United States General Accounting Office

GAO Report to the Chairman, Committee on

Environment and Public Works, U.S.

Senate

January 1999 SAFE DRINKING

WATER ACT

Progress and Future

Challenges in

Implementing the 1996

Amendments

GAO/RCED-99-31

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-281377 

January 14, 1999

The Honorable John H. Chafee

Chairman, Committee on Environment and Public Works

United States Senate

Dear Mr. Chairman:

The Safe Drinking Water Act Amendments of 1996 sought to address

numerous long-standing problems impeding the nation’s primary drinking

water protection program. In doing so, the amendments (1) required that

new contaminant limitations be based on the risk to human health and on

sound science and that the cost of compliance be taken into account,

(2) placed greater focus on the prevention of pollution by requiring that all

waters serving as drinking water sources for public water systems be

assessed for their susceptibility to contamination, (3) added requirements

to help ensure that customers are fully apprised of the quality of their

drinking water, (4) addressed the problems associated with thousands of

“nonviable” small water systems that have often had difficulty ensuring the

safety of their water, (5) established a Drinking Water State Revolving

Fund program to help water systems finance infrastructure improvements,

and (6) authorized additional resources to help the Environmental

Protection Agency (EPA) and the states implement the drinking water

program.

Less than 3 years have elapsed since the amendments were enacted. While

it is too early to fully assess their implementation, sufficient time has

passed for us to obtain some indication of the progress being made by EPA

and the states and to identify some of the key challenges that lie ahead.

Accordingly, as agreed with your office, this report provides information

on each of the key changes identified above and discusses (1) the status of

efforts and progress made by EPA and the states in addressing them and

(2) the future challenges facing EPA and the states in their efforts to do so.

Results in Brief EPA and the states have made progress in meeting the initial requirements

of the Safe Drinking Water Act Amendments of 1996. Of particular note,

EPA has met all of its statutory requirements to develop regulations and

guidelines. For their part, the states have made important strides in setting

up their drinking water revolving funds and are working to meet other

initial requirements to prepare needed strategies and programs. Yet, as

noteworthy as these initial efforts have been, the most difficult challenge

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deals with the longer-term question of implementation—implementation

of the new contaminant standards (including monitoring water systems’

compliance with the standards), the provisions to ensure the viability of

thousands of smaller water systems, and the numerous other requirements

associated with this complex statute. Meeting these longer-term

challenges will call for a sustained effort by EPA, the states, and the

nation’s public water systems and will warrant continuous oversight by

the Congress.

Developing New Contaminant Limitations. EPA is working to meet the

amendments’ requirements to complete many contaminant standards that

were in process at the time of reauthorization, including standards for

arsenic and radon. Many of these standards—which could impose

significant costs for some drinking water systems—may be questioned by

the regulated community as being inadequately supported by the research

on health effects. EPA drinking water officials maintain that ongoing and

planned research, if completed, will be sufficient to support these

regulations. They acknowledge, however, that it will be challenging for the

agency to simultaneously conduct all the programmatic and research

activities needed to support subsequent statutorily required regulations. In

addition, EPA has yet to determine how it will address the amendments’

mandate to review and revise the over 80 existing standards that have

been promulgated in past years.

Assessing Drinking Water Sources. The states are presently working to

develop statewide “source water assessment programs” that identify

sources of public drinking water and show how a state will determine the

vulnerability of the sources to contamination. While the states are required

to develop these programs by February 1999, only one state thus far has an

approved program. Moreover, EPA and state officials agree that the states

will be particularly challenged in meeting the act’s additional requirement

that the states assess each of the nation’s more than 170,000 public water

systems by May 2003 for their vulnerability to contamination. The task will

be particularly challenging in the case of large surface water sources and

aquifers that cross state or international borders because the assessments

will depend heavily on the degree of cooperation between neighboring

states or countries.

Informing Customers of Drinking Water Quality. EPA issued regulations on

August 19, 1998, that call on public water systems to issue annual

consumer confidence reports. These reports are to inform customers of

the source of their drinking water, violations of any federal drinking water

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standards, and contaminants that were detected and their related health

effects. However, EPA and state regulators will be challenged to achieve

consensus as to what constitutes an adequate report. Specifically, while a

broad range of stakeholders (including federal and state officials, and

industry and environmental groups) has expressed support for the

principle of providing better information to customers about their drinking

water quality, some environmental and consumer groups have questioned

whether EPA’s August 1998 regulations will be sufficient to accomplish this

purpose.

Addressing Nonviable Small Water Systems. The states have made

progress in implementing the capacity development requirements for new

systems and in reporting on existing systems with a history of

noncompliance. These requirements, together with the requirement for the

states to develop capacity development strategies, are intended to address

the long-standing problems associated with the viability of thousands of

small public water systems. Both EPA and state officials agree, however,

that the challenge will be in the actual implementation of these strategies.

In particular, the states will need to make judgments about the financial

and managerial capability of new systems, tasks that have not traditionally

been part of the drinking water program. The states will also need to

develop and implement strategies to assist existing systems in acquiring

and maintaining technical, managerial, and financial capacity.

Developing State Drinking Water Revolving Funds. Both EPA and the states

have made progress in launching the Drinking Water State Revolving Fund

program. Specifically, EPA issued final program guidelines by its

February 1997 deadline, and the states completed all of the activities

associated with establishing and operating their funds by September 30,

1998, the statutory deadline for receiving and obligating their initial grants.

A total of $1.25 billion in fiscal year 1997 funds was awarded to the states

and Puerto Rico. These funds can be expected to provide substantial

assistance to many water systems that cannot afford the capital

investments required to provide safe drinking water. The greatest

challenge, however, will be in addressing the particular infrastructure

needs of the nation’s smaller water systems—which EPA estimates will

cost over $37 billion through 2014.

