scope of the operational evaluation does not extend the schedule (90
days after notification of the analytical result) for submitting the
operational evaluation report.

2. Background and Analysis

    The Stage 2 DBPR proposal outlined three components of the
requirements for significant excursions (definition, system evaluation
and excursion report). In response to public comments, the term
``significant excursion'' has been replaced by the term ``operational
evaluation level'' in today's rule. The evaluation and report
components remain the same as those outlined in the proposed rule for
significant excursions. However, the scope of the evaluation and report
components of the operational evaluation has also been modified from
the proposed significant excursion evaluation components based on
public comments.
    In the Stage 2 DBPR proposal, States were to define criteria to
identify significant excursions rather than using criteria defined by
EPA. Concurrent with the Stage 2 DBPR proposal, EPA issued draft
guidance (USEPA 2003e) for systems and States that described how to
determine whether a significant excursion has occurred, using several
different options. The rule proposal specifically requested public
comment on the definition of a significant excursion, whether it should
be defined by the State or nationally, and the scope of the evaluation.
    After reviewing comments on the Stage 2 DBPR proposal, EPA
determined that DBP levels initiating an operational evaluation should
be defined in the regulation to ensure national consistency. Systems
were concerned with the evaluation requirements being initiated based
on criteria that might not be consistent nationally. Also, many States
believed the requirement for States to define criteria to initiate an
evaluation would be difficult for States to implement.
    Under today's rule, EPA is defining operational evaluation levels
with an algorithm based on Stage 2 DBPR compliance monitoring results.
These operational evaluation levels will act as an early warning for a
possible MCL violation in the following quarter. This early warning is
accomplished because the operational evaluation requirement is
initiated when the system assumes that the current quarter's result is
repeated and this will result in an MCL violation. This early
identification allows the system to act to prevent the violation.
    Today's rule also modifies the scope of an operational evaluation.
EPA has concluded that the source of DBP levels

that would initiate an operational evaluation can potentially be linked
to a number of factors that extend beyond distribution system
operations. Therefore, EPA believes that evaluations must include a
consideration of treatment plant and other system operations rather
than limiting the operational evaluation to only the distribution
system, as proposed. Because the source of the problem could be
associated with operations in any of these system components (or more
than one), an evaluation that provides systems with valuable
information to evaluate possible modifications to current operational
practices (e.g. water age management, source blending) or in planning
system modifications or improvements (e.g. disinfection practices, tank
modifications, distribution looping) will reduce DBP levels initiating
an operational evaluation. EPA also believes that State review of
operational evaluation reports is valuable for both States and systems
in their interactions, particularly when systems may be in discussions
with or requesting approvals from the State for system improvements.
Timely reviews of operational evaluation reports will be valuable for
States in reviewing other compliance submittals and will be
particularly valuable in reviewing and approving any proposed source,
treatment or distribution system modifications for a water system.
Under today's rule, systems must submit a written report of the
operational evaluation to the State no later than 90 days after being
notified of the DBP analytical result initiating an operational
evaluation. The written operational evaluation report must also be made
available to the public upon request.
3. Summary of Major Comments
    EPA received comments both in favor of and opposed to the proposed
evaluation requirements. While some commenters felt that the evaluation
requirements should not be a part of the Stage 2 DBPR until there was
more information regarding potential health effects correlated to
specific DBP levels, other commenters felt that the existing health
effects data were sufficient to warrant strengthening the proposed
requirements for an evaluation. Today's final rule requirements are
consistent with the Agreement in Principle recommendations.
    Some commenters noted that health effects research on DBPs is
insufficient to identify a level at which health effects occur and were
concerned that the proposed significant excursion requirements placed
an emphasis on DBP levels that might not be warranted rather than on
system operational issues and compliance with Stage 2 DBPR MCLs.
    Basis. The proposed requirements for significant excursion
evaluations were not based upon health effects, but rather were
intended to be an indicator of operational performance. To address
commenter's concerns and to emphasize what EPA believes should initiate
a comprehensive evaluation of system operations that may result in
elevated DBP levels and provide a proactive procedure to address
compliance with Stage 2 DBP LRAA MCLs , EPA has replaced the term
``significant excursion'' used in the Stage 2 DBPR proposal with the
term ``operational evaluation level'' in today's rule.
    Definition of the operational evaluation levels. The majority of
commenters stated that EPA should define the DBP levels initiating an
operational evaluation (``significant excursion'' in the proposal) in
the regulation to ensure national consistency rather than requiring
States to develop their own criteria (as was proposed). Commenters
suggested several definitions, including a single numerical limit and
calculations comparing previous quarterly DBP results to the current
quarter's result. Commenters that recommended a single numerical limit
felt that such an approach was justified by the available health
effects information, while other commenters felt available heath
effects information did not support a single numerical limit.
Commenters recommended that any definition be easy to understand and
implement.
    EPA agrees with commenter preference for national criteria to
initiate an operational evaluation. The DBP levels initiating an
operational evaluation in today's rule consider routine operational
variations in distribution systems, are simple for water systems to
calculate, and minimize the implementation burden on States. They also
provide an early warning to help identify possible future MCL
violations and allow the system to take proactive steps to remain in
compliance. EPA emphasizes, as it did in the proposal and elsewhere in
this notice, that health effects research is insufficient to identify a
level at which health effects occur, and thus today's methodology for
initiating operational evaluation is not based upon health effects, but
rather is intended as an indicator of operational performance.
    Scope of an evaluation. Some commenters felt that the scope of an
evaluation initiated by locational DBP levels should be limited to the
distribution systems, as in the proposal. Others felt that the
treatment processes should be included in the evaluation, noting that
these can be significant in the formation of DBPs.
    The Agency agrees with commenters that treatment processes can be a
significant factor in DBP levels initiating an operational evaluation
and that a comprehensive operational evaluation should address
treatment processes. In cases where the system can clearly identify the
cause of the DBP levels initiating an operational evaluation (based on
factors such as water quality data, plant performance data,
distribution system configuration, and previous evaluations) the State
may allow the system to limit the scope of the evaluation to the
identified cause. In other cases, it is appropriate to evaluate the
entire system, from source through treatment to distribution system
configuration and operational practices.
    Timing for completion and review of the evaluation report. While
some commenters agreed that the evaluation report should be reviewed as
part of the sanitary survey process (as proposed), many commenters felt
that the time between sanitary surveys (up to five years) minimized the
value of the evaluation report in identifying both the causes of DBP
levels initiating an operational evaluation and in possible changes to
prevent recurrence. Moreover, a number of commenters felt that the
evaluation report was important enough to warrant a separate submittal
and State review rather than have the evaluation report compete with
other priorities during a sanitary survey.
    The Agency agrees that completion and State review of evaluation
reports on a three or five year sanitary survey cycle, when the focus
of the evaluation is on what may happen in the next quarter, would
allow for an unreasonable period of time to pass between the event
initiating the operational evaluation and completion and State review
of the report. This would diminish the value of the evaluation report
for both systems and States, particularly when systems may be in
discussions with or requesting approval for treatment changes from
States, and as noted above, the focus of the report is on what may
occur in the next quarter. EPA believes that timely reviews of
evaluation reports by States is important, would be essential for
States in understanding system operations and reviewing other
compliance submittals, and would be extremely valuable in reviewing and
approving any proposed source, treatment or distribution system
modifications for a water system.

Having the evaluation information on an ongoing basis rather than a
delayed basis would also allow States to prioritize their resources in
scheduling and reviewing particular water system operations and
conditions as part of any on-site system review or oversight.
Therefore, today's rule requires that systems complete the operational
evaluation and submit the evaluation report to the State within 90 days
of the occurrence.

I. MCL, BAT, and Monitoring for Bromate

1. Today's Rule
    Today EPA is confirming that the MCL for bromate for systems using
ozone remains at 0.010 mg/L as an RAA for samples taken at the entrance
to the distribution system as established by the Stage 1 DBPR. Because
the MCL remains the same, EPA is not modifying the existing bromate
BAT. EPA is changing the criterion for a system using ozone to qualify
for reduced bromate monitoring from demonstrating low levels of bromide
to demonstrating low levels of bromate.
2. Background and Analysis
    a. Bromate MCL. Bromate is a principal byproduct from ozonation of
bromide-containing source waters. As described in more detail in the
Stage 2 DBPR proposal (USEPA 2003a), more stringent bromate MCL has the
potential to decrease current levels of microbial protection, impair
the ability of systems to control resistant pathogens like
Cryptosporidium, and increase levels of DBPs from other disinfectants
that may be used instead of ozone. EPA considered reducing the bromate
MCL from 0.010 mg/L to 0.005 mg/L as an annual average but concluded
that many systems using ozone to inactivate microbial pathogens would
have significant difficulty maintaining bromate levels at or below
0.005 mg/L. In addition, because of the high doses required, the
ability of systems to use ozone to meet Cryptosporidium treatment
requirements under the LT2ESWTR would be diminished if the bromate MCL
was decreased from 0.010 to 0.005 mg/L; higher doses will generally
lead to greater bromate formation. After evaluation under the risk-
balancing provisions of section 1412(b)(5) of the SDWA, EPA concluded
that the existing MCL was justified. EPA will review the bromate MCL as
part of the six-year review process and determine whether the MCL
should remain at 0.010 mg/L or be reduced to a lower level. As a part
of that review, EPA will consider the increased utilization of
alternative technologies, such as UV, and whether the risk/risk
concerns reflected in today's rule, as well as in the LT2ESWTR, remain
valid.
    b. Criterion for reduced bromate monitoring. Because more sensitive
bromate methods are now available, EPA is requiring a new criterion for
reduced bromate monitoring. In the Stage 1 DBPR, EPA required ozone
systems to demonstrate that source water bromide levels, as a running
annual average, did not exceed 0.05 mg/L. EPA elected to use bromide as
a surrogate for bromate in determining eligibility for reduced
monitoring because the available analytical method for bromate was not
sensitive enough to quantify levels well below the bromate MCL of 0.010
mg/L.
    EPA approved several new analytical methods for bromate that are
far more sensitive than the existing method as part of today's rule.
Since these methods can measure bromate to levels of 0.001 mg/L or
lower, EPA is replacing the criterion for reduced bromate monitoring
(source water bromide running annual average not to exceed 0.05 mg/L)
with a bromate running annual average not to exceed 0.0025 mg/L.
    In the past, EPA has often set the criterion for reduced monitoring
eligibility at 50% of the MCL, which would be 0.005 mg/L. However, the
MCL for bromate will remain at 0.010 mg/L, representing a risk level of
2x10/b 2x10-4, 10-4 and 10-6 (higher
than EPA's usual excess cancer risk range of 10-4 to
10-6) because of risk tradeoff considerations) (USEPA
2003a).
    EPA believes that the decision for reduced monitoring is separate
from these risk tradeoff considerations. Risk tradeoff considerations
influence the selection of the MCL, while reduced monitoring
requirements are designed to ensure that the MCL, once established, is
reliably and consistently achieved. Requiring a running annual average
of 0.0025 mg/L for the reduced monitoring criterion allows greater
confidence that the system is achieving the MCL and thus ensuring
public health protection.
3. Summary of Major Comments
    Commenters supported both the retention of the existing bromate MCL
and the modified reduced monitoring criterion.

