[Federal Register Volume 63, Number 212 (Tuesday, November 3, 1998)]
[Notices]
[Pages 59299-59300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29448]


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ENVIRONMENTAL PROTECTION AGENCY

[FRL-6183-2]


Drinking Water State Revolving Fund (DWSRF) Program Policy 
Announcement: Eligibility of Using DWSRF Funds to Create a New Public 
Water System

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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SUMMARY: The U.S. Environmental Protection Agency (EPA) is issuing a 
policy decision for the Drinking Water State Revolving Fund (DWSRF) 
program that will allow States to make loans for projects that are 
needed to solve public health problems for residents currently served 
by individual wells or surface water sources. This policy would expand 
the universe of eligible loan recipients by allowing loans to an entity 
that is not currently a public water system, but which will become a 
public water system upon completion of the project. The Agency 
published the proposed policy in the Federal Register on June 12, 1998 
to seek comment. Comments received during a public comment period and 
in a stakeholder meeting held on July 13, 1998 were considered in 
developing the final policy.

Background

    Section 1452(a)(2) of the Safe Drinking Water Act (SDWA) Amendments 
states that ``financial assistance under this section may be used by a 
public water system only for expenditures . . . which . . . will 
facilitate compliance with national primary drinking water regulations 
. . . .'' The Act defines a public water system (PWS) as a ``system . . 
. (of) pipes or other constructed conveyances'' which regularly serves 
at least 15 service connections or at least 25 individuals.
    Several States indicated that a strict interpretation of this 
provision would prevent them from providing funds to an entity (e.g., 
homeowners' association, township) that has a public health problem and 
is not currently a PWS, but which would become a federally regulated 
PWS upon construction of a piped system. States want the flexibility to 
provide DWSRF funds to these entities in order to solve public health 
problems posed by contaminated wells. While the SDWA does allow States 
to lend funds to an existing PWS to extend lines to solve these types 
of public health problems, not all of these situations have an existing 
PWS nearby that is willing or able to help.
    EPA believes that the statute permits the DWSRF to be used to 
create a federally regulated PWS in limited circumstances to solve 
public health problems intended to be addressed by the statute. 
However, the Agency proposed several conditions in its June 12, 1998 
Federal Register proposal which would have to be met before such a 
project could be funded. They were: (a) upon completion of the project, 
the entity responsible for the loan must meet the definition of a 
Federal community public water system; (b) funding is limited to 
projects on the State's fundable list where an actual public health 
problem with serious risks exists; (c) the project must be limited in 
scope to the specific geographic area affected by contamination; (d) 
the project can only be sized to accomodate a reasonable amount of 
growth expected over the life of the facility--growth cannot be a 
substantial portion of the project; and (e) the project must meet the 
same technical, financial and managerial capacity requirements that the 
SDWA requires of all DWSRF assistance recipients.

Comments

    Comments were received from 31 parties by July 27, 1998 (1 week 
after close of the comment period). Support was divided, with 17 in 
favor of, and 14 opposed to, the proposal. Commentors in support of the 
policy came from state health and environmental quality departments, 
national associations representing water utilities, engineering 
professionals and town managers. Commentors opposed to the policy were 
from national associations representing ground water professionals, and 
representatives of state well driller's associations and associated 
industries.
    Most of the comments in support of the policy only asked for 
clarification of the language used in the proposal. One commentor asked 
that the policy be extended to address situations where homeowners 
receive unsafe drinking water from surface water sources.
    There were three main concerns expressed by those opposing the 
policy. The first was that, in proposing such a policy, EPA is implying 
that drinking water provided by private wells is unsafe or inferior to 
that provided by public water systems. Comments indicated that the 
Agency does not distinguish between contaminated wells and contaminated 
ground water and that, in the case of the former, there are often 
solutions that will result in the provision of safe drinking water. The 
second concern was that, in rushing to build new water systems, 
communities and states would not sufficiently evaluate all possible 
alternatives to solving a problem in an effort to identify the most 
cost-effective solution. The third concern was that homeowners served 
by private wells would be forced to ``hook-on'' to a system, would not 
receive sufficient notice when a PWS was proposed, or would not receive 
balanced information about alternatives to construction of a new PWS. A 
concern raised by environmental organizations at a stakeholder meeting 
held to discuss the proposal was that the policy could result in growth 
or urban sprawl. Although EPA limits projects to encompass ``reasonable 
growth'', it provides no definition of what is reasonable.

