Cost of Compliance with Potential Arsenic MCLs

March 1997

Prepared by
Kennedy/Jenks Consultants
Marathon Plaza, Tenth Floor
303 Second Street
San Francisco, CA 94107

EXECUTIVE SUMMARY

The United States Environmental Protection Agency (USEPA) is considering revising the arsenic Maximum Contaminant Level (MCL). California has more than 4,500 utilities with over 10,000 wells and 280 surface water treatment plants that may be affected by this potential revision. The objective of the study was to develop a cost estimate for all of California’s public water systems (PWSs) to meet potential revised arsenic MCLs of 1, 2, 5, 10, and 20 (g/L. The study was sponsored by the Association of California Water Agencies (ACWA).

Approach of this Study

The method and approach of this study were modeled after the American Water Works Association Research Foundation's (AWWARF) cost of compliance protocol, "Estimating the Cost of Compliance with Drinking Water Standards: A User's Guide" (1995).

Compliance costs were estimated for the entire state with individual sources that included active groundwater wells, springs, and surface water treatment plants, as the units of analysis. Total compliance costs were calculated as the sum of all estimated costs for sources that would require modification or treatment to meet a more stringent MCL. Both capital and total annual costs were estimated. Annual costs included annual operations and maintenance and amortized capital.

Primary Conclusions

• An estimated 280 drinking water sources, including wells, springs, rivers, creeks, and aqueducts, would be affected by a 20 µg/L MCL, while about 8,700 sources would be affected by a 1 µg/L MCL. These sources represent 3 percent and 84 percent, respectively, of all drinking water sources in California that must comply with federal MCLs.
  
• The estimated cost impacts to California water utilities range from 270 million to 7.7 billion dollars in total capital costs and 33 million to 1.2 billion dollars per year in total annual costs for an MCL of 20 µg/L to 1 µg/L, respectively. These costs do not include land acquisition costs. Table ES-1 summarizes costs estimated for each potential MCL.

TABLE ES-1

* Includes active wells and surface water treatment plants
** Includes annual O&M costs plus amortized capital

• If the cost of land is included in the analysis, the estimated cost impacts increase by approximately 5 to 10 percent. Table ES-2 summarizes the estimated compliance costs, including land costs, for each potential MCL. This estimate assumes that sludge from coagulation processes is dried in sludge lagoons, while brine from activated alumina and anion exchange is neutralized when necessary and discharged to sewers.

Table ES-2

* Includes active wells and surface water treatment plants
** Includes annual O&M costs plus amortized capital

• If all residual handling occurred on-site, the land required and the overall land costs would nearly double. Depending on the evaporation rates within the state, building ponds for brine disposal is estimated to require an additional 1 to 4 billion dollars in capital for an MCL of 1 µg/L. These brine evaporation costs are in addition to the costs presented in Table ES-2.
  
  
• Using the estimated cost of compliance without land, the incremental cost, the additional cost associated with meeting a given MCL compared to the cost with meeting the next-less-stringent MCL evaluated becomes highest at 5 µg/L to 2 µg/L and remains high for 2 µg/L to 1 µg/L. The incremental capital cost for changing the standard from 5 µg/L to 2 µg/L, or from 2 µg/L to 1 µg/L is approximately 3 billion dollars (See Table ES-2).
  
  
• Systems that serve populations between 10,001 and 100,000 would bear the largest portion of the costs, approximately 40 percent of the capital and annual compliance cost in California, or $3.2 billion of the estimated $7.7 billion capital and $500 million of the $1.2 billion in total annual cost for meeting the 1 µg/L arsenic MCL.
  
  
• Systems serving populations less than 10,000 represent the largest number of PWSs and sources requiring more treatment. These systems account for approximately 92 percent of impacted systems and 60 percent of impacted sources at the 1 µg/L arsenic MCL.
  
  
• On a household basis, the largest cost impact is on the very, very small systems with impacted sources because the costs are spread over a smaller customer base. For systems serving a population between 25 to 100, the estimated annual cost for a household of 3.5 (defined by the State of California) is about the same for complying with arsenic MCLs of from 1 to 20 µg/L, between $1,700 to $2,000 per year. In contrast, for systems serving more than 10,000 people, a household of 3.9 (defined by the State of California) would have an annual cost range between $67 to $210 per year for the same MCLs, more than a ten-fold lower cost on a per household basis.
  
  
• More than 80 percent of California groundwater sources (wells and springs) receive no treatment that would effectively remove arsenic, while nearly every California surface water plant provides some type of coagulation and filtration that, with minor modification, could remove additional arsenic.
  
  
• Approximately 90 percent of groundwater sources (wells and springs) in California would require individual treatment units. Results from the 1995 ACWA Water Quality Survey and previous studies suggest that to centralize the vast majority of groundwater would be difficult and expensive.
  
  
• A variability analysis was conducted for compliance costs from groundwater sources with an assumed MCL of 1 µg/L. The point estimate of total capital compliance costs for an MCL of 1 µg/L was 7.7 billion dollars. By incorporating the bias estimates and summing the variances from groundwater only (groundwater is approximately 95 percent of the total capital cost), total capital compliance costs range from 6.8 to 9.3 billion at the 95 percent confidence level.
  
  
• A sensitivity analysis of total annual compliance costs was performed for the non-centralized groundwater sources for the potential MCL of 1 µg/L. This group of sources comprised approximately 90 percent of the 1.2 billion dollar point estimate for total annual costs. Sensitivity was measured by changing assumptions about interest rates, labor rates, coagulant dosages, and maintenance materials. The cumulative effect of changing these assumptions produced a range for the estimated total annual costs between 970 million dollars to 1.5 billion dollars per year at an MCL of 1 µg/L).