Witness Testimony

Summary of the Statement of the American Water Works Association

The American Water Works Association is the oldest and largest organization in the world dedicated to safe drinking water. The Association represents over 4700 municipal and private utilities of all sizes that collectively serve safe and affordable water to over 80 percent of the American people.

Lead. The lead situation in the District of Columbia does not appear to represent a nation-wide problem, and EPA appears to be responding appropriately to this issue at this time. With more information, it may be appropriate to improve the Lead and Copper Rule (LCR), but the current LCR structure - a treatment technique and an action level - is the appropriate approach to a federal standard for lead.

AWWA supports a five-point action plan on lead:

1. NATIONAL LEAD REDUCTION STRATEGY: We advocate a comprehensive national program of research and public education concerning reducing lead contamination from all sources. It is important to recognize that drinking water is not the major source of lead exposure.

2. OPTIMIZATION OF CORROSION CONTROL: We advocate the use of corrosion control treatment techniques by all utilities to reduce exposure to lead in drinking water.

3. REPLACEMENT OF LEAD SERVICE LINES: We support replacement of lead service lines that significantly contribute to high lead levels in the home.

4. HOLISTIC APPROACH TO DRINKING WATER REGULATIONS: We advocate a "holistic" approach to the development and implementation of drinking water regulations to minimize the extent to which regulations can interfere with each other.

5. INDEPENDENT STUDY OF D.C. LEAD PROBLEMS AND LEGISLATIVE AND REGULATORY CHANGES: We propose an independent study of the drinking water lead contamination incident in Washington, DC, by a group such as the National Academy of Engineering, to determine what caused this incident and what lessons may be learned from this.

Infrastructure. The Association is committed to the principle that water systems should be self-sustaining through their rates and other local charges. However, in some cases new demands for compliance with expensive standards, investments related to homeland security, and the repair and replacement of aging infrastructure have driven the cost of water faster than the local ability to pay for it. This is particularly a problem where there are large stranded assets (infrastructure no longer supported by customers) due to population declines in the community.

The American Water Works Association supports long-term and sustainable federal support for compliance with health-protective standards, security-related investments, and repair and replacement of aging water infrastructure. We believe that long-term, low or no interest loans are an appropriate way to provide such assistance.

INTRODUCTION

Good morning Mr. Chairman. I am Lynn Stovall, General Manager of the Greenville Water System in Greenville, South Carolina. I am here today on behalf of the American Water Works Association (AWWA). AWWA appreciates the opportunity to present its views on drinking water infrastructure needs and other salient issues.

AWWA was founded in 1881 and is the world's largest and oldest scientific and educational association representing drinking water supply professionals. The association's 57,000 members are comprised of administrators, utility operators, professional engineers, contractors, manufacturers, scientists, professors and health professionals. The association's membership includes over 4,700 utilities that provide over 80 percent of the nation's drinking water. AWWA and its members are dedicated to providing safe, reliable drinking water to the American people.

AWWA and its members commend you for holding this hearing to address such important issues as lead and sustaining the nation's aging water infrastructure. We believe few environmental activities are more important to the health of this country than assuring the protection of our water supplies and the treatment, distribution and consumption of a safe, healthful and adequate supply of drinking water.

LEAD CONTAMINATION OF DRINKING WATER

Recently, there has been much interest in Congress about the elevated levels of lead found in drinking water in Washington, DC. Much of the discussion has centered on the lead service lines between the distribution system and the home plumbing, and whether or not they are a significant source of lead in drinking water. We cannot speak to the specifics of the situation in Washington, DC. The matter is still under investigation and AWWA has no direct knowledge of the cause of the elevated lead levels found in tests of drinking water in Washington, DC, or any remedial action that has been taken or should be taken in that instance. Nor does AWWA have any information that would suggest that the problem experienced in Washington, DC, is occurring in other public water systems across the country. We can, however, provide general information concerning the sources of lead in drinking water and what has been done and can be done to reduce exposure to lead in drinking water.