Improving EPA’s and the States’ Capacity to Administer the Program. The

1996 amendments took important steps to address serious resource

shortages affecting EPA’s and the states’ capacity to meet basic program

needs—steps that EPA and state officials agree have helped to put the

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program on a sounder footing. Of particular note, the statute substantially

increased the state program grants and provided the states with access to

money from the revolving fund for program administration. Yet the statute

also challenges EPA and the states with significant new responsibilities.

The net effect of these changes on their capacity to implement the

drinking water program has yet to be determined.

Background The Congress enacted the Safe Drinking Water Act in 1974 to protect the

public from the risks of contaminated drinking water. Under the act, EPA is

required, among other things, to (1) set standards or treatment techniques

for contaminants that may adversely affect human health and (2) establish

requirements for monitoring the quality of drinking water supplies and for

ensuring that water systems are properly operated and maintained. EPA is

authorized to grant primary enforcement authority for the drinking water

program, commonly referred to as “primacy,” to the states that meet

certain requirements. Among the key requirements are that the states

(1) adopt drinking water regulations that are no less stringent than EPA’s

national primary drinking water regulations and (2) adopt and implement

adequate procedures to carry out the program’s requirements and enforce

the regulations.

In a series of reports and testimonies leading up to the 1996 amendments,

we cited a number of problems that seriously impeded EPA’s and the states’

drinking water programs.1

 We noted, for example, that EPA had fallen

behind the statutory timetable for promulgating new regulations and cited

substantial resource constraints that made it difficult for EPA, the states,

and the nation’s public water systems to comply with basic requirements

of the statute. Among other things, we (1) identified the particularly

difficult problems many smaller water systems had in complying with the

act and in ensuring a safe water supply and (2) found that the public was

often inadequately informed of both the health risks posed when water

systems violated contaminant limits and the appropriate preventive

measures that should be taken.

The Safe Drinking Water Act Amendments of 1996 sought to address many

of these issues. Of particular note, the statute eliminated the requirement

that EPA set standards for at least 25 additional contaminants every 3 years

(regardless of the health risks they posed) and replaced it with a 5-year

regulatory cycle that requires that new regulations be based on the risk to

human health and on sound data and science and allowed EPA to consider

1

A list of our past reports on drinking water is at the end of this report.

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costs and benefits as factors in setting the standards. The statute

addressed the severe resource constraints experienced by EPA, the states,

Indian tribes, and water systems with increased funding for research and

the Public Water System Supervision program (the program that largely

supports the states’ key drinking water oversight activities) and through

the creation of the Drinking Water State Revolving Fund program for

infrastructure improvements at water systems. Among other things, the

amendments also (1) attempted to resolve the particularly challenging

problems associated with small water systems; (2) sought to focus greater

attention on preventing the contamination of water supplies at their

source, rather than solely on the purification of water at treatment plants;

and (3) encouraged greater consumer awareness by requiring water

systems to inform their customers about the source and quality of their

drinking water supplies.

Development of New

Contaminant

Limitations

The 1996 amendments replaced the requirement to regulate 25 additional

contaminants every 3 years with a new selection process that explicitly

allows EPA to identify contaminants that warrant regulation on the basis of

the adverse health effects of the contaminants, their frequency of

occurrence in public water systems, and the projected risk reduction to be

achieved in regulating them. EPA was required to publish, by

February 1998, a list of high-priority contaminants not currently regulated.

(EPA calls this the “Contaminant Candidate List.”) Rather than

automatically requiring 25 new contaminants to be regulated every 3 years,

beginning in August 2001 (and in 5-year cycles thereafter), the

amendments require EPA to determine whether to regulate at least 5 of the

contaminants on the list. A determination to regulate is to be based on the

best available public health information and data concerning the

occurrence of the contaminant.

The replacement of the requirement to regulate 25 new contaminants

every 3 years was an important step in addressing both the resource

problems affecting EPA and key regulatory problems affecting the drinking

water industry. Nonetheless, the cost and technical issues associated with

new regulations will continue to challenge both regulators and the

regulated community. In particular, the 1996 amendments required that

EPA complete the development of most of the regulations that were in

process at the time of reauthorization. Specifically, they require the agency

to (1) finalize standards for certain contaminants for which proposed

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regulations were in place (i.e., standards for disinfection by-products2 and

cryptosporidium3

); (2) issue new or updated standards for certain

contaminants that were previously required to be regulated under the 1986

amendments to the Safe Drinking Water Act (i.e., arsenic and radon) and

determine whether to regulate others (i.e., sulfate); and (3) finalize

regulations requiring filtration treatment for surface water systems and

disinfection treatment for groundwater systems (i.e., the Enhanced

Surface Water Treatment Rule and Ground Water Disinfection Rule).

Pursuant to these requirements, the first new drinking water standards in

over 6 years (and the first since the 1996 amendments) were promulgated

by EPA in December 1998—the Interim Enhanced Surface Water Treatment

Rule and the Disinfectants/Disinfection By-Products Stage 1 Rule. Other

regulations currently under development include those dealing with

arsenic, radon, and other radionuclides, disinfectants/disinfection

by-products (stage 2), long-term enhanced surface water treatment, filter

backwash, and groundwater. These regulations are scheduled to be issued

over the next 3 to 5 years. Other efforts will focus on (1) updating the

Total Coliform Rule and regulations on atrazine, aldicarb, and nickel;

(2) regulating contaminants chosen from the Contaminant Candidate List;

and (3) reexamining existing standards for 80 other contaminants.

Compliance costs associated with some of the new regulations will be

significant. For example, EPA has estimated that the total annual

compliance costs associated with the Disinfectants/Disinfection

By-Products Stage 1 Rule will be about $700 million per year for

community4

 and nontransient noncommunity water systems.5

Furthermore, the revised arsenic standard could impose high costs on

water systems; estimates by EPA and the American Water Works

Association indicate that the total annual compliance costs could be as

high as $2.1 billion or $4.1 billion, respectively.6

2

Conventional water treatment practices require the addition of disinfectant chemicals to the water

that, while effective in controlling many harmful microorganisms, combine with organic and inorganic

compounds in the water and form potentially harmful disinfection by-products. The

Disinfectants/Disinfection By-Products Rule will address how to minimize risks from these

by-products and still control microbial contaminants.

