[Federal Register Volume 63, Number 24 (Thursday, February 5, 1998)]
[Notices]
[Pages 6018-6029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2874]
[[Page 6017]]
_______________________________________________________________________
Part V
Environmental Protection Agency
_______________________________________________________________________
Guidance and Information for States on Implementing the Capacity
Development Provisions of the Safe Drinking Water Act; Notice
Federal Register / Vol. 63, No. 24 / Thursday, February 5, 1998 /
Notices
[[Page 6018]]
ENVIRONMENTAL PROTECTION AGENCY
[FRL-5958-8]
Guidance and Information for States on Implementing the Capacity
Development Provisions of the Safe Drinking Water Act
AGENCY: Environmental Protection Agency.
ACTION: Public review draft.
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SUMMARY: The Environmental Protection Agency is publishing, for public
comment, draft ``Guidance for States on Implementing the Capacity
Development Provisions of the 1996 Amendments to the Safe Drinking
Water Act.'' The Agency is also announcing the availability of the
following related draft documents for public review and comment:
Information for States on Implementing the Capacity Development
Provisions of the Safe Drinking Water Act, and Information for the
Public on Participating with States in Preparing Capacity Development
Strategies.
DATES: Comments must be received by April 6, 1998.
ADDRESSES: Send comments to Peter E. Shanaghan, Small Systems
Coordinator, Mail Code 4606, Environmental Protection Agency, 401 M
Street S.W., Washington, D.C. 20460 or E-mail
shanaghan.peter@epa.epamail.gov.
FOR FURTHER INFORMATION CONTACT: Peter E. Shanaghan, 202-260-5813 or
shanaghan.peter@epamail.epa.gov.
SUPPLEMENTARY INFORMATION: The 1996 Safe Drinking Water Act (SDWA)
Amendments bring significant improvements to the national drinking
water program. Capacity development is an important component of the
Act's focus on preventing problems in drinking water. The capacity
development provisions offer a framework within which States and water
systems can work together to ensure that systems acquire and maintain
the technical, financial, and managerial capacity needed to achieve the
public health protection objectives of the SDWA.
The 1996 Amendments emphasize the technical, managerial, and
financial capacity of water systems. By enhancing and ensuring the
technical, financial, and managerial capacity of water systems, States
will promote compliance with national primary drinking water
regulations (NPDWRs) for the long term. To avoid a withholding in its
Drinking Water State Revolving Fund (DWSRF) allotment, each State is
required to obtain the legal authority or other means to ensure that
new community water systems and new nontransient noncommunity water
systems demonstrate adequate capacity, and to develop and implement a
strategy to assist existing systems in acquiring and maintaining
capacity.
The draft guidance published and the draft information documents
being made available today are the result of a thorough stakeholder
consultation process initiated by the U.S. Environmental Protection
Agency (EPA) and its National Drinking Water Advisory Council (NDWAC).
The NDWAC was established by the original Safe Drinking Water Act as a
diverse group of stakeholders to advise the Agency on drinking water
issues. In order to most effectively advise EPA regarding
implementation of the capacity development provisions of the SDWA
Amendments of 1996, NDWAC established a Small Systems Working Group.
The Small Systems Working Group met on four occasions between February
and July, 1997, each two days in length, with the purpose of developing
consensus recommendations on how EPA should implement the capacity
development provisions of the SDWA Amendments of 1996. The Small
Systems Working Group consisted of 22 members representing small public
water systems, environmental and public health advocacy groups, State
drinking water programs, public utility commissions, and other interest
groups. The Small Systems Working Group recommended to NDWAC, which in
turn recommended to EPA, that the Agency publish a combination of
guidance and information to facilitate the implementation of the
capacity development provisions of the 1996 SDWA Amendments. The
working group, through the NDWAC, made specific substantive
recommendations regarding the content of the draft guidance being
published today and information documents being made available today.
Guidance and Information Documents
The guidance document being published today is in large part based
on recommendations by the Small Systems Working Group and NDWAC. The
document is entitled Guidance for States on Implementing the Capacity
Development Provisions of the 1996 Amendments to the Safe Drinking
Water Act, and includes the following major sections:
Guidance for States on Ensuring that All New Community
Water Systems and New Nontransient Noncommunity Water Systems
Demonstrate Technical, Managerial, and Financial Capacity
Guidance for States on Minimum Requirements for State
Capacity Development Strategies (to Avoid DWSRF Withholding)
Guidance for States on Assessment of Capacity for the
Purposes of Awarding Drinking Water State Revolving Fund (DWSRF)
Assistance
The draft information documents being made available today are also
based in large part on specific recommendations by the Small Systems
Working Group and NDWAC. The first document, entitled Information for
States on Implementing the Capacity Development Provisions of the Safe
Drinking Water Act, includes the following chapters:
Information for States on Ensuring that All New Community
Water Systems and New Nontransient Noncommunity Water Systems
Demonstrate Technical, Managerial, and Financial Capacity
Information for States on Preparing State Capacity
Development Strategies
Information for States on Assessment of Capacity (For
Purposes of Awarding DWSRF assistance)
A second draft document recommended by the Small Systems Working
Group and NDWAC, entitled Information for the Public on Participating
with States in Preparing Capacity Development Strategies, is also being
made available today.
Specific Issues for Commentors to Consider
There are two issues on which the Agency wishes to specifically
solicit public comment. The first pertains to the proposed guidance
being published today. Does the proposed guidance strike an appropriate
balance between respecting State flexibility and discretion in
implementation of the capacity development provisions, while ensuring
adequate national level program accountability for SDWA implementation?
The second issue pertains to the draft information document for
which a notice of availability is being published today. Does the
document contain sufficient substantive information, and is the
information appropriately organized, to facilitate State implementation
of the capacity development provisions?
