Miljøprojekt, 915 – Økonomisk vurdering af forskellige strategier til at imødegå BAM-problemer på vandværker

Economic Evaluation of Remediation Strategies for BAM Contamination at Waterworks

Summary and Conclusions

Pesticide contamination of groundwater resources, in particular by 2.6-dichlorbenzamide (BAM), constitutes a major problem for Danish waterworks. Findings so far indicate that a level of BAM in the drinking water above the regulatory standard of 0.1 μg/l is to be expected in large parts of the country over the next 20 to 100 years.

In order to ensure compliance with the limit value, waterworks affected by BAM contamination face not only a need to select a strategy for remedial action but also increased costs for its implementation.

Feasible technical options for countering the BAM contamination may be found within the following categories:

Rehabilitation or closure of wells
Remedial pumping
Establishment of a new well field
Treatment of drinking water in activated carbon filters
Link-up with nearby waterworks

The main objective of this project was to establish a tool, enabling the Danish Environmental Protection Agency and the waterworks to assess the investment and operating cost implications of any given remedial action. Such tool will serve to facilitate the selection of technically and financially feasible actions.

The project objective was reached through the development of a spreadsheet model for calculating the investment and operating costs of feasible remedial actions. The model developed is an integral part of this report, which itself details various remedial actions available, their cost components, the technical and price assumptions of the model, and its operation.

On the basis of the assumptions made, total of 19 remedial actions within the main categories listed above were defined for costing purposes. Key cost drivers were identified for each remedial action. In a user interface of the model, the user may input the values of these cost drivers for a specific waterworks, so that estimates of investment and operating costs for the utility may be generated for any of the established remedial actions.

In order to illustrate the way the model works, the report also presents a number of examples of costs of remedial actions for small, medium-sized and large waterworks respectively.

In these examples not only investment and operating costs are derived. The total costs in present value terms over the planning horizon are also calculated, i.e. in the period during which the BAM contamination of the drinking water is expected to be a problem.

Calculation of costs in present value terms is a prerequisite for an assessment of the cost-effectiveness of the various technically feasible remedial actions in removing the BAM contamination. The action with the lowest overall costs expressed in present value is the most cost-effective, i.e. the cheapest, solution.

Costs in present value terms are estimated only for those actions that have a life at least corresponding to the planning horizon. Actions that may be considered to result only in a short-term extension of the life of the well field, viz. rehabilitation of wells and well closures in combination with establishment of new wells, are thus disregarded in this part of the analysis.

The present value estimates show that, subject to a number of additional assumptions required for calculation purposes, the establishment of a new well field is the most cost-effective action.

A sensitivity analysis reveals that the robustness of this conclusion depends in particular on the number of BAM contaminated wells included in the calculations and on the distance between the new well field and the connection to a raw water main. If the number of wells is sufficiently high or the distance to the water main is sufficiently long, then link-up with another waterworks becomes the cost-effective option.

The calculations also indicate that removal of BAM through activated carbon filtration of the drinking water is a fairly expensive option, in particular if only a comparatively small share of the wells of the waterworks is contaminated. This is so, as the full water intake must treated for technical reasons. Hence, "unnecessary" filtration costs are paid for the treatment of uncontaminated water.

The examples shown in the report presuppose that one remedial action only is selected for countering the BAM problem. In practical application, matters are different, as implementation of the various actions is time-consuming. This is the case not least for the establishment of a new well field. Experience shows that it may take several years before a well field becomes operational. Also, the process of installing an activated carbon filter plant may take one or two years.

In the interim period temporary measures, e.g. rehabilitation of wells, are needed. This means that the waterworks may well need to select a combination of remedial actions, consisting in part of a temporary measure that may be initiated fairly rapidly, in part of an action that results in a sustainable solution to the BAM problem.

The examples included also serve to highlight two key points. Firstly, that a long-term and sustainable solution to BAM contamination will be very costly for smaller waterworks. Investment costs for almost all remedial actions do not depend upon the level of groundwater abstraction and, thus, the size of the works. In addition, it is the case for all actions reviewed that the investment cost per m³ of water abstracted is significantly higher for a small-sized waterworks.

Second, the options available for financing of investments play a key role. An estimation of the impact of investments to contain BAM on the price of water, shows that if half of the required investment costs are to be funded by loans, financing costs may account for quite a large part of the ensuing increase in the price of water, in particular for the smaller waterworks. For these works, the cost-based price increase may be in excess of DKK 1.50/m³ as compared with a current price of water ranging between DKK 2 and 5/m³.

Both factors have repercussions on the future water supply situation in Denmark. The smaller waterworks not only carry a heavier financial burden to counter the BAM problem, they are also the least equipped to do so. In the sector the smaller works are viewed as poorly consolidated. Hence, their capacity for own financing of investments is correspondingly limited.

Given these financial constraints, support from the municipalities will be required. This support may be in the form of extension of loan guarantees or by making borrowed funds available directly. As the cost of loans, however obtained, should be passed on to the price of water, fairly considerable price increases may be the outcome.

In order to avoid such increases, the municipalities could alternatively offer grant assistance to the municipally owned waterworks. However, the budgetary impact of such assistance may be of size that is not politically acceptable.

Without grant assistance, closure of waterworks through mergers may be the only realistic option.

The closure risk for the smaller works must be judged to be quite sizeable. As mentioned in the introduction to this report, findings so far have pointed out that the BAM contamination is likely to be a widespread and long-term problem for the waterworks. Today already, no less than seven percent of the boreholes sampled have shown a BAM content that exceeds the standard for drinking water.

Closure of waterworks means that the fundamental principle in Danish water policy of a decentralized supply cannot be maintained.

The examples of cost estimates to counter the BAM problem finally serve to stress that prevention is better – and much cheaper - than the cure from a financial as well as a welfare economic viewpoint. Information is not available to assess the overall sector costs of the BAM contamination. However, the mere extent of the contamination registered already today undoubtedly means that the additional costs in the future not only for the sector but also for the consumer are bound to be considerable.

Danish waterworks presently face other types of groundwater contamination than BAM: other pesticides, chlorinated solvents and MTBE (Methyl Tertiary-Buthyl Ether). The remedial actions discussed in this report and, thus, also the cost implications, are applicable also to certain of these contaminants.

Rehabilitation and closure of wells, establishment of a new well field and link-up with another waterworks are all remedial actions that are not substance specific. This means that the cost estimates that may be derived from the developed model are valid also for all types of groundwater contamination.

Remedial pumping is not substance specific either. However, if the regulatory authorities require treatment of the pumping water before discharge into a watercourse, then the treatment costs will depend on the contaminating substance. It should be added that as to atrazine, the treatment process is similar to that of BAM, so that the cost estimates for treatment of remedial pumping water are valid also in the case of atrazine contamination.

Activated carbon filtration of drinking water for BAM, on the other hand, is a substance specific method, as the life of the carbon depends on the contaminating substance and also, of course, on the regulatory standard applying to its content in drinking water. As mentioned above, the removal of atrazine in activated carbon filters is similar to that of BAM, so that the cost calculations of the financial model for carbon treatment apply also to atrazine contamination.