J. Public Notice Requirements

1. Today's Rule
    Today's rule does not alter existing public notification language
for TTHM, HAA5 or TOC, which are listed under 40 CFR 141.201-141.210
(Subpart Q).
2. Background and Analysis
    EPA requested comment on including language in the proposed rule
concerning potential reproductive and developmental health effects. EPA
believes this is an important issue because of the large population
exposed (58 million women of child-bearing age; USEPA 2005a) and the
number of studies that, while not conclusive, point towards a potential
risk concern. While EPA is not including information about reproductive
and developmental health effects in public notices at this time, the
Agency plans to reconsider whether to include this information in the
future. As part of this effort, EPA intends to support research to
assess communication strategies on how to best provide this
information.
    The responsibilities for public notification and consumer
confidence reports rest with the individual system. Under the Public
Notice Rule (Part 141 subpart Q) and Consumer Confidence Report Rule
(Part 141 subpart O), the wholesale system is responsible for notifying
the consecutive system of analytical results and violations related to
monitoring conducted by the wholesale system. Consecutive systems are
required to conduct appropriate public notification after a violation
(whether in the wholesale system or the consecutive system). In their
consumer confidence report, consecutive systems must include results of
the testing conducted by the wholesale system unless the consecutive
system conducted equivalent testing (as required in today's rule) that
indicated the consecutive system was in compliance, in which case the
consecutive system reports its own compliance monitoring results.
3. Summary of Major Comments
    EPA requested and received many comments on the topic of including
public notification language regarding potential reproductive and
developmental effects. A number of comments called for including
reproductive and developmental health effects language to address the
potential health concerns that research has shown. Numerous comments
also opposed such language due to uncertainties in the underlying
science and the implications such language could have on public trust
of utilities.
    EPA agrees on the importance of addressing possible reproductive
and developmental health risks. However, given the uncertainties in the
science and our lack of knowledge of how to best communicate undefined
risks, a general statement about reproductive

and developmental health effects is premature at this time. The Agency
needs to understand how best to characterize and communicate these
risks and what to do to follow up any such communication. The public
deserves accurate, timely, relevant, and understandable communication.
The Agency will continue to follow up on this issue with additional
research, possibly including a project to work with stakeholders to
assess risk communication strategies.
    Some comments also suggested leaving the choice of language up to
the water server. EPA believes that this strategy would cause undue
confusion to both the PWS and the public.
    Commenters generally agreed that both wholesale and consecutive
systems that conduct monitoring be required to report their own
analytical results as part of their CCRs. One commenter requested
clarification of consecutive system public notification requirements
when there is a violation in the wholesale system but the consecutive
system data indicate that it meets DBP MCLs.
    Although EPA requires consecutive systems to conduct appropriate
public notification of violations (whether in the wholesale or
consecutive system), there may be cases where the violation may only
affect an isolated portion of the distribution system. Under the public
notification rule, the State may allow systems to limit distribution of
the notice to the area that is out of compliance if the system can
demonstrate that the violation occurred in a part of the distribution
system that is ``physically or hydraulically isolated from other parts
of the distribution system.'' This provision remains in place. As for a
consecutive system whose wholesale system is in violation, the
consecutive system is not required to conduct public notification if
DBP levels in the consecutive system are in compliance.

K. Variances and Exemptions

1. Today's Rule
    States may grant variances in accordance with sections 1415(a) and
1415(e) of the SDWA and EPA's regulations. States may grant exemptions
in accordance with section 1416(a) of the SDWA and EPA's regulations.
2. Background and Analysis
    a. Variances. The SDWA provides for two types of variances--general
variances and small system variances. Under section 1415(a)(1)(A) of
the SDWA, a State that has primary enforcement responsibility
(primacy), or EPA as the primacy agency, may grant general variances
from MCLs to those public water systems of any size that cannot comply
with the MCLs because of characteristics of the raw water sources. The
primacy agency may grant general variances to a system on condition
that the system install the best technology, treatment techniques, or
other means that EPA finds available and based upon an evaluation
satisfactory to the State that indicates that alternative sources of
water are not reasonably available to the system. At the time this type
of variance is granted, the State must prescribe a compliance schedule
and may require the system to implement additional control measures.
Furthermore, before EPA or the State may grant a general variance, it
must find that the variance will not result in an unreasonable risk to
health (URTH) to the public served by the public water system. In
today's final rule, EPA is specifying BATs for general variances under
section 1415(a) (see section IV.D).
    Section 1415(e) authorizes the primacy agency to issue variances to
small public water systems (those serving fewer than 10,000 people)
where the primacy agent determines (1) that the system cannot afford to
comply with an MCL or treatment technique and (2) that the terms of the
variances will ensure adequate protection of human health (63 FR 43833,
August 14, 1998) (USEPA 1998c). These variances may only be granted
where EPA has determined that there is no affordable compliance
technology and has identified a small system variance technology under
section 1412(b)(15) for the contaminant, system size and source water
quality in question. As discussed below, small system variances under
section 1415(e) are not available because EPA has determined that
affordable compliance technologies are available.
    The 1996 Amendments to the SDWA identify three categories of small
public water systems that need to be addressed: (1) Those serving a
population of 3301-10,000; (2) those serving a population of 500-3300;
and (3) those serving a population of 25-499. The SDWA requires EPA to
make determinations of available compliance technologies for each size
category. A compliance technology is a technology that is affordable
and that achieves compliance with the MCL and/or treatment technique.
Compliance technologies can include point-of-entry or point-of-use
treatment units. Variance technologies are only specified for those
system size/source water quality combinations for which there are no
listed affordable compliance technologies.
    Using its current National Affordability Criteria, EPA has
determined that multiple affordable compliance technologies are
available for each of the three system sizes (USEPA 2005a), and
therefore did not identify any variance treatment technologies. The
analysis was consistent with the current methodology used in the
document ``National-Level Affordability Criteria Under the 1996
Amendments to the Safe Drinking Water Act'' (USEPA 1998d) and the
``Variance Technology Findings for Contaminants Regulated Before 1996''
(USEPA 1998e). However, EPA is currently reevaluating its national-
level affordability criteria and has solicited recommendations from
both the NDWAC and the SAB as part of this review. EPA intends to apply
the revised criteria to the Stage 2 DBPR once they have been finalized
for the purpose of determining whether to enable States to give
variances. Thus, while the analysis of Stage 2 household costs will not
change, EPA's determination regarding the availability of affordable
compliance technologies for the different categories of small systems
may.
    b. Affordable Treatment Technologies for Small Systems. The
treatment trains considered and predicted to be used in EPA's
compliance forecast for systems serving under 10,000 people, are listed
in Table IV.K-1.

   Table IV.K-1.--Technologies Considered and Predicted To Be Used in
                  Compliance Forecast for Small Systems
------------------------------------------------------------------------
            SW Water Plants                      GW Water Plants
------------------------------------------------------------------------
 Switching to chloramines as a    Switching to
 residual disinfectant.                   chloramines as a residual
                                          disinfectant
 Chlorine dioxide (not for        UV
 systems serving fewer than 100 people).
 UV............................   Ozone (not for systems
                                          serving fewer than 100 people)
 Ozone (not for systems serving   GAC20
 fewer than 100 people).
 Micro-filtration/Ultra-          Nanofiltration
 filtration.

 GAC20.........................
 GAC20 + Advanced disinfectants
 Integrated Membranes..........
------------------------------------------------------------------------
Note: Italicized technologies are those predicted to be used in the
  compliance forecast.

Source: Exhibits 5.11b and 5.14b, USEPA 2005a.

    The household costs for these technologies were compared against
the EPA's current national-level affordability criteria to determine
the affordable treatment technologies. The Agency's national level
affordability criteria were published in the August 6, 1998 Federal
Register (USEPA 1998d). A complete description of how this analysis was
applied to Stage 2 DBPR is given in Section 8.3 of the Economic
Analysis (USEPA 2005a).
    Of the technologies listed in Table IV.K-1, integrated membranes
with chloramines, GAC20 with advanced oxidants, and ozone are above the
affordability threshold in the 0 to 500 category. No treatment
technologies are above the affordability threshold in the 500 to 3,300
category or the 3,300 to 10,000 category. As shown in the Economic
Analysis for systems serving fewer than 500 people, 14 systems are
predicted to use GAC20 with advanced disinfectants, one system is
predicted to use integrated membranes, and no systems are predicted to
use ozone to comply with the Stage 2 DBPR (USEPA 2005a). However,
several alternate technologies are affordable and likely available to
these systems. In some cases, the compliance data for these systems
under the Stage 2 DBPR will be the same as under the Stage 1 DBPR
(because many systems serving fewer than 500 people will have the same
single sampling site under both rules); these systems will have already
installed the necessary compliance technology to comply with the Stage
1 DBPR. It is also possible that less costly technologies such as those
for which percentage use caps were set in the decision tree may
actually be used to achieve compliance (e.g., chloramines, UV). Thus,
EPA believes that compliance by these systems will be affordable.
    As shown in Table IV.K-2, the cost model predicts that some
households served by very small systems will experience household cost
increases greater than the available expenditure margins as a result of
adding advanced technology for the Stage 2 DBPR (USEPA 2005a). This
prediction may be overestimated because small systems may have other
compliance alternatives available to them besides adding treatment,
which were not considered in the model. For example, some of these
systems currently may be operated on a part-time basis; therefore, they
may be able to modify the current operational schedule or use excessive
capacity to avoid installing a costly technology to comply with the
Stage 2 DBPR. The system also may identify another water source that
has lower TTHM and HAA5 precursor levels. Systems that can identify
such an alternate water source may not have to treat that new source
water as intensely as their current source, resulting in lower
treatment costs. Systems may elect to connect to a neighboring water
system. While connecting to another system may not be feasible for some
remote systems, EPA estimates that more than 22 percent of all small
water systems are located within metropolitan regions (USEPA 2000f)
where distances between neighboring systems will not present a
prohibitive barrier. Low-cost alternatives to reduce total
trihalomethanes (TTHM) and haloacetic acid (HAA5) levels also include
distribution system modifications such as flushing distribution mains
more frequently, looping to prevent dead ends, and optimizing storage
to minimize retention time. More discussion of household cost increases
is presented in Section VI.E and the Economic Analysis (USEPA 2005a).

                                                    Table IV.K-2.--Distribution of Household Unit Treatment Costs for Plants Adding Treatment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Number of
                                                                 households                                                                    Number of    Number of    Number of      Total
                                                                 served by                                                                     households    surface    groundwater   number of
                                                                   plants                                  90th         95th                  with annual     water     plants with  plants with
                                                                   adding    Mean annual     Median     Percentile   Percentile   Available       cost     plants with  annual cost  annual cost
                                                                 treatment    household      annual       annual       annual    expenditure   increases   annual cost   increases    increases
                Systems size (population seved)                 (Percent of      cost      household    household    household    margin ($/    greater     increases     greater      greater
                                                                    all        increase       cost         cost         cost        hh/yr)      than the     greater      than the     than the
                                                                 households                 increase     increase     increase                 available     than the    available    available
                                                                 subject to                                                                   expenditure   available   expenditure  expenditure
                                                                the Stage 2                                                                      margin    expenditure     margin       margin
                                                                   DBPR)                                                                                margin
                                                                          A            B            C            D            E            F            G            H            I    J = H + I
---------------------------------------------------------------
0-500.........................................................     43045(3)      $201.55      $299.01      $299.01      $414.74         $733          964           15            0           15
501-3,300.....................................................   205842 (4)       $58.41       $29.96       $75.09      $366.53         $724            0            9            0            0
3,301-10,000..................................................   342525 (5)       $37.05       $14.59       $55.25      $200.05         $750            0            0            0            0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Household unit costs represent treatment costs only. All values in year 2003 dollars.

