Economic Analysis for the Stage 2 DBPR Proposal July 2003 i Contents List of Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi List of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii Health Risk Reduction and Cost Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi Executive Summary ES. 1 Need for the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 1 ES. 2 Consideration of Regulatory Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 2 ES. 3 Summary of the Proposed Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 2 ES. 4 Systems Subject to the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 6 ES. 5 National Benefits and Costs of the Stage 2 DBPR Preferred Regulatory Alternative . . . ES 8 ES. 5.1 Plants Making Treatment Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 10 ES. 5.2 Derivation of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 12 ES. 5.3 Derivation of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 14 ES. 6 Estimated Impacts on Household Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 15 ES. 7 Comparison of Costs and Benefits for Four Regulatory Alternatives . . . . . . . . . . . . . ES 16 ES. 8 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 18 Chapter 1. Introduction 1.1 Summary of the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1.2 Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 1.3 Calculations and Citations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 Chapter 2. Need for the Proposal 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 2.1.1 Description of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 2.2 Public Health Concerns to Be Addressed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 2.3 Regulatory History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 2.3.1 Statutory Authority for Promulgating the Rule . . . . . . . . . . . . . . . . . . . . . . . . 2 2 2.3.2 1979 Total Trihalomethane Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 2.3.3 1989 Total Coliform Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 2.3.4 1989 Surface Water Treatment Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 2.3.5 1996 Information Collection Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 2.3.6 1998 Interim Enhanced Surface Water Treatment Rule . . . . . . . . . . . . . . . . . 2 5 2.3.7 1998 Stage 1 Disinfectants and Disinfection Byproducts Rule . . . . . . . . . . . . . 2 5 2.3.8 2000 Proposed Ground Water Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 2.3.9 2001 Arsenic Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 2.3.10 2001 Filter Backwash Recycling Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 2.3.11 2002 Long Term 1 Enhanced Surface Water Treatment Rule . . . . . . . . . . . . . 2 7 2.3.12 2002 Proposed Long Term 2 Enhanced Surface Water Treatment Rule . . . . . . 2 7 2.4 Economic Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 7 Economic Analysis for the Stage 2 DBPR Proposal July 2003 ii Chapter 3. Baseline Conditions 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 3.2 Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 3.3 Predictive Tools for Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 3.3.1 The Surface Water Analytical Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 3.3.2 The Small Surface Water Expert Review Process . . . . . . . . . . . . . . . . . . . . . 3 6 3.3.3 The ICR Ground Water Delphi Poll Process . . . . . . . . . . . . . . . . . . . . . . . . . 3 9 3.3.4 The Small Ground Water Expert Review Process . . . . . . . . . . . . . . . . . . . . . 3 9 3.4 Industry Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 10 3.4.1 Public Water System Categorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 10 3.4.2 Systems, Plants, and Population Subject to the Stage 2 DBPR . . . . . . . . . . . . 3 12 <IP_ADDRESS> System Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 13 <IP_ADDRESS> Plant Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 15 <IP_ADDRESS> Population Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 21 3.4.3 Water Treatment Plant Design and Average Daily Flows . . . . . . . . . . . . . . . 3 24 3.4.4 Number of Households Served . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 26 3.4.5 Uncertainty in Baseline Input Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 27 3.5 Influent Water Quality Characterization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 28 3.5.1 Summary of Available Influent Water Quality Data . . . . . . . . . . . . . . . . . . . 3 28 3.5.2 Regional Differences in Water Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 30 3.6 Treatment Characterization for the Pre Stage 1 and Pre Stage 2 DBPRs . . . . . . . . . . . 3 35 3.6.1 Treatment Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 35 3.6.2 Treatment Characterization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 39 3.7 DBP Occurrence for the Pre Stage 1 and Pre Stage 2 DBPR Baselines . . . . . . . . . . . 3 44 3.7.1 Description of ICR and SWAT DBP Data . . . . . . . . . . . . . . . . . . . . . . . . . . 3 45 <IP_ADDRESS> ICR DBP Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 45 <IP_ADDRESS> SWAT DBP Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 46 3.7.2 Pre Stage 1 and Pre Stage 2 DBP Occurrence for Large Surface Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 46 3.7.3 Pre Stage 1 and Pre Stage 2 DBP Occurrence in Large Ground Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 52 3.7.4 Pre Stage 1 and Pre Stage 2 DBP Occurrence for Medium Surface and Ground Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 53 3.7.5 Pre Stage 1 and Pre Stage 2 DBP Occurrences for Small Surface and Ground Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 53 3.8 Summary of Uncertainties in Development of Stage 2 DBPR Baselines . . . . . . . . . . . . 3 55 Chapter 4. Consideration of Regulatory Alternatives 4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.2 Process for Development of Regulatory Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 4.3 Regulatory Alternatives Considered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3 Chapter 5. Benefits Analysis 5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 5.1.1 Overview of Methodology for Quantifying Stage 2 DBPR Benefits . . . . . . . . . 5 2 5.1.2 Summary of National Benefits of the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . 5 4 5.2 Problem Identification and Assessment of Potential Hazard . . . . . . . . . . . . . . . 5 5 5.2.1 Reproductive and Developmental Health Effects . . . . . . . . . . . . . . . . . . . . . . 5 5 <IP_ADDRESS> Epidemiological Evidence of Adverse Reproductive and Economic Analysis for the Stage 2 DBPR Proposal July 2003 iii Developmental Health Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 <IP_ADDRESS> Toxicological Evidence of Adverse Reproductive and Developmental Health Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 15 <IP_ADDRESS> Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 19 5.2.2 Cancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 20 <IP_ADDRESS> Epidemiological Evidence of DBP Carcinogenicity . . . . . . . . 5 20 <IP_ADDRESS> Toxicological Evidence of DBP Carcinogenicity . . . . . . . . . . . . . . . 5 24 <IP_ADDRESS> Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 28 5.3 Exposure Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 29 5.3.1 Population Exposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 29 5.3.2 Routes of Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 30 5.3.3 Special Exposure Issues for Pregnant Women . . . . . . . . . . . . . . . . . . . . . . . 5 31 5.4 Occurrence and Exposure Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 31 5.4.1 Occurrence and Exposure Reduction: Peak DBPs . . . . . . . . . . . . . . . . . . . . 5 32 <IP_ADDRESS> Methodology for Evaluating ICR Data . . . . . . . . . . . . . . . . . . . . . . 5 33 <IP_ADDRESS> Discussion of Changes in Peak DBP Occurrence . . . . . . . . . 5 35 <IP_ADDRESS> Estimated Reduction in Peak DBP Exposure . . . . . . . . . . . . . . . . . . 5 41 5.4.2 Exposure Reduction: Average DBPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 43 5.5 Benefits of the Stage 2 DBPR: Reduced Incidence of Adverse Effects . . . . . . . . . . . . 5 49 5.5.1 Reduced Incidence of Reproductive and Developmental Effects . . . . . . . . . . 5 49 5.5.2 Reduced Incidence of Bladder Cancer Cases . . . . . . . . . . . . . . . . . . . . . . . . 5 49 <IP_ADDRESS> Annual Cancer Cases Avoided ( Steady State) . . . . . . . . . . . . . . . . . 5 50 <IP_ADDRESS> Annual Cancer Cases Avoided Accounting for Cessation Lag . . . . . . 5 52 <IP_ADDRESS> Adjustments in Annual Cancer Cases Avoided to Account for the Rule Implementation Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 56 5.5.3 Other Health Related Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 60 5.5.4 Non Health Related Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 60 5.5.5 Potential Increases in Health Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 60 5.6 Valuation of Health Benefits for the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . 5 64 5.6.1 Value of Reductions in Potential Adverse Reproductive and Developmental Health Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 64 5.6.2 Value of Reductions in Bladder Cancer Cases . . . . . . . . . . . . . . . . . . . . . . . 5 65 5.6.3 Value of Benefits Resulting from the Stage 2 DBPR for the Preferred Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 70 5.6.4 Comparison of the Value of Benefits for Regulatory Alternatives . . . . . . . . . . 5 76 5.7 Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 78 5.8 Sensitivity Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 78 5.9 Potential Fetal Losses Avoided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 81 5.9.1 Reproductive Effects Illustrative Calculation . . . . . . . . . . . . . . . . . . . . . . . . 5 81 5.9.2 Value of Reductions in Fetal Losses Avoided . . . . . . . . . . . . . . . . . . . . . . . . 5 83 Chapter 6. Cost Analysis 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6.1.1 Overview of Methodology for Quantifying Stage 2 DBPR Costs . . . . . . . . . . . 6 2 <IP_ADDRESS> Baseline Data Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2 <IP_ADDRESS> Technology Unit Costs and Technology Selection Forecasts . . . . . . . . 6 4 <IP_ADDRESS> Projections and Discounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4 <IP_ADDRESS> Household Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6 <IP_ADDRESS> Modeled Uncertainty in National Costs . . . . . . . . . . . . . . . . . . . . . . . 6 7 Economic Analysis for the Stage 2 DBPR Proposal July 2003 iv 6.2 Summary of the National Costs of the Stage 2 DBPR ( Preferred Alternative) . . . . . . . . 6 7 6.2.1 Systems Subject to Non Treatment Related Rule Activities . . . . . . . . . . . . . . . 6 8 6.2.2 Plants Adding Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10 6.2.3 Summary of One Time Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 10 6.2.4 Summary of Total Annualized Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 13 6.3 Non Treatment Costs for Systems and States/ Primacy Agencies . . . . . . . . . . . . . . . . 6 13 6.3.1 Rule Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 16 6.3.2 Initial Distribution System Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 17 6.3.3 Additional Routine Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 17 6.3.4 Significant Excursion Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 18 6.3.5 Results ( One Time and Annual Steady State Costs) . . . . . . . . . . . . . . . . . . . 6 19 6.4 Treatment Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 19 6.4.1 Technologies and Unit Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 19 <IP_ADDRESS> Technologies Used to Estimate Treatment Costs . . . . . . . . . . . . . . . 6 21 <IP_ADDRESS> Alternatives to Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 30 6.4.2 Compliance Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 30 <IP_ADDRESS> Overview of Compliance Forecast Methodology . . . . . . . . . . . . . . . 6 31 <IP_ADDRESS> Surface Water Compliance Forecasts . . . . . . . . . . . . . . . . . . . . . . 6 33 <IP_ADDRESS> Ground Water Compliance Forecasts . . . . . . . . . . . . . . . . . . . . . . . 6 37 <IP_ADDRESS> Uncertainties in Compliance Forecast . . . . . . . . . . . . . . . . . . . . . . . 6 37 6.4.3 Results ( Initial Capital and Steady State O& M Costs) . . . . . . . . . . . . . . . . . . 6 37 6.5 Projecting and Discounting Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 41 6.6 Household Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 44 6.7 Unquantifiable Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 51 6.8 Uncertainty Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 51 6.9 Comparison of Regulatory Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 53 Chapter 7. Compliance Forecast Sensitivity Analyses 7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1 7.2 IDSE Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 7.3 Minimal Impact Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Chapter 8. Economic Impact Analysis 8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 8.2 Regulatory Flexibility Act and Small Business Regulatory Enforcement Fairness Act . . . 8 1 8.3 Small System Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8 8.3.1 Affordability Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 8.3.2 Affordable Compliance Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11 8.3.3 Funding Options for Disadvantaged Systems . . . . . . . . . . . . . . . . . . . . . . . 8 14 8.4 Feasible Treatment Technologies for All Systems . . . . . . . . . . . . . . . . . . . . . . . . . . 8 14 8.4.1 ICR Treatment Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 15 8.4.2 BAT Evaluation Using SWAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 16 8.4.3 BATs for Consecutive Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 17 8.5 Effect of Compliance with the Stage 2 DBPR on the Technical, Managerial, and Financial Capacity of Public Water Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 18 8.5.1 Requirements of the Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . 8 19 8.5.2 Systems Subject to the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 20 8.5.3 Impact of the Stage 2 DBPR on System Capacity . . . . . . . . . . . . . . . . . . . . 8 20 8.5.4 Final Analysis of Impact of the Stage 2 DBPR on Small System Capacity . . . . 8 20 Economic Analysis for the Stage 2 DBPR Proposal July 2003 v 8.5.5 Derivation of Stage 2 DBPR Scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 23 <IP_ADDRESS> Familiarization with the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . 8 24 <IP_ADDRESS> Conducting an Initial Distribution System Evaluation . . . . . . . . . . . . 8 25 <IP_ADDRESS> Compliance with MCLs for TTHM and HAA5 . . . . . . . . . . . . . . . . . 8 25 <IP_ADDRESS> Additional Routine Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 27 <IP_ADDRESS> Significant Excursion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 27 8.5.6 Rationale for Scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 28 8.6 Paperwork Reduction Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 28 8.7 Unfunded Mandates Reform Act Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 30 8.8 Indian Tribal Governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 33 8.9 Impacts on Sensitive Subpopulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 35 8.9.1 Protecting Children from Environmental Health Risks and Safety Risks . . . . . 