[Federal Register Volume 63, Number 157 (Friday, August 14, 1998)]
[Rules and Regulations]
[Pages 43834-43851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21746]



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_______________________________________________________________________

Part IV





Environmental Protection Agency





_______________________________________________________________________



40 CFR Parts 141 and 142



Revision of Existing Variance and Exemption Regulations To Comply With 
Requirements of the Safe Drinking Water Act; Final Rule

  Federal Register / Vol. 63, No. 157 / Friday, August 14, 1998 / Rules 
and Regulations  

[[Page 43834]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 141 and 142

[FRL-6144-2]
RIN 2020-AA37


Revision of Existing Variance and Exemption Regulations To Comply 
With Requirements of the Safe Drinking Water Act

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Agency is promulgating regulations to revise the existing 
regulations regarding Safe Drinking Water Act variances and exemptions. 
These revisions are based on the 1996 Safe Drinking Water Act 
Amendments. In addition to revising the existing language regarding 
variances and exemptions, the rule includes procedures and conditions 
under which a primacy State/Tribe or the EPA Administrator may issue 
small system variances to public water systems serving less than 10,000 
persons. This rule-making is intended to provide regulatory relief to 
all public water systems, particularly small systems.

DATES: This rule is effective September 14, 1998. Solely for judicial 
review purposes, this final rule is promulgated as of 1 p.m. eastern 
time on August 28, 1998 as provided in 40 CFR 23.7.

ADDRESSES: The rule-making record is available for inspection at the 
Water Docket, mailcode MC4101, Room EB57, Environmental Protection 
Agency, 401 M Street, SW., Washington, DC, 20460, from 9 a.m. to 4 
p.m., Monday through Friday, excluding legal holidays. For access to 
docket materials, please call (202) 260-3027 to schedule an 
appointment.

FOR FURTHER INFORMATION CONTACT: Andrew J. Hudock, Office of 
Enforcement and Compliance Assurance, Office of Regulatory Enforcement, 
Water Enforcement Division (Mailcode: 2243-A), Environmental Protection 
Agency, 401 M Street, SW., Washington, DC, 20460. Phone: (202) 564-
6032.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Statutory Authority
    A. Overview
    B. New Small System Variances
    C. General Variances and Exemptions
II. Consultation with Public Water Systems, State, Tribal and Local 
Governments, Environmental Groups, and Public Interest Groups
III. Discussion of Final Rule
    A. Purpose and Applicability
    B. Effective Date
    C. Primacy Requirements
    D. ``Plain English'' Format of New Subpart
    E. General Provisions in Subpart K
    F. Small System Variance Requirements
    1. Section 142.306. Compliance Options Analysis
    2. Section 142.306(b). Documentation of State Considerations in 
Reviewing Small System Variances
    3. Section 142.306(b)(2). Affordability Criteria
    4. Section 142.306(b)(3). Availability of Approved Variance 
Technologies
    5. Section 142.306(b)(5). Adequate Protection of Public Health
    6. Section 142.307. Terms and Conditions of Small System 
Variances
    7. Section 142.307(c)(4). Compliance Period for Small System 
Variances
    8. Sections 142.308-142.310. Public Participation Requirements 
for Issuance of a Small System Variance
    G. Sections 142.311 and 142.312. Bases for Administrator's 
Objections to State-Proposed Small System Variances
    H. Section 142.313. Bases for Administrator's Review of State 
Small System Variance Program
    I. General Variances: Time Limitation
    J. Relationship of Exemptions and Small System Variances
    K. State Revolving Fund and Capacity Development Plan Linkage to 
Exemptions and Small System Variances
    L. Exemptions: Renewals for Small Systems
IV. Cost of Rule
V. Other Administrative Requirements
    A. Executive Order 12866
    B. Regulatory Flexibility Act
    C. Paperwork Reduction Act
    D. Unfunded Mandates Reform Act
    E. Enhancing Intergovernmental Partnerships
    F. Risk to Children Analysis and Environmental Justice
    G. National Technology Transfer and Advancement Act
    H. Congressional Review Act
VI. Response to Public Comments

Regulated Entities

    Potentially regulated entities are public water systems (PWSs).

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           Category                  Example of regulated entities      
------------------------------------------------------------------------
Industry.....................  Privately-owned utilities, ancillary     
                                water systems, homeowner's associations,
                                mobile home parks, municipalities;      
                                county governments; water districts;    
                                water and sewer authorities.            
State/Local/Tribal             Publicly-owned PWSs, municipalities,     
 governments.                   county governments, water districts,    
                                State governments.                      
Federal government...........  Federally-owned PWSs.                    
------------------------------------------------------------------------

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that the Agency is now 
aware could potentially be regulated by this action. Other types of 
entities not listed in this table could also be regulated. If you have 
questions regarding the applicability of this action to a particular 
entity, consult the person listed in the preceding section, FOR FURTHER 
INFORMATION CONTACT. Please note that elsewhere throughout this 
preamble and rule, the term ``State'' has the same definition as 
currently exists in 40 CFR 141.2, i.e., ``State means the agency of the 
State or Tribal government which has jurisdiction over public water 
systems* * *.''

I. Statutory Authority

    Sections 115-117 of the Safe Drinking Water Act (SDWA) Amendments 
of 1996 (Pub. L. 104-182), enacted August 6, 1996, amended sections 
1415 and 1416 of the Act (42 U.S.C. 300g-4, 300g-5) concerning 
variances and exemptions. This rulemaking codifies, interprets, and 
implements these new provisions.

A. Overview

    As provided under the Act, under certain conditions, variances are 
available to public water systems that cannot (due to source water 
quality, or, in the case of small systems, affordability) comply with 
the national primary drinking water standards. Variances generally 
allow a system to provide drinking water that may be above the maximum 
contaminant level on the condition that the quality of the drinking 
water is still protective of public health. In the case of small system 
variances, the duration of the variance generally coincides with the 
life of the technology. An exemption, on the other hand, is intended to 
allow a system with compelling circumstances an extension of time 
before the system must comply with applicable Safe Drinking Water Act 
requirements. An exemption is limited to three years after the 
otherwise applicable compliance date, although extensions up to a total

[[Page 43835]]

of six additional years may be available to small systems under certain 
conditions.

B. New Small System Variances

    Section 1415(e) establishes new provisions by which a small public 
water system may obtain a variance from complying with National Primary 
Drinking Water Regulations (NPDWR) under certain specified conditions. 
These provisions were discussed in detail in the proposal (63 FR 19439-
40).

C. General Variances and Exemptions

    As discussed in the preamble to the proposed rule, Congress 
modified the language governing general variances (i.e., those 
variances available to systems of any size). First, a variance may now 
be granted on the condition that the system install the best 
technology, treatment technique, or other means, which the 
Administrator finds are available. This new modification changes the 
previous requirement that mandated that the system install variance 
technologies before a variance could be issued. Second, before a 
variance can be issued, Congress also requires primacy States/Tribes to 
conduct an evaluation that satisfies the State/Tribe that alternative 
sources of water are not reasonably available to a system. Today's rule 
codifies these changes.
    Congress made several changes to the exemption provisions as well. 
First, the new provisions require the schedule for an exemption to 
require compliance with each contaminant level and treatment technique 
for which the exemption was granted as soon as practicable, but not 
later than three years after the otherwise applicable compliance date 
established in section 1412(b)(10) of the Act.
    The only exception to this exemption time period is in section 
1416(b)(2)(C) of the Act, for small systems serving less than 3,300 
persons, under certain specified conditions, for which extensions may 
be renewed for one or more additional two-year periods, but not to 
exceed a total of six years of extensions, in addition to the three-
year original exemption.
    Second, the Amendments also modified section 1416 of the Act to 
specify a wider set of factors that need to be considered before an 
exemption is granted from the requirements of the NPDWR. Section 
1416(a) of the Act now requires the State/Tribe, in determining whether 
an exemption may be granted, to consider whether the public water 
system is a ``disadvantaged community'' and whether management or 
restructuring changes can be made that will result in compliance or, if 
compliance cannot be achieved, would improve the quality of the 
drinking water. Section 1416(a)(4) also requires a State/Tribe to 
consider measures to develop an alternative source of water supply. 
Finally, section 1416(b)(2)(D) of the Act states that a small system 
that has received a variance under section 1415(e) cannot receive an 
exemption under section 1416.

II. Consultation With Public Water Systems, State, Tribal and Local 
Governments, Environmental Groups, and Public Interest Groups

    As required under section 1415 of the SDWA, as amended, the Agency 
has consulted with State representatives, as well as a broad range of 
other interested parties, in the development of this rule. These 
consultations are described in the preamble to the proposed rule (63 FR 
19440-41). The rule being promulgated today has been developed in 
consultation with, and takes into consideration suggestions from, 
public water systems, environmental groups, public interest groups, the 
States, Tribes, and other interested parties.

III. Discussion of Final Rule

A. Purpose and Applicability

    Through this regulation, the Agency seeks to codify the 1996 SDWA 
amendments addressing general variances and exemptions provisions, as 
well as providing a new subpart which addresses the procedures for 
issuance of small system variances. This rule will be applicable to all 
eligible public water systems and primacy agencies (States, Tribes, and 
the Agency).

B. Effective Date

    The effective date of this rule will be September 14, 1998. The 30-
day effective date in the final regulations allows for a State to issue 
variances and exemptions as soon as the State adopts regulations no 
less stringent than today's regulations and submits any revisions to 
the State's rules to EPA for approval under 40 CFR 142.12(a)(1). A 
State may adopt these regulations at any time before or after the 30-
day effective date.
    Upon the effective date, the issuance of all variances and 
exemptions must meet requirements which are no less stringent than 
today's rule. If a State has existing regulations which are less 
stringent than today's rule and the State wishes to issue variances or 
exemptions, the State must adopt regulations which are no less 
stringent than today's rule.
    In response to commenters who were concerned that the 30-day time 
period is too short for implementation by the State, EPA wishes to 
clarify that the effective date in the regulation does not require that 
a State adopt the regulation and modify its program within 30 days of 
promulgation. A State may choose not to issue variances or exemptions 
or may choose to delay implementation until new applicable drinking 
water regulations are promulgated. The effective date provision in the 
regulation does not limit the State in its decision whether to 
implement these regulations.

C. Primacy Requirements

    Primacy States/Tribes, if they choose to issue variances and 
exemptions, are required under section 1413(a)(4) of the Safe Drinking 
Water Act to issue such variances and exemptions under conditions and 
in a manner which is not less stringent than the variance and exemption 
provisions of the Act. In addition, section 1415(e)(7)(A) of the Safe 
Drinking Water Act requires the Administrator to promulgate regulations 
that specify procedures to be used by the Administrator or the State to 
grant or deny variances. In reading these two provisions together, EPA 
believes that Congress intended that States adopt procedures no less 
stringent than those identified in this rule for issuance of small 
system variances. Therefore, the Agency has amended Sec. 142.10(d) of 
the regulations accordingly. Thus, if a primacy State wishes to issue 
small system variances, it must first enact State regulations which are 
no less stringent than the requirements in section 1415(e) of the Act 
and as embodied in this rule, and seek EPA approval of such regulations 
by submitting a program revision package.

D. ``Plain English'' Format of New Subpart

    As discussed in the preamble to the proposed rule, the Agency has 
drafted Subpart K of these regulations in a question-and-answer format 
in ``plain English'', in accordance with current Agency policy for 
regulation development. The intent of ``plain English'' is to produce 
rules which are clear, concise, straight-forward, understandable, and 
enforceable, without extensive ``legalese''. Public comments supported 
this approach.
    On June 1, 1998, President Clinton issued a memorandum directing 
that federal government documents generally be drafted in ``plain 
language''. Although the Presidential Memorandum does not apply to 
rules, such as this one, which are proposed before 1999, EPA believes 
that this rule incorporates and is fully consistent with

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the plain language concepts outlined in the Memorandum.