3

Cryptosporidium is a microorganism commonly found in lakes and rivers that is highly resistant to

disinfection. It can cause gastrointestinal illness with symptoms that include diarrhea, nausea, and

stomach cramps.

4

Community water systems serve the same population year-round.

5

Nontransient noncommunity water systems supply water to at least 25 of the same people at least 6

months per year but not year-round. Some examples are schools, factories, office buildings, and

hospitals that have their own water systems.

6

The estimates are for complying with a standard based on 2 micrograms per liter.

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Compliance costs are typically much greater for customers of small water

systems because these systems have fewer customers to share the costs.

Overall, according to estimates by EPA and the Congressional Budget

Office, the cost of complying with existing regulations averages less than

$20 per household annually for systems serving more than 10,000 people.

For systems serving between 25 and 100 people, however, the average

annual household cost is $145.

Concerns Over Adequacy

of Underlying Science and

Data

The expense associated with drinking water regulations underscores the

need to have a sound scientific and information basis underlying them.

Achieving that scientific basis for the full range of required regulations by

the new statutory deadlines, however, will pose an enormous challenge.

According to officials from EPA’s Office of Ground Water and Drinking

Water, the ongoing and planned research is sufficient to support the

regulations currently under development but cannot adequately support

the work required for future regulations within the timetables prescribed

by the amendments. Citing an Office of Water needs assessment (which

was coordinated with the Office of Research and Development), the

Director of the Standards and Risk Management Division said that the new

demands cannot be met by shifting resources without sacrificing quality or

missing statutory deadlines. Initial EPA estimates are that the annual

funding shortfall for research and data collection will be in the range of

$10 million to $20 million per year for fiscal years 1999 through 2005.

Consequently, without additional resources, EPA will be faced with a

difficult choice: (1) fall behind the statutory timetable for considering

contaminants for possible regulation to advance public health protection,

(2) focus on meeting its timetable—but risk greater challenges to the

adequacy of the proposed regulations’ underlying quality and science, or

(3) shift research and program resources from other high-priority

activities. The Contaminant Candidate List regulations and activities are a

case in point. EPA is required to make regulatory determinations based on

the list by 2001 and concurrently initiate research and data collection to

support subsequent Contaminant Candidate Lists and rules. But agency

officials indicate that current resources are almost fully devoted to the

development and completion of ongoing priority rulemaking efforts and

cannot be shifted to new projects.

Industry organizations we contacted also expressed concern over EPA’s

ability to conduct all of the research necessary to support new regulations.

Officials from the American Water Works Association and the Association

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of Metropolitan Water Agencies told us that the scientific studies

supporting EPA’s rulemakings are one of the issues of greatest concern to

them about the implementation of the 1996 amendments. They expressed

particular concern about the science supporting some of the near-term

regulations. An Association of Metropolitan Water Agencies official told us

that her association is particularly concerned that EPA may be under

pressure to set standards for some contaminants regardless of whether the

scientific data needed to support the rulemakings are ready in time. An

American Water Works Association official expressed similar concerns.

Such concerns prompted these organizations to file a lawsuit seeking an

order compelling EPA to comply with a statutory requirement (under

section 1452 of the Safe Drinking Water Act) to set aside funds from the

Drinking Water State Revolving Fund program’s appropriation, beginning

in fiscal year 1995, for health-related research studies. EPA contends that

the appropriation in question did not include monies for earlier years and

was limited to capitalization grants for Drinking Water State Revolving

Fund programs and grants for assistance to Indian tribes to support the

financing of water infrastructure. EPA instead received $10 million, the

amount authorized to be set aside by section 1452, from a separate fiscal

year 1997 appropriation for health effects research. The water associations

see a danger in year-by-year funding for health effects research. They

believe that if funds were set aside for section 1452, there would be a

constant flow of funds for research. Instead, EPA must depend on

additional appropriations from the Congress every year, which may not

yield the same amount of money as a permanent set-aside. A ruling

confirming EPA’s legal position was issued in October 1998.

Requirement to Review

Existing Regulations

In addition to requiring the completion of the standards currently “in the

pipeline” and the consideration of new ones, the 1996 amendments require

EPA to review the dozens of existing standards that have been promulgated

in past years. Specifically, the amendments require EPA to review and

revise, as appropriate, the existing national primary drinking water

regulations at least every 6 years, with the first such review due in 2002.

Officials in the Office of Ground Water and Drinking Water said that they

had only made preliminary projections of what would be required to

address this activity.

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Assessing the Safety

of Drinking Water

Sources

Although it is widely recognized that the most cost-effective approach to

protecting drinking water is to prevent its contamination at the source, the

nation’s drinking water program has historically focused on finding and

treating contaminants. Efforts focusing on preventing contamination were

limited by the absence of funding and dealt primarily with groundwater

sources.

The 1996 amendments significantly expanded the focus within the

drinking water program on preventing contamination. The amendments

created a source water assessment program that further emphasizes

preventing groundwater contamination and that expands the scope of the

prevention efforts to include surface waters such as rivers, lakes, and

streams used for drinking water. The states are now required to develop

statewide source water assessment programs that identify sources of

public drinking water and show how the states will determine the sources’

vulnerability to contamination. According to EPA guidance, among other

things, the programs must describe how the states will (1) assess the

vulnerability of waters that are used by the states’ public water systems

and that originate within the states’ borders and (2) coordinate with

adjoining states, tribes, or countries for assessments of sources outside

the states’ borders. According to agency officials, the states must

inventory the contaminants and prepare “susceptibility determinations”

that evaluate and rank the threats that the inventoried contaminants pose

to the water sources. For example, contaminants could be ranked as

posing a high, medium, or low threat to the water source on the basis of

the contaminants’ health effects (acute or chronic) and their distance from

the source.