AWWA and its members emphatically support lead exposure reduction measures that promote public health. We have a long history of promoting measures and research to eliminate or reduce exposure to lead through drinking water. AWWA supported amendments to the SDWA to eliminate lead contamination in school drinking water and prohibit drinking water coolers that were not lead free. Through the AWWA Research Foundation (AwwaRF), public water supplies have spent approximately $3.4 million dollars on research projects related to lead and copper corrosion. AwwaRF plans to spend over $2.5 million more on additional research. A summary of the funding for AwwaRF projects related to the Lead and Copper Rule is attached to this statement. I

BACKGROUND ON LEAD CONTAMINATION OF DRINKING WATER

Lead is a naturally occurring metal that was used regularly in a number of industrial capacities for most of the 20th century. Lead was used as a component of paint, piping (including water service lines), solder, brass, and as a gasoline additive until the 1980's. According to the U.S. Environmental Protection Agency (USEPA), lead paint and the contaminated dust and soil it generates is the leading household source of lead exposure. Research has confirmed that lead is highly toxic. Ingestion of lead can pose a serious health risk to humans, especially children. Health risks linked to lead ingestion include increased blood pressure, reduced I.Q. levels, brain damage, loss of hearing, stunted physical growth, reduced learning power, premature births, low birth-weight, fertility problems, and miscarriages. Since 1974, average lead concentration in human blood has been reduced almost 75 percent, primarily as the result of removal of lead from gasoline and lead solder from cans.

Lead contamination almost always occurs after water has left the treatment plant when it travels through piping and plumbing containing lead. Water is naturally corrosive, and in some cases will corrode the pipes and plumbing through which it passes. This corrosion can occur in home fixtures as well. If these fixtures are made of materials, like brass, which contain lead, the fixtures can add dissolved lead to the drinking water. Brass fixtures and lead-based solder used in household plumbing prior to 1986 are significant sources of lead exposure in drinking water. Grounding of electrical circuits in homes to water pipes and galvanic action between two dissimilar metals may increase corrosion that could cause lead to leach into the water. Customers who soften their water or otherwise change its corrosivity can affect the lead content of the water.

In 1986, Congress passed amendments to the Safe Drinking Water Act, effectively banning the continued use of lead in materials used in drinking water systems. This legislation prohibited the use of pipe, solder or flux containing lead and required specific public notification about the presence of lead in its drinking water or drinking water system.

In 1991, USEPA published the Lead and Copper Rule (LCR), to require water utilities to reduce and maintain the corrosivity of water in order to minimize the leaching of lead from pipes and plumbing into drinking water. The LCR requires public water systems to monitor first flush lead levels in a predetermined number of homes based on system size. The homes where monitoring is to occur are selected based on the high likelihood that they will have lead service lines or plumbing that contains solder with high concentrations of lead. Based on data from this monitoring pool of homes, a public water system must meet a 15 parts per billion (ppb) action level at the 90th percentile for taps monitored. Based on the initial monitoring and analysis under the revised LCR, public water systems determined the needed process to maintain "optimal corrosion control." The primacy agency reviewed and approved the proposed control strategies and must approve subsequent changes.

If a public water system exceeds the 15ppb action level, it is required to develop and undertake a lead service line replacement program. The LCR requires that a system replace 7 percent of the lead service lines which the system owns each year until all such lines have been replaced, or until tap water monitoring indicates that its 90th percentile lead level is equal to or less than 15ppb action level.

As part of a corrosion control strategy, many public water systems add a corrosion inhibitor such as zinc orthophosphate to the water. While this is often effective as a means of corrosion control, it does increase the phosphate content in wastewater in that community. Phosphate is a limiting nutrient in many surface waters to which wastewater is discharged and is regulated under the Clean Water Act because of its high potential to contribute to the eutrophication of our lakes and rivers.