E. General Provisions in Subpart K

    Sections 142.301-142.305 of the small system variance regulations 
essentially codify the statutory provisions governing who can apply 
for, and who can grant, these variances. EPA has promulgated these 
provisions as proposed, with slight modifications to address public 
comments.
    For small system variances, section 1415(e)(6) of the Safe Drinking 
Water Act states that such variances are not available for (1) any 
maximum contaminant level (MCL) or treatment technique for a 
contaminant for which a NPDWR was promulgated prior to January 1, 1986, 
or (2) a NPDWR for a microbial contaminant or an indicator or treatment 
technique for microbial contaminant. As discussed in the preamble to 
the proposed rule, the Agency will not be listing small system variance 
technologies for microbial contaminants. In addition, the Agency will 
not be listing any variance technology for an MCL or treatment 
technique for a contaminant for which a NPDWR was promulgated prior to 
January 1, 1986 and not subsequently revised or allowing any variances 
for such contaminants (see Sec. 142.304). With respect to this latter 
category, the Agency interprets the section 1415(e)(6)(A) prohibition 
in the Act to apply to the level at which any contaminant was regulated 
before 1986; therefore, variances are not available to systems above 
the pre-1986 level even if that level was subsequently revised. 
However, if the Agency revises a pre-1986 level and makes it more 
stringent (i.e., makes the MCL lower), then a variance would be 
available for that contaminant, but only up to the pre-1986 MCL.
    Generally, public comments were supportive of this interpretation. 
One public commenter suggested that the Agency allow small system 
variances above the pre-1986 MCL. As noted in the preamble to the 
proposed rule (63 FR 19442), EPA believes that the scope of the 
prohibition on issuing a variance for an MCL or treatment technique for 
a contaminant with respect to which an NPDWR was promulgated prior to 
1986 is somewhat ambiguous. However, EPA believes that the best 
interpretation of this provision is that the prohibition attaches to 
the pre-1986 level for the contaminant and that no variances are 
allowable for revisions to these levels that are less stringent. The 
interpretation suggested by the commenter would allow variances for 
revised, less stringent MCLs even where compliance with an earlier, 
more stringent MCL was required years ago. This interpretation is 
inconsistent with what EPA surmises as the intent behind this 
provision, i.e., to disallow variances for contaminants where 
compliance should have been achieved long ago. Therefore, EPA is 
finalizing the regulation as proposed, but with a note stating EPA's 
interpretation of this provision.
    The Agency also received a comment suggesting that the Agency 
prohibit issuance of the small system variance for acute contaminants. 
EPA believes that such a prohibition is unnecessary. Congress has 
already prohibited the issuance of small system variances for microbial 
contaminants, including many of the acute contaminants. For any other 
contaminants, EPA may not list a variance technology unless the Agency 
makes a finding that the use of that technology for that contaminant is 
protective of public health. In addition, prior to issuance of any 
small system variance, the primacy agency must also make a finding that 
the specific terms and conditions of the variance will ensure adequate 
protection of human health. EPA believes that these determinations will 
appropriately limit variances for acute contaminants.

F. Small System Variance Requirements

    Sections 142.306-142.310 of the rule establish the conditions under 
which the primacy agency can grant small system variances. The Agency 
attempted in the proposed rule to provide flexibility in the process of 
applying and reviewing requests for small system variances. For 
example, the Agency did not specify any particular form of a variance 
application or who (the system or the State) needs to provide the 
relevant information; rather, the Agency only specified that the 
information must be sufficient for the primacy agency to make certain 
findings and that those findings must be documented in writing.
    Some commenters requested that the Agency clarify who has the 
burden of ensuring that the information necessary to issue a small 
system variance is available. The Agency recognizes that States may 
have helpful technical information that may not be readily available to 
a small system, such as sanitary surveys. States are encouraged to work 
with the small systems to determine compliance options and to develop 
information which may improve the quality of the water served by the 
system. States may provide valuable assistance to small systems that do 
not have the capacity to obtain necessary information on their own. 
States may use elements in their Capacity Development Strategies to 
assist public water systems in gathering all necessary information for 
the variance to be issued. However, the ultimate responsibility for 
providing the information necessary to support a variance rests with 
the public water system requesting a small system variance as 
prescribed in section 142.306(a) of the regulation. EPA has modified 
the regulations to clarify this.
1. Section 142.306. Compliance Options Analysis
    Sections 1415(e)(1)-(3) of the Act identify the conditions under 
which small systems may receive a small system variance. In the rule, 
Sec. 142.306(b) codifies these conditions and includes concepts related 
to the State Capacity Development Strategy. The compliance options 
analysis is an integral element of sections 1415 and 1416 of the Act, 
as well as under the rule at Sec. 142.306(b). Similar in concept to 
capacity development, a compliance options analysis can allow the State 
to consider the underlying reasons for noncompliance, and what options 
are available to the system to return to compliance for the long term. 
This portion of the regulations is final as proposed.
2. Section 142.306(b). Documentation of State Considerations in 
Reviewing Small System Variances
    The regulations require that States document their findings 
regarding a small system's eligibility for a small system variance. 
Where the State does not have primary enforcement responsibility under 
section 1413 of the Safe Drinking Water Act, the Agency will document 
its findings for the record, if it grants a small system variance.
    Some public comments on the proposed regulations indicated that 
documentation of State findings and subsequent submittal to the 
Administrator (as required under Sec. 142.311) imposed an unnecessary 
and unreasonable burden on the regulatory agency, and stated that this 
burden should lie more heavily on the public water system. EPA believes 
that it is imperative for the regulatory agency to clearly specify and 
document any information used in determining whether to grant a small 
system variance. A thorough record must be available for interested 
members of the public to understand, comment on, or possibly object to 
a proposed variance or otherwise make informed decisions relating to 
the public water system. In addition, this information is necessary

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for EPA to adequately review proposed small system variances issued as 
well as for the EPA periodic review of the State variance program as 
required by the Act. Because the State or the Administrator would be 
the actual decision makers, they are in a better position than the 
public water system to document and maintain their findings.
    Documentation required in the rule must indicate not only that a 
certain factor listed in Sec. 142.306 of the regulations was 
considered, but must also include the rationale for decisions by the 
State or EPA regarding each of the required findings, as well as the 
underlying facts supporting that decision. Note, however, that EPA does 
not believe that this documentation necessarily needs to be extensive. 
Rather, the documentation needs to be sufficient to explain how the 
variance will meet the statutory and regulatory requirements in enough 
detail that interested members of the public and EPA can understand the 
basis for the decision and determine whether to object to the variance.
3. Section 142.306(b)(2). Affordability Criteria
    Section 142.306(b)(2) of the rule codifies the statutory 
requirement that States undertake a compliance options analysis in 
accordance with the State's own affordability criteria (including 
noncommunity systems). One commenter expressed concern that, depending 
on the level of detail required, the cost of undertaking and 
documenting such an analysis could be excessive relative to the cost of 
installing an appropriate variance technology. As an example, the 
commenter indicated that in their experience, the cost of evaluating 
restructuring and consolidation options for a given project area ranged 
from $50,000 to $100,000. EPA understands that a rigorous compliance 
options analysis may be resource-intensive and expects that States and 
public water systems will tailor the level of analysis to the needs and 
resource constraints of the specific situation. EPA received no other 
comments on this section and is promulgating the rule as proposed.
4. Section 142.306(b)(3). Availability of Approved Variance 
Technologies
    Section 1412(b)(15)(D) of the Act requires that, not later than 
August 6, 1998, the Agency issue guidance or regulations regarding the 
available variance technologies for each national primary drinking 
water regulation for which a variance may be granted. The variance 
regulations include, in various sections (including Sec. 142.306), the 
requirement that, during review of an application for a small system 
variance, a primacy State or the Administrator make a finding whether, 
among other things, the Administrator has published a variance 
technology in accordance with section 1412(b)(15) for the applicable 
maximum contaminant level or treatment technique for which that 
variance is sought.
    Pursuant to section 1412(b)(15)(A) of the Act, variance 
technologies may not suffice to achieve compliance with the relevant 
maximum contaminant level or treatment technique, but the variance 
technologies must achieve the maximum reduction or inactivation 
efficiency that is affordable considering the size of the system and 
the quality of the source water. In addition, section 1412(b)(15)(B) 
requires that any identified variance technology be determined by the 
Administrator to be protective of public health.
    Some public comments requested clarification of whether an 
alternative technology, not listed by the Administrator pursuant to 
section 1412(b)(15) of the Act, may be installed through a small system 
variance. Section 142.307(b)(1) of the regulation requires that the 
terms and conditions of the small system variance include installation 
of the technology specified under section 1412(b)(15)(D) of the Act. 
The Agency recognizes the importance and beneficial value of new 
alternative technologies. However, Congress specifically mandated that 
the Administrator publish a list of technologies for small systems and 
that only the listed technologies may be installed through issuance of 
a small system variance technology. A State or any other party may 
petition the Administrator to consider the listing of any new 
alternative technology. However, section 1415(e)(2) of the Act makes 
clear that the Agency must specifically list a small system technology 
before a State may allow a system to install such technology through a 
small system variance.
5. Section 142.306(b)(5). Adequate Protection of Public Health
    Section 142.306(b)(5) of the rule codifies the statutory 
requirement that the primacy agency grant a small system variance only 
where the terms ensure adequate protection of public health, 
considering the source water quality and removal efficiencies and 
expected useful life of the small systems variance technology. Under 
section 1412(b)(15)(B) of the Act, the Administrator, in identifying 
variance technologies for small systems, must determine that the 
technology is protective of public health considering the quality of 
the source water to be treated and the expected useful life of the 
technology. As explained in the preamble to the proposed rule, the 
Agency believes that Congress intended the Administrator to make a 
determination that, on a national level, any variance technology 
identified is generally protective of public health when applied within 
general source water conditions and operating and maintenance 
procedures. However, recognizing that the level of public health 
protection afforded by a specific technology could be dependent on 
site-specific factors that may vary system by system, Congress provided 
for a corresponding requirement that the State also make a 
determination that the terms of the variance as applied to a particular 
system adequately protect public health.
    As required under section 1412(b)(15)(C) of the Act, the variance 
technology guidance under section 1412(b)(15)(D) will identify 
assumptions used by the Administrator in determining that each 
technology is protective of public health. In doing so, the guidance 
will identify the typical removal efficiency achieved by each variance 
technology listed by the Administrator, considering the overall 
capabilities of the treatment process and the source waters on which 
the technology would typically be applied. The guidance will also 
discuss source water characteristics that can adversely affect the 
removal of the contaminant by the process. The State may use this 
information in the guidance to set specific terms and conditions on the 
operation of the technology that will ensure adequate protection of 
public health.
    In the proposed rule, EPA solicited comment on whether it would be 
useful and appropriate to provide additional technology-specific 
guidance on site-specific factors that should be considered and 
appropriate terms and conditions that may be needed to ensure adequate 
protection of public health. In general, commenters were strongly 
supportive of this idea. Therefore, EPA plans to develop such guidance 
and make it available as expeditiously as possible after promulgation 
of this rule. This guidance will cover those contaminants, if any, and 
available small system variance technologies which are identified in 
the initial listing prepared under section 1412(b)(15)(C). As 
additional contaminants and small system variance technologies are 
identified in the future, the new guidance listing these technologies 
will include information on consideration of