8 36 8.10 Environmental Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 37 8.11 Federalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 38 8.12 Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 39 Chapter 9. Comparison of Benefits and Costs of the Stage 2 DBPR 9.1 Evaluation of National Benefits and Costs of the Stage 2 DBPR . . . . . . . . . . . . . . . . . . 9 1 9.1.1 National Benefits Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 9.1.2 National Cost Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3 9.1.3 Comparison of National Benefits and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3 9.2 Effects of Uncertainties on the Estimation of Net National Benefits . . . . . . . . . . . . . . . 9 4 9.3 Breakeven Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 7 9.4 Comparison of Regulatory Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 8 9.4.1 Comparison of Reductions in DBP Occurrence . . . . . . . . . . . . . . . . . . . . . . . 9 8 9.4.2 Comparison of Benefits and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 9.4.3 Cost Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 9.5 Summary of Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 15 References Economic Analysis for the Stage 2 DBPR Proposal July 2003 vi Appendices Appendix A: Surface Water Compliance Forecasts Using SWAT Appendix B: Ground Water Plant Compliance Forecasts Appendix C: Supplemental Compliance Forecasts Appendix D: Rule Activity Schedule Appendix E: Annual Cancer Cases Avoided as a Result of the Stage 2 DBPR Appendix F: Valuation of Stage 2 DBPR Benefits Appendix G: Illustrative Calculation for Quantifying Reproductive and Developmental Benefits of the Stage 2 DBPR Appendix H: National Costs for Non Treatment Related Rule Activities Appendix I: Cost Implications for Alternative Monitoring Requirements and Alternative Approaches to Implementing the IDSE Appendix J: Unit Costs for Technologies Considered in the Stage 2 DBPR Appendix K: Stage 2 DBPR Cost Projections Appendix L: Benefit and Cost Models Appendix M: Quality Assurance Supplemental Information Economic Analysis for the Stage 2 DBPR Proposal July 2003 vii Exhibits Exhibit ES. 1 Summary of Stage 2 DBPR Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 4 Exhibit ES. 2 Implementation Timeline for the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 5 Exhibit ES. 3 Number of Systems Subject to Non Treatment Related Rule Activities . . . . . . . . . . . . . . ES 7 Exhibit ES. 4 Summary of Estimated National Benefits and Costs of the Stage 2 DBPR . . . . . . . . . . . . ES 9 Exhibit ES. 5 Comparison of Annualized National Costs and Benefits ($ Millions) . . . . . . . . . . . . . . . . ES 10 Exhibit ES. 6 Plants Making Treatment Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 11 Exhibit ES. 7 Methods Used to Predict Treatment Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 11 Exhibit ES. 8 Summary of Annual Household Cost Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 16 Exhibit ES. 9a Comparison of Costs and Benefits for the Stage 2 DBPR Regulatory Alternatives ( 3% Discount Rate, $ Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 17 Exhibit ES. 9b Comparison of Costs and Benefits for the Stage 2 DBPR Regulatory Alternatives ( 7% Discount Rate, $ Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ES 18 Exhibit 1.1 Summary of IDSE SMP Requirements for 100 Percent Purchasing Systems1, Population Based Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 Exhibit 1.2 Summary of IDSE SMP Requirements for Producing Systems1, Plant Based Approach . . . . 1 4 Exhibit 1.3 Comparison of Stage 1 and Stage 2B DBPR Compliance Calculations . . . . . . . . . . . . . . . . . 1 5 Exhibit 1.4 Summary of Stage 2B Monitoring Requirements for 100 Percent Purchasing Systems1, Population Based Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 Exhibit 1.5 Comparison of Stage 1 and Stage 2B DBPR Monitoring Requirements for Producing Systems1, Plant Based Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 Exhibit 3.1 Tools Used to Predict Treatment Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Exhibit 3.2a SWAT Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 Exhibit 3.2b SWAT Inputs and Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 Exhibit 3.3 Derivation of the Stage 2 DBPR System Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 14 Exhibit 3.4 Derivation of the Stage 2 DBPR Plant Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 18 Exhibit 3.5 Derivation of the Stage 2 DBPR Population Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 22 Exhibit 3.6 Design Flows and Average Daily Flows per Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 25 Exhibit 3.7 Number of Households Subject to the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 27 Exhibit 3.8 ICR Large System Influent Water Quality Parameters   Summary of Pre Stage 1 Plant Mean Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 29 Exhibit 3.9 Cumulative Distribution of TOC in Influent Water ICR Plant Mean Data . . . . . . . . . . . . . . 3 31 Exhibit 3.10 Cumulative Distribution of Bromide in Influent Water ICR Plant Mean Data . . . . . . . . . . 3 32 Exhibit 3.11 Medium and Small System Influent Water Quality Parameters   Summary of Pre Stage 1 Plant Mean Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 33 Exhibit 3.12a Influent Water TOC Distribution for ICR Surface Water Systems . . . . . . . . . . . . . . . . . 3 34 Exhibit 3.12b Influent Water TOC Distribution for ICR Ground Water Systems . . . . . . . . . . . . . . . . . 3 34 Exhibit 3.12c Influent Water TOC Distribution for Ground Water Systems Derived from the Ground Water Supply Survey ( GWSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 35 Exhibit 3.13 Comparison of Technologies Considered for the Stage 1 DBPR in the Stage 1 DBPR RIA and the Stage 2 DBPR EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 37 Exhibit 3.14 Aggregated Treatment Technology Categories for Stage 1 DBPR Used for the Stage 2 DBPR EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 38 Exhibit 3.15a Pre Stage 1 DBPR Technologies in Place for CWS Surface Water . . . . . . . . . . . . . . . 3 40 Exhibit 3.15b Pre Stage 1 DBPR Technologies in Place for NTNCWS Surface Water Plants . . . . . . . 3 40 Exhibit 3.16a Pre Stage 1 DBPR Technologies in Place for CWS Ground Water Plants . . . . . . . . . . . 3 41 Exhibit 3.16b Pre Stage 1 DBPR Technologies in Place for NTNCWS Ground Water Plants . . . . . . . . 3 41 Economic Analysis for the Stage 2 DBPR Proposal July 2003 viii Exhibit 3.17a Pre Stage 2 DBPR Technologies in Place for CWS Surface Water Plants . . . . . . . . . . . 3 42 Exhibit 3.17b Pre Stage 2 DBPR Technologies in Place for NTNCWS Surface Water Plants . . . . . . . 3 42 Exhibit 3.18a Pre Stage 2 DBPR Technologies in Place for CWS Ground Water Plants . . . . . . . . . . . 3 43 Exhibit 3.18b Pre Stage 2 DBPR Technologies in Place for NTNCWS Ground Water Plants . . . . . . . . 3 43 Exhibit 3.19 Summary of Pre Stage 1 and Pre Stage 2 DBP Occurrence for Large Surface Water Plants, DS Average Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 47 Exhibit 3.20a Cumulative Distributions of TTHM Monthly Data Predicted by SWAT ( DS Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 48 Exhibit 3.20b Cumulative Distributions of TTHM Plant Mean Data Predicted by SWAT ( DS Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 48 Exhibit 3.21a Cumulative Distributions of HAA5 Monthly Data Predicted by SWAT ( DS Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 49 Exhibit 3.21b Cumulative Distributions of HAA5 Plant Mean Data Predicted by SWAT ( DS Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 49 Exhibit 3.22a Cumulative Distributions of Bromate Monthly Data Predicted by SWAT ( Finished Water) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 50 Exhibit 3.22b Cumulative Distributions of Bromate Plant Mean Data Predicted by SWAT ( Finished Water) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 50 Exhibit 3.23a Cumulative Distributions of Chlorite Monthly Data Predicted by SWAT ( Finished Water) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 51 Exhibit 3.23b Cumulative Distributions of Chlorite Plant Mean Data Predicted by SWAT ( Finished Water) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 51 Exhibit 3.24 Summary of Pre Stage 1 DBP Occurrence for Large Ground Water Plants, ICR Data . . . 3 52 Exhibit 3.25 Summary of Pre Stage 1 DBP Occurrence Data for Small Systems, DS Average Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 54 Exhibit 3.26 Summary of Uncertainties Affecting Stage 2 DBPR Baseline Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 55 Exhibit 4.1 Comparison of Compliance Calculations for Regulatory Alternatives . . . . . . . . . . . . . . . . . . 4 6 Exhibit 5.1 Summary of Quantified Benefits for the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 Exhibit 5.2 Odds Ratios ( and 95% Confidence Intervals 1) Calculated by Reif et al. ( 2000) for Reproductive and Developmental Health Endpoints at TTHM Levels of > 80 µ g/ L versus < 80 µ g/ L and > 60 µ g/ L versus < 60 µ g/ L . . . . . . . . . . . . . . . . . . . . . . . . . 5 12 Exhibit 5.3 PAR Values ( and 95% Confidence Intervals 1 ) Calculated by Reif et al. ( 2000) for Reproductive and Developmental Health Endpoints at TTHM Levels of > 80 µ g/ L versus < 80 µ g/ L and > 60 µ g/ L versus < 60 µ g/ L ( Values are Percentages) . . . . . . . 5 13 Exhibit 5.4 Availability of Reproductive and Developmental Toxicology Studies for Specific DBPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 16 Exhibit 5.5 Reproductive and Developmental Health Effects Associated with DBPs in Toxicological Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 17 Exhibit 5.6 Summary of Epidemiology Studies for Bladder Cancer Associated with Chlorinated Drinking Water and EPA Calculated PAR Values . . . . . . . . . . . . . . . . . . 5 22 Exhibit 5.7 Summary of EPA's Cancer Risk Assessments for Specific DBPs . . . . . . . . . . . . . . . . . . 5 26 Exhibit 5.8 Quantification of Cancer Risk, Pre Stage 2 Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 27 Exhibit 5.9 Estimated Population Exposed to DBPs in Drinking Water . . . . . . . . . . . . . . . . . . . . . . . . 5 30 Exhibit 5.10 Number of Plants, Locations, and TTHM/ HAA5 Observations In Each Data Set . . . . . . . 5 34 Economic Analysis for the Stage 2 DBPR Proposal July 2003 ix Exhibit 5.11 Comparison of TTHM and HAA5 Concentrations Calculated as RAAs and Maximum LRAAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 37 Exhibit 5.12a Distribution of TTHM Observations for Different Subsets of ICR Plants . . . . . . . . . . . . 5 39 Exhibit 5.12b Distribution of HAA5 Observations for Different Subsets of ICR Plants . . . . . . . . . . . . 5 40 Exhibit 5.13 Percent Reduction in Locations with Peaks from the Stage 1 to the Stage 2 DBPR . . . . . . 5 43 Exhibit 5.14 Operational Changes Predicted by SWAT for the Stage 1 DBPR and Stage 2 DBPR, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 45 Exhibit 5.15a TTHM Plant Mean Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . . 5 46 Exhibit 5.15b TTHM Monthly Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . . . . 5 46 Exhibit 5.16a HAA5 Plant Mean Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . . 5 47 Exhibit 5.16b HAA5 Monthly Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . . . . 5 47 Exhibit 5.17a Reduction in Average TTHM and HAA5 Concentrations from Pre Stage 1 to Pre Stage 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 48 Exhibit 5.17b Reduction in Average TTHM and HAA5 Concentrations from Pre Stage 2 to Post Stage 2, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 48 Exhibit 5.18 Steady State Cancer Cases Remaining after Stage 1 and Avoided by Stage 2 ( Total Estimated Cases) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 52 Exhibit 5.19 Cases Avoided Under 2 Percent PAR: Steady State and with Cessation Lag ( TTHM as Indicator) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 57 Exhibit 5.20 Cases Avoided Under 17 Percent PAR: Steady State and with Cessation Lag ( TTHM as Indicator) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 58 Exhibit 5.21 Estimated Cancer Cases Avoided by Year All Water Systems, TTHM as Indicator . . . . . . 5 59 Exhibit 5.22a Chlorite Plant Mean Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . 5 62 Exhibit 5.22b Chlorite Monthly Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . . . 5 62 Exhibit 5.23a Bromate Plant Mean Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . 5 63 Exhibit 5.23b Bromate Monthly Data for Pre Stage 2 and Post Stage 2 . . . . . . . . . . . . . . . . . . . . . . . 5 63 Exhibit 5.24 VSL, WTP, and Morbidity Increment Price Level Updates . . . . . . . . . . . . . . . . . . . . . . . 5 67 Exhibit 5.25 Value of Morbidity Increment, VSL, and WTP by Year . . . . . . . . . . . . . . . . . . . . . . . . . 5 69 Exhibit 5.26 Non discounted Stream of Benefits from the Stage 2 DBPR Preferred Regulatory Alternative, All Systems, TTHM as Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 71 Exhibit 5.27 Benefits Summary for the Stage 2 DBPR, Preferred Regulatory Alternative ( Millions, 2000$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 75 Exhibit 5.28 Number and Annualized Value of Estimated Bladder Cancer Cases Avoided for All Stage 2 DBPR Regulatory Alternatives ( Millions, 2000$) . . . . . . . . . . . . . . . . . . . 5 77 Exhibit 5.29 Uncertainties and Possible Effect on Estimate of Benefits . . . . . . . . . . . . . . . . . . . . . . . 5 79 Exhibit 5.30 Comparison of Number and Annualized Value of Estimated Bladder Cancer Cases Avoided for Stage 2 DBPR Sensitivity Analysis ( Millions, 2000$) . . . . . . . . . . . 5 80 Exhibit 5.31 Summary of the Fetal Loss Human Epidemiology Studies . . . . . . . . . . . . . . . . . . . . . . . 5 82 Exhibit 6.1 Stage 2 DBPR Cost Model Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3 Exhibit 6.2 Household Cost Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7 Exhibit 6.3 Number of Systems Subject to Non Treatment Related Rule Activities . . . . . . . . . . . . . . . . 6 9 Exhibit 6.4 Number and Percent of Plants Adding Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 11 Exhibit 6.5 Initial Capital and One Time Costs for the Stage 2 DBPR ($ Millions) . . . . . . . . . . . . . . . . 6 12 Exhibit 6.6a Total Annualized Costs for Stage 2 DBPR Rule Activities ($ Millions/ Year, 3 Percent Discount Rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 14 Exhibit 6.6b Total Annualized Costs for Stage 2 DBPR Rule Activities ($ Millions/ Year, 7 Percent Discount Rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 15 Exhibit 6.7 Summary of System Costs for Non Treatment Related Stage 2 DBPR Rule Activities Economic Analysis for the Stage 2 DBPR Proposal July 2003 x ( One Time and Steady State) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 20 Exhibit 6.8a Treatment Technologies for Surface Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 24 Exhibit 6.8b Treatment Technologies for Disinfecting Ground Water Plants . . . . . . . . . . . . . . . . . . . 