$10 in benefits for every $1 invested – Minnesota estimates benefits of lead service line replacement

Tom Neltner, J.D.Chemicals Policy Director

Last week, the Minnesota Department of Health (MDH) released a report estimating that investing $4 billion in virtually eliminating lead in drinking water over 20 years would provide societal benefits of more than $8 billion. The state agency only counted the societal benefits from avoiding the loss of IQ points due to children’s exposure to lead.

Replacing lead service lines (LSLs) – the lead pipes that connect a building’s plumbing to the water main under the street – yielded the greatest benefit with an investment of $0.228 to $0.365 billion yielding $2.118 to $4.235 billion in benefits. Replacing lead fixtures and solder had a lower, but still significant, return on the investment.

Based on this analysis, MDH recommended as high priority that the state conduct an inventory of LSLs and that LSLs be removed “at a measured pace” of 20 years. It also recommended undertaking as a medium priority an awareness campaign focused on the danger of lead in drinking water to formula-fed infants younger than nine months old and as a low priority a general public information campaign to prompt homeowners and renters to take action if they have an LSL.

The agency, which includes both the state’s drinking water protection program and its lead poisoning prevention program, prepared the report in response to a provision in a state appropriations law passed in 2017. The report is important because it is the first state assessment we know of, and it reports an impressive return on the investment of more than $10 for every $1 invested in LSL replacement. For these reasons, we took a close look at the analysis and the underlying assumptions.

$228 to $365 million cost estimate for LSL replacement

The state agency estimated that there were 100,000 LSLs in the state, far fewer than the 260,000 estimated by Cornwell et al., 2016.  It reached this number in two ways:

  1. MDH estimated that 400,000 homes in the state were built before 1940, the date when it concluded LSL installation largely stopped. Then it divided that number in half because it estimated half of those 400,000 homes were in the Twin Cities (Minneapolis and St. Paul) and Duluth metro areas where anecdotal evidence indicated most LSLs were located. It divided the number in half again based on the assumption that half of those installed LSLs in the three cities had been replaced since then.
  2. MDH tallied an estimated 93,000 LSLs using reported numbers for the three cities of Minneapolis, St. Paul, and Duluth and rounded up to 100,000 concluding it was “sufficiently accurate for broad estimates of potential costs.”

MDH acknowledged that costs of LSL replacement ranged from $2,500 to $8,000 per line based on a 2016 Environmental Protection Agency (EPA) white paper. It also looked at costs reported by Madison, WI of $1,937 per LSL; Boston, MA of $3,000 per LSL; and Washington, DC of $11,400 per LSL. Using this information, it predicted that the “costs to agencies, homeowners, and building owners could be reduced significantly if removal were coordinated with other street construction/excavation” and undertaken over 20 years. With these assumptions, it estimated the total cost to replace 100,000 LSLs at $0.228 to $0.365 billion over the 20 years (or $2,280-$3,650 per line).

From my perspective, MDH likely underestimated the number of LSLs in the state because it essentially assumed there were no LSLs outside of Duluth and the Twin Cities. However, the three utilities serving these cities have about 16% of all service connections in the state.[1] While MDH may be right that the Cornwell et al. estimate of 260,000 was too high, a comparison of the comprehensive inventory results from the nearby states of Wisconsin and Illinois to their Cornwell estimates suggest that 160,000 may be more reasonable.[2]

In addition, the estimated cost to replace an LSL may be optimistic but is not too far out of line with what some utilities have reported when the replacement work is closely coordinated with other planned work. In short, MDH’s estimate for the cost of LSLs in Minnesota is likely low but not unreasonable.

$2.118 to $4.235 billion in societal benefits from LSL replacement

MDH estimated that lead exposure from all sources will cost the state $84.7 billion based on the value of the lost total productivity in wages and housework, the lost workplace productivity, and lost taxes expected from children born between 2013 to 2037 (the 20-year timeline for the program). The calculations were drawn from an estimate by MDH in 2014 that the overall lifetime costs of lead exposure to children born in the state in a single year was $1.94 billion and supported by an analysis conducted by Dr. Lucia Levers of University of Minnesota.

The report indicates that it likely underestimated cost because it did not include societal benefits not related to IQ. These costs include:

  • Reduced incidence of cardiovascular disease and mortality in adults;
  • Improved health equity by reducing lead exposure in high-risk communities who lack access to capital to replace LSLs;
  • Reduced gender differences in future wages;[3] and
  • Increased value of homes with LSLs removed.

From the total cost of $84.7 billion, MDH estimated that LSL replacement over 20 years would result in societal benefits ranging from $2.118 to $4.235 billion based on increased total productivity.

From my perspective, MDH’s societal cost of lead due to lost IQ is likely high but not unreasonable. In 2017, the Robert Wood Johnson Foundation’s and the Pew Charitable Trusts’ RWJF/Pew Health Impact Project report estimated that the maximum potential future benefits of preventing all lead exposure for children born in the U.S. in 2018 “could reach $84 billion, not including the costs to achieve such total prevention.” Though Minnesota represents 1.7% of the U.S. population, the MDH analysis considered the impact on children born over 25 years and not just one year.

How MDH’s estimated return on the investment compares to RWJF/Pew estimates

In 2017, the RWJF/Pew Health Impact Project report, described above, estimated that “[r]emoving leaded drinking water service lines from the homes of children born in 2018 would protect more than 350,000 children and yield $2.7 billion in future benefits, or about $1.33 per dollar invested.” The differences appear to result from the report’s authors estimating greater costs of LSL replacement than MDH, primarily because they expected to replace LSLs for individual homes rather than the coordinated street-by-street approach anticipated by MDH. In addition, the RWJF/Pew Health Impact Project report estimated that LSL replacement would result in a smaller reduction in drinking water exposure.

Conclusion

MDH’s report provides an excellent big-picture perspective on the importance of replacing LSLs. The report states the assumptions, adequately explains the analysis, and makes sound recommendations. While some may object to the estimated 10:1 return on the investment and disagree on how best to make such an estimate, a return of even half that rate would be impressive. Further, it is important that the state considered both the costs and the benefits of different approaches. Such an analysis provides an important backdrop for what is a very tough public policy discussion.

We encourage other states to conduct a similar analysis and commit to a long-term program of eliminating its LSLs to better protect children. An important first step is to immediately require utilities to develop an inventory of known and potential LSLs, update it annually, and make that information available to the public.

[1] Based on my analysis of data for Minnesota’s active community water systems (CWSs) in EPA’s Safe Drinking Water Information System (SDWIS).

[2] Illinois’ CWSs reported 414,895 LSLs compared to Cornwell’s estimate of 730,000 (76% more than reported). Wisconsin’s CWSs reported 158,725 LSLs compared to Cornwell’s estimate of 240,000 (51% more than reported).

[3] The analysis “kept the gender-based differences in expected lifetime earnings even though there should be an expectation of convergence between males and females over the next 20 years.”

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One Comment

  1. Posted March 17, 2019 at 8:58 am | Permalink

    benefitnya gede bgt yah… tertarik