[[Page 59300]]

Response to Comments

    In proposing this policy, EPA did not intend to imply that private 
wells do not provide safe drinking water to users. There are millions 
of people in the nation that obtain water from wells with good drinking 
water quality. However, it must be acknowledged that there are 
situations where the public health of citizens would be better 
protected by creating a public water system supplying drinking water 
that is required to meet all health-based standards. States need the 
flexibility to address these important public health concerns.
    The Agency recognizes that every situation is different, and that 
in many cases construction of a public water system is not the most 
cost-effective solution to addressing problems caused by poor ground 
water quality or poorly constructed wells. In response to the comments 
received, we have added an additional condition that must be met before 
a loan can be issued to construct a public water system. This condition 
requires that a State determine that the project proposed to create a 
public water system is a cost-effective solution to resolve the problem 
causing a risk to public health.
    It is important to remember that these projects are funded using 
loans, which must ultimately be repaid by the users of the system. The 
DWSRF program requires that all applicants have adequate technical, 
financial and managerial capacity to operate a system. States are also 
required by the Safe Drinking Water Act to ensure that any new system 
created after October 1, 1999 will have adequate capacity to ensure 
provision of safe drinking water. If the cost of a project is too high 
or if community support for a project is lacking, it becomes more 
difficult to guarantee repayment of a loan, and the project would not 
receive assistance. States have also indicated that they have little 
interest in promoting the creation of new small systems, which often 
have more trouble complying with drinking water regulations. These 
controls, along with the condition described above and other 
requirements, should ensure that only cost-effective projects that are 
needed to protect public health receive assistance.
    Public participation is an important element of the 1996 SDWA 
Amendments and the DWSRF program. States are required to release their 
Intended Use Plans for public review and comment before they can 
receive federal funds. States have policies in place to ensure that 
there is sufficient notification at the local level as well. For 
example, all projects are required to undergo an environmental review, 
which includes requirements for public notification. Additionally, in 
some States, where communities must approve debt, the public must 
approve a project by referendum. EPA strongly encourages States to 
ensure that homeowners which would be served by a proposed PWS get 
adequate notice and informational material to allow them to make an 
informed decision.
    The issue of growth is important for the Agency as well as for 
environmental organizations. The DWSRF program cannot be used to 
finance projects where the primary purpose is growth and only allows 
for growth considered to be reasonable. The Agency has been hesitant to 
define ``reasonable'' because one definition would not capture the 
variability between States. For example, what is reasonable in Arizona 
may be completely unacceptable in New Hampshire. Many States are also 
sensitive to the issue of growth and have developed their own policies 
to address what is reasonable. For example, in one State, a proposed 
service area would only be allowed to encompass two properties (wells) 
beyond the last contaminated well. In another State the amount of 
growth that is considered reasonable is that which would increase 
capacity of the existing user base by 10%. Additionally, in most cases, 
requirements for environmental review should ensure that unworthy 
projects are not funded.
    Minor changes to the final policy were also made in response to 
comments asking for clarification regarding such eligibility issues as 
creation of a system to replace a surface water source or creation of a 
regional public water system to consolidate smaller systems.

Final Policy

    EPA will allow for the creation of a community water system 
(publicly or privately owned) to address an existing public health 
problem caused by unsafe drinking water provided by individual wells or 
surface water sources. This policy also extends to a situation where a 
new regional PWS is created by consolidating several existing PWS's 
that have technical, financial or managerial difficulties.
    When reviewing an application for assistance the State must ensure 
that the applicant has given sufficient public notice to potentially 
affected parties and has considered alternative solutions to addressing 
the problem.
    A proposed project may only receive assistance if the following 
conditions are met:
    (a) Upon completion of the project, the entity responsible for the 
loan must meet the definition of a Federal community public water 
system;
    (b) The project must be on the State's fundable list and must 
address an actual public health problem with serious risks;
    (c) The project must be limited in scope to the specific geographic 
area affected by contamination;
    (d) The project can only be sized to accomodate a reasonable amount 
of growth expected over the life of the facility--growth cannot be a 
substantial portion of the project;
    (e) The project must meet the same technical, financial and 
managerial capacity requirements that the SDWA requires of all DWSRF 
assistance recipients; and
    (f) The project is a cost-effective solution to solving the public 
health problem.

FOR FURTHER INFORMATION CONTACT: The Safe Drinking Water Act Hotline, 
telephone (800) 426-4791. Information about the DWSRF program, 
including program guidelines and State contact information, is 
available from the EPA Office of Ground Water and Drinking Water Web 
Site at the URL address ``http://www.epa.gov/safewater.''

    Dated: October 22, 1998.
Elizabeth Fellows,
Acting Director, Office of Ground Water and Drinking Water.
[FR Doc. 98-29448 Filed 11-2-98; 8:45 am]
BILLING CODE 6560-50-P