6 25 Exhibit 6.9a Capital Costs ($/ Plant) for CWS Surface Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . 6 26 Exhibit 6.9b Annual O& M Costs ($/ Plant/ Year) for CWS Surface Water Plants . . . . . . . . . . . . . . . . . 6 26 Exhibit 6.9c Household Unit Costs ($/ Household/ Year) for CWS Surface Water Plants . . . . . . . . . . . . 6 27 Exhibit 6.10a Capital Cost ($/ Plant/ Year) forCWS Disinfecting Ground Water Plants . . . . . . . . . . . . . 6 28 Exhibit 6.10b Annual O& M Costs ($/ Plant/ Year) for CWS Disinfecting Ground Water Plants . . . . . . . 6 28 Exhibit 6.10c Household Unit Costs ($/ Household/ Year) for CWS Disinfecting Ground Water Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 29 Exhibit 6.11 Tools Used to Develop the Stage 2 DBPR Compliance Forecasts . . . . . . . . . . . . . . . . . . 6 31 Exhibit 6.12 Stage 2 DBPR Compliance Forecast Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 32 Exhibit 6.13 Interpretation of Technology Selection Forecasts for Surface Water Plants . . . . . . . . . . . 6 34 Exhibit 6.14a Technology Selection Deltas for CWS Surface Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 35 Exhibit 6.14b Technology Selection Deltas for NTNCWS Surface Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 35 Exhibit 6.15a Post Stage 2 DBPR Technologies in Place for CWS Surface Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 36 Exhibit 6.15b Post Stage 2 DBPR Technologies in Place for NTNCWS Surface Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 36 Exhibit 6.16a Technology Selection Deltas for CWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 38 Exhibit 6.16b Technology Selection Deltas for NTNCWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 38 Exhibit 6.17a Post Stage 2 DBPR Technologies in Place for CWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . 6 39 Exhibit 6.17b Post Stage 2 DBPR Technologies in Place for NTNCWS Disinfecting Ground Water Plants, Preferred Regulatory Alternative . . . . . . . . . . . . . . . . . . . . . . 6 39 Exhibit 6.18 Total Initial Capital Costs ($ Millions) and Steady State O& M Costs ($ Millions/ Year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 40 Exhibit 6.19a Total Annualized Costs at 3 Percent Social Discount Rate ($ Millions) . . . . . . . . . . . . . . 6 42 Exhibit 6.19b Total Annualized Costs at 7 Percent Social Discount Rate ($ Millions) . . . . . . . . . . . . . . 6 43 Exhibit 6.20 Annual Household Cost Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 45 Exhibit 6.21a Household Cost Distributions, All Surface Water Systems Subject to the Rule . . . . . . . . 6 46 Exhibit 6.21b Household Cost Distributions, All Ground Water Systems Subject to the Rule . . . . . . . . 6 47 Exhibit 6.22a Household Cost Distributions, Surface Water Systems Adding Treatment . . . . . . . . . . . 6 48 Exhibit 6.22b Household Cost Distributions, Ground Water Systems Adding Treatment . . . . . . . . . . . 6 49 Exhibit 6.22c Household Cost Distributions, Small Systems Adding Treatment ( Surface and Ground) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 50 Exhibit 6.23 Cost Uncertainty Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 52 Exhibit 6.24 Total Annualized Cost for the Stage 2 DBPR Regulatory Alternatives ($ Millions) . . . . . . . 6 53 Exhibit 7.1 Total Percent Adding Treatment from Stage 1 to Stage 2 for IDSE No. 1 and IDSE No. 2 ( CWSs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3 Exhibit 7.2 Comparison of Estimated Annual Cases and Annualized Benefits for IDSE Sensitivity Analyses and the Preferred Alternative ( Millions, 2000$) . . . . . . . . . . 7 4 Exhibit 7.3 Comparison of the Total Initial Capital Costs for IDSE Sensitivity Analyses and the Preferred Alternative ($ Millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5 Economic Analysis for the Stage 2 DBPR Proposal July 2003 xi Exhibit 7.4a Comparison of Annualized Costs for the IDSE Sensitivity Analyses and the Preferred Alternative, 3 Percent Discount Rate ($ Millions) . . . . . . . . . . . . . . . . . . . . . 7 6 Exhibit 7.4b Comparison of Annualized Costs for the IDSE Sensitivity Analyses and the Preferred Alternative, 7 Percent Discount Rate ($ Millions) . . . . . . . . . . . . . . . . . . . . . 7 7 Exhibit 7.5 Comparison of Estimated Annual Cases and Annualized Benefits for Minimal Impact Sensitivity Analysis and the Preferred Alternative ( Millions, 2000$) . . . . . . . . . . 7 9 Exhibit 7.6 Comparison of Initial Capital Costs for the Minimal Impact Sensitivity Analysis and the Preferred Alternative ($ Millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10 Exhibit 7.7a Comparison of Annualized Costs for the Minimal Impact Sensitivity Analyses and the Preferred Alternative, 3 Percent Discount Rate ($ Millions) . . . . . . . . . . . . . . 7 11 Exhibit 7.7b Comparison of Annualized Costs for the Minimal Impact Sensitivity Analyses and the Preferred Alternative, 7 Percent Discount Rate ($ Millions) . . . . . . . . . . . . . . 7 12 Exhibit 8.1a Annualized Compliance Cost as a Percentage of Revenues for All Small Entities Using Surface Water and GWUDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4 Exhibit 8.1b Annualized Compliance Cost as a Percentage of Revenues for All Small Entities Using Ground Water Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5 Exhibit 8.2 Derivation of Available Expenditure Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 10 Exhibit 8.3 Affordability Analysis Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11 Exhibit 8.4a Affordable Compliance Technologies and Household Unit Treatment Costs ($/ HH/ Year) for Surface Water Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 13 Exhibit 8.4b Affordable Compliance Technologies and Household Unit Treatment Costs ($/ HH/ Year) for Ground Water Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 13 Exhibit 8.5 SWAT Model Predictions of Percent of Large Plants in Compliance with TTHM and HAA5 Stage 2B MCLs after Application of Specified Treatment Technologies . . . . 8 17 Exhibit 8.6 Estimated Impact of the Stage 2 DBPR on Small System Capacity . . . . . . . . . . . . . . . . . . 8 21 Exhibit 8.7 Estimated Impact of the Stage 2 DBPR on Large System Capacity . . . . . . . . . . . . . . . . . . 8 22 Exhibit 8.8 Impact of the Stage 2 DBPR on CWS and NTNCWS Capacity . . . . . . . . . . . . . . . . . . . . 8 23 Exhibit 8.9 Summary of Average Annual Burden Hours and Labor Costs . . . . . . . . . . . . . . . . . . . . . . 8 29 Exhibit 8.10 Public and Private Costs for the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 30 Exhibit 8.11a Annualized Cost of Compliance for CWSs ( 3 and 7 Percent Discount Rates) . . . . . . . . . 8 33 Exhibit 8.11b Annualized Cost of Compliance for NTNCWSs ( 3 and 7 Percent Discount Rates) . . . . . 8 33 Exhibit 8.12 Annual Cost of Compliance for Tribal Systems by System Type and Size ( Annualized at 3 Percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 35 Exhibit 8.13 Increase in Energy Usage as a Result of the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . 8 41 Exhibit 8.14 Sample Calculation for Determining Increase in Energy Usage: Chloramines . . . . . . . . . . 8 42 Exhibit 9.1 Summary of Estimated National Benefits of the Stage 2 DBPR . . . . . . . . . . . . . . . . . . . . . . 9 2 Exhibit 9.2 Summary of Nominal Benefit and Cost Estimates by Year Incurred, Preferred Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3 Exhibit 9.3 Estimated Annualized National Costs and Benefits ($ Millions) . . . . . . . . . . . . . . . . . . . . . . 9 4 Exhibit 9.4 Effects of Uncertainties on National Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5 Exhibit 9.5 IDSE Sensitivity Cost Range Comparison ($ Millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6 Exhibit 9.6 IDSE Sensitivity Benefit Range Comparison ($ Millions) . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6 Exhibit 9.7 Estimated Breakeven Points ( Number of Bladder Cancer Cases Avoided) . . . . . . . . . . . . . . 9 7 Exhibit 9.8 Comparison of DBP Reduction ( of Annual Plant Mean TTHM Data) . . . . . . . . . . . . . . . . . 9 9 Exhibit 9.9 Comparison of Annualized Costs for Regulatory Alternatives . . . . . . . . . . . . . . . . . . . . . . . 9 9 Exhibit 9.10 Comparison of Number and Annualized Value of Estimated Bladder Cancer Cases Avoided for Regulatory Alternatives ( Millions, 2000$) . . . . . . . . . . . . . . . . . . . 9 10 Economic Analysis for the Stage 2 DBPR Proposal July 2003 xii Exhibit 9.11 Comparison of Annualized Costs and Benefits for the Stage 2 Regulatory Alternatives ( 3 % Discount Rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12 Exhibit 9.12 Comparison of Estimated Cost Per Case Avoided for the Regulatory Alternatives ($ Millions, 2000$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 14 Economic Analysis for the Stage 2 DBPR Proposal July 2003 xii Acronyms and Notations AAM Annual Average of the Maximum AIPC All Indian Pueblo Council AMWA Association of Metropolitan Water Agencies ARBRP Arsenic Rule Benefits Review Panel ASDWA Association of State Drinking Water Administrators AD Advanced Disinfectants AO Advanced Oxidants AUX1 Auxiliary Database 1 AUX8 Auxiliary Database 8 AVG 1 Average sample point number 1 AVG 2 Average sample point number 2 AWWA American Water Works Association BAT Best Available Technology BCAA Bromochloroacetic Acid BCAN Bromochloroacetonitrile BDCAA Bromodichloroacetic Acid BDCM Bromodichloromethane BLS Bureau of Labor Statistics CCR Consumer Confidence Report Rule ( 1998) CDC Centers for Disease Control and Prevention CDHS California Department of Health Services CI Confidence Interval CKA Chernoff Kavlock Assay CL2 Chlorine CLM Chloramines CLO2 Chlorine Dioxide COI Cost of Illness CPI Consumer Price Index CWS Community Water System CWSS Community Water Systems Survey DBAA Dibromoacetic Acid DBAN Dibromoacetonitrile DBCM Dibromochloromethane DBPR Disinfectants and Disinfection Byproducts Rule DBP Disinfection Byproduct DCAA Dichloroacetic Acid DCAN Dichloroacetonitrile DNA Deoxyribonucleic Acid DS Average Distribution System Average Sample Point DSE Distribution System Equivalent Sample Point DS Maximum Distribution System Maximum Sample Point DWSRF Drinking Water State Revolving Fund EA Economic Analysis EBCT Empty Bed Contact Time EC Enhanced Coagulation Economic Analysis for the Stage 2 DBPR Proposal July 2003 xiii ECI Employment Cost Index Information ED 10 Effective Dose for 10% response EPA Environmental Protection Agency FACA Federal Advisory Committees Act FBRR Filter Backwash Recycling Rule ( 2001) FLR Full Liter Resorption FR Federal Register FRFA Final Regulatory Flexibility Analysis FTE Full Time Equivalent GAC Granular Activated Carbon GAC10 Granular Activated Carbon   10 Minute Contact Time GAC20 Granular Activated Carbon   20 Minute Contact Time GDP Gross Domestic Product GIS Geographical Information System GW Ground Water GWSS Ground Water Supply Survey GWUDI Ground Water Under the Direct Influence of Surface Water HAA5 Haloacetic Acids [ total of five] HAA6 Haloacetic Acids [ total of six] HAA9 Haloacetic Acids [ total of nine] HAN Haloacetonitrile ICMA International City/ County Management Association ICR Information Collection Rule ( 1996) ILSI International Life Sciences Institute IDSE Initial Distribution System Evaluation IDSE SMP Initial Distribution System Evaluation Standard Monitoring Program IESWTR Interim Enhanced Surface Water Treatment Rule ( 1998) IPCS International Programme on Chemical Safety IRFA Initial Regulatory Flexibility Analysis IRIS Integrated Risk Information System LED 10 Lower Bound on the Effective Dose for 10% response LH Luteinizing Hormone LOAEL Lowest Observed Adverse Effect Level LRAA Locational Running Annual Average LT1ESWTR Long Term 1 Enhanced Surface Water Treatment Rule ( 2002) LT2ESWTR Long Term 2 Enhanced Surface Water Treatment Rule ( under development) MBAA Monobromoacetic Acid MCAA Monochloroacetic Acid MCAN Monochloroacetonitrile MCL Maximum Contaminant Level MCLG Maximum Contaminant Level Goal M DBP Microbial Disinfectants/ Disinfection Byproducts [ Advisory Committee] MF Microfiltration MGD Million Gallons per Day : g/ L Micrograms per Liter mg/ L Milligrams per Liter MHI Median Household Income mJ/ cm2 Millijoules per centimeter square Economic Analysis for the Stage 2 DBPR Proposal July 2003 xiv MLE Maximum Likelihood Estimation MRDL Maximum Residual Disinfectant Level MRDLG Maximum Residual Disinfectant Level Goal mWh Megawatt Hours MX 3 Chloro 4( dichloromethyl) 5 hydroxy 2( 5H) furanone NCSL National Conference of State Legislatures NCWS Noncommunity Water System NDMA N nitrosodimethylamine NDWAC National Drinking Water Advisory Council NF Nanofiltration ng Nanograms NGA National Governors' Association NHEERL National Health and Environmental Effects Research Laboratory ( EPA) NLC National League of Cities NOAEL No Observed Adverse Effect Level NODA Notice of Data Availability NPDWR National Primary Drinking Water Regulations NRWA National Rural Water Association NTNCWS Nontransient Noncommunity Water System NTU Nephelometric Turbidity Unit O 3 Ozone OR Odds Ratio OMB Office of Management and Budget O& M Operations and Maintenance PAR Population Attributable Risk POE Point of Entry POU Point of Use ppb Parts per Billion ppm Parts per Million PUC Public Utilities Commission PSC Public Services Commission PV Present Value PWS Public Water System PWSID Public Water System Identification RAA Running Annual Average RFA Regulatory Flexibility Act RfD Reference Dose RIA Regulatory Impact Analysis RR Relative Risk RSI Risk Sciences Institute SAB Science Advisory Board SBA Small Business Administration SBAR Small Business Advocacy Review SBREFA Small Business Regulatory Enforcement Fairness Act SCADA Supervisory Control and Data Acquisition SD Sprague Dawley SDS Simulated Distribution System SDWA Safe Drinking Water Act ( 1974) Economic Analysis for the Stage 2 DBPR Proposal July 2003 xv SDWIS Safe Drinking Water Information System SER Small Entity Representatives SH Single Highest SIC Standard Industrial Codes SMP Standard Monitoring Program SSS System Specific Study SW Surface Water SWAT Surface Water Analytical Tool Stage 1 DBPR Stage 1 Disinfectants and Disinfection Byproducts Rule ( 1998) Stage 2 DBPR Stage 2 Disinfectants and Disinfection Byproducts Rule ( under development) SWTR Surface Water Treatment Rule ( 1989) TBAA Tribromoacetic Acid TCAA Trichloroacetic Acid TCAN Trichloroacetonitrile TCR Total Coliform Rule ( 1989) THM Trihalomethane TMF Technical, Managerial, and Financial TNCWS Transient Noncommunity Water System TOC Total Organic Carbon TOX Total Organic Halides TTHM Total Trihalomethanes TWG Technical Workgroup T& C Technology and Cost UF Ultrafiltration UMRA Unfunded Mandates Reform Act USC United States Code USDA United States Department of Agriculture USEPA United States Environmental Protection Agency UV Ultraviolet [ Light Disinfection] µ g/ L Micrograms per Liter VSL Value of a Statistical Life WEC Whole embryo culture WHO World Health Organization w( t) cessation lag weighting factor WTP Willingness to Pay Economic Analysis for the Stage 2 DBPR Proposal xvi July 2003 Health Risk Reduction and Cost Analysis ( HRRCA)

