Environmental Protection
Overcoming Obstacles to Innovative State Regulatory Programs Gao ID: GAO-02-268 January 31, 2002The Environmental Protection Agency (EPA) issues regulations that states, localities, and private companies must comply with under the existing federal approach to environmental protection. This approach has been widely criticized for being costly, inflexible, and ineffective in addressing some of the nation's most pressing environmental problems. The states have used several methods to obtain EPA approval for innovative approaches to environmental protection. Among the primary approaches cited by the state environmental officials GAO interviewed are EPA's Project XL and the Joint EPA/State Agreement to Pursue Regulatory Innovation. Officials in most states told GAO that they faced significant challenges in submitting proposals to EPA, including resistance from within the state environmental agency and a lack of adequate resources to pursue innovative approaches. EPA recognizes that it needs to do more to encourage innovative environmental approaches by states and other entities. As a result, EPA has (1) issued a broad-based draft strategy entitled "Innovating for Better Environmental Results" and (2) adopted the recommendations of an internal task force, which advocated the consideration of innovative alternatives as new regulations are developed.
GAO-02-268, Environmental Protection: Overcoming Obstacles to Innovative State Regulatory Programs
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United States General Accounting Office:
GAO:
Report to Congressional Requesters:
January 2002:
Environmental Protection:
Overcoming Obstacles to Innovative State Regulatory Programs:
GAO-02-268:
Contents:
Letter:
Results in Brief:
Background:
States Have Used Several Key Avenues to Promote Innovative
Environmental Approaches:
States‘ Innovative Proposals Face Obstacles at the State and Federal
Level:
Recent EPA Actions Are Intended to Facilitate State Innovative
Approaches:
Conclusions:
Agency Comments:
Objectives, Scope, and Methodology:
Appendixes:
Appendix I: Key Innovations Identified by States:
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Staff Acknowledgments:
Tables:
Table 1: State-Proposed Project XL Initiatives:
Table 2: States‘ Rankings of Key Federal Factors Impeding Innovative
Proposals:
Appendix I:
Figures:
Figure 1: Joint ECOS/EPA Innovations Agreement Projects as of January
2002:
[End of section]
United States General Accounting Office:
Washington, D.C. 20548:
January 31, 2002:
The Honorable Sherwood Boehlert:
The Honorable Cal Dooley:
The Honorable James Greenwood:
House of Representatives:
Under the existing federal approach to environmental protection, the
Environmental Protection Agency (EPA), pursuant to statutes such as the
Clean Air Act and Clean Water Act, prescribes regulations with which
states, localities, and private companies must comply. The approach has
been widely criticized in recent years for being costly, inflexible,
and ineffective in addressing some of the nation‘s most pressing
environmental problems. For example, the National Academy of Public
Administration recently concluded that although traditional regulatory
approaches can keep most forms of industrial pollution in check, they
cannot reach many other sources of pollution and environmental
degradation, such as diffuse sources of water pollution from urban and
agricultural runoff. Even where existing approaches have succeeded in
curtailing pollution from major industrial sources, they have often
been costly or have provided regulated entities with little incentive
to reduce pollution below mandatory compliance levels.
EPA responded to such concerns during the 1990s with a variety of
initiatives intended to encourage innovative regulatory strategies that
could streamline environmental requirements while encouraging more
effective means of protecting the environment. Among the agency‘s
’flagship“ programs was Project XL, which encouraged individual
regulated facilities to propose projects to EPA that would test whether
alternative approaches could achieve compliance at lower cost and
produce greater environmental benefits.
Many sponsors of innovation, however, have expressed disappointment
over the effectiveness of Project XL and similar initiatives intended
to encourage creative improvements in environmental regulation. Some
have also contended that the states could be key to a more effective
and efficient approach to environmental policy. Citing states‘ closer
proximity to environmental problems and central role in enforcing
federal regulation, they have advocated that EPA show greater
flexibility in allowing states to pursue innovative environmental
regulatory approaches. Others, however, have cautioned that unless
these alternative approaches are carefully designed, they could impair
EPA‘s ability to achieve protection of human health and the
environment”the ultimate purpose of the programs”and may not be
permissible under federal environmental statutes.
As agreed with your offices, this report identifies (1) the major
avenues that states have utilized to obtain EPA‘s approval of
innovative approaches to environmental protection and (2) the major
obstacles that impede states from pursuing innovative approaches
needing EPA‘s concurrence. The report also discusses EPA‘s recent
efforts to facilitate innovative approaches to environmental
protection. To address these issues, we sought detailed information
from a diverse group of 15 states on their experiences in pursuing
innovation. In selecting these states, we sought variation in size,
location among EPA‘s 10 geographic regions, and the degree of their
participation in environmental regulatory innovation.[Footnote 1] Among
other steps, we conducted detailed, structured interviews with
environmental officials from these states, and analyzed in detail 20
initiatives they cited as being among the key initiatives they have
pursued.[Footnote 2] We also interviewed officials in the corresponding
eight EPA regional offices and at EPA‘s headquarters, and obtained from
them pertinent EPA-state agreements and guidance documents. A more
detailed explanation of our scope and methodology is included at the
end of this report.