Statutory Basis for the Guidance and Information Documents
The following provisions of the Safe Drinking Water Act as amended
comprise the statutory requirements for capacity development and
provide the basis for the subsequent guidance and accompanying
information documents:
[[Page 6019]]
Section 1420(a): State Authority for New Systems-A State
shall receive only 80 percent of the allotment that the State is
otherwise entitled to receive under section 1452 (relating to State
loan funds) unless the State has obtained the legal authority or other
means to ensure that all new community water systems and new
nontransient, noncommunity water systems commencing operation after
October 1, 1999, demonstrate technical, managerial, and financial
capacity with respect to each national primary drinking water
regulation in effect, or likely to be in effect, on the date of
commencement of operations.
Section 1420(c): Capacity Development Strategy--(1) In
General-Beginning 4 years after the date of enactment of this section,
a State shall receive only--(A) 90 percent in fiscal year 2001; (B) 85
percent in fiscal year 2002; and (C) 80 percent in each subsequent
fiscal year, of the allotment that the State is otherwise entitled to
receive under section 1452 (relating to State loan funds), unless the
State is developing and implementing a strategy to assist public water
systems in acquiring and maintaining technical, managerial, and
financial capacity.
Section 1452(a)(1)(G)(i): New System Capacity--Beginning
in fiscal year 1999, the Administrator shall withhold 20 percent of
each capitalization grant made pursuant to this section to a State
unless the State has met the requirements of section 1420(a) (relating
to capacity development) and shall withhold 10 percent for fiscal year
2001, 15 percent for fiscal year 2002, and 20 percent for fiscal year
2003 if the State has not complied with the provisions of section
1420(c) (relating to capacity development strategies). Not more than a
total of 20 percent of the capitalization grants made to a State in any
fiscal year may be withheld under the preceding provisions of this
clause. All funds withheld by the Administrator pursuant to this clause
shall be reallotted by the Administrator on the basis of the same ratio
as is applicable to funds allotted under subparagraph (D). None of the
funds reallotted by the Administrator pursuant to this paragraph shall
be allotted to a State unless the State has met the requirements of
section 1420 (relating to capacity development).
Section 1452(g)(3): Guidance and Regulations--The
Administrator shall publish guidance and promulgate regulations as may
be necessary to carry out the provisions of this section, including--
(A) provisions to ensure that each State commits and expends funds
allotted to the State under this section as efficiently as possible in
accordance with this title and applicable State laws; (B) guidance to
prevent waste, fraud, and abuse; and (C) guidance to avoid the use of
funds made available under this section to finance the expansion of any
public water system in anticipation of future population growth. The
guidance and regulations shall also ensure that the State and public
water systems receiving assistance under this section, use accounting,
audit, and fiscal procedures that conform to generally accepted
accounting standards.
The Act also provides that the Environmental Protection Agency
(EPA) will assist State capacity development efforts by providing
information and guidance:
Section 1420(d): Federal Assistance--(1) In General--The
Administrator shall support the States in developing capacity
development strategies. * * * (4) Guidance for New Systems--Not later
than 2 years after the date of enactment of this section, the
Administrator shall publish guidance developed in consultation with the
States describing legal authorities and other means to ensure that all
new community water systems and new nontransient, noncommunity water
systems demonstrate technical, managerial, and financial capacity with
respect to national primary drinking water regulations.
Acronyms
------------------------------------------------------------------------
Acronym Definition
------------------------------------------------------------------------
CFR....................................... Code of Federal Regulations.
CWS....................................... Community Water System.
DWRSF..................................... Drinking Water State
Revolving Fund.
EPA....................................... Environmental Protection
Agency.
IUP....................................... Intended Use Plan.
NDWAC..................................... National Drinking Water
Advisory Council.
NPDWR..................................... National Primary Drinking
Water Regulations.
NTNCWS or NTNC............................ Nontransient, Noncommunity
Water System.
PWS....................................... Public Water System.
SDWA...................................... Safe Drinking Water Act.
SDWIS..................................... Safe Drinking Water
Information System.
TNC or TNCWS.............................. Transient, Noncommunity
Water System.
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Contents
I. Introduction to Technical, Managerial, and Financial
Capacity of Water Systems
II. Guidance for States on Ensuring that All New CWSs and
New NTNCWSs Demonstrate Technical, Managerial, and Financial
Capacity
III. Guidance for States on Minimum Requirements for State
Capacity Development Strategies (To Avoid DWSRF Withholding)
IV. Guidance for States on Assessment of Capacity for
Purposes of Awarding DWSRF Assistance
I. Introduction to Technical, Managerial, and Financial Capacity of
Water Systems
The 1996 Safe Drinking Water Act (SDWA) Amendments bring
significant improvements to the national drinking water program.
Capacity development is an important component of the Act's focus on
preventing problems in drinking water. The capacity development
provisions offer a framework within which States and water systems can
work together to ensure that systems acquire and maintain the
technical, financial, and managerial capacity needed to achieve the
public health protection objectives of the SDWA.
The 1996 Amendments emphasize the technical, managerial, and
financial capacity of water systems. By enhancing and ensuring the
technical, financial, and managerial capacity of water systems, States
will promote compliance with national primary drinking water
regulations (NPDWRs) for the long term. To avoid a withholding in its
Drinking Water State Revolving Fund (DWSRF) allotment, each State is
required to obtain the legal authority or other means to ensure that
new community water systems and new nontransient noncommunity water
systems demonstrate adequate capacity, and to develop and implement a
strategy to assist existing systems in acquiring and maintaining
capacity.
The capacity development provisions in the Act offer a simple,
flexible framework within which States can organize their efforts to
address the challenges facing small systems. Each state has
extraordinary flexibility to implement a capacity development program
that is uniquely tailored to its circumstances. The statute specifies
that new systems must demonstrate technical, managerial, and financial
capacity prior to commencing operation, and States must develop and
implement strategies to assist public water systems in acquiring and
maintaining technical, managerial, and financial capacity. The statute
lists several specific issues which a State must consider, solicit
public comment on, and include as appropriate in its capacity
development strategy. The statute does not dictate which substantive
components a State strategy must contain. Enhancing the technical,
managerial, and financial
[[Page 6020]]
capacity of water systems offers great potential for correcting
existing non-compliance and, more importantly, preventing future non-
compliance with NPDWR's.