[[Page 43838]]

site-specific factors and appropriate terms and conditions that may be 
needed to ensure adequate protection of public health.
    Several commenters, while endorsing the need for such guidance, 
also indicated that it should be informational in nature, and not 
undermine the statutory authority of primacy States to determine that 
the terms of the variance ensure adequate protection of public health. 
As stated in the preamble to the proposed rule, EPA understands that 
Congress clearly left the responsibility to consider site-specific 
factors and define appropriate terms and conditions to ensure adequate 
protection of public health to the primacy agencies, and EPA does not 
wish to diminish that responsibility. At the same time, the Agency 
believes (and commenters seem to agree) that it may be efficient for 
EPA to identify, in the context of its determination that a technology 
is protective, those factors of which the Agency is aware that may be 
appropriate for the State to consider on a site-specific basis and to 
suggest appropriate responses to situations which pose additional 
risks. It is in this spirit that EPA has decided to develop the 
guidance discussed in this section.
    EPA also requested comment in the proposed rule regarding the 
appropriateness of including, in the final rule, a requirement that 
States specifically consider impacts on sensitive subpopulations in 
their determination of adequate public health protection. Commenters 
were not supportive of such a requirement and EPA has decided not to 
include it in the final rule. As an alternative, EPA indicated that it 
may include, in the guidance discussed above, information on specific 
factors that may result in special risks to sensitive subpopulations 
and suggestions on how to address such risks. States could then use 
this information as appropriate to support their determination of 
adequate protection of public health. Commenters were supportive of 
this alternative approach. Consequently, EPA will include, in the 
guidance on site-specific factors and appropriate terms and conditions, 
information on special risks to sensitive subpopulations, where such 
risks have been identified, and suggestions on how to address them.
6. Section 142.307. Terms and Conditions of Small System Variances
    Section 142.307 outlines what terms and conditions must be included 
in a small system variance. The Agency received no comments on this 
section and is thus promulgating it as proposed.
7. Section 142.307(c)(4). Compliance Period for Small System Variances
    Section 142.307(c)(4) of the rule codifies the statutory language 
regarding the duration of variances. The Agency is promulgating this 
section as proposed.
    As discussed in the preamble to the proposed rule, the Agency 
interprets section 1415(e)(4) to allow the primacy agency to grant the 
two-year extension to the compliance period at the time of issuance of 
the variance, upon a determination by the primacy State or the 
Administrator that those two additional years are necessary to ensure 
compliance. Such a determination should be supported with sufficient 
documentation. Therefore, it is possible, under certain conditions, 
that small systems may receive a five-year compliance schedule to 
achieve compliance with the terms and conditions of the small system 
variance.
8. Sections 142.308-142.310. Public Participation Requirements for 
Issuance of a Small System Variance
a. Overview
    The Agency is required under section 1415(e)(7)(A)(i) of the Act to 
promulgate regulations specifying requirements for notifying the 
consumers of the public water system that a small system variance is 
proposed to be granted (including information regarding the contaminant 
and variance) and requirements for a public hearing on the small system 
variance before the variance is granted. Today's rule addresses this 
statutory mandate through Secs. 142.308-142.310 of the regulations. 
These requirements are also intended to ensure that persons served by 
the system who may wish to file a petition with the Administrator to 
object to the variance, as provided for in section 1415(e)(10)(B) of 
the Act, have adequate information and time to do so.
    The overall structure of the process intended by today's 
regulations for granting a small system variance has been modified in 
response to public comment. This process, as modified, is outlined 
below, with changes to the process discussed in further detail in the 
paragraphs which follow the outline:
    (1) A small public water system submits an application to the 
primacy agency for a small system variance;
    (2) The primacy agency reviews the small system's application and 
performs a compliance options analysis to determine if a small system 
variance should be issued to the public water system.
    (3) If a small system variance can be issued in accordance with the 
Act and the regulations, and upon finding and documenting the required 
information under Section 142.307 of the rule, the primacy agency 
establishes the terms and conditions of the proposed small system 
variance;
    (4) The primacy agency or public water system provides notice to 
persons served by the system of the primacy agency's intent to propose 
the small system variance and of a public hearing on the proposed 
variance, including information on the contaminant and its potential 
health effects, the compliance options considered, and the terms and 
conditions of the proposed variance; this information must be provided 
at least 30 days prior to the date of the public meeting;
    (5) The primacy agency prepares a draft of the small system 
variance, including terms and conditions, and, if the public meeting 
occurs prior to proposal of the small system variance, makes the draft 
variance available to the public no later than the public meeting;
    (6) The primacy agency proposes the variance by publishing a notice 
in the State equivalent of the Federal Register, or in a newspaper 
widely distributed through the State, or, in the case of the 
Administrator, in the Federal Register;
    (7) Either before, or within 15 days after publication of this 
notice that the variance has been proposed, the primacy agency conducts 
a public hearing on the draft proposed small system variance;
    (8) If a State proposes to issue a small system variance to a 
public water system serving 3,300 or fewer persons, the State must 
submit the proposed small system variance and all supporting 
documentation to EPA for review; if a State proposes to issue a small 
system variance to a public water system serving a population of more 
than 3,300 and fewer than 10,000 persons, the State must submit the 
proposed small system variance and all supporting documentation, 
including any public comments received prior to this submission, to EPA 
for review and approval of the proposed variance;
    (9) Within thirty days of the proposal date (the date on which the 
primacy agency publishes the notice of the proposed variance) of any 
small system variance, persons served by the system may petition the 
Administrator to object to the proposed small system variance; and
    (10) The Administrator must respond to all such petitions within 60 
days of receiving them and may object to a proposed small system 
variance within 90 days of the proposal date.
    After reviewing public comments on the proposed regulations, EPA 
has

[[Page 43839]]

modified these regulations to provide that either the State or public 
water system must provide the notice for a public meeting on the small 
system variance at the same time that the State notifies the public 
that it intends to propose the small system variance. EPA received many 
public comments indicating that, in many circumstances, the public 
water system would be in a better position than the State to identify 
the persons served by the system and the public water system should 
have the burden of providing public notice. The revised regulation 
allows the State to direct the public water system to conduct the 
public notification requirements in the regulation.
    In addition, the Agency received comments that not all States may 
be able to publish such public notice in a State equivalent to the 
Federal Register. In response, the regulations now provide that the 
State may publish the notice of the proposed variance in a newspaper 
with wide circulation in the State.
    In summary, the regulation requires that at least one public notice 
must be provided to the system's consumers (as defined in section 
III.F.8.d. of the preamble) (in addition to publishing notice of the 
proposed variance in the State Register or Federal Register or in a 
newspaper widely distributed in the State) to fulfill the requirement 
of notifying the public of the public hearing and proposal of the small 
system variance. In any case, the Administrator encourages States and 
small systems to engage the public in the development and issuance of 
the small system variance early in the process.
b. Notice by Public Water Systems at the Time that a Small System 
Variance Application Is Submitted
    Based on public comments on the proposed regulations, the Agency is 
not mandating that the public water system provide notice to the 
persons served by the system that the system is applying for a small 
system variance. (Such additional requirements may be imposed through 
State regulations.) Other regulations, such as the public notification 
rule and the consumer confidence rule, will ensure that the persons 
served by the system are aware that the system is operating in 
violation of the applicable drinking water regulation. Therefore, 
requiring this initial notice may be redundant in nature and may not be 
an efficient manner of notifying the public of the condition of the 
drinking water being supplied by the public water system. Even though 
this regulation does not require the proposed early notice, the Agency 
encourages early involvement of the public in the small system variance 
process.
c. Public Meeting Requirement
    Section 142.309 of the regulations addresses the requirements for a 
public meeting on a draft proposed small system variance and notice of 
the public meeting. Consistent with section 1415(e)(7)(A)(i) of the 
Act, a State or the Administrator is required to provide for at least 
one (1) public meeting on the small system variance before it is 
granted. However, before holding a public meeting, the State or the 
Administrator must make public a draft of the proposed small system 
variance along with various supporting information as specified in 
Sec. 142.308(c) of the regulations, to ensure that the public is 
adequately informed of the terms and conditions likely to be in the 
proposed small system variance. The State or the Administrator must 
notify the public of the public meeting (and provide the required 
supporting information) at least 30 days before the date of the 
meeting. EPA is promulgating this section as proposed.
d. Manner of Public Notification
    Section 142.308 of the proposed regulations codifies the Safe 
Drinking Water Act provision that any person served by the system may 
petition the Administrator to object to the granting of a variance.
    Public comments requested that the Agency clarify the terms 
``customers'', ``consumers'', and ``persons served'' as it is used in 
this regulation. EPA interprets ``customers'' to mean billing units or 
other service connections to which water is delivered by the public 
water system. (Other service connections could include, for example, 
municipal facilities which receive service but which might not be 
billed.) On the other hand, EPA interprets ``consumers'' and ``persons 
served'' more broadly to mean persons who receive drinking water from 
the public water system on a regular basis. The term ``person served'' 
or ``consumer'' includes customers, as defined above, and other persons 
who are served by the public water system on a regular basis, such as 
factory workers and tenants of apartment houses and condominiums, who 
may not receive water bills. The notice requirements in these 
regulations are intended to provide adequate notice for persons who may 
wish to participate in the variance process or petition the 
Administrator to object to the variance. The Agency sought to ensure 
that these definitions are consistent with other supporting regulations 
currently in development, including the Consumer Confidence Report 
regulations.
    Based on public comments, the Agency is clarifying whether the 
primacy agency or the public water system has the burden for the public 
notice. The Agency recognizes that there may be certain small systems 
that would require assistance from the primacy agency to satisfy the 
public notification requirements within the small system variance 
process. The Agency encourages the primacy agency to work with such 
systems to ensure that the public is involved in the variance process. 
However, the Agency does not intend to place the actual burden of the 
public notice on the primacy agency in these regulations. In order to 
clarify the Agency's intention, the final regulations make clear that 
either the primacy agency or the public water system must provide the 
public notice. The primacy agency maintains flexibility to direct the 
public water system to provide such notice. For purposes of Agency 
review and/or approval of a small system variance, the Agency is 
concerned that the public notification requirements within the 
regulations are satisfied, not with which entity actually conducts the 
notice.
    Operators of small systems requested that the Agency address the 
issue of whether persons who are not billing customers of the system 
must be provided a notice by direct mail considering the burden 
associated with identifying and obtaining mailing addresses for non-
billed consumers of a system's water. In light of all comments, the 
Agency is retaining the requirement that individual notice only need be 
provided to billed customers of the system. In addition, notice must be 
provided in a brief and concise manner to regular consumers who are not 
billing customers, by some other reasonable method, such as publication 
in a local newspaper, posting in public places, or delivery to 
community organizations. Although this might not reach persons outside 
the service area, it would reach factory workers and tenants of 
apartment houses and condominiums, even if those persons do not receive 
water bills. At the time of variance proposal, however, the State must 
publish a notice in a State-wide publication, thereby reaching 
interested persons who might not receive water bills or live in the 
service area. Today's rule would therefore require a State or public 
water system to provide some form of notice to all persons served by 
the system on a regular basis.

[[Page 43840]]

e. Content of Notices
    Section 1415(e)(7)(A)(i) of the Safe Drinking Water Act requires 
that public notification include information regarding the contaminant 
and variance. Section 142.308(c) of the regulations implements this 
statutory requirement. In this provision, the Agency is requiring, 
along with other information, specific health effects language to be 
used in the notices. The Agency is requiring use of the health effects 
language developed for the Consumer Confidence Report Rule. The Agency 
believes that there are many benefits to the use of standard health 
effects language in the various public notice provisions of the amended 
Safe Drinking Water Act, particularly in reducing confusion for the 
systems and the public.
    In addition, in response to comments, EPA has revised the 
multilingual notification requirement in Sec. 142.308(c)(7) of the 
proposed regulations. With this revision, the primacy agency will 
determine what constitutes a large proportion of non-English-speaking 
residents, and thus when the multilingual notification requirements are 
applicable. The multilingual notification requirement is consistent 
with the Agency's Consumer Confidence Report Rule.
    The Agency received several comments expressing concern that small 
public water systems lack the resources to provide public notification 
materials in foreign languages, and suggesting that EPA either 
eliminate this requirement or develop such materials in the ten most 
frequently used languages. In response, the Agency notes that systems 
are not required to provide a translation of the materials listed in 
section 142.308(c), but only ``information in the appropriate language 
regarding the content and importance of the notice.'' (Section 
142.308(c)(7)) EPA envisions that in many cases this would entail a 
relatively short statement indicating that the enclosed materials 
contain information on a proposed variance from national drinking water 
regulations which could affect the level of public health protection 
afforded to consumers of the system's water. Of course, EPA would 
encourage systems that do have the resources to provide more complete 
translations of the public notification materials in cases where a 
significant non-English-speaking population is present.
f. Consumer Petition Process
    Section 1415(e)(10)(B) of the Safe Drinking Water Act allows for 
persons served by the system to petition the Administrator to object to 
the granting of a small system variance; such petitions must be 
submitted not later than thirty days after a State proposes to issue a 
small system variance. This statutory provision is implemented in 
section 142.310 of today's rule. EPA has clarified the regulation to 
specify that the date of ``proposal'' is the date upon which the State 
publishes its notice of proposal in a State-wide publication. Consumer 
petitions should be mailed to the EPA Regional Administrator.