AWWA RECOMMENDATIONS ON LEAD

While some improvements to the Lead and Copper Rule may be possible and may prove to be warranted, the basic structure of the rule - a treatment technique and an action level - is sound. And we believe that EPA is responding in an appropriate manner to the lead issues that have been raised in Washington, D.C. In addition, AWWA advocates the following measures to help reduce lead exposure from drinking water:

6. NATIONAL LEAD REDUCTION STRATEGY: First and most importantly, we advocate a comprehensive national approach to reducing lead contamination from all sources. This should involve a program of research and public education concerning the sources of, dangers of, and protection against lead contamination from all sources such as paint, dust, drinking water, and others. It is important that the program not be limited to drinking water, since drinking water is not the major source of lead exposure.

7. OPTIMIZATION OF CORROSION CONTROL: We advocate the use of corrosion control treatment techniques by all utilities to reduce exposure to lead in drinking water.

8. REPLACEMENT OF LEAD SERVICE LINES: We support replacement of lead service lines that significantly contribute to high lead levels in the home.

9. HOLISTIC APPROACH TO DRINKING WATER REGULATIONS: We advocate a "holistic" approach to the development and implementation of drinking water regulations to minimize the extent to which regulations can interfere with each other.

10. INDEPENDENT STUDY OF D.C. LEAD PROBLEMS AND LEGISLATIVE AND REGULATORY CHANGES: We propose an independent study of the drinking water lead contamination incident in Washington, DC, by a group such as the National Academy of Engineering, to determine what caused this incident and what lessons may be learned from this.

1. NATIONAL LEAD REDUCTION STRATEGY.

AWWA advocates a comprehensive approach to reducing lead contamination from all sources. We believe that Congress should require a respected body such as the Centers for Disease Control to complete a comprehensive study of lead exposure from all sources, and to develop a national strategy to reduce lead exposure from all significant sources. Such research should include a determination of the contribution to lead in drinking water from lead service lines, pipes inside the home, and plumbing fixtures.

In addition, AWWA proposes a priority national public education campaign aimed at measures and steps people can take to protect themselves from significant sources of lead contamination. AWWA believes that a national coordinated campaign involving all concerned federal agencies and state and local governments will provide significant public health benefits.

AWWA also strongly advocates a continuing public education program concerning all sources of lead exposure and effective protective measures. Public education is a key component of a lead exposure reduction strategy. Water suppliers, working in cooperation with local and state public health officials and others, can help deliver the needed messages on the dangers of lead and the part everyone has to play in reducing risks. Since most lead contamination occurs inside the home from paint chips and dust or comes from home plumbing, increased public awareness is especially important.

In the mid-1980's, AWWA launched the "Get the Lead Out" campaign to raise the level of lead contamination awareness among consumers. We created informational material for utilities to give their customers. We now have consumer information about lead contamination in drinking water on the AWWA website. Concerned consumers can take several precautionary steps to limit possible exposure to lead from their home plumbing. Flushing the tap if a faucet has gone unused for more than a few hours and not using water from the hot water tap for cooking or drinking are simple methods to avoid high lead levels. The longer water stands in a faucet, the more lead can be dissolved and hot water dissolves lead at a faster rate than cold water. AWWA recommends that concerned consumers have their water tested by a State-certified laboratory to determine if lead is leaching into their drinking water from their home plumbing. Consumers should be advised of these precautions even if the water system results from lead testing do not exceed the USEPA "action level" of 15 ppb in more than ten percent of homes tested. Although it is not a specific requirement in the LCR, a water utility should notify a customer of the results of lead testing of the consumer's tap.

2. OPTIMIZATION OF CORROSION CONTROL.

AWWA advocates the treatment technique of optimizing corrosion control as the best way of reducing exposure from lead in drinking water. Determining the corrosivity of water is complex and dependent on several characteristics of the water. Lead contamination of drinking water is primarily the result of lead in home plumbing and fixtures beyond the control of a drinking water utility. The means available to drinking water systems to mitigate the degradation of water passing through pipes and fixtures in home plumbing is through implementation or modification of the corrosion control process. This can be done by adjusting the finished water's pH and alkalinity or by adding corrosion inhibitors.