Under the Safe Drinking Water Act ( SDWA) Amendments of 1996, when proposing a national primary drinking water regulation that includes an maximum contaminant level ( MCL), the Environmental Protection Agency ( EPA) must conduct a health risk reduction and cost analysis ( HRRCA). A HRRCA contains seven requirements, all of which are addressed in this Economic Analysis ( EA) for the Stage 2 Disinfectants and Disinfection Byproducts Rule ( DBPR). The table below shows where the HRRCA requirements are discussed in this document.

HRRCA Crosswalk to the Economic Analysis for the Stage 2 DBPR HRRCA Requirement Addressed in Economic Analysis Quantifiable and nonquantifiable health risk reduction benefits Chapter 5 ( Sections 5.5 and 5.6; Exhibits 5.18 5.28) Chapter 9 ( Sections 9.1.1, 9.1.3, and 9.4.2; Exhibits 9.1 9.3, 9.10, and 9.12)

Quantifiable and nonquantifiable health risk reduction benefits from co occurring contaminants Chapter 5 ( Section 5.5.3)

Quantifiable and nonquantifiable costs Chapter 6 ( All sections and exhibits) Chapter 8 ( Sections 8.2, 8.3, and 8.6 8.8; Exhibits 8.1, 8.2, 8.4, and 8.9 8.12) Chapter 9 ( Sections 9.1.2 and 9.1.3, 9.4.2; Exhibits 9.2 9.3 and 9.9)

Incremental costs and benefits associated with MCL alternatives Chapter 5 ( Section 5.6.4; Exhibit 5.28) Chapter 6 ( Section 6.9; Exhibit 6.24) Chapter 9 ( Section 9.4; Exhibits 9.9 9.11)

Effects of the contaminants on the general population and sensitive subpopulations Chapter 5 ( Sections 5.2 and 5.3.3; Exhibits 5.2 5.8) Chapter 8 ( Sections 8.8, 8.9, and 8.10)

Increased health risk that may occur as a result of compliance Chapter 5 ( Section 5.5.5)

Other relevant factors ( quality and uncertainty of information) Chapter 3 ( Section 3.8; Exhibit 3.26) Chapter 5 ( Section 5.7; Exhibit 5.29) Chapter 6 ( Section 6.8; Exhibit 6.23) Chapter 7 ( All sections and exhibits) Chapter 9 ( Section 9.2; Exhibits 9.4 9.6) 1The key outcomes of this regulatory negotiation effort were recommendations to proceed with rules addressing DBPs and microbial pathogens in two stages and to collect relevant information from public water supplies for use in the development of these rules and the analysis of their impacts. This two stage approach was subsequently incorporated into the 1996 Safe Drinking Water Act ( SDWA) Amendments. The first stage of the M DBP rulemaking process culminated with the joint promulgation of the Stage 1 DBPR and the Interim Enhanced Surface Water Treatment Rule ( IESWTR) by EPA in December 1998.

Economic Analysis for the Stage 2 DBPR Proposal ES 1 July 2003 Executive Summary This document presents the Economic Analysis ( EA), prepared by the Environmental Protection Agency ( EPA), of the benefits and costs of the proposed Stage 2 Disinfectants and Disinfection Byproducts Rule ( DBPR). Executive Order 12866 requires federal agencies to conduct an analysis of the benefits and costs of proposed and final rules that cost over $ 100 million annually. Although EPA's analysis of the Stage 2 DBPR has determined that its annual costs are less than this threshold, EPA has chosen to publish a complete EA for this rule.

ES. 1 Need for the Rule Over 51,600 public water systems ( PWSs), serving nearly 260 million people in the United States, chemically disinfect their water to kill or inactivate microbial contaminants ( USEPA 2001h). Chemical disinfection, however, may pose health risks of its own. Disinfection byproducts ( DBPs) result from reactions between chemical disinfectants and naturally occurring compounds in source waters. Research has shown that some of the DBPs, including total trihalomethanes ( TTHM) and haloacetic acids ( HAA5), which are the subject of this rule, are associated with increased risk of bladder and other cancers. While there are uncertainties in the quantitative relationship between the incidence of these cancers and the occurrence of DBPs in drinking water, EPA believes that the weight of evidence supports concern for these potential hazards and that additional reductions in DBP levels in drinking water will reduce the incidence of bladder cancer and, possibly, other cancers.

In addition, results from toxicology and, particularly, epidemiology studies published in the last several years suggest an increased risk for pregnant women and their fetuses who are exposed to DBPs in drinking water. The studies have shown that early term miscarriage, stillbirth, low birth weight, and some birth defects may be associated with drinking water containing DBPs. ( These studies are discussed in detail in Chapter 5.) There are still uncertainties regarding which DBPs are of greatest concern, what levels of DBPs pose a risk, and at what period of development fetuses may be at the greatest risk. While the levels of DBPs associated with specific potential adverse reproductive and developmental effects are not known, EPA believes the evidence supports concern for these potential hazards and warrants regulatory action.

In a separate but concurrent action, EPA is proposing the Long Term 2 Enhanced Surface Water Treatment Rule ( LT2ESWTR) to improve control of microbial contaminants, particularly Cryptosporidium, in surface water and to ensure that microbial protection is not compromised by efforts to reduce exposure to DBPs. The Stage 2 DBPR and LT2ESWTR represent the final stage of a twostage strategy that was developed in a regulatory negotiation effort in 1992 and 19931 and reflect recommendations presented by the Stage 2 Microbial and Disinfection Byproducts ( M DBP) Federal Advisory Committee Agreement in Principle, signed in September 2000 ( USEPA 2000n). 2 For the purposes of this EA, " surface water" is equivalent to the definition of subpart H systems used in the Stage 2 DBPR rule language and includes systems that provide ground water under the direct influence of surface water ( GWUDI).

Economic Analysis for the Stage 2 DBPR Proposal ES 2 July 2003 ES. 2 Consideration of Regulatory Alternatives The M DBP Advisory Committee met from March 1999 to December 2000 to evaluate whether and to what degree EPA should promulgate revised or additional DBP standards to protect public health. The committee focused on developing a regulatory framework that would reduce peak DBP concentrations in the distribution systems without exorbitant costs, and thus, evaluated regulatory options that either lowered DBP maximum contaminant levels ( MCLs), revised the method for compliance determination, or both. After extensive deliberations, the committee recommended revising the compliance monitoring scheme from that established in the Stage 1 DBPR, while maintaining the same numerical DBP MCL values to determine compliance. The Stage 1 DBPR uses the running annual average ( RAA) of distribution system samples for compliance determination, consistent with the 1979 TTHM standards. While this approach reduces average exposure to DBPs, samples from some locations in the distribution system could have considerably higher DBPs than the system wide average used for compliance determination. The Stage 2 DBPR focuses on reducing the occurrence of peak DBP levels whenever they occur in the system, by requiring compliance to be determined using a locational running annual average ( LRAA) calculation. The M DBP Agreement in Principle ( available on the web at http:// www. epa. gov/ safewater/ mdbp/ st2fr29. html) summarizes the recommendations from the advisory committee ( USEPA 2000p).

This EA considers four regulatory alternatives derived from a larger number discussed by the MDBP Advisory Committee, including the Preferred Alternative that EPA is proposing in the Stage 2 DBPR:

° Preferred Alternative: MCLs of 80 micrograms per liter ( : g/ L) for TTHM and 60 : g/ L for HAA5, measured as an LRAA. MCL of 10 : g/ L for bromate.

° Alternative 1: MCLs of 80 : g/ L for TTHM and 60 : g/ L for HAA5, measured as an LRAA. MCL of 5 : g/ L for bromate.

° Alternative 2: MCLs of 80 : g/ L for TTHM and 60 : g/ L for HAA5, measured as a single highest ( SH) value. MCL of 10 : g/ L for bromate.

° Alternative 3: MCLs of 40 : g/ L for TTHM and 30 : g/ L for HAA5, measured as an RAA. MCL of 10 : g/ L for bromate.

For comparison with the Preferred Alternative, EPA carried Alternatives 1, 2, and 3 through the full analytical process in this document.

ES. 3 Summary of the Proposed Stage 2 DBPR The requirements of the Stage 2 DBPR apply to all community water systems ( CWSs) and nontransient noncommunity water systems ( NTNCWSs)   both ground and surface water systems2   that add a disinfectant other than ultraviolet light ( UV), or that deliver water that has been treated with a disinfectant other than UV. Each Stage 2 DBPR rule activity for the Preferred Regulatory Alternative is described below and illustrated in the flow chart in Exhibit ES. 1. 3 EPA is considering an alternative schedule for IDSE ( starting 2 years later for all systems) and an alternative to the IDSE whereby it is replaced with increased monitoring during the first year to reduce the burden on systems and EPA regions and increase the technical involvement of the States. A more detailed description of these alternatives and estimated costs implications are in Appendix I.

4 A " consecutive system" is a PWS that buys or otherwise receives some or all of its finished water from one or more wholesale systems, for at least 60 days per year. For the purposes of this EA, " 100 percent purchasing systems" are consecutive systems that buy ( or otherwise receive) all of their finished water from one or more systems year round. " Producing systems" are those that do not purchase 100 percent of their water ( i. e., they produce some or all of their own finished water). Economic Analysis for the Stage 2 DBPR Proposal ES 3 July 2003 Initial Distribution System Evaluations The Stage 2 DBPR is designed to reduce DBP occurrence peaks in the distribution system by changing compliance monitoring requirements. Compliance monitoring will be preceded by an initial distribution system evaluation ( IDSE) to identify compliance monitoring locations that represent high TTHM and HAA5 levels. The IDSE consists of either a standard monitoring program ( SMP) or a system specific study ( SSS). NTNCWSs serving fewer than 10,000 people are not required to perform an IDSE, and other systems may receive waivers from the IDSE requirement.

Compliance with Stage 2 DBPR MCLs The Stage 2 DBPR changes the way sampling results are averaged to determine compliance. The determination for the Stage 2 DBPR is based on an LRAA ( i. e., compliance must be met at each monitoring location) instead of the system wide RAA used under the Stage 1 DBPR.

The Stage 2 DBPR will be implemented in two phases, Stage 2A and Stage 2B. Under Stage 2A, all systems must comply with TTHM/ HAA5 MCLs of 120/ 100 : g/ L measured as LRAAs at each Stage 1 DBPR monitoring site, while continuing to comply with the Stage 1 DBPR MCLs of 80/ 60 : g/ L measured as RAAs. Under Stage 2B, systems must comply with TTHM/ HAA5 MCLs of 80/ 60 : g/ L at locations identified under the IDSE. Exhibit ES. 2 shows the compliance schedule for Stage 2A and 2B for different types of systems3.

Routine Monitoring Requirements Systems will continue to monitor at their Stage 1 DBPR compliance monitoring locations for the Stage 2A DBPR. Stage 2B compliance monitoring requirements will be similar to the Stage 1 DBPR requirements for most, but not all, systems. Some small systems will have to add a monitoring location if their highest TTHM and highest HAA5 sites do not occur at the same location. For consecutive systems that buy all of their water4, monitoring requirements will be based on population served rather than on the number of plants; therefore, the number of sampling sites for routine monitoring could either increase or decrease from the Stage 1 to the Stage 2 DBPR.