Results in Brief:
The states have utilized several avenues to obtain approval from EPA
for innovative approaches to environmental protection. Among the
primary approaches cited by the state environmental officials we
interviewed are EPA‘s Project XL and the Joint EPA/State Agreement to
Pursue Regulatory Innovation. Although most proposals were submitted by
private facilities, EPA‘s Project XL has been used by several states to
pursue state-led initiatives. Seven of the 15 states we contacted
either initiated XL projects on their own or worked closely with other
entities (e.g., private companies or municipalities) that had formally
proposed the project to EPA. In 1998, in response to states‘ desire for
a more timely and flexible process, the Environmental Council of the
States (the national, non-profit association of state and territorial
environmental commissioners) and EPA entered into the Joint EPA/State
Agreement to Pursue Regulatory Innovation. The agreement established a
framework under which states can submit proposals and gives specific
timelines for EPA to respond to them. As of January 2002, 15 states had
submitted 45 proposals. Of these, EPA accepted 20 proposals and is
considering 22, while the remaining 3 have been withdrawn or denied.
States have also used several other formal and informal avenues to
pursue innovation with EPA.
Officials in most of the states we contacted told us that they faced
significant challenges before they were in a position to submit
proposals to EPA, including resistance from within the state
environmental agency and a lack of adequate resources to pursue
innovative approaches. But while obstacles at the state level played an
important role, environmental officials from 12 of the 15 states said
that federal obstacles”including the need to comply with detailed EPA
regulations, policies, and guidance, as well as a perceived cultural
resistance to change among EPA staff--were more significant. Of
particular note, state officials ranked the detailed federal regulatory
requirements governing implementation of specific programs as a
significant obstacle in 12 of 20 initiatives. This is largely because
regulations are legally binding and tend to be more detailed and
prescriptive than the statutes they are designed to implement. States
also cited as a significant obstacle a cultural resistance among many
in EPA toward alternative approaches”a resistance that, they
maintained, often manifested itself in a lengthy and costly EPA review
of their proposals. EPA officials noted, however, that this cultural
resistance is often rooted in a concern that strict application of
regulations is needed to reduce the risk of lawsuits filed by private
interest groups.
EPA has recognized the need to improve its strategy to encourage
innovative environmental approaches by states and other entities.
Toward this end, the agency has (1) issued a broad-based draft strategy
on Innovating for Better Environmental Results and (2) adopted the
recommendations of an internal Task Force on Improving EPA Regulations
which, among other things, advocates the consideration of innovative
alternatives as new regulations are developed. Yet, however successful
these efforts may be in alleviating the impact of new regulations on
innovation, they still do not resolve the key problem we and other
organizations have documented concerning the impact of many existing
prescriptive regulations. Current legislation does not contain explicit
language authorizing the use of innovative environmental approaches in
lieu of specific regulatory requirements, and the absence of this ’safe
legal harbor“ for EPA has been a significant obstacle to states and
others in their efforts to test innovative proposals. It has also
tended to reinforce the cultural resistance to innovation that EPA is
seeking to change. Accordingly, in the absence of legislative changes
providing EPA such authority, the effectiveness of the agency‘s
innovation efforts will warrant monitoring by EPA and other
stakeholders in the innovations process, and will also warrant
continued congressional attention.
Background:
Federal environmental policy is shaped by numerous federal statutes,
including The Clean Air Act, The Clean Water Act, and The Resource
Conservation and Recovery Act. These laws charge EPA with protecting
the environment through such activities as setting standards for air
and water quality, issuing permits, and taking enforcement actions. The
laws also allow states to assume many of these responsibilities. As
states‘ responsibilities have grown, they have applied for and received
the lead role in performing these activities. Consequently, the
operational responsibility for most of EPA‘s major programs currently
lies with the states, and EPA routinely relies on states to implement
the full range of environmental responsibilities associated with these
programs.
In recent years, a number of organizations have emphasized the need to
supplement or significantly modify the existing prescriptive, command-
and-control approach toward environmental protection established under
current federal laws. For example, in 1998, Resources for the Future
(an environmental policy research organization) noted that while the
current federal approach has many noteworthy achievements, it is also
flawed in several respects.[Footnote 3] It noted in particular that
federal laws and regulations tend to prescribe the specific means by
which environmental goals will be reached, rather than establishing
goals and allowing states and facilities the flexibility to reach those
goals. GAO has also reported on these matters in recent years, focusing
in particular on EPA‘s efforts to ’reinvent“ environmental regulation.