If source water were the only way lead could enter drinking water, establishing a maximum contaminant level (MCL) for a utility to meet at the plant or in the distribution system would be sufficient to protect public health as it is for the majority of regulated contaminants. If lead were to occur in source waters, it could be removed in the treatment process. Public water systems are clearly responsible for and can control water quality at treatment facilities. However, the major source of lead in drinking water is not source water. It is lead from plumbing systems and faucets in homes that are beyond the control of drinking water utilities. The contribution of lead service lines to lead contamination is uncertain.

Some have suggested establishing an MCL for lead at the end user's tap. This would have the effect of holding water suppliers legally responsible not only for lead sources that they cannot control but also the mistakes, omissions, and even illegal activities of others. There is still lead solder in home plumbing although it was banned in 1986. Studies have shown that brass faucets holding lead free water for an eight-hour period can leach lead into water at levels of 10 ppb and higher. Grounding of electrical circuits in homes to water pipes and galvanic action between two dissimilar metals may increase corrosion that could cause lead to leach into the water. Customers who soften their water or otherwise change its corrosivity can affect the lead content of the water. These types of problems cannot be solved by an MCL at the tap or in the public water system. Each of these by themselves or in combination can cause lead to leach into drinking water. The SDWA limits EPA authority to regulating public water systems. A tap within a residence is not and should not be considered to be part of a public water system.

The SDWA also specifically prohibits USEPA from imposing both an MCL and a treatment technique for the same contaminant. Therefore, AWWA advocates a lead control strategy of optimizing corrosion control in conjunction with public education and a lead service line replacement program as the best method to protect public health.

3. REPLACEMENT OF LEAD SERVICE LINES.

AWWA advocates lead service line removal as a means of reducing lead contamination in drinking water when the lead service line is significantly contributing to lead contamination. However, lead service line replacement is complicated by the ownership of the lead service lines. In some instances, the water utility owns the entire line. In others, the property owner owns the entire service line. And in still other cases, part of the lead service line is owned by the utility and part by the property owner. A public water system can only be held legally liable for replacing the service line or part of the service line owned by the utility. A public water system has no legal means to compel a property owner to replace a lead service line or portion of a lead service line. Requiring a water utility to remove privately owned lead service lines raises constitutional legal issues with regard to private property and eminent domain. All agree that partial replacement of a lead service increases lead levels in water and should be avoided. Further, removing a lead service line may not reduce lead contamination of drinking water. Tests have revealed high lead levels in homes that have no lead service line and low to no measurable lead contamination in homes with lead service lines. Removing lead service lines alone is not the complete solution to reducing lead exposure from drinking water. Because of the costs involved and the likelihood there will be little or no public health benefit in some cases, lead service removal programs should focus on removing lead service lines owned by a utility that are significantly contributing to lead contamination as a high priority.

When the LCR was promulgated in 1991, USEPA estimated that it would cost $1.5 - 6.25 billion nationally ($2.1 - $8.65 billion in 2003 dollars) to remove lead service lines. The LCR estimate is for replacement that will occur as a result of the rule. The USEPA estimate is based on the assumption that 8,300 of the 15,000 systems with lead service lines will be required to replace some lead service lines at a per service line costs of $900 - $1,800. A later study conducted by the AWWA Research Foundation in 1994 estimated that there were a total of some 2.3 to 5.1 million lead service lines in the nation. Removal of the utility owned portion of the lead service line would cost $3.4 to $5.1 billion nationally ($4.2 - $6.3 billion in 2003 dollars). Replacement of all lead service lines, including the portions owned by property owners and by utilities, would cost approximately $10-$14.1 billion nationally ($12.3 -$17.5 in 2003 dollars).