The states are required to develop their source water assessment

programs by February 1999. While EPA headquarters officials expect most

states to meet this deadline, the EPA headquarters, regional, and state

officials we interviewed told us that the states will be considerably more

challenged to meet the statute’s additional requirement that the states

individually assess the nation’s more than 170,000 public water systems for

their vulnerability to contamination. Specifically, the states are required to

complete source water assessments for each system within their

jurisdiction by May 2003 and make them available to the public.

Completing the source water assessments could be complex for many

groundwater and surface water systems, but it will be especially complex

for surface water systems because surface waters move faster and

generally cover a larger area. The task is further complicated by the fact

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that surface water sources, as well as large aquifers, sometimes cross state

or international borders. In such cases, a state may face additional

challenges both in conducting the assessment and in enacting preventive

measures when contamination (or the threat of contamination) originates

in another state. In such cases, source water assessment and protection

will depend heavily on the degree of cooperation that can be developed

with neighboring states and countries.

Improving Consumer

Awareness

To ensure that the public was aware of water systems’ problems, the Safe

Drinking Water Act of 1974 required water system operators to notify their

customers each time their systems failed to meet one of the drinking water

standards for regulated contaminants or to test their supplies as required

by the regulations. According to a 1973 House Committee report, these

requirements were intended to inform the public of any actual or potential

drinking water hazards and to educate the public in order to increase

public support for correcting drinking water violations. In 1992, we

reported that (1) there were high rates of noncompliance with the public

notification regulations, (2) the regulations were difficult for operators to

understand and implement, and (3) notices often did not clearly convey

the appropriate information to the public concerning the health risks

associated with a violation and the preventive action to be taken.7

 Among

other things, we noted that the language EPA specified for notices

sometimes confuses customers because it is technical and provides little

guidance on key matters, such as preventive measures to take in response

to the violations. We also noted that allowing operators to consolidate

notices for less serious violations and for educational matters into a

semiannual or annual report would differentiate more clearly between

public notification for serious or potentially serious violations and for

lesser violations or educational matters.

The 1996 amendments addressed many of these concerns by requiring that

the consumers of public water supplies be given more accurate and timely

information about violations and that this information be in a form that is

more understandable and useful. EPA is currently revising its Public

Notification Rule to reflect these changes and expects to issue the

proposed rule in March 1999 and to promulgate the final rule in December

1999. The 1996 amendments also sought to enhance the provisions of the

drinking water program concerning the public’s right-to-know by requiring

that community water systems issue annual consumer confidence reports

7

Drinking Water: Consumers Often Not Well-Informed of Potentially Serious Violations

(GAO/RCED-92-135, June 25, 1992).

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that include information on the source of the water, violations of any

federal drinking water standards, and contaminants that were detected

and their related health effects. The law required that reports be prepared

in plain language and provided (or made available through other means) to

all customers of a water system. EPA issued its final regulations on

consumer confidence reports on August 19, 1998, and water systems are

required to issue their first reports in October 1999. Stakeholders we

interviewed praised EPA’s efforts to include their input in the development

of its regulations.

A wide variety of stakeholders have expressed broad support—in

principle—for a requirement to better inform consumers about the quality

of their drinking water. In particular, senior officials from EPA, major water

industry associations, and environmental groups all agree that such a

requirement is useful in obtaining greater public support for the measures

necessary to protect water supplies, such as the enactment of utility rate

increases and the implementation of difficult corrective measures.

Officials of the Association of Metropolitan Water Agencies, which

represents the larger systems, and the American Water Works Association,

which represents systems of all sizes, added that large and medium-size

systems should be able to meet the reporting requirements without too

much difficulty.

The challenge, however, has been in achieving consensus as to what

constitutes an adequate consumer confidence report. While supportive of

the concept, a number of environmental and consumer groups have

criticized EPA’s implementing regulations, noting, among other things, that

(1) all consumers will not receive the reports because the reports must be

sent to ratepayers rather than to households (including the tenants of

ratepayers), (2) all consumers may not understand the reports because the

reports are not required to be published in languages other than English,

and (3) the reports will not contain information on all contaminants

detected in the water, but rather information only on currently regulated

contaminants and unregulated contaminants for which monitoring is

required. Conversely, the Association of Metropolitan Water Agencies

contends that the rule balances the need to relay accurate information

about water quality and the need to keep the reports simple and inviting to

read.

In addition to the disagreement over what constitutes an adequate

consumer confidence report, another potentially difficult issue is the

possible inconsistency between the information the public receives from

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these reports and the information in EPA’s primary database for drinking

water compliance—the Safe Drinking Water Information System. The

database contains information on water systems’ violations of drinking

water standards as well as other information and is available to the public

on EPA’s World Wide Web site. The states submit quarterly reports on

violations of drinking water standards to EPA, and EPA, in turn, loads the

information into the database. Industry officials told us, however, that the

database sometimes contains inaccurate or outdated information on

violations and enforcement actions. Consequently, it may conflict with

information in consumer confidence reports. The Director of the Office of

Ground Water and Drinking Water said that EPA recently undertook an

effort, in consultation with a work group consisting of state and local

officials, utilities, environmental groups, and other stakeholders, to define

the scope of the problem and to develop a “data reliability action plan” to

address it.

Finally, while medium and large systems should be able to implement the

requirements for consumer confidence reports without much difficulty,

some state officials we interviewed expected small systems to have

problems. One state official told us that small systems will be reluctant to

submit annual reports to the public about drinking water quality because

system officials believe that they will be opening themselves up to

criticism. Another state official noted that small systems have had

problems in the past in notifying the public of water quality problems and

that these problems will likely continue in the future.