This section presents the background information necessary to
understand the guidance documents that are provided in Sections II
through IV. These draft guidance documents are designed to assist
States in implementing the capacity development provisions of the Act.
Included in this introductory section are a discussion of the
demographics of systems affected by the provisions, and working
definitions of technical, managerial, and financial capacity that are
used throughout the draft guidance and information documents.
1. System Demographics 1
The capacity development provisions of the SDWA apply to several
types of public water systems. Some provisions apply to all public
water systems (PWSs), which include: (1) Community water systems
(CWSs); (2) nontransient, noncommunity water systems (NTNCWSs); and (3)
transient, noncommunity water systems (TNCWSs). Other provisions apply
only to community water systems and nontransient, noncommunity water
systems. It is important to note that the statute does not limit or
focus the capacity development provisions based on system size.
However, as the following discussion makes clear, the overwhelming
majority of water systems are small. Thus, as a practical matter, small
systems will be a significant focus of capacity development efforts due
to the sheer number of such systems.
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\1\ Data Source: Safe Drinking Water Information System (SDWIS).
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A public water system is a ``system for the provision to the public
of water for human consumption through pipes or other constructed
conveyances, if such system has at least fifteen service connections or
regularly serves an average of at least twenty-five individuals''
(Section 1401(4)(A) SDWA as amended). This category includes community
water systems; nontransient, noncommunity water systems; and transient,
noncommunity water systems. There are approximately 172,000 public
water systems nationwide.
A community water system is ``a public water system which serves at
least 15 service connections used by year-round residents or regularly
serves at least 25 year-round residents.'' (40 CFR 141.2) There are
approximately 55,000 community water systems serving over 246 million
people. About 87 percent of CWSs are classified as ``very small''
(serving fewer than 500 persons) or ``small'' (serving from 501 to
3,300 persons). Although the small and very small systems comprise a
significant majority of CWSs, they serve just over 10 percent of the
population served by CWSs. Community water systems can be classified
into two major ownership types--privately owned and publicly owned.
Within the privately owned category, a substantial number of systems
are ``ancillary systems,'' i.e., they provide water as an ancillary
function of their principal business or enterprise. An example is
mobile home parks (Figure 1). Like NTNCWSs, they provide water to their
customers, but provision of water is not their principal business. The
incidence of ancillary systems varies significantly by system size. In
small CWSs serving between 25 and 100 persons, over half (53 percent)
are ancillary systems. In larger CWSs serving more than 10,000 persons,
only 0.1 percent are ancillary systems.
A nontransient, noncommunity water system is defined as ``a public
water system that is not a community water system and that regularly
serves at least 25 of the same persons over 6 months per year.'' (40
CFR 141.2) Examples of establishments which are nontransient,
noncommunity water systems include schools, factories, office/
industrial parks, and major shopping centers. Most are privately owned.
The approximately 20,000 NTNCWSs across the nation serve approximately
6 million people. Over 96 percent of NTNCWSs use ground water as their
primary source. They typically are small systems; 99 percent of NTNCWSs
are classified as ``very small'' or ``small.''
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2. Defining Capacity
In the context of the 1996 Amendments to the Safe Drinking Water
Act, water system capacity refers to the overall capability or
wherewithal of a water system to consistently produce and deliver water
meeting all NPDWRs. Capacity encompasses the technical, managerial, and
financial capabilities of the water system to plan for, achieve, and
maintain compliance with applicable drinking water standards given
available water resources and the characteristics of the service
population.
Technical, managerial, and financial capacity are three general,
highly interrelated areas of overall water system capability:
Technical capacity refers to the physical infrastructure
of the water system, including but not limited to the adequacy of the
source water, infrastructure (source, treatment, storage, and
distribution), and the ability of system personnel to adequately
operate and maintain the system and to otherwise implement technical
knowledge.
Managerial capacity refers to the management structure of
the water system, including but not limited to ownership
accountability, staffing and organization, and effective linkages to
customers and regulatory agencies.
Financial capacity refers to the financial resources of
the water system, including but not limited to revenue sufficiency,
credit worthiness, and fiscal controls.
3. Key Questions
Technical, managerial, and financial capacity are individual yet
highly interrelated areas of a system's overall capability, as
illustrated in Figure 2. A system cannot sustain acceptable performance
without maintaining adequate capability in all three areas. Indicators
of capacity within each area can be framed by key sets of issues and
questions, including but not limited to the following:
Technical Capacity
Source water adequacy. Does the system have access to a
reliable and sufficient source of water? Is the source water of
adequate quality? Is the source adequately protected?
Infrastructure adequacy. Can the system provide water that
meets SDWA standards? What is the condition of the system's
infrastructure, including well(s) and/or source water intakes,
treatment, storage, and distribution? What is the life expectancy of
the system's infrastructure? Does the system have a capital improvement
plan?
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[GRAPHIC] [TIFF OMITTED] TN05FE98.007
BILLING CODE 6560-50-C
[[Page 6024]]
Technical knowledge and implementation. Does the system
have a certified operator? Is the system operated with technical
knowledge of applicable standards? Are personnel able to implement this
technical knowledge effectively? Do the operators understand the
technical and operational characteristics of the system? Does the
system have an effective operation and maintenance program?
Managerial Capacity
Ownership accountability. Are the system owner(s) clearly
identified? Can they be held accountable for the system?
Staffing and organization. Are the system operator(s) and
manager(s) clearly identified? Is the system properly staffed and
organized? Do personnel understand the management aspects of regulatory
requirements and system operations? Do personnel have adequate
expertise to manage water system operations? Do personnel have the
necessary licenses and certifications?