Source: Exhibit 8.4c, USEPA 2005a.

    c. Exemptions. Under section 1416(a), EPA or a State that has
primary enforcement responsibility (primacy) may exempt a public water
system from any requirements related to an MCL or treatment technique
of an NPDWR, if it finds that (1) due to compelling factors (which may
include economic factors such as qualification of the PWS as serving a
disadvantaged community), the PWS is unable to comply with the
requirement or implement measures to develop an alternative source of
water supply; (2) the exemption will not result in an unreasonable risk
to health; and; (3) the PWS was in operation on the effective date of
the NPDWR, or for a system that was not in operation by that date, only
if no reasonable alternative source of drinking water is available to
the new system; and (4) management or restructuring changes (or both)
cannot reasonably result in compliance with the Act or improve the
quality of

drinking water. If EPA or the State grants an exemption to a public
water system, it must at the same time prescribe a schedule for
compliance (including increments of progress or measures to develop an
alternative source of water supply) and implementation of appropriate
control measures that the State requires the system to meet while the
exemption is in effect. Under section 1416(b)(2)(A), the schedule
prescribed shall require compliance as expeditiously as practicable (to
be determined by the State), but no later than 3 years after the
effective date for the regulations established pursuant to section
1412(b)(10). For public water systems which do not serve more than a
population of 3,300 and which need financial assistance for the
necessary improvements, EPA or the State may renew an exemption for one
or more additional two-year periods, but not to exceed a total of 6
years, if the system establishes that it is taking all practicable
steps to meet the requirements above. A public water system shall not
be granted an exemption unless it can establish that either: (1) the
system cannot meet the standard without capital improvements that
cannot be completed prior to the date established pursuant to section
1412(b)(10); (2) in the case of a system that needs financial
assistance for the necessary implementation, the system has entered
into an agreement to obtain financial assistance pursuant to section
1452 or any other Federal or state program; or (3) the system has
entered into an enforceable agreement to become part of a regional
public water system.
3. Summary of Major Comments
    Several commenters agreed with the proposal not to list variances
technologies for the Stage 2 DBPR. One commenter requested that EPA
modify the methodology used to assess affordability. As mentioned
earlier, EPA is currently reevaluating its national-level affordability
criteria and has solicited recommendations from both the NDWAC and the
SAB as part of this review. EPA intends to apply the revised criteria
to the Stage 2 DBPR for the purpose of determining whether to enable
States to give variances.

L. Requirements for Systems to Use Qualified Operators

    EPA believes that systems that must make treatment changes to
comply with requirements to reduce microbiological risks and risks from
disinfectants and disinfection byproducts should be operated by
personnel who are qualified to recognize and respond to problems.
Subpart H systems were required to be operated by qualified operators
under the SWTR (Sec.  141.70). The Stage 1 DBPR added requirements for
all disinfected systems to be operated by qualified personnel who meet
the requirements specified by the State, which may differ based on
system size and type. The rule also requires that States maintain a
register of qualified operators (40 CFR 141.130(c)). While the Stage 2
DBPR requirements do not supercede or modify the requirement that
disinfected systems be operated by qualified operators, such personnel
play an important role in delivering drinking water that meets Stage 2
MCLs to the public. States should also review and modify, as required,
their qualification standards to take into account new technologies
(e.g., ultraviolet (UV) disinfection) and new compliance requirements
(including simultaneous compliance and consecutive system
requirements). EPA received only one comment on this topic; the
commenter supported the need for a qualified operator.

M. System Reporting and Recordkeeping Requirements

1. Today's Rule
    Today's Stage 2 DBPR, consistent with the existing system reporting
and recordkeeping regulations under 40 CFR 141.134 (Stage 1 DBPR),
requires public water systems (including consecutive systems) to report
monitoring data to States within ten days after the end of the
compliance period. In addition, systems are required to submit the data
required in Sec.  141.134. These data are required to be submitted
quarterly for any monitoring conducted quarterly or more frequently,
and within ten days of the end of the monitoring period for less
frequent monitoring. As with other chemical analysis data, the system
must keep the results for 10 years.
    In addition to the existing Stage 1 reporting requirements, today's
rule requires systems to perform specific IDSE-related reporting to the
primacy agency, except for systems serving fewer than 500 for which the
State or primacy agency has waived this requirement. Required reporting
includes submission of IDSE monitoring plans, 40/30 certification, and
IDSE reports. This reporting must be accomplished on the schedule
specified in the rule (see Sec.  141.600(c)) and discussed in section
IV.E of today's preamble. System submissions must include the elements
identified in subpart U and discussed further in section IV.F of
today's preamble. These elements include recommended Stage 2 compliance
monitoring sites as part of the IDSE report.
    Systems must report compliance with Stage 2 TTHM and HAA5 MCLs
(0.080 mg/LTTHM and 0.060 mg/L HAA5, as LRAAs) according to the
schedules specified in Sec. Sec.  141.620 and 141.629 and discussed in
section IV.E of today's preamble. Reporting for DBP monitoring, as
described previously, will remain generally consistent with current
public water system reporting requirements (Sec.  141.31 and Sec.
141.134); systems will be required to calculate and report each LRAA
(instead of the system's RAA) and each individual monitoring result (as
required under the Stage 1 DBPR). Systems will also be required to
provide a report to the State about each operational evaluation within
90 days, as discussed in section IV.H. Reports and evaluations must be
kept for 10 years and may prove valuable in identifying trends and
recurring issues.
2. Summary of Major Comments
    EPA requested comment on all system reporting and recordkeeping
requirements. Commenters generally supported EPA's proposed
requirements, but expressed concern about two specific issues. The
first issue was the data management and tracking difficulties that
States would face if EPA finalized a monitoring approach which had both
plant-based and population-based requirements, as was proposed. Since
today's rule contains only population-based monitoring requirements,
this concern is no longer an issue. See section IV.G in today's
preamble for further discussion.
    The second concern related to reporting associated with the IDSE.
Commenters who supported an approach other than the IDSE for
determining Stage 2 compliance monitoring locations did not support
IDSE-related reporting. The IDSE remains a key component of the final
rule; thus, EPA has retained IDSE-related reporting. However, the
Agency has modified both the content and the timing of the reporting to
reduce the burden. See sections IV.F and IV.E, respectively, of today's
preamble for further discussion.

N. Approval of Additional Analytical Methods

1. Today's Rule
    EPA is taking final action to:
    (1) allow the use of 13 methods published by the Standard Methods
Committee in Standard Methods for the Examination of Water and
Wastewater,

[[Continued on page 437]]

]

[[pp. 437-486]] National Primary Drinking Water Regulations: Stage 2
Disinfectants and Disinfection Byproducts Rule

[[Continued from page 436]]

20th edition, 1998 (APHA 1998) and 12 methods in Standard Methods
Online.
    (2) approve three methods published by American Society for Testing
and Materials International.
    (3) approve EPA Method 327.0 Revision 1.1 (USEPA 2005h) for daily
monitoring of chlorine dioxide and chlorite, EPA Method 552.3 (USEPA
2003f) for haloacetic acids (five) (HAA5), EPA Methods 317.0 Revision 2
(USEPA 2001c) and 326.0 (USEPA 2002) for bromate, chlorite, and
bromide, EPA Method 321.8 (USEPA 2000g) for bromate only, and EPA
Method 415.3 Revision 1.1 (USEPA 2005l) for total organic carbon (TOC)
and specific ultraviolet absorbance (SUVA).
    (4) update the citation for EPA Method 300.1 (USEPA 2000h) for
bromate, chlorite, and bromide.
    (5) standardize the HAA5 sample holding times and the bromate
sample preservation procedure and holding time.
    (6) add the requirement to remove inorganic carbon prior to
determining TOC or DOC, remove the specification of type of acid used
for TOC/DOC sample preservation; and require that TOC samples be
preserved at the time of collection.
    (7) clarify which methods are approved for magnesium hardness
determinations (40 CFR 141.131 and 141.135).
2. Background and Analysis
    The Stage 1 Disinfectants and Disinfection Byproducts Rule (Stage 1
DBPR) was promulgated on December 16, 1998 (USEPA 1998a) and it
included approved analytical methods for DBPs, disinfectants, and DBP
precursors. Additional analytical methods became available subsequent
to the rule and were proposed in the Stage 2 Disinfectants and
Disinfection Byproducts Rule (Stage 2 DBPR) (USEPA 2003a). These
methods are applicable to monitoring that is required under the Stage 1
DBPR. After the Stage 2 DBPR proposal, analytical methods for
additional drinking water contaminants were proposed for approval in a
Methods Update Rule proposal (USEPA 2004). The Stage 2 DBPR and Methods
Update Rule proposals both included changes in the same sections of the
CFR. EPA decided to make all the changes to Sec.  141.131 as part of
the Stage 2 DBPR and the remainder of the methods that were proposed
with the Stage 2 DBPR will be considered as part of the Methods Update
Rule, which will be finalized at a later date. Two ASTM methods, D
1253-86(96) and D 1253-03, that were proposed in the Methods Update
Rule, are being approved for measuring chlorine residual as part of
today's action.
    Minor corrections have been made in two of the methods that were
proposed in the Stage 2 DBPR. In today's rule, the Agency is approving
EPA Method 327.0 (Revision 1.1, 2005) which corrects three
typographical errors in the proposed method.
    EPA is also approving EPA Method 415.3 (Revision 1.1, 2005), which
does not contain the requirement that samples for the analysis of TOC
must be received within 48 hours of sample collection.
    A summary of the methods that are included in today's rule is
presented in Table IV.N-1.

                            Table IV.N-1. Analytical Methods Approved in Today's Rule
----------------------------------------------------------------------------------------------------------------
                                                       Standard methods    Standard methods
             Analyte                  EPA method         20th edition           online               Other
----------------------------------------------------------------------------------------------------------------
                                     Sec.   141.131--Disinfection Byproducts
----------------------------------------------------------------------------------------------------------------
HAA5............................  552.3.............  6251 B............  6251 B-94.........  ..................
Bromate.........................  317.0, Revision     ..................  ..................  ASTM D 6581-00
                                   2.0.
                                  321.8.............
                                  326.0.............
Chlorite (monthly or daily).....  317.0, Revision     ..................  ..................  ASTM D 6581-00
                                   2.0.
                                  326.0.............
Chlorite (daily)................  327.0, Revision     4500-ClO2 E.......  4500-ClO2 E-00....  ..................
                                   1.1.
---------------------------------
                                          Sec.   141.131--Disinfectants
----------------------------------------------------------------------------------------------------------------
Chlorine (free, combined, total)  ..................  4500-Cl D.........  4500-Cl D-00......  ASTM D 1253-86(96)
                                                      4500-Cl F.........  4500-Cl F-00......  ASTM D 1253-03
                                                      4500-Cl G.........  4500-Cl G-00......
Chlorine (total)................  ..................  4500-Cl E.........  4500-Cl E-00......  ..................
                                                      4500-Cl I.........  4500-Cl I-00......
Chlorine (free).................  ..................  4500-Cl H.........  4500-Cl H-00......  ..................
Chlorine Dioxide................  327.0, Revision     4500-ClO2 D.......  4500-ClO2 E-00....  ..................
                                   1.1.               4500-ClO2 E.......
---------------------------------
                                        Sec.   141.131--Other parameters
----------------------------------------------------------------------------------------------------------------
Bromide.........................  317.0, Revision     ..................  ..................  ASTM D 6581-00
                                   2.0.
                                  326.0.............
TOC/DOC.........................  415.3, Revision     5310 B............  5310 B-00.........  ..................
                                   1.1.               5310 C............  5310 C-00.........
                                                      5310 D............  5310 D-00.........
UV254...........................  415.3, Revision     5910 B............  5910 B-00.........  ..................
                                   1.1.
SUVA............................  415.3, Revision     ..................  ..................  ..................
                                   1.1.
----------------------------------------------------------------------------------------------------------------

O. Laboratory Certification and Approval

1. PE Acceptance Criteria
    a. Today's rule. Today's rule maintains the requirements of
laboratory certification for laboratories performing analyses to
demonstrate compliance with MCLs and all other analyses to be conducted
by approved parties. It revises the acceptance criteria for performance
evaluation (PE) studies which laboratories must pass as part of the
certification program. The new acceptance limits are effective 60 days
after promulgation. Laboratories that were certified under the Stage 1
DBPR PE acceptance criteria will be subject to the new criteria when it
is time for them to analyze their annual DBP PE sample(s). Today's rule
also requires that TTHM and HAA5 analyses that are performed for the
IDSE or system-specific study be conducted by laboratories certified
for those analyses.