Significant Excursion Evaluations Because Stage 2 DBPR MCL compliance is based on an annual average of DBP measurements, a system could from time to time have DBP levels significantly higher than the MCL ( referred to as a significant excursion) while still being in compliance. This is because the high concentration could be averaged with lower concentrations at a given location. If a significant excursion occurs, a system must conduct a significant excursion evaluation and discuss the evaluation with the State no later than the next sanitary survey. Economic Analysis for the Stage 2 DBPR Proposal ES 4 July 2003 Systems Subject to the Stage 2 DBPR ( All surface water and ground water CWSs and NTNCWSs that apply a chemical disinfectant to their water, or deliver such water.)

Rule Implementation ( All systems subject to the rule must perform rule implementation activities such as reading the rule, training, etc.)

Initial Distribution System Evaluation ( IDSE) ( All systems subject to the rule must perform an IDSE, or meet the criteria not to perform an IDSE.)

Systems not performing an IDSE Systems perfomring an IDSE Systems qualifying for the 40/ 30 certification Systems conducting a Standard Monitoring Program Systems may or may not have to select new Stage 2B DBPR monitoring sites and submit report Systems submit an IDSE report identifying Stage 2B site selection Systems conducting a System Specific Study Systems receiving a very small system waiver NTNCWSs serving < 10,000 people Compliance with Stage 2 DBPR MCLs ( All systems subject to the rule must meet Stage 2 DBPR MCLs   applicable for Stage 2A MCLs at Stage 1 DBPR locations and Stage 2B MCLs at revised locations. Systems may or may not have to make treatment changes.)

Routine Monitoring Requirements ( Some systems subject to the Stage 2 DBPR may have additional routine monitoring requirements beyond those already required by the Stage 1 DBPR.)

Producing surface water systems serving fewer than 10,000 people and all producing ground water systems must add one sampling site if they determine that high TTHMs and HAA5s do not occur at the same location.

Significant Excursion Evaluations ( All systems subject to the rule must perform significant excursion evaluations if they exceed threshold DBP levels, and review results with the state no later than the next sanitary survey.) Producing surface water systems serving at least 10,000 people will not have to add a sampling site. All 100 percent purchasing systems may have additional routine monitoring sites, depending on their population served, source water type, and Stage 1 DBPR monitoring plan. Exhibit ES. 1 Summary of Stage 2 DBPR Requirements 5 Small systems that either buy from or sell to a large system must follow the large system schedule for the IDSE.

Economic Analysis for the Stage 2 DBPR Proposal ES 5 July 2003 Final Stage 2 DBPR Large and Medium Systems ( Serving > 10,000 People)

Small Systems ( Serving < 10,000 People) 5 Systems Not Conducting Crypto Monitoring Under the LT2ESWTR State Process Submit sites to state IDSE Comply with Stage 2A 2 Year Extension Begin Stage 2B 0.080/ 0.060 LRAA Compliance Primacy Review Stage 2 DBPR sample sites Comply with Stage 2A 2 Year Extension IDSE Submit sites to state Comply with Stage 2A 2 Year Extension Systems Conducting Crypto Monitoring Under the LT2ESWTR Review Stage 2 DBPR sample sites Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Begin Stage 2B 0.080/ 0.060 LRAA Compliance Exhibit ES. 2 Implementation Timeline for the Stage 2 DBPR5 6 The baseline number of plants   as opposed to systems   that may have to add treatment to meet rule requirements is different and discussed in section ES. 5.1.

7 SDWIS Federal Version ( SDWIS/ FED) is a database created by EPA containing data submitted by States and Regions regarding compliance with SDWA. The system and population baselines in this EA reflect the SDWIS 4th quarter frozen data with adjustments to account for reporting discrepancies in Massachusetts and Montana.

Economic Analysis for the Stage 2 DBPR Proposal ES 6 July 2003 ES. 4 Systems Subject to the Stage 2 DBPR Exhibit ES. 3 shows the baseline number of systems subject to the rule6 and the estimated number that will perform various rule activities ( implementation, IDSE monitoring, additional routine monitoring, and significant excursion evaluations). This baseline is derived from EPA's Safe Drinking Water Information System ( SDWIS) inventory, 4th quarter 2000 data. 7 The systems are subdivided by type ( CWS or NTNCWS), source water type ( either disinfecting ground water only or surface water and mixed source) and size ( small and large, based on population served). The number of ground water systems in column A represents the subset of all ground water systems that disinfect.

As shown in column B, EPA estimates that all disinfecting CWSs and NTNCWSs will have to perform at least minimal implementation activities ( reading and understanding the rule, training, and others). The number of systems performing IDSE monitoring ( shown in column D), however, is only a fraction of all systems because some will choose to perform studies or will qualify for waivers from IDSE requirements. Results in column F indicate that less than 20 percent of systems will need to conduct additional routine monitoring for the Stage 2 DBPR beyond the Stage 1 DBPR requirements. This small percentage reflects the fact that sampling requirements for many systems ( particularly large, nonpurchased systems) will not change from Stage 1 DBPR requirements under the Stage 2 DBPR. Systems with increased requirements include small systems that have to add a sample site because their high TTHM and high HAA5 concentrations occur at different locations. For some consecutive systems, monitoring requirements will be based on population served rather than on the number of plants; therefore, the number of sampling sites for routine monitoring could either increase or decrease from the Stage 1 to Stage 2 DBPR.

Because Stage 2 DBPR compliance is based on an annual average of samples collected at each site, EPA expects that some number of Stage 2 compliant systems will observe DBP concentrations high enough to trigger the requirement for a significant excursion evaluation. Column H shows the estimated number of systems that may require significant excursion evaluations. Economic Analysis for the Stage 2 DBPR Proposal ES 7 July 2003 A B C= B/ A* 100 D E= D/ A* 100 F G= F/ A* 100 H I= H/ A* 100 £ 10,000 9,111 9,111 100% 5,954 65% 2,700 30% 120 1% > 10,000 2,292 2,292 100% 1,932 84% 0 0% 218 10% National Totals 11,403 11,403 100% 7,886 69% 2,700 24% 338 3%

£ 10,000 30,683 30,683 100% 1,955 6% 4,772 16% 0 0% > 10,000 1,423 1,423 100% 258 18% 569 40% 0 0% National Totals 32,105 32,105 100% 2,213 7% 5,341 17% 0 0%

£ 10,000 810 810 100% 0 0% 6 1% 0 0% > 10,000 11 11 100% 10 91% 6 55% 0 0% National Totals 821 821 100% 10 1% 12 1% 0 0%

£ 10,000 7,298 7,298 100% 0 0% 8 0% 0 0% > 10,000 6 6 100% 1 17% 1 17% 0 0% National Totals 7,303 7,303 100% 1 0% 9 0% 0 0%

£ 10,000 47,901 47,901 100% 7,909 17% 7,486 16% 120 0% > 10,000 3,731 3,731 100% 2,201 59% 576 15% 218 6% GRAND TOTAL ALL SYSTEMS 51,632 51,632 100% 10,110 20% 8,062 16% 338 1%

Sources: ( A) Exhibit 3.3, column K. ( B), ( D), ( F), ( H) Exhibit 6.3. Surface Water and Mixed NTNCWSs Disinfecting Ground Water Only NTNCWSs Note: Detail may not add to totals due to independent rounding. Column D does not include the number of systems performing SSS's. Refer to Appendix H, Exhibits H. 4a and H. 4b for this estimate. ALL SYSTEMS Surface Water and Mixed CWSs Disinfecting Ground Water Only CWSs IDSE Monitoring Additional Routine Monitoring System Size ( Population Served) Stage 2 DBPR System Baseline Number and Percent of Systems Performing Various Rule Activities Implementation Significant Excursion Evaluations Exhibit ES. 3 Number of Systems Subject to Non Treatment Related Rule Activities 8 There is much discussion among economists of the proper social discount rate to use for policy analysis. Therefore, for Stage 2 DBPR cost analyses, calculations are made using two social discount rates thought to best represent current policy evaluation methodologies, 3 and 7 percent. Historically, the use of 3 percent is based on rates of return on relatively risk free investments, as described in the Guidelines for Preparing Economic Analyses ( USEPA 2000j). The rate of 7 percent is a recommendation of the Office of Management and Budget ( OMB) as an estimate of " before tax rate of return to incremental private investment" ( USEPA 1996b).

Economic Analysis for the Stage 2 DBPR Proposal ES 8 July 2003 ES. 5 National Benefits and Costs of the Stage 2 DBPR Preferred Regulatory Alternative EPA has determined from its analysis of the available animal toxicological studies and human epidemiological studies that the Stage 2 DBPR could provide benefits resulting from reduced incidence of adverse reproductive and developmental effects and reduced incidence of cancer, particularly bladder cancer.

The main category of benefits that EPA has quantified is the expected range of avoided new cases of bladder cancer each year, including both fatal and non fatal cases. In addition, EPA has estimated the monetized value of avoiding these fatal and non fatal bladder cancer cases. Exhibit ES. 4 summarizes the estimated total number of bladder cases avoided and the monetized benefits resulting from those cases avoided for the Stage 2 DBPR Preferred Regulatory Alternative. The cases and monetized benefits are based on reductions in average DBP concentrations that result from treatment technology changes.

Because of limitations in the available data, it is not possible to quantify all of the health benefits of the Stage 2 DBPR. In particular, the science is not strong enough to quantify risk of reproductive and developmental health effects resulting from DBP exposure. To help inform the assessment of the Stage 2 DBPR benefits, EPA has prepared an illustrative calculation for one specific reproductive effect's endpoint ( fetal loss). Results from this analysis show that 1,100 to 4,700 fetal losses could potentially be avoided annually as a result of the Stage 2 DBPR. Other unquantified health and non health benefits derived from rule implementation also could contribute to the overall value of benefits. Unquantified benefits are discussed in detail in Chapter 5 and are summarized in Exhibit 9.1.

EPA's national cost estimate includes costs incurred by CWSs and NTNCWSs for rule implementation, the IDSE, additional routine monitoring, significant excursion evaluations, and treatment changes ( treatment changes account for the majority of the national costs) as well as estimated State/ Primacy Agency costs. Exhibit ES. 4 summarizes the total national cost estimate ( both one time and annualized) for the Stage 2 DBPR Preferred Regulatory Alternative. Note that the exhibit presents two estimates for national costs and monetized benefits, depending upon the discount rate used for present value calculations and annualizing one time costs. 8 Exhibit ES. 5 compares the benefits and costs graphically.

Sections ES. 5.1 through ES. 5.3 summarize the methods used to estimate the number of plants making treatment changes to comply with the rule, and the benefits and costs resulting from these treatment changes. Chapters 3, 5, and 6 and the appendices provide a more complete discussion of all data and calculations used to derive the results in Exhibits ES. 4 and ES. 5. Economic Analysis for the Stage 2 DBPR Proposal ES 9 July 2003 Surface Water Disinfecting Ground Water £ 10,000 > 10,000 £ 10,000 > 10,000 0.9  7.7 18.1  157.8 0.7  5.8 1.2  10.9 20.9  182.2 Annualized Monetized Benefits of Bladder Cancer Cases Avoided Range shown reflects 2 and 17 percent estimates of PAR $ 4.8  $ 41.5 $ 97.9  $ 854.3 $ 3.6  $ 31.3 $ 6.8  $ 59.1 $ 113.0  $ 986.2 and WTP for Lymphoma as the basis for non fatal cases Range shown reflects 2 and 17 percent estimates of PAR $ 2.3  $ 20.2 $ 47.6  $ 415.2 $ 1.7  $ 15.2 $ 3.3  $ 28.7 $ 54.9  $ 479.3 and WTP for Chronic Bronchitis as the basis for non fatal cases Annualized Total Costs $ 8.9 $ 21.5 $ 13.3 $ 14.2 $ 1.1 $ 59.1 Expected value and 90 percent confidence bounds ( ) ($ 8.3  $ 9.6) ($ 19.6  $ 23.4) ($ 12.0  $ 14.6) ($ 13.3  $ 15.2) ($ 54.3  $ 63.9)

Annualized Monetized Benefits of Bladder Cancer Cases Avoided Range shown reflects 2 and 17 percent estimates of PAR $ 4.0  $ 35.1 $ 85.0  $ 741.6 $ 3.0  $ 26.5 $ 5.9  $ 51.3 $ 97.9  $ 854.4 and WTP for Lymphoma as the basis for non fatal cases Range shown reflects 2 and 17 percent estimates of PAR $ 2.0  $ 17.1 $ 41.3  $ 360.6 $ 1.5  $ 12.9 $ 2.9  $ 24.9 $ 47.6  $ 415.5 and WTP for Chronic Bronchitis as the basis for non fatal cases Annualized Total Costs $ 9.2 $ 25.2 $ 13.7 $ 14.9 $ 1.5 $ 64.6 Expected value and 90 percent confidence bounds ( ) ($ 8.5  $ 9.9) ($ 23.0  $ 27.4) ($ 12.3  $ 15.1) ($ 13.9  $ 16.0) ($ 59.2  $ 70.0)

Notes:

Sources: Totals for bladder cancer cases avoided and monetized benefits from Exhibit 5.27. Detail for source and size provided in Appendix F. Total initial capital costs provided in Exhibit 6.5; annualized total costs and state/ primacy agency costs derived from Exhibits 6.6a and 6.6b. Cases avoided and monetized benefits are derived using TTHM as an indicator for all DBPs. These benefits could be zero ( see PAR note below).

