k UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
MAR 30 2012
OFFICE OF
WATEH
MEMORANDUM
SUBJECT: Update to the Implementation of Capacity Development & Drinking Water State
Revolving Fund Programs to Reflect the New Enforcement Policy & Enforcement
Targeting
FROM:
Offide-'of Ground Water and Drinking
TO: Regional Water Division Directors
Regions I-X
The purpose of this memorandum is to provide updated policy on how EPA and the states
will implement the Capacity Development and Drinking Water Stale Revolving Fund (DWSRF)
programs to reflect the new Enforcement Response Policy (ERP) and the Enforcement Targeting
Tool (FTT). The terms "historical significant noncompliance" and "significant noncompliance"
are lo be interpreted for purposes of the Capacity Development and DWSRF program
implementation as systems with ETT scores of 1 1 or greater. This policy change is effective
beginning in Fiscal Year 2013.
Background
Section 1420(b)(l) of the SDWA requires that "... each slate shall prepare, periodically
update, and submit to the Administrator a list of community water systems and nontransient,
noncommunity water systems thai have a history! oj 'significant noncompliance,.. and, lo the
extent practicable, the reasons for noncompliance. " In 1997, the states agreed with EPA to
implement this provision of the Act by reviewing every three years an EPA-generated list of
public water systems that met the definition of historical significant noncompliance (HSNC) and
indicating if the system lacked technical, managerial and financial capacity.
In an effort to prioritize scarce resources, section 1452(a)(3) of the SDWA requires that
"...no assistance... shall be provided to a public water system that... does not have the technical,
managerial, and financial capability to ensure compliance with the requirements of this title... or
is in significant noncompliance with any requirement of the national primary drinking water
regulation or variance. " However, a public water system not meeting these standards " ...may
receive assistance... if the use of the assistance will ensure compliance. " Similarly, section
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1452(b)(3). requires that intended use plans "...provide, to the maximum extent practicable, that
priority for the use of the funds he given to projects that address the most serious risk to human
health [and] are necessary to ensure compliance with the requirements oj this title... "
The SDWA also requires each state to implement a capacity development strategy and
authorizes EPA to assess the efficacy of the program as a condition for the state to receive full
allocation of their DWSRF allotment. To assess the efficacy of the program, states are required
submit annual capacity development reports. As part of this annual report, states are required to
submit a list of new community and nontransicnt noncommunity systems and identify which of
these new systems received a significant noncompliance (SNC) designation during the first three
years of operation.
In December 2009, the Office of Enforcement and Compliance Assurance (OECA)
released the ERP, which provides a new enforcement targeting approach that identifies all
unaddressed violations at a public water system. This new approach replaces the prior strategy,
which focused on water systems in SNC on a rule-by-rule basis. The ERP is supported by the
ETT which assigns a point value to individual violations at each system to help prioritize
drinking water systems with the most serious, numerous, or long lasting unaddressed violations
for possible enforcement. To be consistent with this new approach, the Office of Ground Water
and Drinking Water (OGWDW) is updating the requirements of the Capacity Development
program, which currently include SNCs and IlSNCs, in order to facilitate implementation of the
SDWA.
Meeting Section 1420(b)(l) and Annual Capacity Development Program Report Requirements
To meet the requirement of SDWA section 1420(b)(l) for states to submit to the Agency
a list of systems with a history of significant noncompliance every three years, EPA will utilize
the ETT results which are generated on a quarterly basis. Currently, as part of the ETT
implementation, EPA and states have quarterly discussions on the status of public water systems
identified as enforcement priorities (i.e., with an ETT score greater than or equal to 11) on this
list and identify steps to return to compliance. EPA believes that discussing the priority systems
generated by the ETT and the steps states are taking to return these systems to compliance on a
quarterly basis is a more proactive approach to help resolve potential system capacity issues than
the current approach of reviewing the reasons for non-compliance once every three years.
Under this new approach, states will not be required to submit a list of HSNCs every
three years. However, to meet the intent of section 1420(b)(l), state capacity development
coordinators should be familiar with the ETT outputs and utilize this list as one of the ways to
identify systems that might lack technical, managerial or financial (TMF) capacity and prioritize
assistance. At a minimum, regional capacity development coordinators should work with state
capacity development coordinators to identify whether any of the systems identified in the
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priority list lacks technical, managerial and/or financial capacity before approving the state's
annual capacity development report,
As part of the annual capacity development program reports, states should continue to
report a list of new systems, but rather than reporting SNCs, they should indicate which of those
new community and non-transient non-community water systems have, at any point during the
first three years of operation, had unaddressed violations that incurred an ETT score of greater
than or equal to 11, Under the ERP, systems that receive an ETT score of 11 or greater are
considered a priority system by EPA.