[Footnote 4] EPA has also recognized the need for new approaches in
numerous publications and in its interactions with state governments
and other parties.
The Congress has recently considered giving EPA explicit authority to
allow more flexible approaches by states and others. One such proposal,
the Second Generation of Environmental Improvement Act of 1999 (HR
3448), introduced in the 106th Congress, would have allowed EPA to
enter into innovative strategy agreements with states, companies, or
other interested parties in order to experiment with ways to achieve
environmental standards more efficiently and effectively. Such
agreements could have involved the modification or waiver of existing
agency regulations. The bill was not enacted and has thus far not been
reintroduced in the 107th Congress.
States Have Used Several Key Avenues to Promote Innovative
Environmental Approaches:
In recent years, states have worked with EPA through several key
avenues to pursue innovative environmental approaches. Seven of the 15
states we contacted have used EPA‘s Project XL as such a vehicle, even
though the projects in which they are involved were formally proposed
to EPA by a private company. Partly as a result of states‘
dissatisfaction with Project XL, however, EPA and the Environmental
Council of the States (ECOS) agreed in 1998 to a process in which,
among other things, states submit innovative projects through their
respective EPA regional offices and EPA is provided timelines within
which it must respond. In addition to these two major avenues, states
have also pursued alternative approaches to environmental protection
through the use of the National Environmental Performance Partnership
System (NEPPS), by participating in programs developed through EPA‘s
media offices and by negotiating relatively narrow changes in their day-
to-day working relationship with EPA.
EPA‘s Project XL:
Project XL, which stands for ’excellence“ and ’leadership,“ was
launched in 1995 as part of the previous administration‘s broad effort
to reinvent federal environmental protection policy. Based on
recognition of the need for new approaches to environmental regulation,
Project XL was designed to allow private businesses, as well as states
and local governments, to test innovative ideas to enhance
environmental protection.[Footnote 5] In exchange for improved
performance, participants would be given the flexibility to explore new
approaches to environmental protection.
To participate in Project XL, businesses, states, and other government
agencies submit proposals to EPA, which then evaluates proposals
according to specific criteria and other considerations. EPA requires
that, among other things, Project XL participants demonstrate that
their proposals will result in ’superior environmental performance,“
and include a system for monitoring and a process for stakeholder
involvement. XL projects should also be designed to test innovative
approaches that are transferable to other facilities.
Although most of the more than 50 XL projects approved to date were
submitted by private facilities, some federal and local government
agencies have submitted proposals as well. In addition, four states
have submitted proposals designed to apply to multiple facilities
within the states. Massachusetts‘ Environmental Results Program, for
example, covers the dry cleaning, photo processing, and printing
sectors. Table 1 describes each of the state-initiated projects that
cover multiple facilities or entire industry sectors.
Table 1: State-Proposed Project XL Initiatives:
State‘s Project XL proposal: Massachusetts: Environmental Results
Program;
Project‘s objectives: The goal of this program is to streamline
permitting and reporting processes and to improve environmental
performance for the dry cleaning, photo processing, and printing
industries. The program seeks to eliminate the need to issue facility-
specific permits to thousands of facilities through the establishment
of industry-wide performance standards. The program further requires
participating firms to document compliance through annual self-
certification. In addition, it offers flexibility and compliance
assistance to facilities. This, in turn, should improve performance and
result in resource savings for both the industry and the Massachusetts
Department of Environmental Protection.
State‘s Project XL proposal: New Jersey: Gold Track Program;
Project‘s objectives: The Gold Track Program is part of a tiered system
designed to reward companies that commit to higher levels of
environmental performance than is required by current regulations.
While existing regulatory requirements may not encourage facilities to
go beyond baseline compliance, facilities under the Gold Track program
obtain recognition and regulatory flexibility in exchange for a
commitment to go beyond basic regulatory requirements. These
improvements are to be demonstrated in various ways, including adoption
of environmental management systems and the use of increasingly
stringent facility–wide air emission caps. Currently, Gold Track is
limited to nine facilities. Facilities may also participate in the
Silver or Silver II Tracks, which offer less flexibility for a less
rigorous commitment to environmental protection. However, these tracks
are not included in Project XL.
State‘s Project XL proposal: New York: Hazardous Waste Storage for
Public Utilities;
Project‘s objectives: Under the Resource Conservation and Recovery Act,
when generators of hazardous waste move the waste from its source, they
normally must transport it only to permitted treatment, storage, and
disposal facilities (TSDF). Under this Project XL agreement, however,
public utilities in New York State will be able to consolidate the
waste from various locations at a central collection facility where
they can store it for up to 90 days before transporting it to a
permitted TSDF. This proposal is intended to allow facilities to make
fewer trips to TSDFs; increase public safety by facilitating removal of
hazardous waste and decreasing the risk of accidental release; increase
efficiency of transportation of hazardous wastes for public utilities;
and save time and resources for public utilities and the New York
Department of Environmental Conservation.
