A Costly Benefit: Economic Analysis Does Not Support EPA's New Arsenic Rule. (the Arsenic Controversy)

By Burnett, Jason K.; Hahn, Robert W. | Regulation, Fall 2001 | Go to article overview
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A Costly Benefit: Economic Analysis Does Not Support EPA's New Arsenic Rule. (the Arsenic Controversy)

Burnett, Jason K., Hahn, Robert W., Regulation

THE U.S. ENVIRONMENTAL PROTECTION Agency (EPA) recently finalized a rule that would reduce the maximum allowable level of arsenic in drinking water by 80 percent, from the current limit of 50 micrograms per liter ([micro]g/L) to 10 [micro]g/L. As soon as the rule was announced last January, it became the center of controversy as some experts argued that it was appropriate and necessary while others questioned whether the costs of implementation justified the benefits to human health. That controversy will continue over the next several months, following the Bush administration's decision to reconsider the standard before its implementation in 2006. On the basis of currently available information, we must side with those who question the rule's benefits in relation to its costs. As we explain in this article, we believe the costs will exceed the benefits by over $100 million annually.


The risks of high-level exposure to arsenic have been well documented. As stated in a 1999 report to EPA by the National Research Council (NRC), arsenic in drinking water causes bladder, lung, and skin cancer when consumed in high concentrations. However, the report continues, evidence of risk at lower doses is very weak. The report notes, "No human studies of sufficient statistical power or scope have examined whether consumption of arsenic in drinking water at the current maximum contaminant level... results in an increased incidence of cancer or noncancer effects."

Because of the lack of data, quantification of possible low-dose risks from arsenic is difficult and must be inferred from animal and epidemiological studies of high-level exposure. In formulating the new rule, EPA used such inferences to estimate the risk of bladder and lung cancers given certain low levels of arsenic in water supplies. The agency did not carry out similar projections for other forms of cancer, claiming that such risk assessments are "nonquantifiable."

The data and methodology that EPA employed to estimate the risk of bladder cancer raise concerns. In its calculations, the agency assumed that risk is linearly related to arsenic concentration. That is, from empirical data showing the risk of exposure to high concentrations of arsenic, researchers drew a "straight line" downward to project the risk of low-level exposure.

We believe that arsenic exposure risk levels would be better represented by a curve, so that exposure at levels the body can metabolize would show almost no risk. Given our opinion, we further believe that the actual risk from low-level exposure is likely to be much less than EPA's linear dose-response model indicates. Unfortunately, the agency did not attempt to quantify the extent that the linear dose-response model may overestimate the actual risks of arsenic.


The Safe Drinking Water Act, as amended in 1996, leaves a certain amount of discretion to EPA when setting standards for arsenic. But the act does instruct the agency to use economic analysis to choose the standard. Accordingly, EPA performed a detailed assessment of the benefits and costs of regulating arsenic. The agency's analysis is long and complex, yet fails to provide even rough estimates for certain health benefits that influenced the final decision.

EPA found that the primary costs of the rule are the capital costs of installing water treatment facilities and the costs of operating them. Of course, the lower the allowable limit, the higher would be the cost because more water systems would need to be upgraded to meet the tighter standard. EPA ultimately determined that the cost for the 10 [micro]g/L standard would be over $200 million annually.

Measuring the benefits Juxtaposed against those costs are the benefits. EPA, which considered only the "quantifiable" benefits from reduced incidences of bladder and lung cancers, determined that the benefits have a value of about $170 million annually.

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A Costly Benefit: Economic Analysis Does Not Support EPA's New Arsenic Rule. (the Arsenic Controversy)


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