Effective external linkages. Does the system interact well
with customers, regulators, and other entities? Is the system aware of
available external resources, such as technical and financial
assistance?
Financial Capacity
Revenue sufficiency. Do revenues cover costs? Are rates
and charges for water service adequate to cover the cost of service?
Credit worthiness. Is the system financially healthy? Does
it have access to financial capital through public or private sources?
Fiscal management and controls. Are adequate books and
records maintained? Are appropriate budgeting, accounting, and
financial planning methods used? Does the system manage its revenues
effectively?
Many aspects of water system operations involve more than one kind
of capacity. A program of infrastructure replacement and improvement,
for example, requires technical knowledge, management planning and
oversight, and financial resources. In other words, a water system with
adequate capacity draws on strengths in all three capacity areas--
technical, managerial, and financial.
II. Guidance for States on Ensuring That All New CWSs and New NTNCWSs
Demonstrate Technical, Managerial, and Financial Capacity
The Safe Drinking Water Act (SDWA) Amendments of 1996 (Pub.L. 104-
182) authorize a Drinking Water State Revolving Fund (DWSRF) to help
public water systems finance the infrastructure needed to achieve or
maintain compliance with SDWA requirements and to achieve the public
health protection objectives of the Act. Section 1452 authorizes the
Administrator of the U.S. Environmental Protection Agency (EPA) to
award capitalization grants to the States. Under section 1420(a) of the
Act, the Administrator is directed to withhold a portion of a State's
allotment under section 1452 unless the State ``has obtained the legal
authority or other means to ensure that all new community water systems
and new nontransient, noncommunity water systems commencing operation
after October 1, 1999, demonstrate technical, managerial, and financial
capacity with respect to each national primary drinking water
regulation in effect, or likely to be in effect, on the date of
commencement of operations.'' Section 1452(a)(1)(G)(i) discusses the
process of withholding funds under the Act's provisions related to new
system capacity.
Section 1420(d)(4) instructs the EPA Administrator to publish
``guidance developed in consultation with the States describing legal
authorities and other means to ensure that all new community water
systems and nontransient, noncommunity water systems demonstrate
technical, managerial, and financial capacity with respect to national
primary drinking water regulations.'' This guidance document fulfills
this requirement.
This guidance document--developed in consultation with States and
other stakeholders--provides the criteria that EPA will use in
evaluating State implementation of the requirements of section 1420(a)
of the Act. The criteria are (1) demonstration of statutory or
regulatory basis of authority, (2) demonstration of control points in
the new system development process at which the authority will be
exercised, and (3) initially, a plan for evaluating the program on an
ongoing basis; then in subsequent years an annual description of actual
program implementation and effectiveness. To supplement this guidance,
EPA is making available for public review an informational document
entitled Information for States on Implementing the Capacity
Development Provisions of the Safe Drinking Water Act. Chapter One of
this document contains options States can consider in developing a
program that ensures that all new community and new nontransient,
noncommunity water systems demonstrate technical, managerial, and
financial capacity. This document is available through the Safe
Drinking Water Hotline, and can be obtained by calling 1-800-426-4791.
2. The Statutory Background
General Issues
The SDWA Amendments establish an integrated environmental law.
Links among different parts of the law create a tapestry of provisions;
prevention programs are integrated with, and essential to the success
of, new regulatory flexibilities. One of these prevention programs is
capacity development. The Amendments require States to ensure that all
new community and nontransient, noncommunity systems commencing
operation after October 1, 1999 demonstrate technical, managerial, and
financial capacity. Ensuring capacity, which prevents costly
noncompliance, facilitates the regulatory flexibility of the
Amendments.
Read in the context of the Amendments, the statutory basis for the
criteria that are presented below is clear. First, when the statute
says a State must have the ``legal authority or other means'' to ensure
the capacity of new systems, it means that the State must have the
authority to intervene in the process of new system development to
obtain the necessary demonstration of technical, managerial, and
financial capacity. The conference committee report makes clear that
the phrase ``legal authority or other means'' means that States must
have the ``actual authority'' to ensure the capacity of new systems.
In other words, as described more fully in the criteria, the States
must be able to demonstrate that they have, and can exercise, authority
to prevent the creation of new community or nontransient, noncommunity
systems that do not have technical, managerial, and financial capacity.
This implies, and to make functionally effective may require, that
there must be some ``control point'' at which a State can say ``no'' to
the development of a new system that does not have adequate capacity.
Second, the guidance recognizes a central theme found throughout
the Amendments--an approach to State programs that is flexible and
recognizes the diversity of State strategies to achieve the objectives
of the Amendments. In programs dealing with new system creation, a
State may involve a variety of State and local governmental agencies.
This guidance accepts the diversity of approaches. It requires only
that there be a clear, unambiguous demonstration of State authority to
ensure that no new
[[Page 6025]]
community or nontransient, noncommunity system will be created if it
lacks adequate capacity. Section 1420(a) of the statute emphasizes that
the requirement is effectively a performance standard when it says that
the Administrator shall withhold a portion of a State's allotment
unless the State has obtained the legal authority or other means ``to
ensure'' the intended result.
How this statutory mandate is achieved is up to the State. The
statute does not require that a particular State agency (e.g., the
primacy agency) be responsible; it simply requires that some State
agency be responsible. It does not preclude delegation of authority to
make the decision to other agencies or to local governments. The
statute does, however, require that there be clear State authority to
ensure that new systems have adequate technical, managerial, and
financial capacity.
Third, the statutory emphasis on all three aspects of capacity--
technical, managerial, and financial--requires a comprehensive view of
capacity. To comply with this requirement, it is not enough for a State
to focus on only one aspect, e.g., technical capacity. Section I of
this document provides some suggested parameters for each of the three
areas of capacity.