PAR = Population Attributable Risk. A range of " best estimates" of 2 to 17 percent derived from five epidemiological studies. EPA recognizes that the lower bound estimate may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer ( see section ES5.2 and Chapter 5 for a discussion of PAR values). Total State/ Primacy Agencies Estimated Number of Bladder Cancer Cases Avoided per Year Includes both fatal and non fatal cases. Range corresponds to low and high " best estimates" of PAR Type of Cost or Benefit Unquantified Benefits Causality has not been established between adverse developmental and reproductive health effects and exposure to chlorinated water. Thus, numbers and types of cases avoided, as well as the value of such cases, were not quantified in the primary benefits Qualitative assessment indicates that the value of other health benefits and non health benefits could be positive and significant.

Monetized benefits and costs represent present values in millions of 2000 dollars. Estimates are discounted to 2003. Costs are for CWSs and NTNCWSs and include treatment and nontreatment costs. 90 percent confidence bounds around cost estimates reflec Detail may not add due to independent rounding. Benefits and Costs Based on Annualization Discount Rate of 7 % Benefits and Costs Based on Annualization Discount Rate of 3 % Exhibit ES. 4 Summary of Estimated National Benefits and Costs of the Stage 2 DBPR Preferred Regulatory Alternative ($ Million) Economic Analysis for the Stage 2 DBPR Proposal ES 10 July 2003 Unquantified Benefits Estimated Annualized Value of Quantified National Benefits 0 800 900 400 500 600 Estimated Annualized National Costs 700 100 200 300 Exhibit ES. 5 Comparison of Annualized National Costs and Benefits ($ Millions)

Source: Exhibit 9.3 ES. 5.1 Plants Making Treatment Changes A key input to estimating the national benefits and costs is the number of plants making treatment changes to comply with the rule. Exhibit ES. 6 ( column A) shows the baseline number of plants subject to the Stage 2 DBPR. Like the system baseline in Exhibit ES. 3, the plant baseline is derived from the 4th quarter 2000 SDWIS data and includes only the subset of ground water plants that disinfect. The system baseline from SDWIS is converted to the plant baseline through three steps: ( 1) link purchased systems to their respective seller( s), ( 2) categorize systems by primary source water type, and ( 3) multiply the adjusted system inventory from steps 1 and 2 by the mean estimated number of plants per system. Refer to section 3.4 of this EA for a detailed description of the derivation of the Stage 2 DBPR plant baseline.

Columns B and C in Exhibit ES. 6 show the number and percent of plants in the baseline expected to add advanced technologies or chloramines to meet the requirements of the Stage 2 DBPR. Advanced technologies include alternative disinfectants such as ozone, UV, and chlorine dioxide, and DBP precursor removal technologies such as microfiltration or ultrafiltration.

The methods used by EPA to predict the number of plants changing treatment to meet the rule and the technologies used by these plants are summarized in Exhibit ES. 7. These methods are complex and are different for different source water types and system sizes. The primary tool used to predict changes in treatment and reductions in DBP levels was the Surface Water Analytical Tool ( SWAT). SWAT was developed by EPA using results from the 1996 Information Collection Rule ( ICR) for large surface water plants. The SWAT results were also used directly for the medium surface water systems; adjustments were made to the forecasts for small surface water systems to account for differences in water quality and operational constraints that exist in small systems.

For large ground water plants, ICR data were used to determine which plants would add treatment for the Stage 2 DBPR, and a Delphi poll process ( a group of drinking water experts who provided best professional judgment in a structured format) was used to identify the most likely technologies selected by these plants. Like the medium and small surface water systems, the technology forecasts for the medium and small ground water systems were derived from the large system forecasts, adjusting for differences in water quality, operational constraints, and other factors. Economic Analysis for the Stage 2 DBPR Proposal ES 11 July 2003 System Size ( Population Served) Stage 2 DBPR Plant Baseline A B C= B/ A* 100 £ 10,000 4,089 149 3.7% > 10,000 2,471 143 5.8% National Totals 6,560 293 4.5%

£ 10,000 42,496 1,151 2.7% > 10,000 6,999 145 2.1% National Totals 49,495 1,296 2.6%

£ 10,000 802 30 3.8% > 10,000 11 1 5.8% National Totals 813 31 3.8%

£ 10,000 7,298 204 2.8% > 10,000 6 0.1 2.1% National Totals 7,303 204 2.8% ALL PLANTS £ 10,000 54,685 1,535 2.81% > 10,000 9,486 289 3.05% GRAND TOTAL ALL PLANTS 64,171 1,824 2.84% Note: Detail may not add to totals due to independent rounding. Sources: ( A) Exhibit 3.4, column Q. Number and Percent of Plants Adding Treatment ( B) Number of plants adding treatment based on technology selection delta forecast for surface water and ground water systems in section 6.4. Primarily Surface Water CWSs Primarily Ground Water CWSs Primarily Suface Water NTNCWSs Primarily Ground Water NTNCWSs Exhibit ES. 6 Plants Making Treatment Changes Exhibit ES. 7 Methods Used to Predict Treatment Changes System Size ( Population Served) Source Water Category Surface Water Disinfecting Ground Water Large (> 100,000 people) SWAT Ground Water Delphi Poll Medium ( 10,000 to 100,000 people) Extrapolation from SWAT Extrapolation from large ground water system results Small ( # 10,000 people) Extrapolation from SWAT, through small surface water system expert review process Extrapolation from large ground water system results, through small ground water system expert review process 9 See Chapter 5 for a complete discussion.

Economic Analysis for the Stage 2 DBPR Proposal ES 12 July 2003 There are uncertainties associated with the estimates of plants making treatment changes shown in Exhibit ES. 6. One is the effect of the IDSE on predictions of non compliance. The number of plants adding chloramines or advanced technology could be understated because plants may find higher TTHM or HAA5 concentrations at new sites identified during the IDSE. The number of plants adding chloramines or advanced technology, however, may be overstated because of conservative assumptions used in the analysis. For example, compliance determination for plants is made assuming a 20 percent margin of safety under the MCLs. Systems complying by switching to chloramines may choose to meet the Stage 2 MCLs with a much smaller margin of safety since chloramines dampen the variability of DBP concentrations on distribution systems. Also, EPA believes that the estimated number of ground water and small surface water plants changing technology may be biased upward because their monitoring requirements and, thus, compliance calculation, are expected to be very similar from the Stage 1 to Stage 2 DBPR. Chapter 7 provides a more complete discussion of these uncertainties and includes a quantitative analysis to assess their effects. It is not known in which direction the net impact of these uncertainties influences the estimates in Exhibit ES. 6.

ES. 5.2 Derivation of Benefits The quantified benefits estimates for the Stage 2 DBPR are based on reductions in fatal and nonfatal bladder cancer cases. Only an illustrative example of reduction in one potential reproductive and developmental health endpoint ( fetal loss) is given because of the much greater uncertainties in quantifying this risk than for bladder cancer.

All benefit calculations were performed using the Stage 2 DBPR Benefits Model ( USEPA 2003i). EPA used similar approaches to estimate the number of bladder cancer cases avoided and the avoided incidence of fetal loss the illustrative calculation. The major steps in deriving and characterizing cases avoided are:

° Estimate the current cases of annual bladder cancer and fetal loss.

° Estimate how many of these cases are attributable to DBP exposure.

° Estimate the reduction in current cases corresponding to anticipated reductions in DBP occurrence and exposure due to the Stage 2 DBPR ( i. e., cases avoided).

For bladder cancer, EPA computed the total national annual monetized benefits of the Stage 2 DBPR by multiplying the estimated number of bladder cancer cases avoided by an estimated monetary value associated with the avoided cases of fatal and non fatal bladder cancer. EPA has not valued fetal losses at this time.

To quantify the benefits due to reduction in bladder cancer, EPA begins with an estimated number of new cases per year from all causes of 56,500 ( based on published 2002 American Cancer Society data, available on the web at http:// www. cancer. org/). The estimated percent of those cases attributable to DBPs is based on several epidemiological studies conducted in the 1980s and 1990s. 9 Results from five studies were used to estimate the population attributable risk ( PAR) of bladder cancer due to DBPs. PAR represents the fraction of occurrence of a particular disease that is attributable to some specified risk factor. Analysis of data from the five studies showed that best estimates of PAR Economic Analysis for the Stage 2 DBPR Proposal ES 13 July 2003 range from 2 to 17 percent. The total cases of bladder cancer from all causes multiplied by the range of best estimate PAR values results in approximately 1,100 to 9,600 new bladder cancer cases per year that can be attributed to DBPs in chlorinated drinking water. EPA recognizes that the causality has not yet been established between chlorinated water and bladder cancer and that the actual cases attributable to DBPs could be zero.

The baseline cancer incidence and the PAR estimates described above reflect conditions prior to the implementation of not only the Stage 2 DBPR but also the Stage 1 DBPR. To estimate the benefits of the Stage 2 DBPR, EPA first estimated the portion of the 56,500 annual cases expected to be avoided by DBP reductions resulting from the Stage 1 DBPR and then estimated the additional cases avoided due to the additional reductions in DBP levels predicted for the Stage 2 DBPR. EPA has assumed that reductions in bladder cancer cases attributable to DBP exposure are directly proportional to reductions in the national average DBP levels. SWAT was the primary tool used to predict these reductions in national average TTHM and HAA5 levels. The resulting reductions in new bladder cancer cases are calculated annually for a 25 year time period based on the rule implementation schedule, and include an adjustment to account for an anticipated transition time for individual risk to be reduced from pre Stage 2 levels to post Stage 2 levels ( referred to as the cessation lag). Also, EPA has estimated that 26 percent of bladder cancer cases are fatal, while 74 percent are non fatal ( USEPA, 1999a)

The final step in the benefit calculation is to monetize the estimated reduction in bladder cancer cases by applying economic values for avoided illness and deaths. The value of avoiding non fatal bladder cancer cases is based on people's willingness to pay ( WTP) for incremental reductions in the risk of contracting cancer. The reduced risk represented by willingness to pay accounts for the desire to avoid treatment costs, pain and discomfort, productivity losses, and any other adverse consequences related to contraction of a non fatal case of bladder cancer.

Because specific estimates of WTP for avoiding non fatal bladder cancer are not available, EPA estimated WTP values from two other non fatal illnesses: chronic bronchitis and curable lymphoma. Both are considered equally valid estimates of WTP for non fatal bladder cancer.

For fatal bladder cancer cases, the Value of a Statistical Life ( VSL) is used to capture the value of benefits. The VSL represents an estimate of the monetary value of reducing risks of premature death from cancer. The VSL, therefore, is not an estimate of the value of saving a particular individual's life. Rather, the value of a " statistical" life represents the sum of the values placed on small individual risk reductions across an exposed population. Other economic factors are taken into consideration when calculating benefits over time, such as income growth and social discount rates.

There are several areas of uncertainty with respect to quantified benefits for bladder cancer. Many are incorporated into the analyses, such as the uncertainty in PAR values reflected by the use of a wide range of " best estimates" of 2 to 17 percent derived from several credible epidemiological studies. Uncertainties in these best estimates of PAR suggest 95 percent confidence interval ranges truncated at 0 percent on the low end and up to 33 percent on the high end ( see Appendix E for details). There is also uncertainty in the valuation of the estimated bladder cancer cases avoided, including the use of two alternatives for valuing non fatal bladder cancer.

As noted previously, EPA expects that a large portion of the total benefits from this rule could come from reduction in developmental and reproductive health effects, although the science on these effects as a result of DBP exposure is not strong enough to fully quantify risk. EPA completed a preliminary quantification of the fetal loss risk and rule benefits in an illustrative calculation. Fetal loss was used in the analysis because, while some epidemiological data exist for other reproductive and 10 System size categories are based on population served and are as follows: < 100; 101 500; 501 1,000; 1,001 3,300; 3,301 10,000; 10,001 50,000; 50,001 100,000; 100,001 1 million; > 1 million. These categories are consistent with data in the Drinking Water Baseline Handbook ( USEPA 2001h).

Economic Analysis for the Stage 2 DBPR Proposal ES 14 July 2003 developmental effects potentially associated with DBP exposure, more data are available on this particular end point. Because approximately one million of the six million pregnancies each year in the United States end in a miscarriage or stillbirth ( Ventura et al. 2000a), even a small risk attributable to DBP exposure that can be avoided by reducing DBP levels may result in a significant number of avoided fetal losses.

EPA estimated the reduction in fetal losses in a similar manner to bladder cancer cases. A range of possible PAR values for relating annual fetal losses to DBP exposure was obtained from available epidemiological studies. Reductions in occurrence of peak DBPs due to the Stage 1 DBPR and the Stage 2 DBPR were estimated. Reductions in exposure to peak DBPs were assumed to be proportional to reductions in peak DBP occurrence.

The estimate of potential fetal losses avoided as a result of the Stage 2 DBPR ranges from 1,100 to 4,700. Like the analysis of bladder cancer, there is large uncertainty in fetal loss PAR values, reflected in the large range of values used in the analysis. There are other important uncertainties in this illustrative calculation, including the assumed proportional relationship between reduction in fetal losses and reduction in exposure to peak levels due to the Stage 2 DBPR.

ES. 5.3 Derivation of Costs To estimate the total national costs of the Stage 2 DBPR, EPA calculated the incremental costs to be incurred by PWSs and States from the Stage 1 DBPR to the Stage 2 DBPR. Cost analyses for PWSs include identifying treatment process improvements that systems may make, as well as estimating the costs to implement the rule, conduct IDSEs, perform additional routine monitoring, and evaluate significant DBP excursion events ( referred to as " non treatment" activities in this document). State cost analyses include estimates of the labor burdens that States would face, such as training employees on the requirements of the Stage 2 DBPR, responding to PWS reports, and record keeping. Cost calculations are performed using the Stage 2 DBPR Cost Model ( USEPA 2003j). The methodology for estimating treatment and non treatment related costs for systems is discussed in the next several paragraphs, followed by a discussion of uncertainties. ( A complete discussion of the cost analysis is provided in Chapter 6.)