Some property owners may be unable to afford the cost and local or state restrictions may prevent a public water system from paying for or financing the lead service line removal. A public water system has access to the Drinking Water State Revolving Fund (DWSRF) to fund removing lead service lines that it owns. A property owner may not have such easy access to fund lead service line replacement. In 1991, AWWA recommended in testimony that Congress consider enacting a tax credit for property owners who must pay for the removal of lead service lines. We still believe this is a good idea that is in the interests of public health in this country.

The cost to consumers of removing lead service lines is in addition to the cost of replacing aging drinking water infrastructure. These many and expensive infrastructure costs to the consumer that we discussed earlier in this testimony present a complicated challenge to local governments in their efforts to remove lead service lines.

4. HOLISTIC APPROACH TO DRINKING WATER REGULATIONS.

AWWA advocates a holistic approach to drinking water regulations that considers simultaneous compliance with existing drinking water regulations and other environmental regulations. The recent experience in Washington, DC, with lead contamination is one example of the pitfalls of the "silo" approach to drinking water regulation. By "silo" we mean developing a rule in isolation and not completely understanding its connectivity to other regulations. Without having all of the data necessary for a complete technical analysis, it appears that treatment changes (enhanced coagulation and switching to chloramines) the utility instituted to comply with the Stage 1 Disinfectants and Disinfection By-Products Rule (DBPR) may have contributed to the increased levels of lead in the district's drinking water.

Potential problems with the Lead and Copper Rule (LCR) stemming from treatment changes made to comply with the Stage 1 DBPR were known at the time that regulation was finalized. In AWWA's comments on the Notice of Data Availability (NODA) for the Stage 1 DBPR in 1998, and again in our comments on the proposed LCR technical corrections in 1998, AWWA recommended that the enhanced coagulation requirements for Stage 1 DBPR include greater flexibility for states and utilities in determining the most appropriate treatment approach for simultaneous control of organics, disinfection by-products, and corrosion.

USEPA expects to finalize the Long Term 2 Enhanced Surface Water Treatment Rule (LT2ESWTR) and the Stage 2 Disinfectants and Disinfection Byproducts Rule (DBPR) in early 2005. These rules specify a range of treatment and management strategies to reduce disease associated with Cryptosporidium and other pathogenic microorganisms while at the same time avoiding dangerous levels of disinfectant byproducts. Many more utilities will switch to chloramines or make other major treatment changes to comply with the Stage 2 DBPR. The effect of these rules on compliance with the LCR was not a consideration in their development.

Furthermore, the recently released study by USEPA's Office of Research and Development (ORD), The Occurrence of Disinfection By-Products (DBPs) of Health Concern In Drinking Water: Results of a Nationwide DBP Occurrence Study, found alternative treatment methods, such as chloramine and ozone, create as many as 50 new, and possibly more risky, DBPs. Little health effects information is available on these new DBPS. In both Stage 1 DBPR and Stage 2 DBPR, there has been a consistent and progressive shift to alternative disinfectants for compliance. Unfortunately, this new research now suggests that there may well be significant, and as yet unquantified, undesirable health risks associated with this shift to alternative disinfectants.

The arsenic regulation provides another example of the "silo" approach to drinking water regulation. California has a more stringent classification of hazardous waste than the rest of the nation. This classification system was in place during the development of the arsenic regulation. AWWA and many California utilities, in formal comments on the proposed rule, advised USEPA that this regulation was going to result in the production of tons of hazardous waste in California. USEPA's approach to the hazardous waste issue was that this classification system was California's problem and this issue didn't need to be addressed in the national regulation. As a result, the costs to dispose of the hazardous waste from the California utilities were not included in the estimated national cost of compliance. Now, based on the latest research, treatments to remove arsenic generate both solid and liquid hazardous wastes, and the estimated costs to properly dispose of these wastes from California utilities alone are equivalent to EPA's estimated national cost of compliance.