Improving the

Capacity of Small

Systems to Deliver

Safe Water

In 1994, we reported that EPA and the states were increasingly recognizing

that the heart of the noncompliance problem lies with the sheer volume of

small water systems that do not have the financial, technical, or

managerial capacity to comply with current and future requirements of the

drinking water program.8

 Accordingly, several states turned toward

“viability programs” and restructuring strategies that consolidated

nonviable systems9

 with larger water systems through management and/or

ownership changes to provide a more comprehensive solution. Viability

programs, in general, are designed to (1) assess water systems’ ability to

consistently meet current and prospective regulatory requirements and

(2) determine the best solutions for bringing nonviable systems into

8

See Drinking Water: Stronger Efforts Essential for Small Communities to Comply With Standards

(GAO/RCED-94-40, Mar. 9, 1994).

9

In general, nonviable water systems lack the technical, financial, or managerial capabilities to remain

in long-term compliance with drinking water regulations.

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compliance. However, we found that the states lacked the resources

needed in the near term to develop and implement these programs and

that the states also had difficulty obtaining from the state legislatures the

authority needed to put the programs in place.

The 1996 amendments addressed many of the issues associated with small

systems’ viability and placed specific requirements on EPA and the states.

EPA was required to publish a report on the states’ existing capacity

development programs by February 1997 and to issue guidance by August

1998 to help the states implement the capacity development provisions.

The states were required to (1) prepare, periodically update, and submit to

the EPA Administrator a list of water systems with histories of significant

noncompliance; (2) have the legal authorities and other means to ensure

that new water systems have the technical, financial, and managerial

capability to comply with drinking water regulations; (3) develop and

implement a strategy for capacity development to assist existing systems

in acquiring and maintaining capacity; (4) report to the EPA Administrator

and the states’ governors on the success of their capacity development

programs; and (5) certify the operators of community and nontransient

noncommunity public water systems. The amendments authorized funds

for training the operators of small systems and strengthened the overall

program by providing the states with financial incentives for achieving

these requirements. Specifically, under the Drinking Water State Revolving

Fund program, EPA must withhold allotments to the states that (1) have not

acquired, by September 1999, the actual authority to require new systems

to demonstrate capacity; (2) have not adopted and are not implementing

operator certification programs by February 2001; or (3) are not

developing and implementing a capacity development strategy by

October 2000.

To date, EPA and the states have made progress in establishing the

necessary framework for addressing the long-standing problem of small

systems’ capacity. Specifically, EPA met its requirements to report on

existing programs and to develop guidelines in conjunction with

stakeholders.10 Stakeholders praised EPA’s efforts to include their input in

developing guidelines and program requirements. States have filed their

initial reports on systems in significant noncompliance, and according to

EPA, as of the end of fiscal year 1998, 35 states had indicated to EPA that

they believed they had the necessary legal authority to address new

10Notice of Availability of Final Guidance on Implementing the Capacity Development Provisions of

the Safe Drinking Water Act Amendments of 1996, and Information for States on Implementing the

Capacity Development Provisions of the Safe Drinking Water Act Amendments of 1996 (Federal

Register, Aug. 10, 1998, pp. 42632-33).

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systems’ capacity. State officials we interviewed told us that they generally

expected to meet the deadline for developing and implementing strategies

for capacity development. State officials also told us that they expected to

meet the deadline for adopting and implementing operator certification

programs.

Yet while progress has been made in fulfilling key preliminary activities

(e.g., acquiring legal authorities, completing required reports, developing

necessary strategy documents), both EPA and state officials agree that the

actual implementation of strategies to ensure adequate capacity among all

public water systems will pose significant challenges to the states. In

particular, it will require that professional judgment be exercised on

matters that have not traditionally been part of the drinking water

program. Officials in Massachusetts and Illinois noted, for example, that

they must now make decisions on the financial and managerial capability

of new systems. The official in Massachusetts also said that the program

there will have to hire staff with financial backgrounds. Moreover,

according to EPA, the states will also need to develop and implement

strategies to assist existing systems in acquiring and maintaining technical,

managerial, and financial capacity.

The need for capacity development strategies and programs will also

create challenges for EPA’s regional offices. The Chief of the Drinking

Water Program in EPA’s San Francisco regional office said that significant

effort will be required to ensure that the states are adequately

implementing all aspects of their capacity development programs and that

the regional office’s monitoring of capacity development will be made

more difficult because the states’ programs vary.

Although all of the states have operator certification programs, expanding

these programs to cover all water systems will be a challenge for many.

This is especially true for the states that have a large number of small

water systems and nontransient noncommunity water systems whose

operators previously were not required to be certified. For example, some

states will have to certify as many as 6,000 additional operators. One

official noted that his state expects a four- to fivefold increase in the

number of small system operators that must be certified and that the state

lacks the resources to meet this increased workload.

Page 14 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

Implementing the

New Drinking Water

State Revolving Fund

Program

In a September 1993 report entitled Technical and Economic Capacity of

States and Public Water Systems to Implement Drinking Water

Regulations: Report to Congress, EPA estimated that the capital

expenditures needed nationwide to comply with the existing requirements

of the Safe Drinking Water Act totaled more than $8.6 billion.11 EPA

recognized that meeting the needs of small water systems would be

particularly challenging. The report noted that as a result of their inherent

management and financial weaknesses, small water systems had “a

significant degree of infrastructure deterioration” that added greatly to

their total financing needs. Moreover, EPA’s cost estimates did not include

projections for new rules under development, such as standards for

disinfection by-products, arsenic, radon, and groundwater disinfection,

that could impose substantial additional costs.