G. Sections 142.311 and 142.312. Bases for Administrator's Objections 
to State-Proposed Small System Variances

    Pursuant to section 1415(e)(9) of the Act, Sec. 142.312(a) of the 
rule requires a primacy State, which is proposing to grant a small 
system variance to a public water system serving more than 3,300 and 
fewer than 10,000 persons, to submit that variance to the Administrator 
for review and approval prior to issuance. Section 142.312(c) requires 
that, if the Administrator disapproves the variance, the Administrator 
notify the State in writing of the reasons for such disapproval. Such 
disapproval must be based upon a determination that the small system 
did not meet the requirements for a variance under the Act and 
regulations, including the requirement that the system cannot afford to 
comply with the maximum contaminant level (MCL) or treatment technique 
for which the variance is being sought, in accordance with the State 
affordability criteria.
    In addition, Sec. 142.311(a) of the rule requires a primacy State, 
which is proposing to grant a small system variance to a public water 
system serving 3,300 or fewer persons, to submit that variance to the 
Administrator for review prior to issuance. Some public comments to the 
proposed regulations suggested that the Administrator does not have the 
statutory authority to review proposed small system variances for 
systems serving fewer than 3,300 persons and that the proposed 
regulations are therefore in conflict with section 1415(e)(1) and 
1415(e)(8) of the Act. The Agency does not believe that this 
interpretation of the statute is appropriate since it is inconsistent 
with the Administrator's broad review authority provided in section 
1415(e)(10)(A) of the Act.
    The Act specifies two different and distinct procedures for 
reviewing and objecting to any proposed small system variance proposed 
by a State. Section 1415(e)(10)(A) of the Act addresses EPA review of 
``any'' variance proposed by the State and its ability to object to 
``any'' proposed variance. Section 1415(e)(10)(B) of the Act addresses 
consumer petitions to the Administrator requesting that the 
Administrator exercise objection authority under section 1415(e)(10)(A) 
of the Act. Section 1415(e)(10)(B) does not limit EPA's authority to 
review and object to a proposed small system variance and is 
independent from the Administrator's authority under section 
1415(e)(10)(A).
    The Agency's interpretation of section 1415(e)(10) of the Act is 
not in conflict with section 1415(e)(1) and 1415(e)(8) of the Act. 
Section 1415(e)(1) allows the primacy agency to issue small system 
variances in accordance with the Act and regulations. EPA's review and/
or objection to a small system variance does not diminish a State's 
responsibility to decide whether to issue a small system variance. 
Section 1415(e)(8) of the Act does not conflict with the Agency's 
ability to review and/or object to a small system variance. Section 
1415(e)(8) solely addresses EPA's review of a State's variance program 
as a whole and is independent from EPA's authority under section 
1415(e)(10)(A) to object to a specific proposed variance.
    In addition, Congress mandated under section 1415(e)(9) that the 
State submit for review and approval by the Administrator any small 
system variance proposed for a system serving more than 3,300 and fewer 
than 10,000 persons. Before a State grants a small system variance for 
a public water system serving this population, the Administrator must 
formally approve the variance. Without such approval, a State may not 
grant the variance. The Administrator's approval of variances under 
section 1415(e)(9) of the Act is independent from the Administrator's 
authority to review ``any'' variance under section 1415(e)(10) of the 
Act.
    Section 142.311(a) of the regulations, which requires that the 
State submit the proposed small system variance and all supporting 
information to the Administrator, is necessary to implement section 
1415(e)(10)(A) of the Act, which allows the Administrator to review and 
object to any proposed small system variance. Section 142.311(b) of the 
regulation is simply the codification of section 1415(e)(10)(A) of the 
Act included in the regulation for purposes of clarity.

H. Section 142.313. Bases for Administrator's Review of State Small 
System Variance Program

    Pursuant to section 1415(e)(8)(A) of the Safe Drinking Water Act, 
Sec. 142.313 of the rule requires the Administrator to periodically 
review the primacy State's

[[Page 43841]]

variance program to determine whether variances granted by the State 
comply with the requirements of the Act. EPA received no comments on 
this section and is promulgating it as proposed.

I. General Variances: Time Limitation

    Section 1415(a)(1)(A)(ii) of the Safe Drinking Water Act states 
that a schedule prescribed under a general variance must require 
compliance, by the public water system, with each maximum contaminant 
level or treatment technique requirement with respect to which the 
variance was granted, as expeditiously as practicable (as the State may 
reasonably determine) but sets no specific final date for compliance 
other than that in the compliance schedule. EPA requested comment on 
whether the Agency should specify a time-frame in the final rule, 
consistent with the time frame for small system variances in the Act. 
Commenters were generally opposed to this approach.
    The Agency recognizes that in issuing a general variance the State 
has the flexibility to prescribe time frames within a schedule to reach 
compliance with the conditions of the variance and the Act, including 
installation of the best available technology. However, consistent with 
section 1415(e) of the Act, the Agency presumes that a reasonable time 
frame for public water systems to install the best available technology 
is within five years of granting of the variance. The Agency recognizes 
that there may be situations in which five years may not be a feasible 
time frame to install such technology. However, when such situations 
are presented, efforts must be made to ensure that the public be 
notified and involved in the variance process. Today's regulations 
require that if a State prescribes a schedule in a general variance 
that requires compliance beyond five years of the issuance date the 
State must (1) document its rationale for the extended compliance 
schedule, (2) discuss the rationale for the extended compliance 
schedule in the required public notice and opportunity for public 
hearing, and (3) provide the shortest practicable time schedule 
feasible under the circumstances. Such requirements are consistent with 
the theme of the 1996 Amendments to the Safe Drinking Water to maximize 
public participation in major decisions affecting drinking water. Under 
this approach, the State retains flexibility in determining the time 
frame for compliance under a general variance as expeditiously as 
practicable.

J. Relationship of Exemptions and Small System Variances

    Under section 1416(b)(2)(D) of the Safe Drinking Water Act, a 
public water system may not receive an exemption under section 1416 if 
the system was granted a small system variance under section 1415(e) of 
the Act. The Act is silent on whether a small system variance under 
section 1415(e) may be issued after the issuance of an exemption under 
section 1416. In the proposal, EPA asked for comment on this and 
commenters were generally in favor of allowing a variance after an 
exemption. However, after consideration of public comment, policy 
considerations and the statutory framework in sections 1415(e) and 
1416, the Agency believes that public water systems should generally 
not receive a variance after receiving an exemption for the same 
contaminant.
    The Agency interprets section 1416(b)(1)(A) to require that the 
endpoint of a compliance schedule established under an exemption be 
full compliance with the maximum contaminant level or treatment 
technique for which the exemption was granted. During the stakeholders 
process and the public comment period, the Agency received comments 
indicating that the regulations should implement the exemption 
provisions of the Act to allow a public water system which has received 
an exemption to subsequently receive a variance for that same 
contaminant if it turns out that there is no affordable compliance 
technology for the system. While the final rule promulgated today does 
not explicitly prohibit the issuance of a variance after an exemption, 
EPA believes that it is generally inappropriate. Rather, EPA believes 
that the determination of whether there is an affordable compliance 
technology for the system should be made in the initial compliance 
options analysis. However, if, during the course of the compliance 
schedule established for a small public water system's exemption, the 
regulations for the contaminant for which the exemption was granted 
were revised and the MCL was made more stringent, then the system, with 
a new regulatory compliance date and new MCL, would have the option of 
seeking full compliance with the new MCL by the compliance date, 
seeking a small system variance or seeking an exemption.
    Congress established two distinct mechanisms to allow systems 
regulatory alternatives. Exemptions were established to allow public 
water systems more time to comply with a newly promulgated national 
primary drinking water regulation under certain conditions. Under an 
exemption, under certain conditions, a small system may have up to 9 
years, including extensions, to achieve full compliance. Small system 
variances were established to allow small public water systems up to a 
possible 5 years to install alternative technologies under certain 
conditions. Upon completion of the compliance options analysis, the 
public water system should know whether an exemption or small system 
variance is the proper route to pursue. If a small system cannot afford 
to install a small system technology within the maximum allowable 5-
year period, the primacy agency must consider other alternatives to 
address the noncompliance of the system. To grant a small system 
variance after an exemption could prolong the installation of the 
proper treatment technology well beyond the statutory time frames 
provided for either an exemption or a variance. Therefore, the Agency 
believes that it is generally inappropriate to grant a small system 
variance after an exemption.
    The Agency also notes that, for a primacy agency to grant a small 
system variance, it must determine that compliance with the MCL is not 
affordable, according to the primacy agency's affordability criteria, 
through treatment, alternate sources of water supply, restructuring or 
consolidation, or obtaining financial assistance from the drinking 
water State Revolving Fund (SRF) or any other Federal or State program. 
In contrast, an exemption must include a schedule to achieve compliance 
within three years (with up to three two-year extensions for small 
systems in some circumstances). EPA believes that it would generally be 
difficult for a primacy agency to determine that compliance with the 
MCL is not affordable for a system that had previously been granted an 
exemption, unless there has been a significant unforeseen change in 
circumstances since the initial compliance options analysis upon which 
the exemption was based. By ``unforeseen changes in circumstances'' 
that may cause a primacy agency to determine that a system cannot 
afford to comply after an initial compliance determination, EPA means 
the following circumstances:

    (1) Significant changes in source water due to natural disasters 
in the community;
    (2) Small public water systems or primacy agencies could not 
have reasonably obtained all information related to source water 
quality and the absence of such information led to an improper 
determination that an

[[Page 43842]]

exemption, as opposed to a small system variance, should be granted;
    (3) Significant unforeseen change in economic circumstances, such 
as a severe economic downturn in the community, which would make the 
cost of the compliance technology unaffordable according to the primacy 
agency's affordability criteria. Failure to obtain funding from any 
particular source (e.g., State or Federal assistance program) would not 
automatically indicate that the compliance technology is unaffordable. 
The primacy agency should consider all financial circumstances, 
including alternate funding sources, in determining affordability; or,
    (4) The public water system installs and is properly operating the 
best available technology, as designated by the Administrator, and is 
in compliance with all other requirements of the Act and regulations, 
but continues to be in non-compliance with the MCL or treatment 
technique for which the exemption was granted.

    If such a change should occur, and a system will not be able to 
comply with the MCL within the established time frame, the system 
should notify the primacy agency immediately, rather than waiting for 
the next compliance deadline to pass, and the primacy agency should 
take appropriate action. The Agency believes that the most appropriate 
mechanism to address such a system is through an administrative order 
or consent order allowing the small system to install a small system 
variance technology, as designated by the Administrator, as an interim 
measure toward achieving full compliance in the future. Regardless of 
the mechanism selected, however, the primacy agency must ensure that 
the terms of any variance or order provide adequate protection of 
public health.

