysis performed during this economic review will continue as more comments are received by EPA during the remainder of the public comment period.
ATTACHMENT B — SECTION 308 OF THE CLEAN WATER ACT
U.S. ENVIRONMENTAL PROTECTION AGENCY,
Washington, D.C.,
August 4, 1978.
Hon. EDMUND M. MUSKIE,
U.S. Senate,
Washington, D.C.
DEAR SENATOR MUSKIE: This will respond to your inquiry concerning the Agency's request for financial data pursuant to Section 308 of the Clean Water Act from those companies which are members of one or more of the 21 major industrial categories specified in the Clean Water Act.
Sections 301 and 304 of the Clean Water Act mandate that the Environmental Protection Agency develop uniform, national effluent standards for major industrial categories covering waste waters discharged into streams and rivers or to municipal treatment facilities. In June 1976 this basic mandate was reinforced as a result of a judgment in the U.S. District Court for the District of Columbia in NRDC et. at. v. Train. Under the court order the Environmental Protection Agency is required to develop or revise "best available technology economically achievable" (1983) effluent limitations, new source performance standards (NSPS) and pretreatment standards for at least 21 major industrial categories covering 65 classes of potentially toxic pollutants.
To ensure that the information needed to develop these regulations is both thorough and timely, the Environmental Protection Agency must engage in a wide range of information gathering,. monitoring, sampling, and inspection activities. Section 308 of the Clean Water Act authorizes the Environmental Protection Agency to require owners or operators of any point-source to maintain records, submit any information necessary todevelop a regulation, sample effluents, and install and maintain monitoring equipment. This authority includes requests for financial information pursuant to the regulatory process.
Rules and regulations concerning the confidentiality of business information of this type have been promulgated and can be reviewed in full in the Federal Register of September 1, 1976. The Environmental Protection Agency is fully aware of the sensitive nature of the financial information being requested and every precaution allowed by law has been taken to maintain confidentiality of the information received.
40 CFR 2.2111 provides for penalties for wrongful disclosure of business information. Under that Section any Environmental Protection Agency employee who fails to properly safeguard confidential information shall bs liable to dismissal, suspension, fine or other adverse personnel action. Use of business information, gained in the Environmental Protection Agency employee's official capacity, for private gain or advantage of that employee may result in criminal. prosecution under 18 U.S.C. 1905. Contractors who use or disclose information in ways other than permitted by the contract under which the information was gathered shall be liable to debarment, suspension, or criminal prosecution.
The Environmental Protection Agency's request for financial information is to assure that regulations ultimately promulgated are both fair and economically achievable by the industry. Without an accurate assessment of industry's financial capabilities to meet potential pollution control requirements, there remains a risk that the technology based limitations ultimately recommended could place an unreasonable hardship on industry members. The Environmental Protection Agency is concerned that hardship to the industry may result from the closure of facilities that find it impossible to expend funds to comply with effluent regulations.
The Environmental Protection Agency has attempted to design survey instruments which are adapted to the industry being surveyed. Thus, when requesting information from an industry with many small businesses, the questionnaire will be much simpler to fill out. However, the effects of regulations are generally most severe on small businesses. In order to prevent closures it is necessary to predict the number of closures which might be expected to result from various regulations under consideration: prediction is possible only with the financial data collected in the economic surveys. Regulations developed without such data and analysis might be more stringent than those based on such data and could be expected to result in larger number of closures of small businesses.
The most accurate method of determining "affordability" at the plant level is to evaluate historical financial data, including data on sales, costs end profits, in order to determine what level of technology is economically achievable. Much of this data is not available to Environmental Protection Agency from any source except the firms within the industry. Industry members have the best information on the needs and capabilities of firms affected by Environmental Protection Agency's regulations.
Therefore, the Environmental Protection Agency needs access to plant level information in order that an adequate economic and financial data base exists to evaluate the regulatory options and in effect to select regulatory options that are justifiable by careful analysis of costs and other factors.
Besides the Environmental Protection Agency's own internal checks on its data collection activities, all of the surveys, in particular those requesting financial information, are reviewed by the Office of Management and Budget. This added clearance process insures that only the minimum amount of information is requested of industry for the development of defensible regulations. Enclosed is a copy of Environmental Protection Agency's clearance procedure and our agreement with OMB.
I hope this response is helpful to you and gives you a clearer picture of the Agency's activities. If I can be of any further service, please do not hesitate to contact me again.
Sincerely yours,
THOMAS C. JORLING,
Assistant Administrator for Water and Waste Management.
OFFICE OF MANAGEMENT AND BUDGET,
Washington, D.C.,
June 1, 1978.
Hon. JOHN J. STANTON,
Director, Program Report Division,
Environmental Protection Agency,
Washington, D.C.,
DEAR Mr. STANTON: The request for clearance of a Plan of Data Collection for Sections 301, 304, 305, and 307 of the Clean Water Act of 1977 is not disapproved for use. It may be used to develop specific data collection instruments and procedures to be used to gather information for the purpose of developing new effluent limitations guidelines and other standards. Each such data collection instrument used for this purpose is to bear OMB No. 158-R0160 in the upper right hand corner of the instrument.
This clearance is made subject to the following conditions to assure that implementation of this plan is consistent with that plan and the requirements of the Federal Reports Act (44 U.S.C. 3501 et seq.).
As conditions of clearance the Agency shall:
A. Beginning June 30, 1978 and in January and June of 1979, 1980 and 1981 publish in the Federal Register a schedule containing the following information:
(1) a list of all anticipated data collection activity to be conducted during the subsequent six month period;
(2) the type and estimated number of respondents for each data collection activity required of each respondent; and
(3) the estimated reporting hour burden required of each respondent; and
(4) the identity, address, and phone number of the official responsible for each data collection activity.
If EPA wishes to perform a data collection activity not described in accordance with the above procedure, it shall publish in the Federal Register the above information with respect to the particular data collection activity no less than thirty days prior to its initiation. This provision shall not apply to data collection activities initiated prior to June 30, 1978.
B. Prior to the distribution of any questionnaire or other instrument, EPA will transmit in duplicate to OMB the following information to enable OMB to verify that it is consistent with this clearance:
(1) the questionnaire or other information collection instrument;
(2) the identity of those industry representatives consulted by EPA in connection with the preparation of the instrument.
(3) certification by the data collection officer of the Office of Water Planning and Standards that the data collection instrument will result in valid and reliable information and that although reasonable efforts have been made to obtain this information from other public sources, such information is not reasonably available; and
(4) a description of any special attention that has been given to the reporting problems of small businesses (firms with fewer than 100 employees).
OMB will review all submitted instruments within ten working days after receipt. Such review shall be aimed at determining consistency with the conditions of this clearance and the Federal Reports Act. Any instrument to which OMB does not object in writing within said ten day period may be used for its stated purpose.
Sincerely,
ROYE L. LOWRY, Clearance Officer.