Section 1412 (b)(5) of the SDWA states that rule writers must consider risk tradeoffs in setting an MCL. In particular, they must consider risk tradeoffs if the levels of other contaminants are raised or they interfere with the efficacy of treatment techniques or processes that are used to comply with other regulations. Consequently, AWWA believes that the agency should adequately consider negative consequences of regulatory actions, particularly with respect to potential human health impacts. This issue is particularly acute when regulations are driven by potential or poorly understood risks, such as DBP regulations.

AWWA urges USEPA to appropriately consider simultaneous compliance with existing drinking water regulations when a new drinking water regulation is finalized. Additionally, USEPA should appropriately account for the impacts from existing environmental regulations when it finalizes a new national drinking water regulation. We believe that a holistic approach to drinking water regulations will provide better public health protection.

5 INDEPENDENT STUDY OF D.C. LEAD PROBLEMS AND LEGISLATIVE AND REGULATORY CHANGES.

AWWA advocates an independent study of the drinking water lead contamination incident in Washington, DC, to evaluate what if any changes may need to be made in the law or regulation. Earlier this year, Delegate Norton (DC) introduced H.R. 4268, the Lead-Free Drinking Water Act of 2004. AWWA supports the purpose of the bill to improve protection of public health by reducing exposure to lead contamination in drinking water. However, AWWA believes that before legislation is enacted, Congress needs to know for sure what caused the elevated lead levels in the District of Columbia water system. At this time, it is difficult to determine if H.R. 4268 could have prevented the current high levels of lead in the District of Columbia water system. Solutions proposed in the bill could be addressing issues that were not the cause of the high lead levels and miss entirely the actual cause that needs to be corrected. For instance, why were lead levels high in some homes without lead service lines and low in some homes with lead service lines? Why did the lead levels vary so widely for the same tap tested at different intervals? This would lead one to believe that other factors were the cause of or involved in the high lead levels. There is no reason, at this time, to believe that the high lead level problem in the District of Columbia is a nationwide problem that would require changes to the SDWA. AWWA believes that the current SDWA requirements protect public health and USEPA currently is engaged in an extensive national review of the Lead and Copper Rule implementation to identify how well the rule is performing across the nation and what gaps exist in federal guidance and regulation. In May, USEPA convened a panel of experts in St. Louis, Missouri, to address the issues involved in complying with the Lead and Copper Rule and will publish the results. AWWA supports these efforts by USEPA. The Lead and Copper Rule should not be revised until this review is completed.

AWWA recommends that Congress direct an independent study of the high lead levels in the District of Columbia water system be conducted. This could be done very soon in an appropriations bill.

AWWA Leadership on Lead

AWWA's leadership in reducing lead exposure through drinking water continues to the present. In June of this year, AWWA adopted an action plan to address lead contamination in drinking water. Our plan includes the following activities:

A. Developing and distributing a framework for utilities:

. Addressing simultaneous compliance with the Lead and Copper rule (LCR) and other rules; and

. Evaluating possible changes to optimized corrosion control, such as introduction of an alternative corrosion inhibitor.

B. Developing and distributing information to utilities on ways to encourage customers in lead service line replacement;

C. Developing and distributing information to assist utilities in providing useful information to customers about lead and the LCR;

D. Developing and distributing information to utilities on how to assist schools and daycare centers evaluate and address high lead levels in their facilities;

We believe that the results of this action plan will be of great benefit to public health in the United States and will be of assistance to EPA in making any needed improvements to the LCR.

SUSTAINING OUR AGING DRINKING WATER INFRASTRUCTURE

Another critical issue facing community water systems involves sustaining the nation's aging drinking water infrastructure. In previous testimony in Congress and in our report entitled Dawn of the Replacement Era: Reinvesting in Drinking Water Infrastructure, published in May 2001, AWWA called for a new partnership for investing in drinking water infrastructure. AWWA recommended changing and expanding the existing Drinking Water State Revolving Fund to significantly increase federal funding for projects to repair, replace, or rehabilitate drinking water infrastructure to include the aging distribution system.