K. State Revolving Fund and Capacity Development Plan Linkage to 
Exemptions and Small System Variances

    Strong statutory linkage exists between the small system variance 
and exemption provisions in sections 1415(e) and 1416 of the Safe 
Drinking Water Act and the State Revolving Fund provisions of section 
1452 of the Act. This linkage was discussed in the proposal (63 FR 
19448). The State Revolving Fund provisions and the variance and 
exemption provisions can be used together to complete two important 
tasks: (1) Ensure that State Revolving Fund assistance is targeted 
toward those public water systems most in need of such assistance, and 
(2) allow systems which receive such assistance to be able to use it in 
a way that will either produce full compliance with an MCL within the 
compliance schedule established by the State (in the case of systems 
receiving an exemption), or improve the quality of water delivered to 
consumers (in the case of systems receiving a variance).
    This linkage is reflected in today's final rule. Section 
142.20(b)(1) requires that before finding that management and 
restructuring changes cannot be made, as part of the compliance options 
analysis required for an exemption, the State must consider the 
availability of SRF loan fund assistance to implement, among other 
alternatives, activities consistent with the State's Capacity 
Development Strategy to help the public water system acquire and 
maintain technical, financial and managerial capacity to come into 
compliance with the Act. Section 142.306(b)(2)(iv) requires 
consideration of the possibility of obtaining financial assistance from 
the drinking water SRF as part of the compliance options analysis 
required for a small system variance.
    Commenters expressed two concerns with these provisions. One 
commenter was concerned that the provisions not be interpreted in a way 
that would undermine State authority to develop individual Capacity 
Development Strategies in accordance with section 1420 of the Act, or 
used as grounds for withholding SRF funds because of a State decision 
regarding a particular system. EPA is well aware that under section 
1420(c)(4) of the Act, State decisions regarding implementation of the 
Capacity Development Strategy with respect to individual systems are 
not subject to review by the Administrator and may not serve as the 
basis of withholding funds under section 1452 of the Act. EPA has no 
intention of using its oversight of the variance and exemption 
provisions of the Act as grounds for withholding funds under section 
1452 of the Act, and does not see any conflict between these rules and 
State authority with respect to Capacity Development Strategies under 
section 1420 of the Act. Rather, the linkages in these rules are 
provided to highlight a State's opportunity to use its Capacity 
Development Strategy to assist systems in acquiring the technical, 
financial and managerial capacity needed to either come into compliance 
with an MCL or treatment technique after an appropriate period of time, 
or to install and operate an appropriate variance technology.
    Several commenters expressed concern with the requirement that the 
SRF be considered as a possible funding source as part of the 
compliance options analysis to obtain a small system variance. These 
commenters indicated that small systems may lack the overall capacity 
required to qualify for SRF loans, and that this requirement in today's 
rule could be interpreted as limiting State flexibility in managing its 
SRF programs. EPA does not believe that this is an issue. The 
requirement to consider the SRF as a possible funding source does not 
mean that the State must provide SRF assistance to a system seeking a 
variance (or exemption), only that this option should be considered as 
part of the initial compliance options analysis. States retain full 
authority to allocate SRF funds in accordance with the provisions of 
the Act. EPA believes that the requirement to consider the SRF as a 
possible funding source to assist small systems in achieving compliance 
is fully consistent with those provisions.

L. Exemption: Renewals for Small Systems

    Under section 1416(b)(2)(A) of the Safe Drinking Water Act, an 
exemption issued to a public water system must prescribe a schedule 
requiring compliance by the system with each contaminant level and 
treatment technique requirement with respect to which the exemption was 
granted as expeditiously as practicable (as the State may reasonably 
determine) but not later than three years after the otherwise 
applicable compliance date established in section 1412(b)(10). Section 
1416(b)(2)(C) states ``[i]n the case of a system which does not serve 
more than a population of 3,300 and which needs financial assistance 
for the necessary improvements, an exemption * * * may be renewed for 
one or more additional 2-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 of the established compliance 
schedule.
    The intensive compliance options analysis required, under 
Sec. 142.20(b)(1) and Sec. 142.50(a), to be performed before an 
exemption is initially granted should indicate whether an exemption is 
appropriate. If an exemption is appropriate after the compliance 
options analysis, the primacy agency should facilitate and work with 
the system to ensure compliance as soon as practicable, but within 
three years of the otherwise applicable compliance date, including 
providing financial assistance under section 1452 of the Act. Under 
Sec. 142.20(b)(2) and Sec. 142.56 of the rule, two-year extensions of 
exemptions pursuant to section 1416(b)(2)(C) of the Act may only be 
granted to systems which serve 3,300 or fewer people and which need 
financial assistance, and upon State review of the small system's

[[Page 43843]]

progress and the State's subsequent determination that the small system 
is taking all practicable steps to meet the requirements of the Act.
    As discussed in the preamble to the proposed rule, the Agency 
interprets the extension provisions for public water systems serving 
less than 3,300 persons to allow the primacy agency to grant the 
additional two-year periods at the time of initial issuance of the 
exemption for those small systems that need financial assistance for 
the necessary improvements. Public comments on this issue in the 
proposed rule were generally supportive of this approach.
    This interpretation is based on the statute and EPA's recognition 
that there may be some instances where certain small systems serving 
less than 3,300 persons may require more than three years to achieve 
full compliance under an exemption. Additional time may allow for the 
small system to acquire the necessary financial assistance, 
restructure, find an alternative source water and/or make necessary 
capital improvements. Compliance schedules under exemptions should 
reflect a practical time line for the small public water system to meet 
the established milestones as expeditiously as possible. The Agency 
anticipates that most small systems will achieve full compliance under 
exemptions in less than 3 years after the otherwise applicable 
compliance date but recognizes that this determination should be made 
on a case-by-case basis considering specific factors of the given small 
public water system. Therefore, a system which serves less than 3,300 
persons and which needs financial assistance for the necessary 
improvements may receive a compliance schedule under an exemption with 
milestone dates later than three years from the issuance date of the 
exemption. In any case, the primacy agency is required to establish a 
schedule requiring compliance as expeditiously as practicable but no 
later than the statutory time frames.
    This interpretation does not affect the requirement under section 
1416(b)(2)(C) of the Act that the primacy agency must ``renew'' the 
exemption every two years after the first 3 years to ensure that the 
system is taking all practicable steps to meet the requirements of the 
Act and the established compliance schedule. EPA interprets the 
``renewal'' requirement to mean that the primacy agency must review the 
system's compliance with the exemption and document its findings of 
continued eligibility. The Agency anticipates that the primacy agency's 
review of the public water system will involve a review of the public 
water system's efforts to comply with the established milestones and 
other requirements of the Act. Even though not required by section 1416 
of the Act, the primacy State may wish to consider the incorporation of 
public participation into this review process. If the primacy agency 
determines that a small system is not taking all practical steps to 
comply with the requirements, the exemption should not be continued and 
the public water system would be subject to an enforcement response to 
address violations of the established compliance schedule. Where an 
exemption is continued, the primacy agency must ensure that at the end 
of the exemption period, the public water system is in full compliance 
with applicable national primary drinking water regulation.
    The Agency received public comments requesting that the Agency 
clarify how the 6-year limit on renewals of exemptions for small 
systems applies to existing exemptions issued before enactment of the 
1996 Amendments. As discussed above, under section 1416(b)(2)(C), a 
State may renew an exemption issued to a small system serving less than 
3,300 persons for one or more additional 2-year periods under certain 
conditions, but not to exceed a total of 6 years. The Agency interprets 
this provision to be effective upon the effective date of the 1996 
Amendments to the Safe Drinking Water Act. Therefore, the six-year 
limit on renewals of exemptions is effective as of August 6, 1996. 
Therefore, for example, if a three-year, small system exemption was 
issued by a primacy agency in 1993, the primacy agency may, under 
certain conditions as specified in the Act, renew the exemption, 
through extensions and the requisite reviews, until 2002. No existing 
exemption for a small system may remain in effect for more than nine 
years beyond the date that it was initially issued.

IV. Cost of Rule

    The cost of the rule and economic analysis were described in detail 
in the preamble to the proposed rule. (63 FR 19448-50)
    Based upon this economic impact analysis (EIA), public water 
systems would realize net economic benefits as a result of today's 
rule. Results of the impact analysis show that, if all eligible public 
water systems in all 56 States and territories apply for and are 
granted variances under sections 1415(a) or 1415(e), or exemptions 
under today's rule, for the rules considered in this analysis, then the 
regulation will show a net annualized economic benefit of $573,706 to 
the Agency, States, and public water systems, not including benefits 
due to increased public health protection or savings associated with 
the installation of affordable technologies. A summary of this EIA is 
available in the Office of Water Docket, #W-97-26.
    Based on this economic impact analysis, the variance and exemption 
rule is not considered to have a significant impact in the form of an 
unfunded mandate of $100,000,000 or more or in any year as identified 
under the Unfunded Mandates Reform Act, nor would it have a significant 
adverse economic impact on a substantial number of small entities, as 
discussed in the section entitled ``Unfunded Mandates Reform Act'' in 
the preamble to today's rule.

V. Other Administrative Requirements

A. Executive Order 12866

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to review by the Office of Management and Budget 
and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of the 
recipients thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action'' 
because it may raise novel legal or policy issues. The rule seeks to 
improve public health protection while providing regulatory relief to 
small systems by encouraging the adoption, by small systems unable to 
comply with drinking water standards, of affordable technologies that 
will improve the quality of their water even if they do not achieve 
full compliance with the MCL or treatment technique requirement for a 
particular contaminant. Therefore, EPA submitted this action to OMB for

[[Page 43844]]

review. Substantive changes made in response to OMB suggestions or 
recommendations have been documented in the public record.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act (SBREFA), generally 
requires the Agency to consider explicitly the effect of regulations on 
small entities. However, under section 605(b) of the RFA, if the Agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities, the Agency is not required to 
prepare an RFA.
    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b), the Administrator certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities. Regulations on variances and exemptions provide regulatory 
relief from the costs of complying with a maximum contaminant level or 
a treatment technique under a given national primary drinking water 
regulation. As directed in the Safe Drinking Water Act, this rule 
describes procedures and criteria by which small public water systems 
which cannot afford the appropriate treatment to comply with a given 
national primary drinking water regulation can receive a variance or 
exemption. Thus, public water systems show a net economic benefit under 
today's rule as a result of being granted a variance or exemption, 
rather than bear process costs associated with litigation and 
enforcement. Please see section IV, ``Cost of Rule'', in the preamble 
to the proposed rule (63 FR 19448-50) for a more detailed discussion of 
the economic costs and benefits of today's rule.