     Table IV.O-1.--Performance Evaluation (PE) Acceptance Criteria
------------------------------------------------------------------------
                                      Acceptance
                                        limits
                DBP                  (percent of         Comments
                                     true value)
------------------------------------------------------------------------
TTHM
    Chloroform.....................       < plus-  Laboratory must meet
                                        minus>20   all 4 individual THM
                                                   acceptance limits in
                                                   order to successfully
                                                   pass a PE sample for
                                                   TTHM
    Bromodichloromethane...........       < plus-
                                        minus>20
    Dibromochloromethane...........       < plus-
                                        minus>20
    Bromoform......................       < plus-
                                        minus>20
HAA5
    Monochloroacetic Acid..........       < plus-  Laboratory must meet
                                        minus>40   the acceptance limits
                                                   for 4 out of 5 of the
                                                   HAA5 compounds in
                                                   order to successfully
                                                   pass a PE sample for
                                                   HAA5
    Dichloroacetic Acid............       < plus-
                                        minus>40
    Trichloroacetic Acid...........       < plus-
                                        minus>40
    Monobromoacetic Acid...........       < plus-
                                        minus>40
    Dibromoacetic Acid.............       < plus-
                                        minus>40
Chlorite...........................       < plus-
                                        minus>30
Bromate............................       < plus-
                                        minus>30
------------------------------------------------------------------------

    b. Background and analysis. The Stage 1 DBPR (USEPA 1998a)
specified that in order to be certified the laboratory must pass an
annual performance evaluation (PE) sample approved by EPA or the State
using each method for which the laboratory wishes to maintain
certification. The acceptance criteria for the DBP PE samples were set
as statistical limits based on the performance of the laboratories in
each study. This was done because EPA did not have enough data to
specify fixed acceptance limits.
    Subsequent to promulgation of the Stage 1 DBPR, EPA was able to
evaluate data from PE studies conducted during the Information
Collection Rule (USEPA 1996) and during the last five general Water
Supply PE studies. Based on the evaluation process as described in the
proposed Stage 2 DBPR (USEPA 2003a), EPA determined that fixed
acceptance limits could be established for the DBPs. Today's action
replaces the statistical PE acceptance limits with fixed limits
effective one year after promulgation.
    c. Summary of major comments. Four commenters supported the fixed
acceptance criteria as presented in the proposed rule. One requested
that a minimum concentration be set for each DBP in the PE studies, so
that laboratories would not be required to meet tighter criteria in the
PE study than they are required to meet with the minimum reporting
level (MRL) check standard. EPA has addressed this concern by directing
the PE sample suppliers to use concentrations no less than 10 [mu]g/L
for the individual THM and HAAs, 100 [mu]g/L for chlorite, and 7 [mu]g/
L for bromate in PE studies used for certifying drinking water
laboratories.
    Two commenters requested that the effective date for the new PE
acceptance criteria be extended from 60 days to 180 days, because they
felt that 60 days was not enough time for laboratories to meet the new
criteria. EPA realized from those comments that the original intent of
the proposal was not clearly explained; the 60 days was to be the
deadline for when the PE providers must change the acceptance criteria
that are used when the studies are conducted. Laboratories would have
to meet the criteria when it is time for them to analyze their annual
PE samples in order to maintain certification. Depending upon when the
last PE sample was analyzed, laboratories could have up to one year to
meet the new criteria. In order to eliminate this confusion, EPA has
modified the rule language to allow laboratories one year from today's
date to meet the new PE criteria.
2. Minimum Reporting Limits
    a. Today's rule. EPA is establishing regulatory minimum reporting
limits (MRLs) for compliance reporting of DBPs by Public Water Systems.
These regulatory MRLs (Table IV.O-2) also define the minimum
concentrations that must be reported as part of the Consumer Confidence
Reports (40 CFR Sec.  141.151(d)). EPA is incorporating MRLs into the
laboratory certification program for DBPs by requiring laboratories to
include a standard near the MRL concentration as part of the
calibration curve for each DBP and to verify the accuracy of the
calibration curve at the MRL concentration by analyzing an MRL check
standard with a concentration less than or equal to 110% of the MRL
with each batch of samples. The measured DBP concentration for the MRL
check standard must be 50% of the expected value, if any
field sample in the batch has a concentration less than 5 times the
regulatory MRL.

                               Table IV.O-2.--Regulatory Minimum Reporting Levels
----------------------------------------------------------------------------------------------------------------
                                                 Minimum reporting level
                      DBP                               (mg/L) \1\                       Comments
----------------------------------------------------------------------------------------------------------------
TTHM \2\
    Chloroform.................................                   0.0010
    Bromodichloromethane.......................                   0.0010
    Dibromochloromethane.......................                   0.0010
    Bromoform..................................                   0.0010
HAA5 \2\
    Monochloroacetic Acid......................                   0.0020
    Dichloroacetic Acid........................                   0.0010
    Trichloroacetic Acid.......................                   0.0010
    Monobromoacetic Acid.......................                   0.0010
    Dibromoacetic Acid.........................                   0.0010
Chlorite.......................................                    0.020  Applicable to monitoring as prescribed
                                                                           in Sec.   141.132(b)(2)(i)(B) and
                                                                           (b)(2)(ii).
Bromate........................................         0.0050 or 0.0010  Laboratories that use EPA Methods
                                                                           317.0 Revision 2.0, 326.0 or 321.8
                                                                           must meet a 0.0010 mg/L MRL for
                                                                           bromate.
----------------------------------------------------------------------------------------------------------------
\1\ The calibration curve must encompass the regulatory minimum reporting level (MRL) concentration. Data may be
  reported for concentrations lower than the regulatory MRL as long as the precision and accuracy criteria are
  met by analyzing an MRL check standard at the lowest reporting limit chosen by the laboratory. The laboratory
  must verify the accuracy of the calibration curve at the MRL concentration by analyzing an MRL check standard
  with a concentration less than or equal to 110% of the MRL with each batch of samples. The measured
  concentration for the MRL check standard must be 50% of the expected value, if any field sample in
  the batch has a concentration less than 5 times the regulatory MRL. Method requirements to analyze higher
  concentration check standards and meet tighter acceptance criteria for them must be met in addition to the MRL
  check standard requirement.
\2\ When adding the individual trihalomethane or haloacetic acid concentrations to calculate the TTHM or HAA5
  concentrations, respectively, a zero is used for any analytical result that is less than the MRL concentration
  for that DBP, unless otherwise specified by the State.

    b. Background and analysis. EPA proposed to establish regulatory
MRLs for DBPs in order to define expectations for reporting compliance
monitoring data to the Primacy Agencies and in the Consumer Confidence
Reports. The proposed MRLs were generally based on those used during
the Information Collection Rule (USEPA 1996), because an analysis of
the quality control data set from the Information Collection Rule (Fair
et al. 2002) indicated that laboratories are able to provide
quantitative data down to those concentrations.
    EPA also proposed that laboratories be required to demonstrate
ability to quantitate at the MRL concentrations by analyzing an MRL
check standard and meeting accuracy criteria on each day that
compliance samples are analyzed. Three public commenters noted that
meeting the accuracy requirement for the MRL check standard did not
contribute to the quality of the data in cases in which the
concentration of a DBP in the samples was much higher than the MRL. For
example, if chloroform concentrations are always greater than 0.040 mg/
L in a water system's samples, then verifying accurate quantitation at
0.0010 mg/L is unnecessary and may require the laboratory to dilute
samples or maintain two calibration curves in order to comply with the
requirement. EPA has taken this into consideration in today's rule and
has adjusted the requirement accordingly. EPA is maintaining the
requirement for all laboratories to analyze the MRL check standard, but
the laboratory is only required to meet the accuracy criteria (< plus-
minus>50%) if a field sample has a concentration less than five times
the regulatory MRL concentration.
    EPA proposed a regulatory MRL of 0.200 mg/L for chlorite, because
data from the Information Collection Rule indicated that most samples
would contain concentrations greater than 0.200 mg/L (USEPA 2003c). EPA
also took comment on a lower MRL of 0.020 mg/L. Commenters were evenly
divided concerning which regulatory MRL concentration should be adopted
in the final rule. EPA has decided to set the chlorite regulatory MRL
at 0.020 mg/L in today's rule. This decision was based on two factors.
First, the approved analytical methods for determining compliance with
the chlorite MCL can easily support an MRL of 0.020 mg/L. More
importantly, since the proposal, EPA has learned that water systems
that have low chlorite concentrations in their water have been
obtaining data on these low concentrations from their laboratories and
have been using these data in their Consumer Confidence Reports.
Setting the MRL at 0.020 mg/L is reflective of current practices in
laboratories and current data expectations by water systems.
    c. Summary of major comments. There were no major comments.

P. Other Regulatory Changes

    As part of today's action, EPA has included several
``housekeeping'' actions to remove sections of Part 141 that are no
longer effective. These sections have been superceded by new
requirements elsewhere in Part 141.
    Sections 141.12 (Maximum contaminant levels for total
trihalomethanes) and 141.30 (Total trihalomethanes sampling, analytical
and other requirements) were promulgated as part of the 1979 TTHM Rule.
These sections have been superceded in their entirety by Sec.  141.64
(Maximum contaminant levels for disinfection byproducts) and subpart L
(Disinfectant Residuals, Disinfection Byproducts, and Disinfection
Byproduct Precursors), respectively, as of December 31, 2003. Also,
Sec.  141.32 (Public notification) has been superceded by subpart Q
(Public Notification of Drinking Water Violations), which is now fully
in effect.
    Section 553 of the Administrative Procedure Act, 5 U.S.C.
553(b)(B), provides that, when an agency for good cause finds that
notice and public procedure are impracticable, unnecessary, or contrary
to the public interest, the agency may issue a rule without providing
prior notice and an opportunity for public comment. In addition to
updating methods, this rule also makes minor corrections to the
National Primary Drinking Water Regulations, specifically the Public
Notification tables (Subpart Q, Appendices A and B). Two final drinking
water rules (66 FR 6976 and 65 FR 76708) inadvertently added new
endnotes to two existing tables using the same endnote numbers. This
rule corrects this technical drafting error by

renumbering the endnote citations in these two tables. Thus, additional
notice and public comment is not necessary. EPA finds that this
constitutes ``good cause'' under 5 U.S.C. 553(b)(B). For the same
reasons, EPA is making this rule change effective upon publication. 5
U.S.C. 553(d)(3).

V. State Implementation

A. Today's Rule

    This section describes the regulations and other procedures and
policies States must adopt to implement today's rule. States must
continue to meet all other conditions of primacy in 40 CFR Part 142. To
implement the Stage 2 DBPR, States must adopt revisions to the
following:

    --Sec.  141.2--Definitions
    --Sec.  141.33--Record maintenance;
    --Sec.  141.64--Maximum contaminant levels for disinfection
byproducts;
    --subpart L--Disinfectant Residuals, Disinfection Byproducts, and
Disinfection Byproduct Precursors;
    --subpart O, Consumer Confidence Reports;
    --subpart Q, Public Notification of Drinking Water Violations;
    --new subpart U, Initial Distribution System Evaluation; and
    --new subpart V, Stage 2 Disinfection Byproducts Requirements.
1. State Primacy Requirements for Implementation Flexibility
    In addition to adopting basic primacy requirements specified in 40
CFR part 142, States are required to address applicable special primacy
conditions. Special primacy conditions pertain to specific regulations
where implementation of the rule involves activities beyond general
primacy provisions. The purpose of these special primacy requirements
in today's rule is to ensure State flexibility in implementing a
regulation that (1) applies to specific system configurations within
the particular State and (2) can be integrated with a State's existing
Public Water Supply Supervision Program. States must include these
rule-distinct provisions in an application for approval or revision of
their program. These primacy requirements for implementation
flexibility are discussed in this section.
    To ensure that a State program includes all the elements necessary
for an effective and enforceable program under today's rule, a State
primacy application must include a description of how the State will
implement a procedure for modifying consecutive system and wholesale
system monitoring requirements on a case-by-case basis, if a State will
use the authority to modify monitoring requirements under this special
primacy condition.
2. State Recordkeeping Requirements
    Today's rule requires States to keep additional records of the
following, including all supporting information and an explanation of
the technical basis for each decision:

    --very small system waivers.
    --IDSE monitoring plans.
    --IDSE reports and 40/30 certifications, plus any modifications
required by the State.
    --operational evaluations conducted by the system.
3. State Reporting Requirements
    Today's rule has no new State reporting requirements.
4. Interim Primacy
    States that have primacy for every existing NPDWR already in effect
may obtain interim primacy for this rule, beginning on the date that
the State submits the application for this rule to USEPA, or the
effective date of its revised regulations, whichever is later. A State
that wishes to obtain interim primacy for future NPDWRs must obtain
primacy for today's rule. As described in Section IV.F, EPA expects to
work with States to oversee the individual distribution system
evaluation process that begins shortly after rule promulgation.
5. IDSE Implementation
    As discussed in section IV.E, many systems will be performing
certain IDSE activities prior to their State receiving primacy. During
that period, EPA will act as the primacy agency, but will consult and
coordinate with individual States to the extent practicable and to the
extent that States are willing and able to do so. In addition, prior to
primacy, States may be asked to assist EPA in identifying and
confirming systems that are required to comply with certain IDSE
activities. Once the State has received primacy, it will become
responsible for IDSE implementation activities.