Finally, section 1420 makes explicit that the definition of system
capacity be forward looking. Under section 1420(c), for example, States
are required to develop a strategy to assist systems in ``acquiring and
maintaining'' all three areas of capacity. Thus, to demonstrate
capacity, the system must have technical, managerial, and financial
capacity on the first day of operation and over time. When States
evaluate the capacity of new systems, they must assess both current and
future capacity. The criteria shown below are to help States develop an
effective program that ensures its new community and nontransient,
noncommunity water systems conform with the requirements of the Safe
Drinking Water Act.
EPA expects that States will provide, either as part of their DWSRF
capitalization grant applications, or as a separate submittal, a full
description, explanation, and documentation of their programs for
ensuring a demonstration of new system capacity. The Agency will use
the criteria discussed in this guidance to evaluate whether the State's
program meets the requirements of the SDWA, as amended. EPA is required
to begin DWSRF withholding related to new system capacity in fiscal
year 1999. Any capitalization grant award made in fiscal year 1999 is
subject to the capacity development withholding (including fiscal year
1998 funds awarded in fiscal year 1999). Thus State capitalization
grant applications submitted for award in fiscal year 1999, for fiscal
year 1999 funds or fiscal year 1998 unawarded funds, must contain a
full description, explanation, and documentation of the States program
for ensuring a demonstration of new system capacity. Once a State has
successfully demonstrated a basis of authority and control points at
which the authority will be exercised, the State should include these
demonstrations in the operating agreement of its capitalization grant
application, but need not include it in each subsequent capitalization
grant application (or as a separate submission) unless the basis of
authority or control points have changed. However, documentation of
ongoing program implementation must be provided in all subsequent
capitalization grant applications or as part of the DWSRF annual
review.
3. Criteria
For the first year of implementation, EPA will base its withholding
decision on whether a State can demonstrate a statutory or regulatory
basis of authority to prevent the creation of new community water
systems and new nontransient, noncommunity water systems which lack
capacity, demonstrate control points for the exercise of that
authority, and provide a plan for program implementation and evaluation
on an ongoing basis. For subsequent years, if the authority and control
points remain unchanged, the withholding decisions will be based on
whether the State is consistently implementing its program.
A Basis of Authority
Under section 1420(a), EPA shall withhold 20% of a State's
capitalization grant under section 1452 unless the State has obtained
the ``legal authority or other means'' to ensure the demonstration of
capacity by new community water systems and new nontransient,
noncommunity water systems commencing operation after October 1, 1999.
This authority must provide the State with the capability to intervene
in the process of new system development in order to obtain necessary
assurances of technical, managerial, and financial capacity. As
explained in the introduction, the phrase ``legal authority or other
means'' means that States must have the ``actual authority'' to ensure
that new systems have adequate capacity. To meet the requirements of
this provision, States must identify and demonstrate this authority.
Examples of ``legal authority or other means'' are provided in Chapter
Two of the EPA document Information for States on Implementing the
Capacity Development Provisions of the Safe Drinking Water Act.
Implicit in the requirements of section 1420(a) are the following:
The State must specify which agency of State government is
responsible for ensuring that new systems demonstrate capacity. This
agency could be the State SDWA primacy agency. The State, at its sole
discretion, may decide which agency is responsible, but there must be a
responsible agency.
The State agency responsible for making determinations of
technical, managerial and financial capacity need not always be the
SDWA primacy agency. Certification authority for new investor-owned
systems, for example, may rest with the State public utility
commission. Collaborative arrangements among agencies for controlling
new system development must be documented through statutory or other
means (such as memoranda of understanding).
The responsible State agency (or combination of agencies)
must possess and demonstrate the ``actual authority'' to prevent the
creation of a new system if the system cannot demonstrate adequate
technical, managerial, and financial capacity. ``Actual authority'' may
take the form of statutory authority, regulations, or other effective
and demonstrable means of preventing the creation of a new system due
to inadequate capacity.
Active involvement of local and county entities is one
means of addressing new system capacity concerns. The authority for
obtaining the necessary assurances of technical, managerial, and
financial capacity may be granted initially at the local level, but the
State is ultimately accountable for meeting the capacity requirements
of the Act, and must have the final authority to ensure new system
capacity.
Demonstration of Control Points in the New System Development Process
A control point is a point at which a State (or other unit of
government) can make an authoritative decision as to the adequacy of a
new system, in terms of its technical, managerial, and financial
capacity. Control points allow a State to exercise its legal authority
or other means to ensure the capacity of new systems. They provide
opportunities to prevent the creation of systems that lack technical,
managerial, and financial capacity. Each State must demonstrate to EPA
that it has one or more clear
[[Page 6026]]
control points. Many control points are possible at both the State and
local levels of government. While actions by local governments can be
an important part of the process, the State must have at least one
control point that allows it to exercise its authority directly. The
existence of this authority does not preclude the State from providing
advice or technical assistance that could help to ensure that a system
has adequate capacity.
Examples of generic control points in the new system development
process are described in Chapter Two of the EPA document, Information
for States on Implementing the Capacity Development Provisions of the
Safe Drinking Water Act.
Plan for Implementation and Evaluation of the New System Capacity
Assurance Program
States must develop plans for implementing and evaluating their
capacity-assurance program for new systems. The EPA Administrator must
make continuing year-by-year determinations with regard to withholding
under section 1452(a)(1)(G)(i). Initially, State programs will be
assessed prospectively; but evaluations of program implementation and
effectiveness will become more important in succeeding years. States
must therefore present a plan for program implementation and evaluation
as part of their initial demonstration of authority for new systems
under section 1420(a). The plan must outline a means of verifying
program implementation and evaluating the program. In subsequent years,
the State must describe ongoing program implementation and evaluation
during the preceding year and plans for program implementation and
evaluation during the current year.