Recognizing that many systems will not be able to finance treatment

facilities to comply with both new and existing requirements, the Congress

authorized $9.6 billion, to be appropriated over a number of years, to

establish a Drinking Water State Revolving Fund program. As in the case

of the state revolving fund program authorized by the Clean Water Act,12

EPA provides grants under the drinking water program to capitalize the

states’ funds. The states, in turn, identify investment priorities and manage

the loan program. As loans are repaid, the fund is replenished, and loans

can be made for other eligible projects. The drinking water program

allows the states to set aside up to 31 percent of their funds for certain

activities, including (1) 2 percent to provide technical assistance to small

systems for purposes such as selecting the correct treatment technology;

(2) 4 percent for the administrative costs associated with the Drinking

Water State Revolving Fund program;13 (3) 10 percent for the management

of various state drinking water program activities, such as the public water

system supervision program or operator certification program; and

(4) 15 percent for several other categories of activities, such as the

establishment and implementation of a wellhead protection program to

protect groundwater sources of drinking water.

Both EPA and the states have made considerable progress in launching the

Drinking Water State Revolving Fund program. EPA issued the final

program guidelines in February 1997, and the states completed all of the

11EPA 810-R-93-001, Office of Water (Sept. 1993).

12We discussed issues associated with this state revolving loan fund program in a 1992 report, Water

Pollution: State Revolving Funds Insufficient to Meet Wastewater Treatment Needs (GAO/RCED-92-35,

Jan. 27, 1992).

13This set-aside can also be used for providing technical assistance to public water systems.

Page 15 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

activities associated with establishing and receiving their fiscal year 1997

capitalization grants by September 30, 1998. As part of their capitalization

grant applications, the states were required to describe how their

programs would conform with specific statutory requirements, including

providing assurances from the states’ attorneys general, or other

appropriate parties, that the states had the authority to establish and

operate their revolving funds in accordance with the Safe Drinking Water

Act. The states also completed intended use plans that identified how they

intended to distribute available funds among various set-asides and loans,

including priority listings of projects the states expected to fund.

Moreover, according to the Project Manager of EPA’s Drinking Water State

Revolving Fund program, the states sought public review and comment, as

required, on funding decisions described in their intended use plans. The

states successfully completed all of these required activities by

September 30, 1998, the statutory deadline for receiving and obligating

their fiscal year 1997 capitalization grants. The total amount of fiscal year

1997 funding awarded to the 50 states and Puerto Rico was $1.25 billion.

The set-asides for the states and Puerto Rico totaled $241.8 million, or

more than 19 percent of their available funds.14

Meeting the Needs of Small

Systems

As we have noted, the Drinking Water State Revolving Fund program can

be expected to provide substantial relief to many water systems that

cannot afford the capital investments required to provide safe drinking

water.15 It will not, however, meet all of the infrastructure needs over the

long term. According to EPA’s most recent needs survey, for the 20-year

period from 1995 through 2014, a total of $138.4 billion will be needed to

build new and upgrade the existing infrastructure of the nation’s water

systems.16 It will be particularly challenging for the fund to satisfy one of

the Congress’s primary objectives in authorizing the state revolving fund

program—addressing the needs of the nation’s smaller water systems. The

infrastructure of these systems has long been problematic. In 1993, for

example, we reported on the basis of a 50-state survey that 15 to 20

percent of the nation’s small community water systems needed “major

improvements” in their water treatment facilities, water storage facilities,

14Grants to the states are available for obligation in the fiscal year for which the funds are authorized

and the following fiscal year. This means that the states had to receive their fiscal year 1997 grants by

September 30, 1998. Set-aside funds must be maintained outside of the revolving fund account.

15Drinking Water: Safe Drinking Water Act Reauthorization Issues (GAO/T-RCED-96-35, Nov. 1, 1995).

16Drinking Water Infrastructure Needs Survey: First Report to Congress, EPA 812-R-97-001, Office of

Water (Jan. 1997).

Page 16 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

and water distribution systems.17 According to EPA’s needs survey, the total

infrastructure investment needed by these systems through 2014 is

$37.2 billion.

In establishing the Drinking Water State Revolving Fund program, the

Congress added a number of important provisions in recognition of the

special needs associated with small water systems. For example, the states

are required to include affordability considerations in their criteria for

setting priorities among loans and are allowed to use up to 30 percent of

their allotments to provide loan subsidies for “disadvantaged”

communities (including many small water systems). The law also provides

that at least 15 percent of each state’s revolving fund (which includes

repayments, state match, and leveraged funds) must be loaned to systems

serving populations of less than 10,000 and that 2 percent may be set aside

for providing technical assistance to these systems. Officials from the

National Rural Water Association view these provisions very positively

because, unlike the situation with the Clean Water State Revolving Loan

Fund, the states have the flexibility to address state-specific issues,

including the problems experienced by small systems.

While the Drinking Water State Revolving Fund program’s effectiveness in

meeting small systems’ needs remains to be proven, major associations

representing public water systems point to the inherent advantages that

large systems have in competing for these funds. For example, the

Executive Director of the Association of Metropolitan Water Agencies

(which represents larger systems) told us that a fair number of large

systems will probably apply for revolving fund money, noting that large

systems will be in a position to “get the fund moving” by getting more

money to revolve in and out of the fund. Officials from the National Rural

Water Association, which represents smaller systems, predicted that the

states will be less likely to provide substantial monies from the revolving

fund to small systems because it is easier to administer fewer large loans

than it is to administer many small loans and loans to larger systems are

also less likely to adversely affect the states’ bond ratings.

National Rural Water Association officials did note, however, that states

have already used, or intend to use, the set-aside provisions, especially the

2-percent set-aside for technical assistance to small systems. Available

17Drinking Water: Key Quality Assurance Program Is Flawed and Underfunded (GAO/RCED-93-97,

Apr. 9, 1993). Five of the 50 states reported that they were unable to respond to our questions about

the condition of public water systems under their jurisdiction, while two other states were able to

respond to only some of the questions. Additionally, nine states reported that some of the elements we

asked about were not applicable for one or more categories of water systems in their jurisdictions.

Page 17 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

information on the program indicates that the states are using the

revolving fund to provide technical assistance and loans to small water

systems. According to EPA data, during fiscal year 1997, almost all of the

states took advantage of the 2-percent set-aside for technical

assistance—43 states took the full set-aside, 3 took less than 2 percent,

and 4 took nothing. In total, the states and Puerto Rico took $20.2 million

for this set-aside.