B. Background and Analysis

    SDWA establishes requirements that a State or eligible Indian Tribe
must meet to assume and maintain primary enforcement responsibility
(primacy) for its PWSs. These requirements include the following
activities: (1) Adopting drinking water regulations that are no less
stringent than Federal drinking water regulations; (2) adopting and
implementing adequate procedures for enforcement; (3) keeping records
and making reports available on activities that EPA requires by
regulation; (4) issuing variances and exemptions (if allowed by the
State), under conditions no less stringent than allowed under SDWA; and
(5) adopting and being capable of implementing an adequate plan for the
provisions of safe drinking water under emergency situations.
    40 CFR part 142 sets out the specific program implementation
requirements for States to obtain primacy for the public water supply
supervision program as authorized under SDWA section 1413. In addition
to adopting basic primacy requirements specified in 40 CFR Part 142,
States may be required to adopt special primacy provisions pertaining
to specific regulations where implementation of the rule involves
activities beyond general primacy provisions. States must include these
regulation specific provisions in an application for approval of their
program revision.
    The current regulations in 40 CFR 142.14 require States with
primacy to keep various records, including the following: analytical
results to determine compliance with MCLs, MRDLs, and treatment
technique requirements; PWS inventories; State approvals; enforcement
actions; and the issuance of variances and exemptions. Today's final
rule requires States to keep additional records, including all
supporting information and an explanation of the technical basis for
decisions made by the State regarding today's rule requirements. The
State may use these records to identify trends and determine whether to
limit the scope of operational evaluations. EPA currently requires in
40 CFR 142.15 that States report to EPA information such as violations,
variance and exemption status, and enforcement actions; today's rule
does not add additional reporting requirements or modify existing
requirements.
    On April 28, 1998, EPA amended its State primacy regulations at 40
CFR 142.12 to incorporate the new process identified in the 1996 SDWA
Amendments for granting primary enforcement authority to States while
their applications to modify their primacy programs are under review
(63 FR 23362, April 28, 1998) (USEPA 1998f). The new process grants
interim primary enforcement authority for a new or revised regulation
during the period in which EPA is making a determination with regard to
primacy for that new or revised regulation. This interim enforcement
authority begins on the date of the primacy application submission or
the effective date of the

new or revised State regulation, whichever is later, and ends when EPA
makes a final determination. However, this interim primacy authority is
only available to a State that has primacy (including interim primacy)
for every existing NPDWR in effect when the new regulation is
promulgated. States that have primacy for every existing NPDWR already
in effect may obtain interim primacy for this rule and a State that
wishes to obtain interim primacy for future NPDWRs must obtain primacy
for this rule.
    EPA is aware that due to the complicated wholesale system-
consecutive system relationships that exist nationally, there will be
cases where the standard monitoring framework will be difficult to
implement. Therefore, States may develop, as a special primacy
condition, a program under which the State can modify monitoring
requirements for consecutive systems. These modifications must not
undermine public health protection and all systems, including
consecutive systems, must comply with the TTHM and HAA5 MCLs based on
the LRAA at each compliance monitoring location. Each consecutive
system must have at least one compliance monitoring location. However,
such a program allows the State to establish monitoring requirements
that account for complicated distribution system relationships, such as
where neighboring systems buy from and sell to each other regularly
throughout the year, water passes through multiple consecutive systems
before it reaches a user, or a large group of interconnected systems
have a complicated combined distribution system. EPA has developed a
guidance manual to address these and other consecutive system issues.

C. Summary of Major Comments

    Public comment generally supported the special primacy requirements
in the August 11, 2003 proposal, and many commenters expressed
appreciation for the flexibility the special primacy requirements
provided to States.
    Many commenters expressed concern about EPA as the implementer
instead of the State, given the existing relationship between the State
and system. EPA agrees that States perform an essential role in rule
implementation and intends to work with States to the greatest extent
possible, consistent with the rule schedule promulgated today. EPA
believes that pre-promulgation coordination with States, changes in the
final rule strongly supported by States (e.g., population-based
monitoring instead of plant-based monitoring), and the staggered rule
schedule will facilitate State involvement in pre-primacy
implementation.
    Many commenters also requested that the State have more flexibility
to grant sampling waivers and exemptions. EPA believes that it has
struck a reasonable balance among competing objectives in granting
State flexibility. State flexibility comes at a resource cost and
excessive system-by-system flexibility could overwhelm State resources.
Also, EPA believes that much of the monitoring and water quality
information a State would need to properly consider whether a waiver is
appropriate is generally not available and, if available, difficult to
evaluate.

VI. Economic Analysis

    This section summarizes the Economic Analysis for the Final Stage 2
Disinfectants and Disinfection Byproducts Rule (Economic Analysis (EA))
(USEPA 2005a). The EA is an evaluation of the benefits and costs of
today's final rule and other regulatory alternatives the Agency
considered. Specifically, this evaluation addresses both quantified and
non-quantified benefits to PWS consumers, including the general
population and sensitive subpopulations. Costs are presented for PWSs,
States, and consumer households. Also included is a discussion of
potential risks from other contaminants, uncertainties in benefit and
cost estimates, and a summary of major comments on the EA for the
proposed Stage 2 DBPR.
    EPA relied on data from several epidemiologic and toxicologic
studies, the Information Collection Rule (ICR), and other sources,
along with analytical models and input from technical experts, to
understand DBP risk, occurrence, and PWS treatment changes that will
result from today's rule. Benefits and costs are presented as
annualized values using social discount rates of three and seven
percent. The time frame used for benefit and cost comparisons is 25
years--approximately five years account for rule implementation and 20
years for the average useful life of treatment technologies.
    EPA has prepared this EA to comply with the requirements of SDWA,
including the Health Risk Reduction and Cost Analysis required by SDWA
section 1412(b)(3)(C), and Executive Order 12866, Regulatory Planning
and Review. The full EA is available in the docket for today's rule,
which is available online as described in the ADDRESSES section. The
full document provides detailed explanations of the analyses summarized
in this section and additional analytical results.

A. Regulatory Alternatives Considered

    The Stage 2 DBPR is the second in a set of rules that address
public health risks from DBPs. EPA promulgated the Stage 1 DBPR to
decrease average exposure to DBPs and mitigate associated health
risks--compliance with TTHM and HAA5 MCLs is based on averaging
concentrations across the distribution system. In developing the Stage
2 DBPR, EPA sought to identify and further reduce remaining risks from
exposure to chlorinated DBPs.
    The regulatory options EPA considered for the Stage 2 DBPR are the
direct result of a consensus rulemaking process (Federal Advisory
Committee Act (FACA) process) that involved various drinking water
stakeholders (see Section III for a description of the FACA process).
The Advisory Committee considered the following key questions during
the negotiation process for the Stage 2 DBPR:
     What are the remaining health risks after implementation
of the Stage 1 DBPR?
     What are approaches to addressing these risks?
     What are the risk tradeoffs that need to be considered in
evaluating these approaches?
     How do the estimated costs of an approach compare to
reductions in peak DBP occurrences and overall DBP exposure for that
approach?
    The Advisory Committee considered DBP occurrence estimates to be
important in understanding the nature of public health risks. Although
the ICR data were collected prior to promulgation of the Stage 1 DBPR,
they were collected under a similar sampling strategy. The data support
the concept that a system could be in compliance with the RAA Stage 1
DBPR MCLs of 0.080 mg/L and 0.060 mg/L for TTHM and HAA5, respectively,
and yet have points in the distribution system with either periodically
or consistently higher DBP levels.
    Based on these findings, the Advisory Committee discussed an array
of alternatives to address disproportionate risk within distribution
systems. Alternative options included lowering DBP MCLs, revising the
method for MCL compliance determination e.g., requiring individual
sampling locations to meet the MCL as an LRAA or requiring that no
samples exceed the MCL), and combinations of both. The Advisory
Committee also considered the associated technology changes and costs
for these alternatives. After narrowing down options, the Advisory
Committee

primarily focused on four types of alternative MCL scenarios. These are
the alternatives EPA evaluated in the EA, as follows:

Preferred Alternative
    --MCLs of 0.080 mg/L for TTHM and 0.060 mg/L for HAA5 as LRAAs
    --Bromate MCL remaining at 0.010 mg/L
Alternative 1
    --MCLs of 0.080 mg/L for TTHM and 0.060 mg/L for HAA5 as LRAAs
    --Bromate MCL of 0.005 mg/L
Alternative 2
    --MCLs of 0.080 mg/L for TTHM and 0.060 mg/L for HAA5 as absolute
maximums for individual measurements
    --Bromate MCL remaining at 0.010 mg/L
Alternative 3
    --MCLs of 0.040 mg/L for TTHM and 0.030 mg/L for HAA5 as RAAs
    --Bromate MCL remaining at 0.010 mg/L.

    Figure VI.A-1 shows how compliance would be determined under each
of the TTHM/HAA5 alternatives described and the Stage 1 DBPR for a
hypothetical large surface water system. This hypothetical system has
one treatment plant and measures TTHM in the distribution system in
four locations per quarter (the calculation methodology shown would be
the same for HAA5). Ultimately, the Advisory Committee recommended the
Preferred Alternative in combination with an IDSE requirement
(discussed in Section IV.F).