III. Guidance for States on Minimum Requirements for State Capacity
Development Strategies (to Avoid DWSRF Withholding)
The Safe Drinking Water Act (SDWA) Amendments of 1996 (Pub.L. 104-
182) authorize a Drinking Water State Revolving Fund (DWSRF) to help
public water systems finance the infrastructure needed to achieve or
maintain compliance with SDWA requirements and in achieving the public
health objectives of the Act. Section 1452 authorizes the Administrator
of the U.S. Environmental Protection Agency (EPA) to award
capitalization grants to the States. Section 1420(c) of the Act directs
the Administrator to withhold a portion of a State's allotment under
section 1452 unless the State is ``developing and implementing a
strategy to assist public water systems in acquiring and maintaining
technical, managerial, and financial capacity.''
This document provides the criteria that EPA will use in evaluating
State capacity development strategies to implement the withholding
requirements in section 1420(c) of the Act. Each State will have
considerable flexibility in preparing its capacity development
strategy. Only minimum criteria will be reviewed to ensure that the
State meets the provisions of section 1420(c). The five criteria are
(1) solicitation and consideration of public comments, (2)
consideration of section 1420(c)(2)(A-E), (3) description of the
capacity development strategy, (4) description of strategy
implementation, and (5) required actions regarding systems in
significant noncompliance. Chapter Three of Information for States on
Implementing the Capacity Development Provisions of the Safe Drinking
Water Act contains options on how States might meet these requirements.
The basis for this guidance is the Administrator's authority to issue
guidance and regulations relative to the State Revolving Loan Fund
under section 1452(g)(3) the SDWA and the specific provisions of
section 1420 of the Act.
EPA views the purpose of this guidance as helping to ensure that
the wide and creative flexibility intended under the law for States in
framing their capacity development strategies will be available in
fact. Section 1452(a)(1)(G)(i) of SDWA states that EPA ``shall
withhold'' up to 20% of a State's DWSRF allocation ``if the State has
not complied with the provisions of Section 1420(c).'' Thus, some
States might be unduly, but understandably, cautious in drafting their
strategies if they were largely uncertain about how EPA was going to
assess such compliance, and would not want to risk proceeding on a
mistaken assumption that might place their DWSRF allocations in
jeopardy. EPA believes that fidelity to Congress' intention in this
regard and fairness to the States demands that EPA clarify in advance
how the directives of Section 1452(a)(1)(G)(i) will be applied, and
this guidance seeks to do so.
EPA expects that States will include in their DWSRF capitalization
grant applications, or separately and in advance of its application, a
full description and documentation of their capacity development
strategy. The Agency will use the criteria discussed in this guidance
to evaluate whether the State's strategy meets the requirements of the
SDWA, as amended. EPA is required to begin DWSRF withholding related to
capacity development strategies in fiscal year 2001. Thus, State
capitalization grant applications submitted for award in fiscal year
2001 must contain a full description and documentation of the State
capacity development strategy or such description and documentation
must be submitted separately and in advance of the capitalization grant
application. Once a State has successfully demonstrated development of
a capacity development strategy, the State should include this
demonstration in the operating agreement of its capitalization grant
application, but need not include this demonstration in each subsequent
capitalization grant application or separate submittal, unless the
strategy has changed. However, a full documentation of ongoing strategy
implementation must be provided in both the initial and all subsequent
capitalization grant applications, or as part of the DWSRF annual
review, subject to these provisions.
2. Benefits of a State Capacity Development Strategy
The SDWA Amendments strongly emphasize prevention of drinking water
contamination. They seek to avoid new problems through a number of
interrelated provisions, such as capacity development, operator
certification, and source water protection. Achieving increased
technical, financial, and managerial capacity can allow systems to take
advantage of operator certification and source water protection and
will help prevent compliance problems in the future. The Amendments'
new prevention approach has two key elements:
A clear State lead, with flexibility and resources to
achieve results.
A strong effort to provide information to the public and
involve stakeholders in decision-making processes.
The Amendments seek to improve the ability of water systems to
reliably provide safe water by requiring States to ensure adequate
capacity in new systems and to assist existing systems in acquiring and
maintaining capacity through a State capacity development strategy.
This strategy is intended to be a plan for the State program to assist
water systems in acquiring and maintaining the technical, managerial,
and financial capacity to reliably deliver safe drinking water. The
tools and approaches that States develop as part of their capacity
development strategies will make the Act's implementation more
workable, consistent, and effective. Some possible tools and approaches
available to States are
[[Page 6027]]
described in Chapter Three of EPA's Information for States on
Implementing the Capacity Development Provisions of the Safe Drinking
Water Act.
3. Criteria
EPA will use the following criteria to evaluate whether or not a
State has complied with the capacity development strategy requirements
of the SDWA, as amended. States not complying with the statutory
requirements face withholding of a portion of their DWSRF allotment, as
discussed previously.
Solicitation and Consideration of Public Comment
The Act provides that the States, in preparing their capacity
development strategies, ``shall consider, solicit public comment on,
and include as appropriate'' the elements listed in section
1420(c)(2)(A-E). To meet its statutory obligations with regard to
public comment, a State must:
Certify that it pro-actively solicited public comments on
the listed elements, and that the process of soliciting public comment
occurred as part of the preparation of its capacity development
strategy.
Describe all significant public comments and the State's
response to those comments.
Definitions
For the purposes of this requirement, several terms must be
defined.
A ``proactive process'' is a process that has the following
characteristics:
The State notified the general public--through
appropriately visible channels--of the opportunity to provide comment
on elements A-E as part of the State's preparation of its capacity
development strategy.
The State identified, before soliciting public comments,
the groups that might be interested in the preparation of a capacity
development strategy. These groups are likely to be of the same type as
those identified in section 1420(c)(2)(E).
The State ensured that each of the identified groups
received a request for public comment on the listed elements.
The State provided an accessible mechanism for receiving
public comment.
