Safe Drinking Water Act: Costs of Compliance

EPA’s regulatory program for drinking water has issued seven cost-significant rules since 1996, the year that the SDWA was last amended. This working paper examines the costs of these, relying on estimates presented by EPA in its regulatory analyses supporting the rule, as well as other research. We estimate that the combined cost of these seven major rules promulgated through early 2004 amounts to approximately $7.7 billion in capital outlays and $1.8 billion in annual costs.

These estimates are based on EPA’s published estimates. In the case of the suite of rules issued as part of the M/DBP cluster, the EPA estimates reflect the efforts of stakeholder-involved technical work groups working in an open, consensus-oriented framework. Therefore, there is limited debate over the accuracy or completeness of these estimates. For other rulemakings, however, there has been considerable debate and disagreement over the costs (especially for contentious rulemakings such as the arsenic rule). For these latter rules, we have discussed necessary modifications and made what we believe to be reasonable (and perhaps conservative) adjustments to EPA costs, as discussed in relatively great detail above.

The most appreciable changes made to the EPA estimates reflect:

• Relying on NDWAC-based adjustments to the Frey et al. estimates of arsenic compliance costs, to embody differences from the EPA estimates in terms of (1) assigning different probabilities to predict some of the compliance technology choices by utilities, (2) accounting for the possibility of multiple treatment sites per utility, and (3) recognizing that treatment residuals (waste) disposal will not always be feasible through inexpensive dumping to sanitary sewers (and that more costly residuals management approaches may often be necessary, even if the wastes are not considered hazardous).
• Updating the EPA estimates for radionuclide rule compliance, by (1) adding regulatory monitoring costs back into the compliance cost estimate, and (2) applying a more conventional, lower-end probability to estimate how many systems could comply at relatively low cost by tapping a new, high quality water source.

In addition, the post 1996 compliance costs do not include several relatively expensive rule-makings that currently are in progress. The final Stage 2 DBP rule and the Long Term 2 Enhanced Surface Water Treatment Rule are expected to be promulgated in the summer of 2005, and the groundwater rule is expected to be finalized by late 2004 or early 2005. The proposed MCL for radon also should be finalized in the coming years.

The ideas presented in this research are the author’s and do not represent official positions of the Mercatus Center at George Mason University.