The events of September 11, 2001, have added a new dimension to the protection of drinking water and infrastructure needs. Public water systems now face significant costs to increase the security of the nation's community water systems. AWWA estimates that drinking water utilities need to spend approximately $1.6 billion immediately to protect water systems' critical assets with improved perimeter security and access controls. This does not include the capital costs of upgrades to address vulnerabilities identified in vulnerability assessments such as hardening pumping stations, chemical storage buildings, transmission mains, adding redundant infrastructure, or relocating facilities and pipelines.

A safe and secure drinking water infrastructure is one resource that all Americans rely on every day. It is a cornerstone of both our economic well-being and our public health. Largely buried underground and invisible, it is also a resource many have taken for granted.

FEDERAL MANDATES AND THE CONTEXT FOR DRINKING WATER AND WASTEWATER INFRASTRUCTURE FUNDING ISSUES

Both drinking water and wastewater utilities face enormously expensive federal mandates that set the context for all other funding issues. The drinking water community faces a complex array of expensive new federal requirements and new standards, including standards for arsenic, radon, disinfection byproducts, enhanced surface water treatment, and others. Wastewater utilities also face enormously expensive federal mandates, such as those relating to Combined Sewer Overflows (CSO) and Sanitary Sewer Overflows (SSO).

For both water and wastewater utilities, these needs significantly skew financing for other investments, including the replacement of aging pipes, appurtenances, and other infrastructure. Many local ratepayers may be seriously challenged to pay for these mandates, and the full cost water service can cause lower-income customers to delay or defer other spending. This in itself can cause serious health effects if low-income customers defer or avoid visits to the doctor, don't fill prescriptions, etc., in order to pay the water bill. In many cases, it appears that spending for clean water mandates has "driven out" a community's ability to raise rates for drinking water needs. Because federal mandates have consumed the ratepayer's budget, more routine repair and replacement of drinking water infrastructure has been deferred in many cases.

We believe that significant federal assistance, including grants, is appropriate to help meet the cost of these very expensive federal mandates on water and wastewater utilities. We would point out that, in the case of CSO and SSO mandates, federal support for the cost of those requirements is not only justified in the community receiving federal support, it also lowers costs for drinking water utilities downstream in the form of improved water quality. This is especially true in critical source water protection areas.

DRINKING WATER INFRASTRUCTURE NEEDS

The American Water Works Association (AWWA) has long been committed to the proposition that utilities should be self-sustaining through rates and other local charges. We believe that a healthy utility will be locally self-sustaining and not dependent on federal assistance.

Having said that, we also recognize that new security concerns, combined with the cost of compliance with federally mandated regulations and the aging of many water systems, drive the need to greatly increase the level of investment in water-related infrastructure. AWWA recognizes that there is a gap between current investment and levels of investment that are required to sustain adequate drinking water service over the long run. Research has shown that this gap is real, and in the coming decades approaches $300 billion above and beyond what water utilities are already spending. Moreover, this gap is growing. The gap does not apply to every utility and does not affect all utilities in the same way. But many utilities are affected, and the solution properly involves all levels of government as well as utilities themselves.

Notwithstanding AWWA's commitment to full cost recovery through rates, some water systems will require assistance to make the transition from current levels of investment to full sustainability through rates and other local charges. This need is especially great in systems with large amounts of stranded assets resulting from significant population declines in their service territories or large federal mandates for investment to remediate combined sewer overflow (CSO) problems.

The federal government should renew its commitment to significant support for compliance with health-protective standards, security, and the repair and replacement of aging drinking water infrastructure. AWWA recommends that:

1. The United States provide assistance to community water systems in the form of very low or no-interest loans with a 30-to-40 year repayment period. The federal government, or the states if the program is administered through them, should also retain current authority to make grants and loans in combination and to use other financing tools to leverage public and private capital.