C. Paperwork Reduction Act

    The information collection requirements in this rule have been 
submitted for approval to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. An 
Information Collection Request (ICR) document has been prepared by EPA 
(ICR No. 270.39) to amend the current public Water System Supervision 
Program ICR (OMB control number 2040-0090), and a copy may be obtained 
from Sandy Farmer by mail at OP Regulatory Information Division; U.S. 
Environmental Protection Agency (2137); 401 M St., SW.; Washington, DC 
20460, by email at [email protected], or by calling (202) 
260-2740. A copy may also be downloaded off the internet at http://
www.epa.gov/icr. The information requirements are not effective until 
OMB approves them.
    Information required by this regulation allows the State or the 
Administrator to determine that the circumstances at a public water 
system satisfy the statutory conditions for granting a small system 
variance or an exemption. Some of the required information allows the 
Administrator and the public to determine that the public had adequate 
opportunity to review and comment on a decision to grant a small system 
variance. The information collection requirements of this rule are 
mandatory for public water systems applying for either a variance or an 
exemption and for primacy States that review and either grant or deny 
these applications. Information collected by this rule will be provided 
to the public to facilitate public involvement in this process.
    Although it is impossible to determine the burden this rule would 
impose with respect to seeking a variance or an exemption from a 
drinking water regulation not yet promulgated, EPA did estimate the 
burden with respect to the two regulations from which a variance or 
exemption may hypothetically be sought. With respect to the lead and 
copper rule and the phase II/V rule, the distribution of burden between 
public water systems and states is approximately 13,050 hours and 
109,080 hours respectively, for a total annualized burden of 122,130 
hours. Expressed another way, in a monetization of these hours, all 
public water systems would bear a total annual cost of approximately 
$348,716, while States would bear an annual cost of $5,041,694.
    Promulgation of this rule, however, is also expected to result in 
significant reductions in the burden associated with litigation and 
enforcement actions. EPA has estimated that public water systems would 
reduce their annual burden by 54,648 hours or by $3,342,616 (a 
monetization of these hours). States would reduce their annual burden 
by 62,766 hours or by $2,863,321 (a monetization of these hours). The 
projected burden reduction has not been netted out of the burden 
estimate in the ICR because the Agency does not generally include 
litigation and enforcement actions in its paperwork burden estimates 
for the Public Water Supply Supervision Program. A more detailed 
explanation of how EPA calculated these results can be found in the 
Information Collection Request. Burden means the total time, effort, or 
financial resources expended by persons to generate, maintain, retain, 
or disclose or provide information to or for a Federal agency. This 
includes the time needed to review instructions; develop, acquire, 
install, and utilize technology and systems for the purposes of 
collecting, validating, and verifying information, processing and 
maintaining information, and disclosing and providing information; 
adjust the existing ways to comply with any previously applicable 
instructions and requirements; train personnel to be able to respond to 
a collection of information; search data sources; complete and review 
the collection of information; and transmit or otherwise disclose the 
information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR Chapter 15.
    Send comments on the Agency's need for this information, the 
accuracy of the provided burden estimates, and any suggested methods 
for minimizing respondent burden, including through the use of 
automated collection techniques to the Director, OP Regulatory 
Information Division; U.S. Environmental Protection Agency (2137); 401 
M St., SW.; Washington, DC 20460; and to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, 725 17th St., NW., 
Washington, DC 20503, marked ``Attention: Desk Officer for EPA.'' 
Comments are requested by September 14, 1998. Include the ICR number in 
any correspondence.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, Tribal, and local 
governments and the private sector. Under section 202 of the UMRA, the 
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, Tribal, and local 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year.
    Before promulgating an Agency rule for which a written statement is 
needed, section 205 of the UMRA generally requires the Agency to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, most cost-effective, or least burdensome 
alternative that achieves

[[Page 43845]]

the objectives of the rule. The provisions of section 205 of the UMRA 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 of the UMRA allows the Agency to adopt an alternative other 
than the least costly, most cost-effective, or least burdensome 
alternative if the Administrator publishes with the final rule an 
explanation why that alternative was not adopted.
    Before the Agency establishes any regulatory requirements that may 
significantly or uniquely affect small governments, including Tribal 
governments, it must have developed a small government agency plan 
under section 203 of the UMRA. The plan must provide for notifying 
potentially affected small governments, enabling officials of affected 
small governments to have meaningful and timely input in the 
development of Agency regulatory proposals with significant Federal 
intergovernmental mandates, and informing, educating, and advising 
small governments on compliance with the regulatory requirements.
    Today's rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, or tribal 
governments or the private sector. This rule imposes no enforceable 
duty on any State, local or tribal governments or the private sector. 
States or Tribes may choose whether to acquire or maintain primacy 
under the Safe Drinking Water Act. Further, States and Tribes with 
primacy may choose whether to issue variances and exemptions; they can 
decide to not issue any exemptions or variances at all. If they choose 
to issue variances or exemptions, they are only required to issue 
variances and exemptions in a manner not less stringent than the 
conditions under, and the manner in which, variances and exemptions may 
be granted under section 1415 and 1416 of the SDWA. Thus, today's rule 
is not subject to the requirements of section 202 and 205 of the UMRA.
    Moreover, because this rule establishes procedures and criteria for 
public water systems to obtain variances and exemptions from Safe 
Drinking Water Act requirements, the Agency has determined that this 
rule contains no regulatory requirements that might significantly or 
uniquely adversely affect small governments and thus this rule is not 
subject to the requirement of section 203 of UMRA.

E. Enhancing Intergovernmental Partnerships

    To reduce the burden of Federal regulations on States and small 
governments, the President issued Executive Order 12875, entitled 
Enhancing the Intergovernmental Partnership, on October 28, 1993 (48 FR 
58093). Under Executive Order 12875, EPA may not issue a regulation 
that is not required by statute and that creates a mandate upon a 
State, local or Tribal government unless the Federal government 
provides the necessary funds to pay the direct costs incurred by the 
State, local or Tribal government or EPA provides to the Office of 
Management and Budget a description of the extent of the Agency's prior 
consultation and written communications with elected officials and 
other representatives of affected State, local and Tribal governments, 
the nature of their concerns, and an Agency statement supporting the 
need to issue the regulation. In addition, Executive Order 12875 
requires EPA to develop an effective process permitting elected 
officials and other representatives of State, local and Tribal 
governments ``to provide meaningful and timely input in the development 
of regulatory proposals containing significant unfunded mandates.''
    As described in the preamble to the proposed rule (63 FR 19440-41), 
the Agency held several meetings with a wide variety of State and local 
representatives, who provided meaningful and timely input toward the 
development of the proposed rule. Summaries of these meetings have been 
included in the public docket for this rulemaking. In addition, the 
Agency conducted outreach efforts to contact and inform Tribal groups 
regarding this rulemaking.

F. Risk to Children Analysis and Environmental Justice

    On April 21, 1997, the President issued Executive Order 13045 
entitled Protection of Children From Environmental Health Risks and 
Safety Risks (62 FR 19883). Under section 5 of the Order, a Federal 
agency submitting a ``covered regulatory action'' to OMB for review 
under Executive Order 12866 must provide information regarding the 
environmental health or safety effects of the planned regulation on 
children. A ``covered regulatory action'' is defined in section 2-202 
as a substantive action in a rulemaking that (a) is likely to result in 
a rule that may be economically significant'' under Executive Order 
12866 and (b) concerns an environmental health risk or safety risk that 
an agency has reason to believe may disproportionally affect children. 
If the regulatory action meets both criteria, the Agency must evaluate 
the environmental health or safety effects of the planned rule on 
children and explain why the planned regulation is preferable to other 
potentially effective and reasonably feasible alternatives considered 
by the agency. While this rule is not a `` covered regulatory action'' 
as defined in the Order because it is not economically significant (see 
section IV above), EPA believes that the rule has the potential to 
reduce risks to children, as discussed in more detail below.
    In addition, under Executive Order 12898, entitled ``Federal 
Actions to Address Environmental Justice in Minority Populations and 
Low-Income Populations'', dated February 11, 1994, the Agency must make 
achieving environmental justice part of its mission.
    The Agency believes that this rule has the potential to 
significantly reduce risks to children caused by inadequate drinking 
water and address environmental justice problems. After a small public 
water system applies for a small system variance, Sec. 142.306(b) of 
the rule requires the State to perform a compliance options analysis 
for the system. Small noncompliant public water systems are often 
financially distressed as a result of the service population's 
inability to pay for safe drinking water and other factors. The public 
water system could have unprotected source waters or be unable to 
afford the appropriate treatment technology or technique, certified 
operator, and/or adequate transmission and distribution systems. As 
required by Sec. 142.306(b) of the rule, an analysis of the applicant 
system's compliance options will provide insight into alternative means 
of compliance. This might include some form of restructuring or 
consolidation with another system, development of a cleaner, safer 
water source, or using some alternative treatment technique or 
technology.
    If according to a State's affordability criteria, these compliance 
options are unaffordable for a drinking water system, the State may 
grant the system a variance. Prior to issuing a variance, 
Sec. 142.306(b)(5) of the rule requires that the State find that the 
terms and conditions of a small system variance ensure ``adequate 
protection of human health.'' Similarly, an exemption can only be 
granted if its conditions ensure that there is no ``unreasonable risk 
to health.'' Both findings are made at the State level on a case-
specific basis.
    The intent of the small system variance subpart of the rule is to 
move a system, which is not complying with Safe Drinking Water Act 
standards because the treatment required is unaffordable, toward or 
into compliance

[[Page 43846]]

status by requiring the system to install, operate and maintain 
treatment which is affordable and protective of human health. Although 
the level of treatment provided may not meet the maximum contaminant 
level, it must be determined to be protective of human health--both by 
the Agency in identifying the approved variance technology and by the 
primacy State in making such a finding--if the variance is granted.
    The Agency believes that a system operating under a small system 
variance will provide better treatment than that provided by a system 
in noncompliance. Although the drinking water system may not be able to 
provide water that is consistently below the maximum contaminant level, 
a water system operating under a variance will be able to create a net 
gain in the quality of its finished water above what it could provide 
before installing a variance technology. In turn, this will lead to a 
net gain in public health protection for infants, children, and nursing 
or pregnant women as well as for persons in low-income areas, thus 
protecting children's health as well as alleviating environmental 
justice problems.
    In addition to requirements that ensure public participation in 
granting variances and exemptions, section 142.308(c)(7) of the rule 
requires that, in communities with a large proportion of non-English 
speaking persons, as defined by the primacy agency, notices provided to 
the public must include information in the appropriate language 
regarding the content and importance of the notice. EPA believes that 
this provision also addresses Executive Order 12898.
    For these reasons, the Agency believes that this rule is consistent 
with, and implements, the Executive Order on protecting children as 
well as the Executive Order addressing environmental justice.

G. National Technology Transfer and Advancement Act

    Under section 12(d) of the National Technology Transfer and 
Advancement Act, the Agency is required to use voluntary consensus 
standards in its regulatory activities, unless to do so would be 
inconsistent with applicable law or otherwise impractical. Voluntary 
consensus standards are technical standards (e.g., materials 
specifications, test methods, sampling procedures, business practices, 
etc.) that are developed or adopted by voluntary consensus standards 
bodies. Where available and potentially applicable voluntary consensus 
standards are not used by the Agency, the Act requires the Agency to 
provide Congress, through the Office of Management and Budget, an 
explanation of the reasons for not using such standards. Because this 
rule is procedural and does not involve or require the use of any 
technical standards, the Agency does not believe that this Act is 
applicable to this rule. Moreover, the Agency is unaware of any 
voluntary consensus standards relevant to this rulemaking. Therefore, 
even if the Act were applicable to this kind of rulemaking, the Agency 
does not believe that there are any ``available or potentially 
applicable'' voluntary consensus standards.

H. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as enacted 
under the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to each House of the Congress and to the Comptroller 
General of the United States. EPA will submit a report containing this 
rule and other required information to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States 
prior to publication of the rule in the Federal Register. This action 
is not a ``major rule'' as defined by 5 U.S.C. 804(2). This rule will 
be effective on September 14, 1998.

VI. Response to Public Comments

    The record for this rulemaking has been established under docket 
number W-97-26, and includes the Agency's response to all comments 
submitted, supporting documentation, and copies of comments received, 
including printed paper versions of electronic comments.

List of Subjects in 40 CFR Parts 141 and 142

    Environmental protection, Administrative practice and procedures, 
Chemicals, Indian-lands, Intergovernmental relations, Radiation 
protection, Reporting and recordkeeping requirements, Water supply.

    Dated: August 6, 1998.
Carol M. Browner,
Administrator.

    For the reasons set out in the preamble, the Environmental 
Protection Agency amends 40 CFR parts 141 and 142 as follows:

PART 141--NATIONAL PRIMARY DRINKING WATER REGULATIONS

    1. The authority citation for part 141 is revised to read as 
follows:

    Authority: 42 U.S.C. 300f, 300g-1, 300g-2, 300g-3, 300g-4, 300g-
5, 300g-6, 300j-4, 300j-9, and 300j-11.

    2. Section 141.4(a) is revised to read as follows:


Sec. 141.4  Variances and exemptions.