`Significant public comment' is any public comment that contributes
to or addresses in a substantive manner the development of a
comprehensive State strategy. Significant public comment includes
comments that suggest changes to, or express support for, any State
position. `Response' to significant public comment is the State's
description of the manner in which it used or did not use all
significant public comments in preparing its capacity development
program. The response must clearly outline how and why the State
decided to use or not to use such comments.
States With Existing Strategies
Some States have implemented or are implementing capacity
development strategies. Having a strategy does not exempt a State from
its responsibility to solicit and consider public comments on that
strategy. Each State that has a strategy must solicit and consider
public comment on the State's treatment of the listed elements (i.e.,
elements listed in section 1420(c)(2)(A-E)) in its strategy. One means
of doing this is by including the existing strategy in the Intended Use
Plan (IUP) and taking effective steps to highlight the opportunity for
comments on the substantive elements of the strategy. Each State with
an existing strategy must certify that it used a proactive process to
solicit public comment, and the State must describe all significant
public comments and its response to each of them.
Consideration of Section 1420(c)(2)(A-E)
Under section 1420(c)(2) the State ``shall consider, solicit public
comment on, and include as appropriate'' each of the listed elements A
through E. These five elements require the State to consider:
i. Methods or criteria that the State will use to identify and
prioritize systems most in need of improving technical, managerial, and
financial capacity (section 1420(c)(2)(A)).
ii. A description of the institutional, regulatory, and financial,
tax, or legal factors at the Federal, State, or local level that
encourage or impair capacity development (section 1420(c)(2)(B)).
iii. How the State will use the authority and resources of the SDWA
or other means to assist public water systems in complying with
drinking water regulations, encourage the development of partnerships
between public water systems to enhance technical, managerial, and
financial capacity of systems, and assist in the training and
certification of operators (section 1420(c)(2)(C)).
iv. A description of how the State will establish the baseline and
measure improvements in capacity with respect to drinking water
regulations (section 1420(c)(2)(D)).
v. Procedures to identify persons interested and/or involved in the
development and implementation of the capacity development strategy
(section 1420(c)(2)(E)).
To comply with this requirement, the State must describe the issues
it considered relative to each of the listed elements and explain why
it included or excluded each element from its capacity development
strategy.
Description of the Capacity Development Strategy
EPA must review two aspects of a State's capacity development
strategy. First, a State must develop a strategy. This means that there
must be a rational basis for concluding that the elements chosen by the
State--when taken together and considered as a whole--constitute a
strategy that is likely ``to assist public water systems in acquiring
and maintaining technical, managerial, and financial capacity''
(section 1420(c)(1)). A State must describe the manner in which the
selected elements fit together and achieve the statutory objective. EPA
will not evaluate the desirability or potential effectiveness of each
element. The Agency will, however, evaluate whether there is a rational
basis for concluding that the State has a strategy, as required by
section 1420(c)(1).
Second, to complete the report as specified in section 1420(c)(3),
a State must describe its plan and means for assessing and measuring
its progress toward improving the technical, managerial, and financial
capacity of the public water systems in the State. Further, this
section requires the State agency responsible for executing the
capacity development strategy to prepare a triennial report to the
Governor on ``the efficacy of the strategy and progress made towards
improving the technical, managerial, and financial capacity of public
water systems in the State.'' The State will not meet this requirement
if its strategy does not include some means of assessment.
Description of Strategy Implementation
EPA will defer to each State's determination of how the State will
implement its plan. Initially, each State only must describe its
current strategy implementation efforts, as well as its plans for
future strategy implementation. In subsequent years, the State must
describe the actual strategy implementation during the preceding year
and plans for strategy implementation during the current year.
Required Actions Regarding Systems in Significant Noncompliance
As required by section 1420(b), each State must prepare,
periodically update, and submit to the EPA Administrator a
[[Page 6028]]
list of community water systems and nontransient, noncommunity water
systems that have a history of significant noncompliance. States must
also indicate, to the extent practicable, the reasons for this
noncompliance.
Each State must also submit, by August 6, 2001, a report to the
Administrator on the success of enforcement mechanisms and initial
capacity development efforts in helping community water systems and
nontransient noncommunity water systems with a history of significant
noncompliance to improve technical, managerial, and financial capacity.
Both requirements must be met as part of the implementation of a
State's capacity development strategy.
Definitions
For the purposes of this requirement, several terms must be
defined.
``Periodically update'' is defined as once every 3 years. The first
list was due to the Administrator by August 6, 1998. Subsequent lists
will be due to the Administrator every three years.
A ``history of significant noncompliance'' means being in
significant noncompliance during (at least) any 3 quarters of the
previous 3 years.
IV. Guidance for States on Assessment of Capacity for Purposes of
Awarding DWSRF Assistance
The Safe Drinking Water Act (SDWA) Amendments of 1996 (Pub.L. 104-
182) authorize a Drinking Water State Revolving Fund (DWSRF) to help
public water systems finance the infrastructure needed to achieve or
maintain compliance with SDWA requirements and to achieve the public
health objectives of the Act. Section 1452 authorizes the Administrator
of the U.S. Environmental Protection Agency (EPA) to award
capitalization grants to the States. The States, in turn, provide
assistance to eligible water systems. Under section 1452(a)(3)(A), a
State may not provide assistance to a system that lacks the technical,
managerial, or financial capability 2 to maintain SDWA
compliance, or is in significant noncompliance with any requirement of
a National Primary Drinking Water Regulation (NPDWR) or variance. Two
exceptions to this requirement are provided in section 1452(a)(3)(B).
This provision allows States to provide assistance to a system that is
in significant noncompliance if the use of the financial assistance
from the DWSRF will ensure compliance. If the system lacks adequate
capacity the state may provide DWSRF assistance if the owner or
operator of the system agrees to undertake feasible and appropriate
changes in operation to ensure technical, managerial, and financial
capacity to comply with the SDWA over the long term.
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\2\ The term capability is synonymous with ``capacity'' for the
purposes of this provision of the Act.