All treatment costs are based on mean unit cost estimates for advanced technologies and chloramines. Technology unit cost estimates are in the form of " dollars per plant" for initial capital and yearly operations and maintenance ( O& M) activities. Derivation of unit costs for a wide range of plant sizes, represented by different design and average daily flow rates, are described in detail in the document, Technologies and Costs for Control of Microbial Contaminants and Disinfection Byproducts ( USEPA 2003o). EPA uses mean population per system for each of nine system size categories ( derived from SDWIS) combined with regression equations to estimate mean design and average daily flows as a function of population served, for ground and surface water plants. 10 Unit costs ( capital and O& M) for each of the nine system size categories can be calculated using these mean flow values. The unit costs are then combined with the predicted number of plants selecting each technology to produce national treatment cost estimates. 11 A population based monitoring approach ( i. e., the number of samples is based solely on system size and source water type) is used for 100 percent purchasing systems. A plant based approach ( i. e., the number of samples depends not only on system size and source water type, but also on the number of plants in a system) is used for producing systems. EPA is considering a population based approach for all systems for IDSE and routine monitoring requirements. Appendix I of this EA provides the rationale for using a population based approach for all systems and compares costs and burdens of the two approaches.

Economic Analysis for the Stage 2 DBPR Proposal ES 15 July 2003 Non treatment costs for implementation, the IDSE, additional routine monitoring, and significant excursion evaluations are based on estimates of labor hours for performing these activities and on additional laboratory costs. For all non treatment cost calculations, EPA used the Stage 2 DBPR system baseline shown in Exhibit ES. 3. For the IDSE and additional routine monitoring, costs are estimated separately for 100 percent purchasing systems ( those that buy or otherwise receive all of their finished water from another system) and producing systems that do not buy or otherwise receive all of their finished water ( i. e., they produce some or all of their own finished water) because the Stage 2 DBPR set forth different requirements for these two groups of systems. 11 EPA recognizes that systems vary with respect to many of the input parameters to the Stage 2 DBPR cost model ( e. g., plants per system, population served, flow per population, labor rates). In most cases, there is insufficient information to characterize fully the variability on a national scale. EPA believes that mean values for the various input parameters are adequate to generate EPA's best estimate of national costs for the rule.

EPA also recognizes that there is uncertainty in the national cost estimates in addition to those elements of uncertainty discussed in Section ES. 5.1 related to the number of plants implementing various treatment technologies. There is uncertainty in the national average unit capital and O& M costs for the various technologies expected to be implemented in response to the Stage 2 DBPR. This uncertainty has been incorporated into the cost model ( using Monte Carlo simulation procedures). The national costs of the Stage 2 DBPR summarized in Exhibit ES. 4 show both the expected values and the 90 percent confidence bounds on the national cost estimates obtained from the cost model.

ES. 6 Estimated Impacts on Household Costs EPA assumes that systems will, to the extent possible, pass cost increases on to their customers through increases in water rates. Exhibit ES. 8 presents estimated annual household cost increases for the Stage 2 DBPR Preferred Regulatory Alternative. The top half of the exhibit shows summary statistics for all households served by systems subject to the rule, including those that will not change or add treatment but will incur other minimal costs, such as for rule implementation or additional routine monitoring. The bottom half shows statistics just for those households served by systems actually changing treatment technologies to comply with the rule ( see Exhibit ES. 6 for estimates of the percent of plants adding treatment). Because treatment changes represent the majority of rule costs, this provides insight into how the rule will affect that segment of the population most impacted by the rule.

As shown in Exhibit ES. 8, the mean, median, and 90th percentile household cost increases for all systems are $ 0.51, $ 0.02, and $ 0.47, respectively. The mean, median, and 90th percentile household cost increases for those served by plants adding treatment are $ 8.52, $ 1.22, and $ 20.57, respectively. Households in small systems served by plants adding treatment will experience the highest household cost increases because they must spread technology costs over a smaller customer base. 12 Section 1415( e)( 1) of SDWA allows States to grant variances to small water systems in lieu of complying with an MCL if EPA determines that no nationally affordable compliance technologies exist for that system size/ water quality combination. These variances also may be granted only where EPA has identified a variance technology under Section 1412( b)( 15) for the contaminant, system size, and source water quality in question. EPA is conducting a rigorous review of the methodology for the small system affordability analysis.

13 The only technology that was selected for the Stage 2 DBPR Preferred Regulatory Alternative that is slightly above the affordability threshold for systems serving 25 to 500 people is GAC20 ( 90 day reactivation frequency) with advanced oxidants. EPA believes, however, that the number of plants in small systems predicted to add advanced technologies ( including GAC20) is overstated for two reasons: 1) Stage 2 DBPR requirements for small systems are similar to Stage 1 DBPR requirements and may not trigger compliance violations, as explained in the minimal impacts sensitivity analysis in Chapter 7, and 2) distribution system modifications are not considered in the compliance forecast. A more detailed discussion of this rationale is provided in Chapter 8.

Economic Analysis for the Stage 2 DBPR Proposal ES 16 July 2003 All Households Subject to the Stage 2 DBPR Total Number of Households Served ( Percent of Total) Mean Annual Household Cost Increase Median Annual Household Cost Increase 90th Percentile Annual Household Cost Increase 95th Percentile Annual Household Cost Increase Percentage of Annual Household Cost Increase < $ 12 Percentage of Annual Household Cost Increase < $ 120 All Systems 98,254,000 ( 100.0) $ 0.51 $ 0.02 $ 0.47 $ 0.79 99.24% 99.96% All Small Systems 14,522,000 ( 100.0) $ 1.66 $ 0.18 $ 0.90 $ 2.96 98.23% 99.74% SW £ 10,000 3,165,000 ( 3.2%) $ 3.72 $ 0.90 $ 2.96 $ 5.51 97.89% 99.09% SW > 10,000 58,876,000 ( 59.9%) $ 0.34 $ 0.003 $ 0.32 $ 0.33 99.35% 100.00% GW £ 10,000 11,357,000 ( 11.6%) $ 1.08 $ 0.11 $ 0.53 $ 1.37 98.37% 99.92% GW > 10,000 24,857,000 ( 25.3%) $ 0.23 $ 0.01 $ 0.47 $ 0.47 99.57% 100.00% Households Served by Plants Adding Treatment Number of Households Served ( Percent of Total) Mean Annual Household Cost Increase Median Annual Household Cost Increase 90th Percentile Annual Household Cost Increase 95th Percentile Annual Household Cost Increase Percentage of Household Cost Increase < $ 12 Percentage of Household Cost Increase < $ 120 All Systems 4,793,000 ( 4.9%) $ 8.52 $ 1.22 $ 20.57 $ 33.98 84.47% 99.18% All Small Systems 422,000 ( 2.9%) $ 43.78 $ 19.05 $ 117.68 $ 166.67 39.38% 91.12% SW £ 10,000 142,000 ( 4.5%) $ 60.64 $ 9.08 $ 166.67 $ 270.04 54.36% 79.78% SW > 10,000 3,868,000 ( 6.6%) $ 5.02 $ 1.02 $ 11.58 $ 23.56 90.16% 99.96% GW £ 10,000 279,000 ( 2.5%) $ 35.18 $ 19.22 $ 72.07 $ 117.68 33.71% 96.94% GW > 10,000 504,000 ( 2.0%) $ 5.90 $ 1.33 $ 26.33 $ 33.24 78.73% 100.00%

Source: Results represent the sum of treatment and non treatment costs. Household costs for treatment are derived from household unit costs in Exhibits 6.9c and 6.10c combined with technology selection deltas in Exhibits 6.14 and 6.16. Household costs for non treatment related rule activities are derived from mean costs for each system size category for implementation, IDSE, additional routine monitoring, and significant excursion evaluations ( as derived in Appendix H). See section 6.1.1 for additional information on the derivation of household costs. Notes: Detail may not to total add due to independent rounding. Number of households served by systems adding treatment will be higher than households served by plants adding treatment because an entire system will incur costs even if less than the total number of plants for that system add treatment ( this would result in lower household costs, however). EPA analyzed the affordability of the Stage 2 DBPR to determine if variance technologies are needed for small systems. 12 The analysis was performed by comparing median household cost increases to an " affordability threshold" ( i. e., the total annual household water bill that would be considered affordable). The results of EPA's analysis show that, with very few exceptions, the household costs for all technologies predicted to be selected by small systems are less than the available expenditure margin and that variance technologies are not required. 13 Exhibit ES. 8 Summary of Annual Household Cost Increases Economic Analysis for the Stage 2 DBPR Proposal ES 17 July 2003 WTP for lymphoma used to value nonfatal cases WTP for chronic bronchitis used to value non fatal cases A B C D E Preferred ( 80/ 60 LRAA, Br 10) 21  182 $ 113  $ 986 $ 55  $ 479 $ 59 ( $ 54  64 )

Alternative 1 ( 80/ 60 LRAA, Br 5) 22  189 $ 117  $ 1,024 $ 57  $ 498 $ 182 ( $ 165  200 )

Alternative 2 ( 80/ 60 SH, Br 10) 135  1,182 $ 733  $ 6,398 $ 356  $ 3,109 $ 410 ( $ 384  436 )

Alternative 3 ( 40/ 30 RAA, Br 10) 161  1,408 $ 873  $ 7,621 $ 424  $ 3,704 $ 594 ( $ 556  632 )

Notes:

A. See section ES. 2 for a full description of the regulatory alternatives considered in this EA.

E. 90 percent confidence bounds around cost estimate reflect uncertainty in unit treatment costs. Source: Exhibit 6.24 B. Based on TTHM as an indicator. EPA recognizes that the number of cases avoided could be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer. Source: Exhibit 5.28 C. and D. Source: Exhibit 5.28 Monetized benefits and costs represent values in millions of 2000 dollars. Estimates are discounted to 2003. Costs are for CWSs and NTNCWSs and include treatment and non treatment costs. Rule Alternative Estimated Number of Cases Avoided ( 2 and 17% PAR) Annualized Value of Estimated Bladder Cancer Cases Avoided Total Annualized Costs ( 90 % Confidence Bounds) ES. 7 Comparison of Costs and Benefits for Four Regulatory Alternatives Section ES. 2 described the four regulatory alternatives considered in this economic analysis. Costs and benefits for these four alternatives are summarized in Exhibit ES. 9a for a 3 percent discount rate and ES. 9b for a 7 percent discount rate. EPA recognizes that the quantified benefits based on reduced cases of bladder cancer, as shown in Exhibits ES. 9a and b, could be zero for all alternatives since causality has not yet been established between exposure to chlorinated water and bladder cancer. It is important to note, however, that the non quantified benefits ( e. g., reduction in developmental and reproductive risk) are not included in the primary benefits analysis, but could be substantial ( see the illustrative calculation of fetal losses avoided in Chapter 5).

As shown in Exhibits ES. 9a and b, estimated costs for Alternative 1 are more than twice those for the preferred alternative, though quantified benefits based on bladder cancer cases avoided are nearly the same. The M DBP Advisory Committee did not favor this alternative because they were concerned that lowering the bromate level to 5 µ g/ L could have adverse effects on microbial protection. ( see Chapter 4 for a full discussion).

Exhibit ES. 9a Comparison of Costs and Benefits for the Stage 2 DBPR Regulatory Alternatives ( 3% Discount Rate, $ Million) Economic Analysis for the Stage 2 DBPR Proposal ES 18 July 2003 WTP for Lymphoma used to value non fatal cases WTP for Chronic Bronchitis used to value non fatal cases A B C D E Preferred ( 80/ 60 LRAA, Br 10) 21  182 $ 98  $ 854 $ 48  $ 415 $ 65 ( $ 59  70 )

Alternative 1 ( 80/ 60 LRAA, Br 5) 22  189 $ 102  $ 887 $ 49  $ 431 $ 195 ( $ 176  214 )

Alternative 2 ( 80/ 60 SH, Br 10) 135  1,182 $ 635  $ 5,546 $ 309  $ 2,697 $ 443 ( $ 413  472 )

Alternative 3 ( 40/ 30 RAA, Br 10) 161  1,408 $ 757  $ 6,607 $ 368  $ 3,213 $ 644 ( $ 601  687 )

Notes:

A. See section ES. 2 for a full description of the regulatory alternatives considered in this EA.

E. 90 percent confidence bounds around cost estimate reflect uncertainty in unit treatment costs. Source: Exhibit 6.24 B. Based on TTHM as an indicator. EPA recognizes that the number of cases avoided could be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer. Source: Exhibit 5.28 C. and D. Source: Exhibit 5.28 Monetized benefits and costs represent values in millions of 2000 dollars. Estimates are discounted to 2003. Costs are for CWSs and NTNCWSs and include treatment and non treatment costs. Rule Alternative Estimated Number of Cases Avoided ( 2 and 17% PAR) Annualized Value of Estimated Bladder Cancer Cases Avoided Total Annualized Costs ( 90 % Confidence Bounds) Exhibit ES. 9b Comparison of Costs and Benefits for the Stage 2 DBPR Regulatory Alternatives ( 7% Discount Rate, $ Million)

The range of quantified benefits increases significantly with Alternatives 2 and 3. However, the associated costs also increase significantly   cost figures in Exhibit ES. 9 show estimated values between $ 384 and $ 682 million per year. Although the benefits for Alternatives 2 and 3 are potentially significant, the M DBP Advisory Committee did not favor this alternative because it believed that the health effects data are not certain enough to warrant such a potentially expensive regulation at this time.