    (a) Variances or exemptions from certain provisions of these 
regulations may be granted pursuant to sections 1415 and 1416 of the 
Act and subpart K of part 142 of this chapter (for small system 
variances) by the entity with primary enforcement responsibility, 
except that variances or exemptions from the MCL for total coliforms 
and variances from any of the treatment technique requirements of 
subpart H of this part may not be granted.
* * * * *

PART 142--NATIONAL PRIMARY DRINKING WATER REGULATIONS 
IMPLEMENTATION

    3. The authority citation for part 142 continues to read as 
follows:

    Authority: 42 U.S.C. 300g, 300g-1, 300g-2, 300g-3, 300g-4, 300g-
5, 300g-6, 300j-4, and 300j-9.

    4. Section 142.10 is amended by revising paragraph (d) to read as 
follows:


Sec. 142.10  Requirements for a determination of primary enforcement 
responsibility.

* * * * *
    (d) Variances and exemptions.
    (1) If it permits small system variances pursuant to Section 
1415(e) of the Act, it must provide procedures no less stringent than 
the Act and Subpart K of this part.
    (2) If it permits variances (other than small system variances) or 
exemptions, or both, from the requirements of the State primary 
drinking water regulations, it shall do so under conditions and in a 
manner no less stringent than the requirements of Sections 1415 and 
1416 of the Act. In granting these variances, the State must adopt the 
Administrator's findings of best available technology, treatment 
techniques, or other means available as specified in Subpart G of this 
part. (States with primary enforcement responsibility may adopt 
procedures different from those set forth in Subparts E and F of this 
part, which apply to the issuance of variances (other than small system 
variances) and exemptions by the Administrator in States that do not 
have primary enforcement responsibility, provided that the State 
procedures meet the requirements of this paragraph); and
* * * * *

[[Page 43847]]

    5. Section 142.20 is revised to read as follows:


Sec. 142.20  State-issued variances and exemptions under Section 
1415(a) and Section 1416 of the Act.

    (a) States with primary enforcement responsibility may issue 
variances to public water systems (other than small system variances) 
from the requirements of primary drinking water regulations under 
conditions and in a manner which are not less stringent than the 
requirements under Section 1415(a) of the Act. In States that do not 
have primary enforcement responsibility, variances may be granted by 
the Administrator pursuant to Subpart E of this part.
    (1) A State must document all findings that are required under 
Section 1415(a) of the Act.
    (2) If a State prescribes a schedule pursuant to section 1415(a) of 
the Act requiring compliance with a contaminant level for which the 
variance is granted later than five years from the date of issuance of 
the variance the State must--
    (i) Document its rationale for the extended compliance schedule;
    (ii) Discuss the rationale for the extended compliance schedule in 
the required public notice and opportunity for public hearing; and
    (iii) Provide the shortest practicable time schedule feasible under 
the circumstances.
    (b) States with primary enforcement responsibility may issue 
exemptions from the requirements of primary drinking water regulations 
under conditions and in a manner which are not less stringent than the 
requirements under Section 1416 of the Act. In States that do not have 
primary enforcement responsibility, exemptions may be granted by the 
Administrator pursuant to Subpart F of this part.
    (1) A State must document all findings that are required under 
Section 1416 of the Act:
    (i) Before finding that management and restructuring changes cannot 
be made, a State must consider the following measures, and the 
availability of State Revolving Loan Fund assistance, or any other 
Federal or State program, that is reasonably likely to be available 
within the period of the exemption to implement these measures:
    (A) Consideration of rate increases, accounting changes, the 
appointment of a State-certified operator under the State's Operator 
Certification program, contractual agreements for joint operation with 
one or more public water systems;
    (B) Activities consistent with the State's Capacity Development 
Strategy to help the public water system acquire and maintain 
technical, financial, and managerial capacity to come into compliance 
with the Act; and
    (C) Ownership changes, physical consolidation with another public 
water system, or other feasible and appropriate means of consolidation 
which would result in compliance with the Act;
    (ii) The State must consider the availability of an alternative 
source of water, including the feasibility of partnerships with 
neighboring public water systems, as identified by the public water 
system or by the State consistent with the Capacity Development 
Strategy.
    (2) In the case of a public water system serving a population of 
not more than 3,300 persons and which needs financial assistance for 
the necessary improvements under the initial compliance schedule, an 
exemption granted by the State under section 1416(b)(2)(B)(i) or (ii) 
of the Act may be renewed for one or more additional 2-year periods, 
but not to exceed a total of 6 additional years, only if the State 
establishes that the public water system is taking all practicable 
steps to meet the requirements of Section 1416(b)(2)(B) of the Act and 
the established compliance schedule to achieve full compliance with the 
contaminant level or treatment technique for which the exemption was 
granted. A State must document its findings in granting an extension 
under this paragraph.

Subpart E--Variances Issued by the Administrator Under Section 
1415(a) of the Act

    6. The heading for Subpart E is revised to read as set forth above.
    7. Section 142.42 is amended by revising paragraph (c) to read as 
follows:


Sec. 142.42  Consideration of a variance request.

* * * * *
    (c) A variance may be issued to a public water system on the 
condition that the public water system install the best technology, 
treatment techniques, or other means, which the Administrator finds are 
available (taking costs into consideration) and based upon an 
evaluation satisfactory to the Administrator that indicates that 
alternative sources of water are not reasonably available to the public 
water system.
* * * * *

Subpart F--[Amended]

    8. Section 142.50 is revised to read as follows:


Sec. 142.50  Requirements for an exemption.

    (a) The Administrator may exempt any public water system within a 
State that does not have primary enforcement responsibility from any 
requirement regarding a maximum contaminant level or any treatment 
technique requirement, or from both, of an applicable national primary 
drinking water regulation upon a finding that--
    (1) Due to compelling factors (which may include economic factors, 
including qualification of the public water system as a system serving 
a disadvantaged community pursuant to section 1452(d) of the Act), the 
public water system is unable to comply with such contaminant level or 
treatment technique requirement or to implement measures to develop an 
alternative source of water supply;
    (2) The public water system was in operation on the effective date 
of such contaminant level or treatment technique requirement, or for a 
public water system that was not in operation by that date, no 
reasonable alternative source of drinking water is available to such 
new public water system;
    (3) The granting of the exemption will not result in an 
unreasonable risk to health; and
    (4) Management or restructuring changes (or both), as provided in 
Sec. 142.20(b)(1)(i), cannot reasonably be made that will result in 
compliance with the applicable national primary drinking water 
regulation or, if compliance cannot be achieved, improve the quality of 
the drinking water.
    (b) No exemption shall be granted unless the public water system 
establishes that the public water system is taking all practicable 
steps to meet the standard; and
    (1) The public water system cannot meet the standard without 
capital improvements which cannot be completed prior to the date 
established pursuant to Section 1412(b)(10) of the Act;
    (2) In the case of a public water system which needs financial 
assistance for the necessary improvements, the public water system has 
entered into an agreement to obtain such financial assistance or 
assistance pursuant to Section 1452 of the Act, or any other Federal or 
State program that is reasonably likely to be available within the 
period of the exemption; or
    (3) The public water system has entered into an enforceable 
agreement to

[[Page 43848]]

become a part of a regional public water system.
    (c) A public water system may not receive an exemption under this 
subpart if the public water system was granted a variance under Section 
1415(e) of the Act.
    9. Section 142.53 is amended by revising paragraph (c)(1) to read 
as follows:


Sec. 142.53  Disposition of an exemption request.

* * * * *
    (c) * * *
    (1) Compliance (including increments of progress or measures to 
develop an alternative source of water supply) by the public water 
system with each contaminant level requirement or treatment technique 
requirement with respect to which the exemption was granted; and
* * * * *
    10. Section 142.55 is amended by revising paragraph (b) and 
removing and reserving paragraph (c) to read as follows:


Sec. 142.55  Final Schedule.

* * * * *
    (b) Such schedule must require compliance with each contaminant 
level and treatment technique requirement with respect to which the 
exemption was granted as expeditiously as practicable but not later 
than 3 years after the otherwise applicable compliance date established 
in section 1412(b)(10) of the Act.
    (c) [Reserved].
    11. Section 142.56 is revised to read as follows:


Sec. 142.56  Extension of date for compliance.

    In the case of a public water system which serves a population of 
not more than 3,300 persons and which needs financial assistance for 
the necessary improvements, an exemption granted under Sec. 142.50(b) 
(1) or (2) may be renewed for one or more additional 2-year periods, 
but not to exceed a total of 6 additional years, if the public water 
system establishes that the public water system is taking all 
practicable steps to meet the requirements of section 1416(b)(2)(B) of 
the Act and the established compliance schedule.
    12. Subpart K is added to read as follows:

Subpart K--Variances for Small System

Sec.

General Provisions

142.301  What is a small system variance?
142.302  Who can issue a small system variance?
142.303  Which size public water systems can receive a small system 
variance?
142.304  For which of the regulatory requirements is a small system 
variance available?
142.305  When can a small system variance be granted by a State?

Review of Small System Variance Application

142.306  What are the responsibilities of the public water system, 
State and the Administrator in ensuring that sufficient information 
is available and for evaluation of a small system variance 
application?
142.307  What terms and conditions must be included in a small 
system variance?

Public Participation

142.308  What public notice is required before a State or the 
Administrator proposes to issue a small system variance?
142.309  What are the public meeting requirements associated with 
the proposal of a small system variance?
142.310  How can a person served by the public water system obtain 
EPA review of a State proposed small system variance?

EPA Review and Approval of Small System Variances

142.311  What procedures allow for the Administrator to object to a 
proposed small system variance or overturn a granted small system 
variance for a public water system serving 3,300 or fewer persons?
142.312  What EPA action is necessary when a State proposes to grant 
a small system variance to a public water system serving a 
population of more than 3,300 and fewer than 10,000 persons?
142.313  How will the Administrator review a State's program under 
this subpart?

Subpart K--Variances for Small System

General Provisions


Sec. 142.301  What is a small system variance?

    Section 1415(e) of the Act authorizes the issuance of variances 
from the requirement to comply with a maximum contaminant level or 
treatment technique to systems serving fewer than 10,000 persons. The 
purpose of this subpart is to provide the procedures and criteria for 
obtaining these variances. The regulations in this subpart shall take 
effect on September 14, 1998.


Sec. 142.302  Who can issue a small system variance?

    A small system variance under this subpart may only be issued by 
either:
    (a) A State that is exercising primary enforcement responsibility 
under Subpart B for public water systems under the State's 
jurisdiction; or
    (b) The Administrator, for a public water system in a State which 
does not have primary enforcement responsibility.


Sec. 142.303  Which size public water systems can receive a small 
system variance?

    (a) A State exercising primary enforcement responsibility for 
public water systems (or the Administrator for other systems) may grant 
a small system variance to public water systems serving 3,300 or fewer 
persons.
    (b) With the approval of the Administrator pursuant to 
Sec. 142.312, a State exercising primary enforcement responsibility for 
public water systems may grant a small system variance to public water 
systems serving more than 3,300 persons but fewer than 10,000 persons.
    (c) In determining the number of persons served by the public water 
system, the State or Administrator must include persons served by 
consecutive systems. A small system variance granted to a public water 
system would also apply to any consecutive system served by it.


Sec. 142.304  For which of the regulatory requirements is a small 
system variance available?

    (a) A small system variance is not available under this subpart for 
a national primary drinking water regulation for a microbial 
contaminant (including a bacterium, virus, or other organism) or an 
indicator or treatment technique for a microbial contaminant.
    (b) A small system variance under this subpart is otherwise only 
available for compliance with a requirement specifying a maximum 
contaminant level or treatment technique for a contaminant with respect 
to which;
    (1) a national primary drinking water regulation was promulgated on 
or after January 1, 1986; and
    (2) the Administrator has published a small system variance 
technology pursuant to Section 1412(b)(15) of the Act.