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As part of its Capitalization Grant Application, each State must
explain how it will review the technical, managerial, and financial
capability of all systems that receive assistance. This requirement is
separate from the capacity development strategy required under section
1420(c) of the Act. The basis for this guidance is the Administrator's
authority to issue guidance under section 1452(g)(3) of the Act.
This guidance document--developed in consultation with States and
other stakeholders--provides the minimum requirements for State
assessment of a system's technical, managerial, and financial capacity
for the purposes of distributing DWSRF funds. To ensure the
implementation of section 1452(a)(3)(A), a State must describe its
procedures for assessing technical, managerial, and financial capacity
at present and for the foreseeable future; whether DWSRF assistance
will help to ensure compliance (if a system is not in compliance); and
whether the system has a long-term plan to develop adequate capacity
(if a system lacks capacity).
EPA recognizes that assessing system capacity is an iterative
process, which may change as a State annually prepares its capacity
development strategy and evaluates the strategy's success. This
guidance provides a phased approach for States to develop and describe
their assessment procedures. Initially, States must describe the
procedures they will use to assess system capacity. In subsequent
years, States must summarize the results of the previous year's
assessment and describe any changes to the procedures for assessing
technical, managerial, and financial capacity. This allows States to
change their assessment procedures to meet the needs of their capacity
development strategies. Tools and approaches that States can use to
assess system capacity are described in Chapter Four of EPA's
Information for States on Implementing the Capacity Development
Provisions of the Safe Drinking Water Act.
In developing procedures to assess system capacity, States should
recognize that these assessments are to be part of a systematic process
that will better enable the State to carry out other tasks required by,
or vital to, the law and the drinking water program. By examining the
broad goals of the program and of its strategy, a State can select the
assessment tools and approaches that will most benefit its overall
program. Viewing each component of the capacity development process--
including the method for assessing systems--as one part of an
integrated whole will enable a State to develop a comprehensive,
integrated strategy for capacity development that will make the law's
implementation more workable, consistent, and effective. EPA will use
the criteria presented below to evaluate State DWSRF capitalization
grant applications. Chapter Four of EPA's Information for States on
Implementing the Capacity Development Provisions of the Safe Drinking
Water Act contains options States can consider in preparing the
substance of their assessment procedures.
2. Criteria
Procedure To Assess Technical, Managerial, and Financial Capacity
Section 1452(a)(3)(A) of the Amendments specify that a State may
not provide assistance to a system that lacks the technical,
managerial, and financial capability to ensure SDWA compliance. To
comply with this provision, a State must have a procedure to assess the
technical, managerial, and financial capacity of water systems at
present and for the foreseeable future.
EPA, based upon specific recommendation by the NDWAC, is proposing
that a State's procedures to assess technical, financial, and
managerial capacity for the purpose of determining whether to award
DWSRF assistance be placed in the Intended Use Plan (IUP) of the
State's capitalization grant application. This is to ensure adequate
opportunity for public review and comment on these procedures prior to
implementation.
To meet its statutory obligations under this provision initially, a
State must provide in its IUP:
An assurance that it will assess the technical,
managerial, and financial capacity of water systems, and
A brief description of the procedures that will be used to
conduct the assessment of capacity at present and for the foreseeable
future.
To meet its statutory obligations under this provision in
subsequent years, a State must summarize as part of its capitalization
grant application, or as part of the DWSRF annual review, the results
of its assessment from the previous year and describe any changes
[[Page 6029]]
to its procedures for assessing capacity at present and for the
foreseeable future.
Procedure for Assessing Whether DWSRF Assistance Will Help to Ensure
Compliance (If a System Is Not Presently in Compliance)
Section 1452(a)(3)(A) prohibits provision of DWSRF assistance to
any system in significant noncompliance with a national primary
drinking water regulation or variance unless the use of the financial
assistance from the DWSRF will ensure compliance.
To determine which systems are eligible for assistance under
section 1452(a)(3)(A), a State must develop a procedure to assess
whether such assistance will help to ensure compliance in a system that
is presently in significant non-compliance.
To meet its statutory obligations under this provision initially, a
State must provide as part of its IUP:
An assurance that it will assess whether such assistance
will help systems in noncompliance ensure that they come into
compliance.
A brief description of the procedures that will be used to
conduct the assessment.
To meet its statutory obligations under this provision in
subsequent years, a State must summarize, as part of its capitalization
grant application, the results of its assessment from the previous year
and describe any changes to its procedure for assessment.
Procedure for Assessing Whether the System Has a Long-Term Plan to
Undertake Feasible and Appropriate Changes in Operations Necessary to
Develop Adequate Capacity (If a System Lacks Capacity)
Section 1452(a)(3)(B) prohibits provision of DWSRF assistance to
any system which does not have the technical, managerial, and financial
capability to ensure compliance with SDWA, as amended, unless the owner
or operator of the system agrees to undertake feasible and appropriate
changes in operation to ensure technical, managerial, and financial
capacity to comply with the SDWA over the long term.
To determine which systems are eligible for assistance under
section 1452(a)(3)(B), a State must develop a procedure to assess
whether the system has a long-term plan to undertake feasible and
appropriate changes in operations necessary to develop adequate
capacity (if a system lacks capacity).
To meet its statutory obligations under this provision initially, a
State must provide as part of its IUP
An assurance that it will assess, for systems presently
lacking capacity, whether the system has a long-term plan to undertake
feasible and appropriate changes in operations necessary to develop
adequate capacity.
A brief description of the procedures that will be used to
conduct the assessment.
To meet its statutory obligations under this provision in
subsequent years, a State must summarize as part of its capitalization
grant application the results of its assessment from the previous year
and describe any changes to its procedure for assessment.
Dated: January 27, 1998.
Cynthia C. Dougherty,
Director, Office of Ground Water and Drinking Water.
[FR Doc. 98-2874 Filed 2-4-98; 8:45 am]
BILLING CODE 6560-50-P