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B. Analyses That Support Today's Final Rule

    EPA's goals in designing the Stage 2 DBPR were to protect public
health by reducing peak DBP levels in the distribution system while
maintaining microbial protection. As described earlier, the Stage 1
DBPR reduces overall average DBP levels, but specific locations within
distribution systems can still experience relatively high DBP
concentrations. EPA believes that high DBP concentrations should be
reduced due to the potential association of DBPs with cancer, as well
as reproductive and developmental health effects.
    EPA analyzed the benefits and costs of the four regulatory
alternatives presented in the previous section. Consistent with the
recommendations of the Advisory Committee, EPA is establishing the
preferred alternative to achieve the Agency's goals for the Stage 2
DBPR. The following discussion summarizes EPA's analyses that support
today's final rule. This discussion explains how EPA predicted water
quality and treatment changes, estimated benefits and costs, and
assessed the regulatory alternatives.
1. Predicting Water Quality and Treatment Changes
    Water quality and treatment data from the ICR were used in
predicting treatment plant technology changes (i.e. compliance
forecasts) and reductions in DBP exposure resulting from the Stage 2
DBPR. Because ICR data were gathered prior to Stage 1 DBPR compliance
deadlines, EPA first accounted for treatment changes resulting from the
Stage 1 DBPR. Benefit and cost estimates for the Stage 2 DBPR reflect
changes following compliance with the Stage 1 DBPR.
    The primary model used to predict changes in treatment and
reductions in DBP levels was the Surface Water Analytical Tool (SWAT),
which EPA developed using results from the ICR. SWAT results were
applied directly for large and medium surface water systems and were
adjusted for small surface water systems to account for differences in
source water DBP precursor levels and operational constraints in small
systems. EPA used ICR data and a Delphi poll process (a group of
drinking water experts who provided best professional judgment in a
structured format) to project technologies selected by ground water
systems.
    To address uncertainty in SWAT predictions, EPA also predicted
treatment changes using a second methodology, called the ``ICR Matrix
Method.'' Rather than a SWAT-predicted pre-Stage 1 baseline, the ICR
Matrix Method uses unadjusted ICR TTHM and HAA5 pre-Stage 1 data to
estimate the percent of plants changing technology to comply with the
Stage 2 DBPR. EPA gives equal weight to SWAT and ICR Matrix Method
predictions in estimating Stage 2 compliance forecasts and resultant
reductions in DBP exposure. The ICR Matrix Method is also used to
estimate reductions in the occurrence of peak TTHM and HAA5
concentrations because SWAT-predicted TTHM and HAA5 concentrations are
valid only when considering national averages, not at the plant level.
    When evaluating compliance with a DBP MCL, EPA assumed that systems
would maintain DBP levels at least 20 percent below the MCL. This
safety margin represents the level at which systems typically take
action to ensure they meet a drinking water standard and reflects
industry practice. In addition, the safety margin accounts for year-to-
year fluctuations in DBP levels. To address the impact of the IDSE, EPA
also analyzed compliance using a safety margin of 25 percent based on
an analysis of spatial variability in TTHM and HAA5 occurrence. EPA
assigned equal probability to the 20 and 25 percent safety margin for
large and medium surface water systems for the final analysis because
both alternatives are considered equally plausible. EPA assumes the 20
percent operational safety margin accounts for variability in small
surface water systems and all groundwater systems.
2. Estimating Benefits
    Quantified benefits estimates for the Stage 2 DBPR are based on
potential reductions in fatal and non-fatal bladder cancer cases. In
the EA, EPA included a sensitivity analysis for benefits from avoiding
colon and rectal cancers. EPA believes additional benefits from this
rule could come from reducing potential reproductive and developmental
risks. EPA has not included these potential risks in the primary
benefit analysis because of the associated uncertainty.
    The major steps in deriving and characterizing potential cancer
cases avoided include the following: (1) estimate the current and
future annual cases of illness from all causes; (2) estimate how many
cases can be attributed to DBP occurrence and exposure; and (3)
estimate the reduction in future cases corresponding to anticipated
reductions in DBP occurrence and exposure due to the Stage 2 DBPR.
    EPA used results from the National Cancer Institute's Surveillance,
Epidemiology, and End Results program in conjunction with data from the
2000 U.S. Census to estimate the number of new bladder cancer cases per
year (USEPA 2005a). Three approaches were then used to gauge the
percentage of cases attributable to DBP exposure (i.e., population
attributable risk (PAR)). Taken together, the three approaches provide
a reasonable estimate of the range of potential risks. EPA notes that
the existing epidemiological evidence has not conclusively established
causality between DBP exposure and any health risk endpoints, so the
lower bound of potential risks may be as low as zero.
    The first approach used the range of PAR values derived from
consideration of five individual epidemiology studies. This range was
used at the basis for the Stage 1 and the proposed Stage 2 economic
analyses (i.e., 2 percent to 17 percent) (USEPA 2003a).
    The second approach used results from the Villanueva et al. (2003)
meta-analysis. This study develops a combined Odds Ratio (OR) of 1.2
that reflects the ever-exposed category for both sexes from all studies
considered in the meta-analysis and yields a PAR value of approximately
16 percent.
    The third approach used the Villanueva et al. (2004) pooled data
analysis to develop a dose-response relationship for OR as a function
of average TTHM exposure. Using the results from this approach, EPA
estimates a PAR value of approximately 17 percent.
    EPA used the PAR values from all three approaches to estimate the
number of bladder cancer cases ultimately avoided annually as a result
of the Stage 2 DBPR. To quantify the reduction in cases, EPA assumed a
linear relationship between average DBP concentration and relative risk
of bladder cancer. Because of this, EPA considers these estimates to be
an upper bound on the annual reduction in bladder cancer cases due to
the rule.
    A lag period (i.e., cessation lag) exists between when reduction in
exposure to a carcinogen occurs and when the full risk reduction
benefit of that exposure reduction is realized by exposed individuals.
No data are available that address the rate of achieving bladder cancer
benefits resulting from DBP reductions. Consequently, EPA used data
from epidemiological studies that address exposure reduction to
cigarette smoke and arsenic to generate three possible cessation lag
functions for bladder cancer and DBPs. The cessation lag functions are
used in conjunction

with the rule implementation schedule to project the number of bladder
cancer cases avoided each year as a result of the Stage 2 DBPR.
    Although EPA used three approaches for estimating PAR, for
simplicity's sake, EPA used the Villanueva et al. (2003) study to
calculate the annual benefits of the Stage 2 DBPR. The benefits
estimates derived from Villanueva et al. (2003) capture a substantial
portion of the overall range of results, reflecting the uncertainty in
both the underlying OR and PAR values, as well as the uncertainty in
DBP reductions for Stage 2.
    To assign a monetary value to avoided bladder cancer cases, EPA
used the value of a statistical life (VSL) for fatal cases and used two
alternate estimates of willingness-to-pay to avoid non-fatal cases (one
based on curable lymphoma and the other based on chronic bronchitis).
EPA believes additional benefits from this rule could come from a
reduction in potential reproductive and developmental risks. See
Chapter 6 of the EA for more information on estimating benefits (USEPA
2005a).
3. Estimating Costs
    Analyzing costs for systems to comply with the Stage 2 DBPR
included identifying and costing treatment process improvements that
systems will make, as well as estimating the costs to implement the
rule, conduct IDSEs, prepare monitoring plans, perform additional
routine monitoring, and evaluate significant DBP excursion events. The
cost analysis for States/Primacy Agencies included estimates of the
labor burdens for training employees on the requirements of the Stage 2
DBPR, responding to PWS reports, and record keeping.
    All treatment costs are based on mean unit cost estimates for
advanced technologies and chloramines. Derivation of unit costs are
described in detail in Technologies and Costs for the Final Long Term 2
Enhanced Surface Water Treatment Rule and Final Stage 2 Disinfectants
and Disinfection Byproducts Rule (USEPA 2005g). Unit costs (capital and
O&M) for each of nine system size categories are calculated using mean
design and average daily flows values. The unit costs are then combined
with the predicted number of plants selecting each technology to
produce national treatment cost estimates.
    Non-treatment costs for implementation, the IDSE, monitoring plans,
additional routine monitoring, and operational evaluations are based on
estimates of labor hours for performing these activities and on
laboratory costs.
    While systems vary with respect to many of the input parameters to
the Stage 2 DBPR cost analysis (e.g., plants per system, population
served, flow per population, labor rates), EPA believes that mean
values for the various input parameters are appropriate to generate the
best estimate of national costs for the rule. Uncertainty in the
national average unit capital and O&M costs for the various
technologies has been incorporated into the cost analysis (using Monte
Carlo simulation procedures). Costs of the Stage 2 DBPR are estimated
at both mean and 90 percent confidence bound values.
    EPA assumes that systems will, to the extent possible, pass cost
increases on to their customers through increases in water rates.
Consequently, EPA has also estimated annual household cost increases
for the Stage 2 DBPR. This analysis includes costs for all households
served by systems subject to the rule, costs just for those households
served by systems actually changing treatment technologies to comply
with the rule, costs for households served by small systems, and costs
for systems served by surface water and ground water sources.
4. Comparing Regulatory Alternatives
    Through the analyses summarized in this section, EPA assessed the
benefits and costs of the four regulatory alternatives described
previously. Succeeding sections of this preamble present the results of
these analyses. As recommended by the Advisory Committee, EPA is
establishing the preferred regulatory alternative for today's Stage 2
DBPR. This regulation will reduce peak DBP concentrations in
distribution systems through requiring compliance determinations with
existing TTHM and HAA5 MCLs using the LRAA. Further, the IDSE will
ensure that systems identify compliance monitoring sites that reflect
high DBP levels. EPA believes that these provision are appropriate
given the association of DBPs with cancer, as well as potential
reproductive and developmental health effects.
    Alternative 1 would have established the same DBP regulations as
the preferred alternative, and would have lowered the bromate MCL from
0.010 to 0.005 mg/L. The Advisory Committee did not recommend and EPA
did not establish this alternative because it could have an adverse
effect on microbial protection. The lower bromate MCL could cause many
systems to reduce or eliminate the use of ozone, which is an effective
disinfectant for a broad spectrum of microbial pathogens, including
microorganisms like Cryptosporidium that are resistant to chlorine.
    Alternative 2 would have prohibited any single sample from
exceeding the TTHM or HAA5 MCL. This is significantly more stringent
than the preferred alternative and would likely require a large
fraction of surface water systems to switch from their current
treatment practices to more expensive advanced technologies. Consistent
with the Advisory Committee, EPA does not believe such a drastic shift
is warranted at this time.
    Similarly, Alternative 3, which would decrease TTHM and HAA5 MCLs
to 0.040 mg/L and 0.030 mg/L, respectively, and would require a
significant portion of surface water systems to implement expensive
advanced technologies in place of their existing treatment. Further,
compliance with TTHM and HAA5 MCLs under this alternative would be
based on the RAA, which does not specifically address DBP peaks in the
distribution system as the LRAA, in conjunction with the IDSE, are
designed to do. Based on these considerations, EPA and the Advisory
Committee did not favor this alternative.

C. Benefits of the Stage 2 DBPR

    The benefits analysis for the Stage 2 DBPR includes a description
of non-quantified benefits, calculations of quantified benefits, and a
discussion of when benefits will occur after today's final rule is
implemented. An overview of the methods used to determine benefits is
provided in Section VI.B. More detail can be found in the final EA. A
summary of benefits for the Stage 2 DBPR is given in this section.
1. Nonquantified Benefits
    Non-quantified benefits of the Stage 2 DBPR include potential
benefits from reduced reproductive and developmental risks, reduced
risks of cancers other than bladder cancer, and improved water quality.
EPA believes that additional benefits from this rule could come from a
reduction in potential reproductive and developmental risks. However,
EPA does not believe the available evidence provides an adequate basis
for quantifying these potential risks in the primary analysis.
    Both toxicology and epidemiology studies indicate that other
cancers may be associated with DBP exposure but currently there is not
enough data to include them in the primary analysis. However, EPA
believes that the association between exposure to DBPs and colon and
rectal cancer is possibly

significant, so an analysis of benefits is presented as a sensitivity
analysis.
    To the extent that the Stage 2 DBPR changes perceptions of the
health risks associated with drinking water and improves taste and
odor, it may reduce actions such as buying bottled water or installing
filtration devices. Any resulting cost savings would be a regulatory
benefit. Also, as PWSs move away from conventional treatment to more
advanced technologies, other non-health benefits are anticipated
besides better tasting and smelling water. For example, GAC lowers
nutrient availability for bacterial growth, produces a biologically
more stable finished water, and facilitates management of water quality
in the distribution system. Since GAC also removes synthetic organic
chemicals (SOCs), it provides additional protection from exposure to
chemicals associated with accidental spills or environmental runoff.
2. Quantified Benefits
    EPA has quantified the benefits associated with the expected
reductions in the incidence of bladder cancer. As discussed in Section
VI.B, EPA used the PAR values from all three approaches to estimate the
number of bladder cancer cases ultimately avoided annually as a result
of the Stage 2 DBPR, shown in Figure VI.C-1.
    Table VI.C-1 summarizes the estimated number of bladder cancer
cases avoided as a result of the Stage 2 DBPR, accounting for cessation
lag and the rule implementation schedule, and the monetized value of
those cases. The benefits in Table VI.C-1 were developed using the PAR
value from Villanueva et al. (2003), as described in Section VI.B.
Table VI.C-1 summarizes the benefits for the Preferred Regulatory
Alternative for the Stage 2 DBPR. Benefits estimates for the other
regulatory alternatives were derived using the same methods as for the
Preferred Regulatory Alternative and are presented in the EA.
    The confidence bounds of the results in Table VI.C-1 reflect
uncertainty in PAR, uncertainty in the compliance forecast and
resulting reduction in DBP concentrations, and cessation lag.
Confidence bounds of the monetized benefits also reflect uncertainty in
valuation parameters. An estimated 26 percent of bladder cancer cases
avoided are fatal, and 74 percent are non-fatal (USEPA 1999b). The
monetized benefits therefore reflect the estimate of avoiding both
fatal and non-fatal cancers in those proportions.