    Note to paragraph (b)(1): Small system variances are not 
available for public water systems above the pre-1986 maximum 
contaminant level even if subsequently revised. If the Agency 
revises a pre-1986 maximum contaminant level and makes it more 
stringent, then a variance would be available for that contaminant, 
but only up to the pre-1986 maximum contaminant level.


Sec. 142.305  When can a small system variance be granted by a State?

    No small system variance can be granted by a State until the later 
of the following:
    (a) 90 days after the State proposes to grant the small system 
variance;

[[Page 43849]]

    (b) If a State is proposing to grant a small system variance to a 
public water system serving 3,300 or fewer persons and the 
Administrator objects to the small system variance, the date on which 
the State makes the recommended modifications or responds in writing to 
each objection; or
    (c) If a State is proposing to grant a small system variance to a 
public water system serving a population more than 3,300 and fewer than 
10,000 persons, the date the Administrator approves the small system 
variance. The Administrator must approve or disapprove the variance 
within 90 days after it is submitted to the Administrator for review.

Review of Small System Variance Application


Sec. 142.306  What are the responsibilities of the public water system, 
State and the Administrator in ensuring that sufficient information is 
available and for evaluation of a small system variance application?

    (a) A public water system requesting a small system variance must 
provide accurate and correct information to the State or the 
Administrator to issue a small system variance in accordance with this 
subpart. A State may assist a public water system in compiling 
information required for the State or the Administrator to issue a 
small system variance in accordance with this subpart.
    (b) Based upon an application for a small system variance and other 
information, and before a small system variance may be proposed under 
this subpart, the State or the Administrator must find and document the 
following:
    (1) The public water system is eligible for a small system variance 
pursuant to Secs. 142.303 (i.e., the system serves a population of 
fewer than 10,000 persons) and 142.304 (i.e., the contaminant for which 
the small system variance is sought is not excluded from variance 
eligibility);
    (2) The public water system cannot afford to comply, in accordance 
with the affordability criteria established by the State (or by the 
Administrator in States which do not have primary enforcement 
responsibility), with the national primary drinking water regulation 
for which a small system variance is sought, including by:
    (i) Treatment;
    (ii) Alternative sources of water supply;
    (iii) Restructuring or consolidation changes, including ownership 
change and/or physical consolidation with another public water system; 
or
    (iv) Obtaining financial assistance pursuant to Section 1452 of the 
Act or any other Federal or State program;
    (3) The public water system meets the source water quality 
requirements for installing the small system variance technology 
developed pursuant to guidance published under section 1412(b)(15) of 
the Act;
    (4) The public water system is financially and technically capable 
of installing, operating and maintaining the applicable small system 
variance technology; and
    (5) The terms and conditions of the small system variance, as 
developed through compliance with Sec. 142.307, ensure adequate 
protection of human health, considering the following:
    (i) The quality of the source water for the public water system; 
and
    (ii) Removal efficiencies and expected useful life of the small 
system variance technology.


Sec. 142.307  What terms and conditions must be included in a small 
system variance?

    (a) A State or the Administrator must clearly specify enforceable 
terms and conditions of a small system variance.
    (b) The terms and conditions of a small system variance issued 
under this subpart must include, at a minimum, the following 
requirements:
    (1) Proper and effective installation, operation and maintenance of 
the applicable small system variance technology in accordance with 
guidance published by the Administrator pursuant to section 1412(b)(15) 
of the Act, taking into consideration any relevant source water 
characteristics and any other site-specific conditions that may affect 
proper and effective operation and maintenance of the technology;
    (2) Monitoring requirements, for the contaminant for which a small 
system variance is sought, as specified in 40 CFR part 141; and
    (3) Any other terms or conditions that are necessary to ensure 
adequate protection of public health, which may include:
    (i) Public education requirements; and
    (ii) Source water protection requirements.
    (c) The State or the Administrator must establish a schedule for 
the public water system to comply with the terms and conditions of the 
small system variance which must include, at a minimum, the following 
requirements:
    (1) Increments of progress, such as milestone dates for the public 
water system to apply for financial assistance and begin capital 
improvements;
    (2) Quarterly reporting to the State or Administrator of the public 
water system's compliance with the terms and conditions of the small 
system variance;
    (3) Schedule for the State or the Administrator to review the small 
system variance under paragraph (d) of this section; and
    (4) Compliance with the terms and conditions of the small system 
variance as soon as practicable but not later than 3 years after the 
date on which the small system variance is granted. The Administrator 
or State may allow up to 2 additional years if the Administrator or 
State determines that additional time is necessary for the public water 
system to:
    (i) Complete necessary capital improvements to comply with the 
small system variance technology, secure an alternative source of 
water, or restructure or consolidate; or
    (ii) Obtain financial assistance provided pursuant to section 1452 
of the Act or any other Federal or State program.
    (d) The State or the Administrator must review each small system 
variance granted not less often than every 5 years after the compliance 
date established in the small system variance to determine whether the 
public water system continues to meet the eligibility criteria and 
remains eligible for the small system variance and is complying with 
the terms and conditions of the small system variance. If the public 
water system would no longer be eligible for a small system variance, 
the State or the Administrator must determine whether continuing the 
variance is in the public interest. If the State or the Administrator 
finds that continuing the variance is not in the public interest, the 
variance must be withdrawn.

Public Participation


Sec. 142.308  What public notice is required before a State or the 
Administrator proposes to issue a small system variance?

    (a) At least fifteen (15) days before the date of proposal, and at 
least thirty (30) days prior to a public meeting to discuss the 
proposed small system variance, the State, Administrator, or public 
water system as directed by the State or Administrator, must provide 
notice to all persons served by the public water system. For billed 
customers, identified in paragraph (a)(1) of this section, this notice 
must include the information listed in paragraph (c) of this section. 
For other persons regularly served by the system, identified in 
paragraph (a)(2) of this section, the notice shall include the 
information identified in paragraph (d) of this section. Notice must be 
provided to all persons served by:

[[Page 43850]]

    (1) Direct mail or other home delivery to billed customers or other 
service connections, and
    (2) Any other method reasonably calculated to notify, in a brief 
and concise manner, other persons regularly served by the system. Such 
methods may include publication in a local newspaper, posting in public 
places or delivery to community organizations.
    (b) At the time of proposal, the State must publish a notice in the 
State equivalent to the Federal Register or a newspaper or newspapers 
of wide circulation in the State, or, in the case of the Administrator, 
in the Federal Register. This notice shall include the information 
listed in paragraph (c) of this section.
    (c) The notice in paragraphs (a)(1) and (b) of this section must 
include, at a minimum, the following:
    (1) Identification of the contaminant[s] for which a small system 
variance is sought;
    (2) A brief statement of the health effects associated with the 
contaminant[s] for which a small system variance is sought using 
language in Appendix C of Part 141 Subpart O of this chapter;
    (3) The address and telephone number at which interested persons 
may obtain further information concerning the contaminant and the small 
system variance;
    (4) A brief summary, in easily understandable terms, of the terms 
and conditions of the small system variance;
    (5) A description of the consumer petition process under 
Sec. 142.310 and information on contacting the EPA Regional Office;
    (6) a brief statement announcing the public meeting required under 
Sec. 142.309(a), including a statement of the purpose of the meeting, 
information regarding the time and location for the meeting, and the 
address and telephone number at which interested persons may obtain 
further information concerning the meeting; and
    (7) In communities with a large proportion of non-English-speaking 
residents, as determined by the primacy agency, information in the 
appropriate language regarding the content and importance of the 
notice.
    (d) The notice in paragraph (a)(2) of this section must provide 
sufficient information to alert readers to the proposed variance and 
direct them where to receive additional information.
    (e) At its option, the State or the Administrator may choose to 
issue separate notices or additional notices related to the proposed 
small system variance, provided that the requirements in paragraphs (a) 
through (d) of this section are satisfied.
    (f) Prior to promulgating the final variance, the State or the 
Administrator must respond in writing to all significant public 
comments received relating to the small system variance. Response to 
public comment and any other documentation supporting the issuance of a 
variance must be made available to the public after final promulgation.


Sec. 142.309  What are the public meeting requirements associated with 
the proposal of a small system variance?

    (a) A State or the Administrator must provide for at least one (1) 
public meeting on the small system variance no later than 15 days after 
the small system variance is proposed.
    (b) At the time of the public meeting, the State or Administrator 
must prepare and make publicly available, in addition to the 
information listed in Sec. 142.308(c), either:
    (1) The proposed small system variance, if the public meeting 
occurs after proposal of the small system variance; or
    (2) A draft of the proposed small system variance, if the public 
meeting occurs prior to proposal of the proposed small system variance.
    (c) Notice of the public meeting must be provided in the manner 
required under Sec. 142.308 at least 30 days in advance of the public 
meeting. This notice must be provided by the State, the Administrator, 
or the public water system as directed by the State or Administrator.


Sec. 142.310  How can a person served by the public water system obtain 
EPA review of a State proposed small system variance?

    (a) Any person served by the public water system may petition the 
Administrator to object to the granting of a small system variance 
within 30 days after a State proposes to grant a small system variance 
for a public water system.
    (b) The Administrator must respond to a petition filed by any 
person served by the public water system and determine whether to 
object to the small system variance under Sec. 142.311, no later than 
60 days after the receipt of the petition.

EPA Review And Approval of Small System Variances


Sec. 142.311  What procedures allow the Administrator to object to a 
proposed small system variance or overturn a granted small system 
variance for a public water system serving 3,300 or fewer persons?

    (a) At the time a State proposes to grant a small system variance 
under this subpart, the State must submit to the Administrator the 
proposed small system variance and all supporting information, 
including any written public comments received prior to proposal.
    (b) The Administrator may review and object to any proposed small 
system variance within 90 days of receipt of the proposed small system 
variance. The Administrator must notify the State in writing of each 
basis for the objection and propose a modification to the small system 
variance to resolve the concerns of the Administrator. The State must 
make the recommended modification, respond in writing to each 
objection, or withdraw the proposal to grant the small system variance.
    (c) If the State issues the small system variance without resolving 
the concerns of the Administrator, the Administrator may overturn the 
State decision to grant the variance if the Administrator determines 
that the State decision does not comply with the Act or this rule.


Sec. 142.312  What EPA action is necessary when a State proposes to 
grant a small system variance to a public water system serving a 
population of more than 3,300 and fewer than 10,000 persons?

    (a) At the time a State proposes to grant a small system variance 
to a public water system serving a population of more than 3,300 and 
fewer than 10,000 persons, the State must submit the proposed small 
system variance and all supporting information, including public 
comments received prior to proposal, to the Administrator.
    (b) The Administrator must approve or disapprove the small system 
variance within 90 days of receipt of the proposed small system 
variance and supporting information. The Administrator must approve the 
small system variance if it meets each requirement within the Act and 
this rule.
    (c) If the Administrator disapproves the small system variance, the 
Administrator must notify the State in writing of the reasons for 
disapproval and the small system variance does not become effective. 
The State may resubmit the small system variance for review and 
approval with modifications to address the objections stated by the 
Administrator.


Sec. 142.313  How will the Administrator review a State's program under 
this subpart?

    (a) The Administrator must periodically review each State program 
under this subpart to determine whether small system variances granted 
by the State comply with the requirements of

[[Page 43851]]

the Act, this rule and the affordability criteria developed by the 
State.
    (b) If the Administrator determines that small system variances 
granted by a State are not in compliance with the requirements of the 
Act, this rule or the affordability criteria developed by the State, 
the Administrator shall notify the State in writing of the deficiencies 
and make public the determinations.
    (c) The Administrator's review will be based in part on quarterly 
reports prepared by the States pursuant to Sec. 142.15(a)(1) relating 
to violations of increments of progress or other violated terms or 
conditions of small system variances.

[FR Doc. 98-21746 Filed 8-13-98; 8:45 am]
BILLING CODE 6560-50-P