2. Congress clarify that projects to meet standards; to address security needs; and to repair, replace, or rehabilitate drinking water infrastructure are eligible for assistance.

3. All community water systems be eligible for assistance, regardless of size or type of ownership.

4. Repayment terms and conditions be reasonable. They may include demonstrations of system viability and ability to repay a loan.

5. The application process and other procedures for those wishing to access these funds be streamlined and minimized.

6. There be a designated allocation in the program for large systems similar to the one in current law for small systems (15 percent), unless there are insufficient projects to use earmarked funds in a given year.

7. Funds be available and encouragement given for voluntary consolidation among water systems where such consolidation is practical and cost-effective.

8. At least $15 billion over the next five years be provided in federal assistance to community water systems for the purposes described above.

LEAKING PIPES

The way we manage our water resources to serve human needs has a major impact on the quality of the natural environment and the costs that ratepayers must bear. Water conservation is a major public policy concern because of the significant environmental benefits and energy and cost savings to be gained. Saving water is saving dollars. The facilities that we have built to dam, divert, transport, pump and treat water are among the largest infrastructure engineering projects on earth and are a great part of the cost of drinking water. Aging distribution systems can be a source of water loss that drives up the cost of water. The cost of the lost water is reflected in the need build more or larger treatments plants to produce more water, to pump more water at increased energy costs and to build more storage capacity for drinking water needs. Studies have shown that conserving water through such things as replacing aging infrastructure with leaking pipes can help delay the need for developing expensive new drinking water supply and treatment facilities. An AWWA Research Foundation report in 1994 conservatively estimated the cost of lost water alone to be $2.8 billion per year nationally ($3.5 billion in 2003 dollars). A 1995 Western Canada Water and Wastewater Association report on leak detection estimated that a water savings of 4 percent to 20 percent could be achieved through the elimination leaks from the distribution system. When the cost of lost water, energy costs and the cost of avoiding new infrastructure are added together, the money invested in replacing aging leaking infrastructure is a good return on investment for the nation.

CONCLUSION

America needs a new partnership for reinvesting in drinking water infrastructure. There are important roles at all levels of government. To help reduce the burden on consumers, many water utilities have made great strides in efficiencies, with some utilities achieving a 20-percent savings, or more, in operations and maintenance. Water utilities will continue to reduce costs, seek cost-effective financing, and employ innovative management strategies. And AWWA does not expect that federal funds will be available for 100 percent of the increase in spending facing the nation's water utilities. .

AWWA remains committed to the principle of full cost recovery through rates. Regardless, there will remain communities that can't make the transition to sustainability through local rates without federal assistance. Due to needs for investment in health-protective standards, security projects, repair and replacement of infrastructure, and demographic changes, many utilities will be very hard pressed to meet their capital needs without some form of federal assistance. Much of our investment need is driven by federal mandates and new security needs. The nation has already accepted the principle that the federal government should help pay for what it requires other levels of government to do. Over the next 20 years, it is clear that Safe Drinking Water Act (SDWA) and Clean Water Act (CWA) compliance requirements and infrastructure needs will compete for limited capital resources. New security concerns, combined with the aging of many water systems, plus the capital cost of compliance with federally mandated regulations, such as lead service line replacement, drive the need to greatly increase the level of investment in water-related infrastructure now. Compliance, security and infrastructure needs under the SDWA and CWA can no longer be approached as separate issues. Solutions need to be developed in the context of the nation's total drinking water and wastewater compliance, security and infrastructure needs.

AWWA and its members thank you for holding this hearing concerning the infrastructure needs of America's drinking water utilities and lead contamination of drinking water. AWWA pledges to work with Congress to develop a responsible and fair solution to the nation's growing drinking water infrastructure security challenges and eliminating lead contamination of drinking water. We thank you for your consideration of our views.

This concludes the AWWA statement on drinking water infrastructure needs and other salient issues. I would be pleased to answer any questions or provide additional material for the subcommittee.