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             Table VI.C-1.--Summary of Quantified Benefits for the Stage 2 DBPR (Millions of $2003)
----------------------------------------------------------------------------------------------------------------
   Annual average cases avoided    Discount rate, WTP   Annualized benefits of cases avoided
----------------------------------    for non-fatal   ---------------------------------------    Cessation lag
   Mean         5th        95th           cases            Mean         5th          95th            model
----------------------------------------------------------------------------------------------------------------
279         103         541        3%, Lymphoma......       $1,531         $233       $3,536  Smoking/Lung
                                   7% Lymphoma.......        1,246          190        2,878   Cancer
                                   3% Bronchitis.....          763          165        1,692
                                   7% Bronchitis.....          621          135        1,376
188         61          399        3%, Lymphoma......        1,032          157        2,384  Smoking/Bladder
                                   7% Lymphoma.......          845          129        1,950   Cancer
                                   3% Bronchitis.....          514          111        1,141
                                   7% Bronchitis.....          420           91          932
333         138         610        3%, Lymphoma......        1,852          282        4,276  Arsenic/Bladder
                                   7% Lymphoma.......        1,545          235        3,566   Cancer
                                   3% Bronchitis.....          922          200        2,045
                                   7% Bronchitis.....          769          167        1,704
----------------------------------------------------------------------------------------------------------------
Notes: Values are discounted and annualized in 2003$. The 90 percent confidence interval for cases incorporates
  uncertainty in PAR, reduction in average TTHM and HAA5 concentrations, and cessation lag. The 90 percent
  confidence bounds for monetized benefits reflect uncertainty in monetization inputs relative to mean cases.
  Based on TTHM as an indicator, benefits were calculated using the Villanueva et al. (2003) PAR. EPA recognizes
  that benefits may be as low as zero since causality has not yet been established between exposure to
  chlorinated water and bladder cancer. Assumes 26 percent of cases are fatal, 74 percent are non-fatal (USEPA
  1999b).

 Source: Exhibit 6.1, USEPA 2005a.

3. Timing of Benefits Accrual
    EPA recognizes that it is unlikely that all cancer reduction
benefits would be realized immediately upon exposure reduction. Rather,
it is expected that there will likely be some transition period as
individual risks reflective of higher past exposures at the time of
rule implementation become, over time, more reflective of the new lower
exposures. EPA developed cessation lag models for DBPs from literature
to describe the delayed benefits, in keeping with the recommendations
of the SAB (USEPA 2001d). Figure VI.C-2 illustrates the effects of the
cessation lag models. The results from the cessation lag models show
that the majority of the potential cases avoided occur within the first
fifteen years after initial reduced exposure to DBPs. For example,
fifteen years after the exposure reduction has occurred, the annual
cases avoided will be 489 for the smoking/lung cancer cessation lag
model, 329 for the smoking/bladder cancer cessation lag model, and 534
cases for the arsenic/bladder cancer cessation lag model. These
represent approximately 84%, 57%, and 92%, respectively, of the
estimated 581 annual cases ultimately avoidable by the Stage 2 DBPR.
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    In addition to the delay in reaching a steady-state level of risk
reduction as a result of cessation lag, there is a delay in attaining
maximum exposure reduction across the entire affected population that
results from the Stage 2 DBPR implementation schedule. For example,
large surface water PWSs have six years from rule promulgation to meet
the new Stage 2 MCLs, with up to a two-year extension possible for
capital improvements. In general, EPA assumes that a fairly constant
increment of systems will complete installation of new treatment
technologies each year, with the last systems installing treatment by
2016. The delay in exposure reduction resulting from the rule
implementation schedule is incorporated into the benefits model by
adjusting the cases avoided for the given year and is illustrated in
Table VI.C-2.

   Table VI.C-2.--Bladder Cancer Cases Avoided (TTHM as Indicator) Each Year using Three Cessation Lag Models
----------------------------------------------------------------------------------------------------------------
                                                 Smoking/lung cancer     Smoking/bladder       Arsenic/bladder
                                                 cessation lag model  cancer cessation lag  cancer cessation lag
                     Year                      ----------------------         model                 model
                                                                     -------------------------------------------
                                                  Total     Percent     Total     Percent     Total     Percent
----------------------------------------------------------------------------------------------------------------
1.............................................          0          0          0          0          0          0
2.............................................          0          0          0          0          0          0
3.............................................          0          0          0          0          0          0
4.............................................          0          0          0          0          0          0
5.............................................          0          0          0          0          0          0
6.............................................         24          4         23          4         45          8
7.............................................         62         11         54          9        110         19
8.............................................        111         19         90         16        187         32
9.............................................        170         29        132         23        275         48
10............................................        220         38        161         28        334         58
11............................................        265         46        184         32        379         65
12............................................        305         53        204         35        412         71
13............................................        341         59        221         38        438         76
14............................................        371         64        237         41        458         79
15............................................        396         68        251         43        475         82
16............................................        416         72        265         46        488         84
17............................................        433         75        278         48        499         86
18............................................        448         77        289         50        509         88
19............................................        460         79        301         52        516         89
20............................................        471         81        311         54        523         90
21............................................        481         83        321         55        528         91
22............................................        489         84        330         57        533         92
23............................................        496         86        339         59        537         93
24............................................        503         87        347         60        541         93
25............................................        509         88        355         61        544        94
----------------------------------------------------------------------------------------------------------------
Notes: Percent of annual cases ultimately avoidable achieved during each of the first 25 years. The benefits
  model estimates 581 (90% CB = 229-1,079) annual cases ultimately avoidable using the Villanueva et al. (2003)
  PAR inputs and including uncertainty in these and DBP reductions. EPA recognizes that benefits may be as low
  as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

Source: Summarized from detailed results presented in Exhibits E.38a, E.38e and E.38i, USEPA 2005a.

D. Costs of the Stage 2 DBPR

    National costs include those of treatment changes to comply with
the rule as well as non-treatment costs such as for Initial
Distribution System Evaluations (IDSEs), additional routine monitoring,
and operational evaluations. The methodology used to estimate costs is
described in Section VI.B. More detail is provided in the EA (USEPA
2005a). The remainder of this section presents summarized results of
EPA's cost analysis for total annualized present value costs, PWS
costs, State/Primacy agency costs, and non-quantified costs.
1. Total Annualized Present Value Costs
    Tables VI.D-1 and VI.D-2 summarize the average annualized costs for
the Stage 2 DBPR Preferred Regulatory Alternative at 3 and 7 percent
discount rates, respectively. System costs range from approximately $55
to $101 million annually at a 3 percent discount rate, with a mean
estimate of approximately $77 million per year. The mean and range of
annualized costs are similar at a 7 percent discount rate. State costs
are estimated to be between $1.70 and $1.71 million per year depending
on the discount rate. These estimates are annualized starting with the
year of promulgation. Actual dollar costs during years when most
treatment changes are expected to occur would be somewhat higher (the
same is true for benefits that occur in the future).
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2. PWS costs
    PWS costs for the Stage 2 DBPR include non-treatment costs of rule
implementation, Initial Distribution System Evaluations (IDSEs), Stage
2 DBPR monitoring plans, additional routine monitoring, and operational
evaluations. Systems required to install treatment to comply with the
MCLs will accrue the additional costs of treatment installation as well
as operation and maintenance. Significant PWS costs for IDSEs,
treatment, and monitoring are described in this section, along with a
sensitivity analysis.
    a. IDSE costs. Costs and burden associated with IDSE activities
differ depending on whether or not the system performs the IDSE and, if
so, which option a system chooses. All systems performing the IDSE are
expected to incur some costs. EPA's analysis allocated systems into
five categories to determine the costs of the IDSE--those conducting
standard monitoring, SSS, VSS, 40/30, and NTNCWS not required to do an
IDSE. EPA then developed cost estimates for each option. Tables VI.D-3,
VI.D-4, and VI.D-5 illustrate PWS costs for IDSE for systems conducting
an SMP, SSS, and 40/30, respectively.
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    b. PWS treatment costs. The number of plants changing treatment as
a result of the Stage 2 DBPR and which technology various systems will
install are determined from the compliance forecast. The percent of
systems predicted to make treatment technology changes and the
technologies predicted to be in place after implementation of the Stage
2 DBPR are shown in Table VI.D-6. The cost model includes estimates for
the cost of each technology; the results of the cost model for PWS
treatment costs are summarized in Table VI.D-7.

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    c. Monitoring costs. Because systems already sample for the Stage 1
DBPR, costs for additional routine monitoring are determined by the
change in the number of samples to be collected from the Stage 1 to the
Stage 2 DBPR. The

Stage 2 DBPR monitoring requirements for systems are based only on
population served and source water type, while the Stage 1 DBPR
requirements are also based on the number of treatment plants. With
this modification in monitoring scheme, the average system will have no
change in monitoring costs. The number of samples required is estimated
to increase for some systems but actually decrease from the Stage 1 to
the Stage 2 DBPR for many systems. Table VI.D-8 summarizes the
estimated additional routine monitoring costs for systems.
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3. State/Primacy Agency Costs
    To estimate State/Primacy Agency costs, the estimated number of
full-time equivalents (FTEs) required per activity is multiplied by the
number of labor hours per FTE, the State/Primacy Agency hourly wage,
and the number of States/Primacy Agencies. EPA estimated the number of
FTEs required per activity based on experience implementing previous
rules, such as the Stage 1 DBPR. State/Primacy Agency costs are
summarized in Table VI.D-9.
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4. Non-quantified Costs
    All significant costs that EPA has identified have been quantified.
In some instances, EPA did not include a potential cost element because
its effects are relatively minor and difficult to estimate. For
example, it may be less costly for a small system to merge with
neighboring systems than to add advanced treatment. Such changes have
both costs (legal fees and connecting infrastructure) and benefits
(economies of scale). Likewise, procuring a new source of water would
have costs for new infrastructure, but could result in lower treatment
costs. Operational costs such as changing storage tank operation were
also not considered as alternatives to treatment. These might be
options for systems with a single problem area with a long residence
time. In the absence of detailed information needed to evaluate
situations such as these, EPA has included a discussion of possible
effects where appropriate. In general, however, the expected net effect
of such situations is lower costs to PWSs. Thus, the EA tends to
present conservatively high estimates of costs in relation to non-
quantified costs.

E. Household Costs of the Stage 2 DBPR

    EPA estimates that, as a whole, households subject to the Stage 2
DBPR face minimal increases in their annual costs. Approximately 86
percent of the households potentially subject to the rule are served by
systems serving at least 10,000 people; these systems experience the
lowest increases in costs due to significant economies of scale.
Households served by small systems that add treatment will face the
greatest increases in annual costs. Table VI.E-1 summarizes annual
household cost increases for all system sizes.