Additional Resources

Provided to Improve

EPA’s and the States’

Capacity

Prior to the 1996 amendments, we reported serious deficiencies in EPA’s

and the states’ capabilities to ensure that even the most basic regulatory

requirements were being met. The problem was attributed largely to a

shortage of resources. The 1996 amendments took important steps to

address this problem; they substantially increased program grants for the

states and provided access to revolving loan fund money to pay for

program administration. Yet the statute also increased EPA’s and the states’

responsibilities in new ways. The net effect of these changes on the

capacity of EPA and the states to implement the drinking water program

has yet to be determined.

Provisions of the 1996

Amendments to Improve

EPA’s and the States’

Capacity

Prior to the 1996 amendments, one of the most serious problems facing

the nation’s drinking water program had been the capability of the states

and EPA to administer an increasingly complex and demanding set of

responsibilities. Among other things, the states’ drinking water staffs were

typically responsible for performing physical inspections of drinking water

facilities, providing technical assistance, ensuring water systems’

compliance with contaminant limits and other program requirements, and

taking enforcement action against violators. However, resource shortages

left state programs deficient to the point that many were unable to meet

some of their most basic requirements.18 Similarly, EPA had fundamental

problems in carrying out its responsibilities to promulgate complex new

regulations and oversee state programs.

The 1996 amendments addressed these resource problems in a number of

important ways. First, they authorized substantially increased funding for

the states’ Public Water System Supervision program grants, which totaled

$70 million in fiscal year 1995 and were authorized at $100 million annually

18For example, see Drinking Water: Widening Gap Between Needs and Available Resources Threatens

Vital EPA Program (GAO/RCED-92-184, July 6, 1992), which reported that to ensure that certain

statutory requirements were being addressed, scarce resources were being shifted away from key

quality assurance activities (such as sanitary surveys) that had traditionally formed the backbone of

the states’ programs.

Page 18 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

through 2003. The new law also authorized the states to use a portion of

their Drinking Water State Revolving Fund money to help them

(1) administer their programs for loans, public water system supervision,

operator certification, and source water assessment; (2) develop and

implement capacity development strategies; and (3) provide technical

assistance to small systems. The states set aside more than $100 million of

their total fiscal year 1997 funds for these purposes. The states also set

aside more than $100 million to conduct the source water assessments

required by the 1996 amendments. The law authorized additional funds for

research and removed (or substantially modified) some of the most

burdensome aspects of the previous law—most notably the requirement

that EPA develop standards for 25 additional contaminants (for which the

states would then monitor water system compliance) every 3 years. The

law also simplified EPA’s process for taking action against systems that

violate drinking water standards and strengthened EPA’s authority to

assess administrative penalties.

Impact on the States’

Capacity

EPA and state officials agree that the 1996 amendments have gone a long

way toward putting the drinking water program on a sounder footing.

Citing a variety of reasons, however, they warn that resource constraints

will still make it difficult to achieve all the requirements of the new statute.

The Executive Director of the Association of State Drinking Water

Administrators, for example, indicated that while the additional funds will

help the states catch up with preexisting responsibilities, the new law also

contained additional requirements that will place demands on finite state

resources. She noted that the requirements associated with the source

water protection program and with capacity development were

particularly burdensome for the states. She added that future contaminant

regulations—such as those on disinfectants/disinfection by-products,

which will require monitoring and adjustments of the treatment process to

balance control of microbial contaminants and disinfection

by-products—will require the states to work closely with water systems,

provide more technical assistance, and ensure that system operators have

adequate training.

The Director of EPA’s Office of Ground Water and Drinking Water

acknowledged that although the 1996 amendments provided the states

with more resources, the states will also face a substantially greater

workload over the next few years. She noted in particular that the states

have had a hiatus in terms of dealing with new regulations because EPA has

not issued any new standards in more than 6 years. However, with new EPA

Page 19 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

regulations being developed, she expected a substantial increase in the

states’ workload in about 2 years.

EPA and state officials also pointed out that the added challenges facing the

states’ drinking water programs were qualitative as well as quantitative in

nature, in some cases addressing new issues and requiring new skills

among the states’ drinking water staffs. As noted earlier, state and EPA

officials said that the Drinking Water State Revolving Fund program in

particular requires a level of financial expertise that was previously

unnecessary and unavailable among most drinking water staffs. EPA

officials in the Chicago regional office also noted that improving the

capacity of small systems requires that the states make judgments about

the financial, technical, and managerial abilities of water systems and that

the states have little experience in developing such programs or making

such judgments. They also noted that some states cannot hire additional

staff and will therefore have difficulty acquiring the expertise needed to

meet these new program requirements.

While the potential exists for a shortfall in the states’ resources, it is

difficult to predict its probability or potential magnitude. In the years

preceding the 1996 amendments, an estimate was made of the shortfall in

the states’ resources, and it was actively considered in developing the 1996

amendments.19 Association of State Drinking Water Administrators and

EPA officials said that they are planning to estimate the states’ resource

needs associated with the new requirements.

Impact on EPA’s Capacity EPA officials have also expressed concern about their agency’s own

capacity, both at headquarters and among the regional offices, to support

and oversee the states’ programs. As noted earlier, EPA is required to

develop and provide implementing guidance for complex and

controversial new contaminant regulations while at the same time

implementing an array of existing contaminant regulations. The officials

emphasized that the challenge of developing and implementing new

regulations during the next few years is augmented by other significant

support and oversight responsibilities, including those for operator

certification programs, guidelines for capacity development programs, and

others.

19Specifically, on the basis of a “resource needs” model developed by EPA and the Association of State

Drinking Water Administrators, EPA estimated in 1993 that the gap between the states’ program needs

and the available resources was approximately $162 million.