ES. 8 Conclusions Pursuing its mandate to protect public health, EPA has proposed the Stage 2 DBPR to reduce the risks that byproducts of chemical disinfection pose to consumers of drinking water. Disinfection itself is important for protecting the public against waterborne microbes, and is practiced by over 51,600 PWSs in the United States. The chemicals commonly used, however, can react with substances in the source water to create harmful disinfection byproducts. These disinfection byproducts include trihalomethanes and haloacetic acids, which are associated with increased incidence of bladder cancer and, possibly, of other cancers. They may also cause adverse reproductive and developmental effects such as early term miscarriage, stillbirth, low birth weight, and some birth defects. There is uncertainty in the scientific literature regarding the extent to which DBPs contribute to the incidence of these adverse effects in the exposed population. Nevertheless, EPA believes that the evidence provided in the toxicological and epidemiological studies relating DBPs to cancer and to reproductive and developmental effects supports concern for these potential hazards and justifies the proposed regulatory action. 1 Chapter 6 shows that the costs of the Stage 2 DBPR are estimated to be less than $ 100 million per year.

Economic Analysis for the Stage 2 DBPR Proposal 1 1 July 2003 1. Introduction This document presents an analysis of the costs and benefits of the Stage 2 Disinfectants and Disinfection Byproducts Rule ( DBPR). The analysis is performed in compliance with Executive Order 12866, Regulatory Planning and Review ( USEPA 1993), which requires that the Environmental Protection Agency ( EPA) estimate the economic impact of rules costing over $ 100 million annually1 in an Economic Analysis ( EA) and to submit the analysis in conjunction with publishing the rule.

This chapter provides a summary of the Stage 2 DBPR in Section 1.1. Section 1.2 outlines the organization of this EA and section 1.3 provides information regarding supporting calculations and citations in this EA.

1.1 Summary of the Stage 2 DBPR The requirements of the Stage 2 DBPR apply to all community water systems ( CWSs) and nontransient noncommunity water systems ( NTNCWSs) that add a disinfectant other than ultraviolet light ( UV) or that deliver water that has been treated with a disinfectant other than UV. The Stage 2 DBPR builds on the 1979 Total Trihalomethane Rule and the 1998 Stage 1 DBPR by requiring reduced levels of disinfection byproducts ( DBPs) in distribution systems. Each rule activity for the Preferred Regulatory Alternative and the associated rule schedule are described below.

The Stage 2 DBPR is designed to reduce DBP occurrence peaks in the distribution system by changing compliance monitoring requirements. Compliance monitoring will be preceded by an initial distribution system evaluation ( IDSE) to identify distribution system locations that represent high total trihalomethane ( TTHM) and haloacetic acids ( HAA5) levels. Systems may perform an IDSE either by completing a system specific study ( SSS) or a standard monitoring program ( SMP). NTNCWSs serving fewer than 10,000 people are not required to conduct an IDSE. In addition, some systems may not need to perform the IDSE if ( 1) they demonstrate low historic DBP distribution system concentrations ( all samples less than or equal to 0.040 mg/ L and 0.030 mg/ L for TTHM and HAA5, respectively), or if ( 2) they serve fewer than 500 people and the State/ Primacy Agency determines that the Stage 1 DBPR monitoring site represents both their highest TTHM and HAA5 concentrations.

The IDSE SMP requirements depend on a system's source water type, population served, number of plants, residual disinfectant, and whether or not they purchase 100 percent of their finished water. For the purposes of this EA, systems are classified into one of two categories according to their buying and selling relationships with other systems: ( 1) 100 percent purchasing systems buy or otherwise receive all of their finished water from another system, ( 2) Producing systems do not buy or otherwise receive all of their water ( i. e., they produce some or all of their own finished water). Temporary or emergency sources are not considered when determining if a system is 100 percent purchasing. 2 EPA has identified several potential issues with the plant based approach ( e. g., the number of required sample sites may be either excessive or insufficient in representing DBP occurrence in cases where a small system has multiple plants, or where a very large systems has very few plants) and is considering a population based approach for the IDSE and Stage 2B compliance monitoring for all systems. EPA has requested comment on this alternative monitoring scheme in the preamble to this rule proposal. Appendix I summarizes the rationale for considering the population based approach for all systems and evaluates cost implications.

3 EPA is considering delaying implementation deadlines for the IDSE to reduce the burden on systems and EPA regions and increase technical involvement of the States. See Appendix I for further discussion.

Economic Analysis for the Stage 2 DBPR Proposal 1 2 July 2003 EPA has developed two monitoring schemes for the SMP for 100 percent purchasing and producing systems:

( 1) A population based approach ( with the number of samples based solely on system size and source water type) for 100 percent purchasing systems.

( 2) A plant based approach ( in which the numbers of samples are dependent on the number of plants in the system as well as on system size and source water type) for producing systems.

Appendix I discusses the rationale for using the population based approach in detail. 2 Exhibits 1.1 and 1.2 present the IDSE SMP requirements for 100 percent purchasing systems and producing systems, respectively.

The Stage 2 DBPR changes the way sampling results are averaged to determine compliance. The compliance determination for the Stage 2 DBPR is based on a locational running annual average ( LRAA) instead of the system wide running annual average ( RAA) used under the Stage 1 DBPR. LRAAs are essentially RAAs calculated separately for each sample location in the distribution system. With the Stage 2 LRAA requirement, the TTHM and HAA5 maximum contaminant levels ( MCLs) must be met at each monitoring location, while the Stage 1 RAA requires a system to average results over all monitoring locations. Exhibit 1.3 provides a comparison of Stage 1 and Stage 2 DBPR compliance calculations.

The Stage 2 DBPR, which is being promulgated simultaneously with the Long Term 2 Enhanced Surface Water Treatment Rule ( LT2ESWTR) to address complex risk trade offs between DBPs and microbial pathogens, will be implemented in two stages.

Stage 2A: Starting [ 3 years after rule promulgation], all systems must comply with TTHM/ HAA5 MCLs of 120/ 100 µ g/ L measured as LRAAs at each Stage 1 DBPR monitoring site and must continue to comply with the Stage 1 DBPR TTHM/ HAA5 MCLs of 80/ 60 µ g/ L, measured as RAAs.

Stage 2B: Starting [ 6 years after rule promulgation], systems serving at least 10,000 people must comply with TTHM/ HAA5 MCLs of 80/ 60 µ g/ L measured as LRAAs at the monitoring sites identified during an IDSE3. For small systems required to perform Cryptosporidium monitoring under the LT2ESWTR, compliance with the 80/ 60 µ g/ L MCLs, measured as LRAAs, will begin [ 8.5 years after rule promulgation]. For all other small systems, compliance with the 80/ 60 µ g/ L MCLs, measured as LRAAs, will begin [ 7.5 years after rule promulgation]. If a system requires capital improvements, the State/ Primacy Agency may grant up to an additional 24 months for compliance. Economic Analysis for the Stage 2 DBPR Proposal 1 3 July 2003 Exhibit 1.1 Summary of IDSE SMP Requirements for 100 Percent Purchasing Systems1, Population Based Approach System Size ( Population Served) Number of Distribution System Sites2 ( by location type) per System Total Number of Sites per System Monitoring Frequency for the 1 year IDSE period3 Near Entry Point Average Residence Time High TTHM High HAA5 Systems Using Surface Water in Whole or in Part4 < 500   1 1 2 Every 180 days 500  4,999   1 1 2 Every 90 days 5,000  9,999  1 2 1 4 Every 90 days 10,000  24,999 1 2 3 2 8 Every 60 days 25,000  49,999 2 3 4 3 12 Every 60 days 50,000  99,999 3 4 5 4 16 Every 60 days 100,000  499,999 4 6 8 6 24 Every 60 days 500,000  < 1.5 million 6 8 10 8 32 Every 60 days 1.5 million  < 5 million 8 10 12 10 40 Every 60 days > 5 million 10 12 14 12 48 Every 60 days Systems Using Only Ground Water < 500   1 1 2 Every 180 days 500  9,999   1 1 2 Every 90 days 10,000  99,999 1 1 2 2 6 Every 90 days 100,000  499,999 1 1 3 3 8 Every 90 days > 500,000 2 2 4 4 12 Every 90 days 1 100 percent purchasing systems buy or otherwise receive all of their finished water from one or more wholesale systems year round. 2 A dual sample set must be collected at each location. A dual sample set is one TTHM and one HAA5 sample that is taken at the same time and location. 3 Monitoring frequency is the approximate number of days between monitoring events.

4 For the purposes of this EA, " surface water" systems are equivalent to " subpart H" systems and include systems that provide ground water under the direct influence of surface water ( GWUDI). Economic Analysis for the Stage 2 DBPR Proposal 1 4 July 2003 Exhibit 1.2 Summary of IDSE SMP Requirements for Producing Systems1, Plant Based Approach System Size ( Population Served) Residual Disinfectant Number of Distribution System Sites2 ( by location type) per Plant Total Number of Sites per Plant Monitoring Frequency3 Near Entry Point Average Residence Time High TTHM High HAA5 Systems Using Surface Water in Whole or in Part4 < 500 Chlorine or Chloramines   1 1 2 Every 180 days 500  9,999 Chlorine or Chloramines   1 1 2 Every 90 days > 10,000 Chlorine 1 2 3 2 8 Every 60 days Chloramines 2 2 2 2 8 Systems Using Ground Water Only < 10,000 Chlorine or Chloramines   1 1 2 Every 180 days > 10,000 Chlorine or Chloramines   1 1 2 Every 90 days 1 Producing systems do not buy 100 percent of their water year round ( i. e., they produce some or all of their own finished water). 2 A dual sample set must be collected at each location. A dual sample set is one TTHM and one HAA5 sample that is taken at the same time and location. 3 Monitoring frequency is the approximate number of days between monitoring events. 4 For the purposes of this EA, " surface water" systems are equivalent to " subpart H" systems and include systems that provide GWUDI. Economic Analysis for the Stage 2 DBPR Proposal 1 5 July 2003 Stage 2B DBPR ( Note that some sampling locations may change as a result of the IDSE.) Stage 1 DBPR Distribution System Sampling Location First Quarter Average of All Samples Second Quarter Third Quarter Fourth Quarter Average of All Samples Average of All Samples Average of All Samples Running Annual Average ( RAA) of Quarterly Averages MUST BE AT OR BELOW COMPLIANCE LEVELS First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Locational Running Annual Average MUST BE AT OR BELOW COMPLIANCE LEVELS First Quarter Second Quarter Third Quarter Fourth Quarter Locational Running Annual Average MUST BE AT OR BELOW COMPLIANCE LEVELS First Quarter Second Quarter Third Quarter Fourth Quarter Locational Running Annual Average MUST BE AT OR BELOW COMPLIANCE LEVELS First Quarter Second Quarter Third Quarter Fourth Quarter Locational Running Annual Average MUST BE AT OR BELOW COMPLIANCE LEVELS Exhibit 1.3 Comparison of Stage 1 and Stage 2B DBPR Compliance Calculations Economic Analysis for the Stage 2 DBPR Proposal 1 6 July 2003 Systems will continue to monitor at their Stage 1 DBPR compliance monitoring locations for the Stage 2A DBPR; however, monitoring location requirements for Stage 2B may change. Exhibit 1.4 shows the Stage 2B compliance monitoring requirements for 100 percent purchasing surface and ground water systems. For these systems, monitoring requirements are no longer based on the number of plants, as was the case under the Stage 1 DBPR; therefore, the number of sampling sites may increase or decrease from Stage 1 to Stage 2 DBPR. Stage 2B compliance monitoring requirements will be similar to the Stage 1 DBPR requirements for most producing systems. Exhibit 1.5 shows a comparison of Stage 1 and Stage 2B compliance monitoring requirements for these systems.

Because Stage 2 DBPR MCL compliance is based on an annual average of DBP measurements, a system could from time to time experience DBP levels significantly higher than the MCL ( referred to as a significant excursion) while maintaining compliance because the high concentration levels could be averaged with lower concentrations. For this reason, the Stage 2 DBPR includes a provision for " significant excursions" as follows:

° Systems are required to conduct a significant excursion evaluation and review/ discuss the evaluation with the State/ Primacy Agency no later than the next sanitary survey. A significant excursion evaluation must include an examination of distribution system operational practices and how these practices may be modified to reduce TTHM and HAA5 levels.

Appendix H provides further detail on significant excursion requirements. Economic Analysis for the Stage 2 DBPR Proposal 1 7 July 2003 Exhibit 1.4 Summary of Stage 2B Monitoring Requirements for 100 Percent Purchasing Systems1, Population Based Approach System Size ( Population Served) Number of Distribution System Sites2 ( by location type) per System Total Number of Sites per System Monitoring Frequency3 Existing Stage 1 Compliance Sites Highest TTHM Highest HAA5 Systems Using Surface Water in Whole or in Part4 < 500  1 1 25 Every 365 days 500  4,999  1 1 25 Every 90 days 5,000  9,999  1 1 2 Every 90 days 10,000  24,999 1 2 1 4 Every 90 days 25,000  49,999 1 3 2 6 Every 90 days 50,000  99,999 2 4 2 8 Every 90 days 100,000  499,999 3 6 3 12 Every 90 days 500,000  1,499,999 4 8 4 16 Every 90 days 1.5 million  < 5 million 5 10 5 20 Every 90 days > 5 million 6 12 6 24 Every 90 days Systems Using Only Ground Water < 500  1 1 25 Every 365 days 500  9,999  1 1 2 Every 365 days 10,000  99,999 1 2 1 4 Every 90 days 100,000  499,999 1 3 2 6 Every 90 days > 500,000 2 4 2 8 Every 90 days 1 100 percent purchasing systems buy or otherwise receive all of their finished water from one or more wholesale systems year round. 2 A dual sample set must be collected at each location. A dual sample set is one TTHM and one HAA5 sample that is taken at the same time and location. 3 Monitoring frequency is the approximate number of days between monitoring events.