We believe that this revised approach will provide for more effective, cross-program
collaboration across the drinking water program and will minimize the burden on states with
their reporting requirements to the Agency. The state capacity development coordinators are
urged to work closely with their state enforcement staff, and to discuss any findings from
reviewing the ETT" list provided each quarter to identify systems that lack TMF capacity and to
determine steps to help the system return to compliance in a timely manner.
Meeting SDWA Section 1452(a)(3) Requirement for the Drinking Water State Revolving
Fund (DWSRF) Program
The DWSRF program was established to provide a financing mechanism for ensuring safe
drinking water to the public. Section 1452(a)(3) of the SDWA explicitly states that DWSRF
assistance cannot be provided to any public water system that is in significant noncompliance
with any requirement of a national primary drinking water regulation or variance, unless certain
stated conditions are met. To address the ERP & ETT, the DWSRF program is modifying the
current implementation practices and interpreting that wherever the statue or EPA's regulations
and guidance refer to SMC or HSNC, these terms mean public water systems with ETT scores of
greater than or equal to 11. Thus, DWSRF assistance may not be provided to any public water
system with an ETT score greater than or equal to 11, unless the conditions delineated in SDWA
section 1452(a)(3)(B) and (C) are met.
Many states have developed DWSRF project priority ranking systems that explicitly consider a
system's "SNC" status. State DWSRF programs are urged to update their Intended Use Plan
(IUP) terminology and criteria that contain SNC or HSNC to reflect the new ETT terminology.
State and Regional DWSRF coordinators should meet with their corresponding state and regional
capacity development coordinators and/or enforcement programs to coordinate priorities,
including DWSRF set aside assistance and/or DWSRF infrastructure assistance agreements, to
ensure that systems prioritized for attention through the ETT are given the fullest possible
consideration for available assistance. The significance of such cross-program coordination was
documented in the recommendations of the December 1, 2011, Office of Inspector General
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report entitled. Enhanced Coordination Needed to Ensure Drinking Water Slate Revolving Funds
Are Used to Help Communities Not Meeting Standards (Report No. 12-P-OI02),
For purposes of the DWSRF 20 percent Capacity Development withholding
determination, the regional capacity development coordinator is expected to provide written
documentation to the regional DWSRF coordinator at least once per year on the implementation
status of the state Capacity Development program. If the regional capacity development
coordinator provides written documentation concluding that a state is meeting its ongoing
implementation requirements under SDWA Section 1420, then the regional DWSRF coordinator
can inform the appropriate state grant project officer that no 20 percent withholding related to
capacity development will be required from any DWSRF capitalization grants awarded that year,
As a reminder, for purposes of the DWSRF 20 percent Operator Certification
withholding determination, the regional operator certification coordinator is expected to provide
written documentation to the regional DWSRF coordinator at least once per year on the
implementation status of the state Operator Certification program. If the regional operator
certification coordinator provides written documentation concluding that a state is meeting its
ongoing implementation requirements under SDWA Section 1419, then the regional DWSRF
coordinator can inform the appropriate state grant project officer that no 20 percent withholding
related to operator certification will be required from any DWSRF capitalization grants awarded
that year.
EPA will continue to work with the capacity development and DWSRF coordinators to
facilitate the transition to this new approach and assist where necessary. We may revisit this
policy in the future based on lessons learned from implementing this new approach. To
download a copy of the latest ETT priority list, please visit the following wrebsite:
http://www.epa-olis.gov/otis/sdw'a_home.htm!.
Should you have any questions or concerns regarding this new approach please contact
Mindy Eisenberg, Acting Chief of the Protection Branch, at 202-566-1290 or Charles Job. Chief
of the Infrastructure Branch, at 202-564-3941,
cc:
Regional Drinking Water Program Managers
Regional DWSRF Program Managers
Regional Drinking Water Enforcement Program Managers
Mark Pollins, OECA
Ed Messina. OECA
Jim Taft. ASDWA
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