Page 20 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

Agency officials also expressed concern about EPA’s ability to

institutionalize new programs and procedures among its regional offices.

Each new contaminant regulation or new program requirement places

significant implementation burdens on the EPA regional offices as well as

on the states. As contaminant regulations or other program requirements

become final, the regional offices must provide the states with training on,

and interpretations of, the new requirements. They must also review and

approve the related state regulations and programs. At the same time, the

regional offices play a more direct role in the case of regulations that have

not been adopted by individual states and that thus cannot be enforced by

those states.

The Executive Director of the Association of State Drinking Water

Administrators echoed the concerns about the ability of EPA’s regional

offices to handle the increased workload. The official noted that many

regional staff members are new to the drinking water program and do not

have a historical perspective on the program and that existing expertise

had been lost as a result of reorganizations. The official also expressed

concern that such staffing constraints could lead EPA to take a “one size

fits all” approach and limit the states’ flexibility.

Observations EPA and the states have made progress in meeting the initial requirements

of the Safe Drinking Water Act Amendments of 1996. Of particular note,

EPA has met all of its statutory requirements to develop regulations and

guidelines, and other stakeholders (including the states, representatives of

the regulated industry, and environmental groups) have credited the

agency with effectively involving them in this process. For their part, the

states have made important strides in addressing one of their most

important initial objectives—setting up their drinking water revolving

funds—and are working to meet other initial requirements to prepare

needed strategies and programs. Yet as noteworthy as these initial efforts

have been, the most difficult challenge deals with the longer-term question

of implementation—implementation of the new contaminant standards

(including monitoring water systems’ compliance with the standards), the

new requirements to augment consumer awareness, the provisions to

ensure the viability of thousands of smaller water systems, and the

numerous other requirements associated with this complex statute.

Meeting these longer-term challenges will call for a sustained effort by EPA,

the states, and the nation’s public water systems and will warrant

continuous oversight by the Congress.

Page 21 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

Agency Comments We provided copies of a draft of this report to EPA for its review and

comment and discussed the agency’s response with the Director of the

Office of Ground Water and Drinking Water and her staff. The EPA officials

expressed general agreement with the information in the report, indicating

that it was an important gauge of the progress made by EPA, the states, and

communities in the early implementation stages of the requirements of the

Safe Drinking Water Act Amendments of 1996. The officials also suggested

a number of technical clarifications and corrections, which have been

incorporated as appropriate.

Scope and

Methodology

To accomplish our objectives, we interviewed officials in EPA’s Office of

Ground Water and Drinking Water, Office of Research and Development,

Office of Enforcement and Compliance Assurance, and Office of General

Counsel and obtained and reviewed related legislation and program

regulations, guidance, and reports. We also interviewed drinking water

officials in EPA’s Boston, Chicago, and San Francisco regional offices and

interviewed state program managers in six states within these

regions—Arizona, Illinois, Maine, Massachusetts, Minnesota, and Nevada.

Criteria for selecting these states included diversity in geographical

location, size, and the extent of the progress they had made in

implementing the new requirements of the 1996 amendments. In addition,

we interviewed officials of the Association of State Drinking Water

Administrators, the American Water Works Association, the Association of

Metropolitan Water Agencies, the National Rural Water Association, the

National Association of Towns and Townships, and the Natural Resources

Defense Council. We conducted our review from March 1998 through

January 1999 in accordance with generally accepted government auditing

standards.

As arranged with your office, unless you announce its contents earlier, we

plan no further distribution of this report until 7 days after the date of this

letter. At that time, we will make copies available to interested

congressional committees and the Administrator, EPA. We will also make

copies available to others on request.

Page 22 GAO/RCED-99-31 Safe Drinking Water Act
B-281377 

If you have any questions about this report, please contact me at

(202) 512-6111. Major contributors to this report were Ellen Crocker,

Teresa Dee, Steve Elstein, and Lena Natola.

Sincerely yours,

Peter F. Guerrero

Director, Environmental

 Protection Issues

Page 23 GAO/RCED-99-31 Safe Drinking Water Act
Related GAO Products

Drinking Water: Some Households Rely on Untreated Water From

Irrigation Systems (GAO/RCED-98-244, Sept. 3, 1998).

Drinking Water: Information on the Quality of Water Found at Community

Water Systems and Private Wells (GAO/RCED-97-123, June 12, 1997).

Flexibility in the Safe Drinking Water Act (GAO/RCED-96-12R, Nov. 21, 1995).

Drinking Water: Safe Drinking Water Act Reauthorization Issues

(GAO/T-RCED-96-35, Nov. 1, 1995).

Drinking Water: Combination of Strategies Needed to Bring Program Costs

in Line With Resources (GAO/T-RCED-94-152, Mar. 14, 1994).

Drinking Water: Stronger Efforts Essential for Small Communities to

Comply With Standards (GAO/RCED-94-40, Mar. 9, 1994).

Drinking Water Program: States Face Increased Difficulties in Meeting

Basic Requirements (GAO/RCED-93-144, June 25, 1993).

Drinking Water: Stronger Efforts Needed to Protect Areas Around Public

Wells From Contamination (GAO/RCED-93-96, Apr. 14, 1993).

Drinking Water: Key Quality Assurance Program Is Flawed and

Underfunded (GAO/RCED-93-97, Apr. 9, 1993).

Drinking Water: Widening Gap Between Needs and Available Resources

Threatens Vital EPA Program (GAO/RCED-92-184, July 6, 1992).

Drinking Water: Consumers Often Not Well-Informed of Potentially

Serious Violations (GAO/RCED-92-135, June 25, 1992).

Observations on Compliance and Enforcement in EPA’s Drinking Water

Program (GAO/T-RCED-91-47, May 10, 1991).

Drinking Water: Compliance Problems Undermine EPA Program as New

Challenges Emerge (GAO/RCED-90-127, June 8, 1990).

(160437) Page 24 GAO/RCED-99-31 Safe Drinking Water Act
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