                                                     Table VI.E-1.--Annual Household Cost Increases.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Percentage   Percentage
                                                                                Median        90th         95th      of annual    of annual
                                                             Total number   Mean annual     annual     percentile   percentile   household    household
                                                             of households   household    household      annual       annual        cost         cost
                                                                served          cost         cost      household    household    increase <    increase <
                                                                              increase     increase       cost         cost         $12          $120
                                                                                increase     increase    (percent)    (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Households Served by All Plants
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Systems...............................................     101,553,868        $0.62        $0.03        $0.36        $0.98           99          100
All Small Systems.........................................      14,261,241         2.20         0.10         0.79         2.57           97          100
SW <  10,000...............................................       3,251,893         4.58         0.79         2.69         7.24           95           99
SW >= 10,000..............................................      62,137,350         0.46         0.02         0.35         1.81           99          100
GW <  10,000...............................................      11,009,348         1.49         0.02         0.39         0.99           98          100
GW >= 10,000..............................................      25,155,277         0.13         0.00         0.03         0.08          100          100
-----------------------------------------------------------
                                                      Households Served by Plants Adding Treatment
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Systems...............................................      10,161,304        $5.53        $0.80       $10.04       $22.40           92           99
All Small Systems.........................................         591,623        46.48        18.47       168.85       197.62           38           89
SW <  10,000...............................................         285,911        43.05        13.79       173.53       177.93           47           85
SW >= 10,000..............................................       9,060,119         2.83         0.80         6.98        11.31           96          100
GW <  10,000...............................................         305,712        49.69        16.65       109.86       197.62           31           92
GW >= 10,000..............................................         509,562         5.97         1.37        26.82        33.84           79          100
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Detail may not add to total 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 only some of the plants for that system add treatment (this would
  result in lower household costs, however).

Source: Exhibit 7.15, USEPA 2005a.

F. Incremental Costs and Benefits of the Stage 2 DBPR

    Incremental costs and benefits are those that are incurred or
realized in reducing DBP exposures from one alternative to the next
more stringent alternative. Estimates of incremental costs and benefits
are useful in considering the economic efficiency of different
regulatory options considered by the Agency. Generally, the goal of an
incremental analysis is to identify the regulatory option where net
social benefits are maximized. However, the usefulness of this analysis
is constrained when major benefits and/or costs are not quantified or
not monetized. Also, as pointed out by the Environmental Economics
Advisory Committee of the Science Advisory Board, efficiency is not the
only appropriate criterion for social decision making (USEPA 2000i).
    For the proposed Stage 2 DBPR, presentation of incremental
quantitative benefit and cost comparisons may be unrepresentative of
the true net benefits of the rule because a significant portion of the
rule's potential benefits are not quantified, particularly potential
reproductive and developmental health effects (see Section VI.C). Table
VI.F-1 shows the incremental monetized costs and benefits for each
regulatory alternative. Evaluation of this table shows that incremental
costs generally fall within the range of incremental benefits for each
more stringent alternative. Equally important, the addition of any
benefits attributable to the non-quantified categories would add to the
benefits without any increase in costs.
    Table VI.F-1 shows that the Preferred Alternative is the least-cost
alternative. A comparison of Alternative 1 with the Preferred
Alternative shows that Alternative 1 would have approximately the same
benefits as the Preferred Alternative. The costs of Alternative 1 are
greater due to the additional control of bromate. However, the benefits
of Alternative 1 are less than the Preferred Alternative because the
Agency is not able to estimate the additional benefits of reducing the
bromate MCL. Alternative 1 was determined to be unacceptable due to the
potential for increased risk of microbial exposure. Both benefits and
costs are greater for Alternative 2 and Alternative 3 as compared to
the Preferred Alternative. However, these regulatory alternatives do
not have the risk-targeted design of the Preferred Alternative. Rather,
implementation of these stringent standards would require a large
number of systems to change treatment technology. The high costs of
these regulatory alternatives and the drastic shift in the nation's
drinking water practices were considered unwarranted at this time. (See
Section VI.A of this preamble for a description of regulatory
alternatives.)

                                            Table VI.F-1.--Incremental Costs and Benefits of the Stage 2 DBPR
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Annual       Annual      Incremental costs     Incremental benefits     Incremental net
 WTP for non-fatal bladder cancer                             costs       benefits  ----------------------------------------------        benefits
               cases                   Rule alternative   --------------------------                                              ----------------------
                                                                A            B                 C                      D                    E=D-C
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 3 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lymphoma..........................  Preferred............          $79       $1,531  $79..................  $1,531...............  $1,452
                                    Alternative 1 \1\....          254        1,377  (\1\)................  (\1\)................  (\1\)
                                    Alternative 2........          422        5,167  343..................  3,637................  3,294
                                    Alternative 3........          634        7,130  212..................  1,962................  1,750
Bronchitis........................  Preferred............           79          763  79...................  763..................  684

                                    Alternative 1 \1\....          254          686  (\1\)................  (\1\)................  (\1\)
                                    Alternative 2........          422        2,575  343..................  1,812................  1,469
                                    Alternative 3........          634        3,552  212..................  978..................  765
-----------------------------------
                                                                 7 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lymphoma..........................  Preferred............          $77       $1,246  $77..................  $1,246...............  $1,170
                                    Alternative 1 \1\....          242        1,126  (\1\)................  (\1\)................  (\1\)
                                    Alternative 2........          406        4,227  330..................  2,981................  2,651
                                    Alternative 3........          613        5,832  207..................  1,605................  1,399
Bronchitis........................  Preferred............           77          621  77...................  621..................  544
                                    Alternative 1 \1\....          242          561  (\1\)................  (\1\)................  (\1\)
                                    Alternative 2........          406        2,105  330..................  1,484................  1,154
                                    Alternative 3........          613        2,904  207..................  799..................  593
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Notes: Estimates are discounted to 2003 and given in 2003 dollars. Based on TTHM as an indicator, Villanueva et al. (2003) for baseline risk, and
  smoking/lung cancer cessation lag model. Assumes 26 percent of cases are fatal, 74 percent are non-fatal (USEPA 1999b). EPA recognizes that benefits
  may be as low as zero since causality has not yet been established between exposure to chlorinated water and bladder cancer.

 \1\ Alternative 1 appears to have fewer benefits than the Preferred Alternative because it does not incorporate the IDSE, as explained in Chapter 4.
  Furthermore, this EA does not quantify the benefits of reducing the MCL for bromate (and potentially associated cancer cases), a requirement that is
  included only in Alternative 1. This means that Alternative 1 is dominated by the Preferred Alternative in this analysis (having higher costs than the
  Preferred Alternative but lower benefits), and so it is not included in the incremental comparison of alternatives (Columns C-E). OMB states this in
  terms of comparing cost effectiveness ratios, but the same rule applies to an incremental cost, benefits, or net benefits comparison: ``When
  constructing and comparing incremental cost-effectiveness ratios, [analysts] * * * should make sure that inferior alternatives identified by the
  principles of strong and weak dominance are eliminated from consideration.'' (OMB Circular A-4, p. 10)

 Source: Exhibit 9.13, USEPA 2005a.

G. Benefits From the Reduction of Co-occurring Contaminants

    Installing certain advanced technologies to control DBPs has the
added benefit of controlling other drinking water contaminants in
addition to those specifically targeted by the Stage 2 DBPR. For
example, membrane technology installed to reduce DBP precursors can
also reduce or eliminate many other drinking water contaminants
(depending on pore size), including those that EPA may regulate in the
future. Removal of any contaminants that may face regulation could
result in future cost savings to a water system. Because of the
difficulties in establishing which systems would be affected by other
current or future rules, no estimate was made of the potential cost
savings from addressing more than one contaminant simultaneously.

H. Potential Risks From Other Contaminants

    Along with the reduction in DBPs from chlorination such as TTHM and
HAA5 as a resultof the Stage 2 DBPR, there may be increases in other
DBPs as systems switch from chlorine to alternative disinfectants. For
all disinfectants, many DBPs are not regulated and many others have not
yet been identified. EPA will continue to review new studies on DBPs
and their occurrence levels to determine if they pose possible health
risks. EPA continues to support regulation of TTHM and HAA5 as
indicators for chlorination DBP occurrence and believes that
operational and treatment changes made because of the Stage 2 DBPR will
result in an overall decrease in risk.
1. Emerging DBPs
    Iodo-DBPs and nitrogenous DBPs including halonitromethanes are DBPs
that have recently been reported (Richardson et al. 2002, Richardson
2003). One recent occurrence study sampled quarterly at twelve surface
water plants using different disinfectants across the U.S. for several
iodo-THMs and halonitromethane species (Weinberg et al. 2002). The
concentrations of iodo-THMs and halonitromethane in the majority of
samples in this study were less than the analytical minimum reporting
levels; plant-average concentrations of iodo-THM and halonitromethane
species were typically less than 0.002 mg/L, which is an order of
magnitude lower than the corresponding average concentrations of TTHM
and HAA5 at those same plants. Chloropicrin, a halonitromethane
species, was also measured in the ICR with a median concentration of
0.00019 mg/L across all surface water samples. No occurrence data exist
for the iodoacids due to the lack of a quantitative method and
standards. Further work on chemical formation of iodo-DBPs and
halonitromethanes is needed.
    Iodoacetic acid was found to be cytotoxic and genotoxic in
Salmonella and mammalian cells (Plewa et al. 2004a) as were some of the
halonitromethanes (Kundu et al. 2004; Plewa et al. 2004b). Although
potent in these in vitro screening studies, further research is needed
to determine if these DBPs are active in living systems. No conclusions
on human health risk can be drawn from such preliminary studies.
2. N-Nitrosamines
    Another group of nitrogenous DBPs are the N-nitrosamines. A number
of N-nitrosamines exist, and N-nitrosodimethylamine (NDMA), a probable
human carcinogen (USEPA 1993), has been identified as a potential
health risk in drinking water. NDMA is a contaminant from industrial
sources and a potential disinfection byproduct from reactions of
chlorine or chloramine with nitrogen containing organic matter and from
some polymers used as coagulant aids. Studies have produced new
information on the mechanism of formation of NDMA, but there is not
enough information at this time to draw conclusions regarding a
potential increase in NDMA occurrence as systems change treatment.
Although there are studies that examined the occurrence of NDMA in some
water systems, there are no systematic evaluations of the occurrence of
NDMA and other nitrosamines in U.S. waters.

Recent studies have provided new occurrence information that shows NDMA
forms in both chlorinated and chloraminated systems. Barrett et al.
(2003) reported median concentrations of less than 2ng/L for the seven
chlorine systems studied and less than 3 ng/L for 13 chloramine
systems. Another study demonstrated that factors other than
disinfectant type may play an important role in the formation of NDMA
(Schreiber and Mitch 2005). More research is underway to determine the
extent of NDMA occurrence in drinking water systems. EPA has proposed
monitoring for NDMA under Unregulated Contaminant Monitoring Rule 2 (70
FR 49094, at 49103, August 22, 2005) (USEPA 2005m).
    Risk assessments have estimated that the 10-\6\ lifetime
cancer risk level is 7 ng/L based on induction of tumors at multiple
sites. NDMA is also present in food, tobacco smoke, and industrial
emissions, and additional research is underway to determine the
relative exposure of NDMA in drinking water to these other sources.
3. Other DBPs
    Some systems, depending on bromide and organic precursor levels in
the source water and technology selection, may experience a shift to
higher ratios, or concentrations, of brominated DBPs while the overall
TTHM or HAA5 concentration may decrease. In some instances where
alternative disinfectants are used, levels of chlorite and bromate may
increase as a result of systems switching to chlorine dioxide or ozone,
respectively. However, EPA anticipates that changes in chlorite and
bromate concentration as a result of the Stage 2 DBPR will be minimal
(USEPA 2005a). For most systems, overall levels of DBPs, as well as
brominated DBP species, should decrease as a result of this rule. EPA
continues to believe that precursor removal is a highly effective
strategy to reduce levels of DBPs.
    EPA also considered the impact this rule may have on microbial
contamination that may result from altering disinfection practices. To
address this concern, the Agency developed this rule jointly with the
Long Term 2 Enhanced Surface Water Treatment Rule (LT2ESWTR). EPA