State‘s Project XL proposal: Pennsylvania: Coal Remining and
Reclamation Project;
Project‘s objectives: This project is designed to encourage coal
operators to remine and reclaim abandoned coal mine sites. Under
current Clean Water Act regulations, operators must meet numeric limits
under a water discharge permit at individual discharge points.
Operators may be reluctant to engage in remining activities because
they may exceed these limits due to pre-existing discharges from closed
mines. In contrast, under this agreement, operators do not have to meet
the limits at each individual discharge point, but instead can use
’Best Management Practices“ and monitor the overall concentration of
pollutants in-stream. This is expected to reduce risk and expense to
coal mine operators, improve overall water quality, and increase the
number of operators participating in remining and reclamation
activities.
[End of table]
While not initiating specific Project XL proposals, 7 of the 15 states
we contacted have participated by working on initiatives that were
formally proposed to EPA under Project XL by private companies. For
example, even before the establishment of Project XL, the Minnesota
Pollution Control Agency had been working with the 3M Company to
develop alternative compliance approaches, which it subsequently
pursued under the auspices of Project XL. More recently, Minnesota has
actively worked with the Andersen Windows Corporation on a proposal to
reduce air emissions from a facility in Bayport, Minnesota, in exchange
for regulatory flexibility. Similarly, Virginia played an active role
in advocating an innovative approach to controlling air emissions
proposed by Merck Pharmaceuticals for their facility in Stonewall,
Virginia.
Joint EPA/State Agreement to Pursue Regulatory Innovation:
In 1998, EPA and ECOS agreed to encourage experimentation by states
with new approaches to environmental protection through their Joint
EPA/State Agreement to Pursue Regulatory Innovation. In part, this
agreement grew out of the states‘ frustration with other avenues for
pursuing innovation, such as Project XL. Specifically, states were
frustrated with Project XL‘s requirement that sponsors document a
proposal‘s ability to achieve ’superior environmental performance.“
[Footnote 6] Many believed that such a requirement was too stringent
and precluded worthwhile projects that would deliver environmental
results equivalent to existing regulations but more efficiently. States
also believed that the process of submitting a Project XL proposal and
receiving EPA‘s approval was too time-consuming.
In response to these concerns, the ECOS/EPA agreement outlined a
process by which states could submit innovative projects through the
EPA regional offices and provided timelines during which EPA must
provide a response. Specifically, once a state submits a proposal to
EPA, the agency has 4 weeks to reply to the state with a list of
questions and concerns. Within 90 days of receipt of the initial
proposal, EPA must issue a final response to the state. According to
the EPA regional officials we interviewed, states do not often hold EPA
strictly to these deadlines. Nonetheless, state officials told us that
the time limit is sometimes helpful in obtaining a timely EPA response
when necessary. In addition, the agreement omits Project XL‘s
requirement for ’superior environmental performance.“ Instead, it only
requires that innovations seek more efficient and/or effective ways of
protecting the environment.
The agreement also lays out a set of principles intended to guide the
development and implementation of innovations. Specifically, it states
that (1) innovation often involves experimentation that should not harm
human health or the environment but may include some chance of failure;
(2) innovations must seek more efficient or effective ways of meeting
environmental performance goals; (3) innovations should seek creative
ways to tackle environmental problems; (4) stakeholders should be
involved in the development and evaluation of innovations; (5) results
of innovations must be measured and analyzed; (6) innovations must be
enforceable and accountable; and (7) states and EPA must work as
partners to promote innovation.
State proposals submitted to EPA to date have covered a wide range of
innovations. Some agreements have targeted one specific problem at an
individual facility, while others have been designed to affect a large
number of stakeholders or to develop a framework through which a state
and EPA agree to handle innovative proposals. For example:
* The New Hampshire Department of Environmental Services sought
flexibility under federal regulations for a single pulp and paper mill
to test an innovative regulatory approach to pollution control and
treatment. Under new regulations, the mill would be required to install
expensive technology to control airborne methanol emissions. Under the
proposal, however, the mill would use an alternative technology that
would result in a four-fold reduction in methanol emissions over the
current requirements while saving the company approximately $825,000.
* In contrast, a proposal by Michigan‘s Department of Environmental
Quality covered a much larger group of stakeholders. The proposal seeks
approval for a new approach to meeting Total Maximum Daily Load (TMDL)
[Footnote 7] requirements under the Clean Water Act. In particular, it
would facilitate ways that point sources of pollution (e.g., an
industrial facility discharging from one or more pipes) could
collaborate with diffuse, ’nonpoint“ sources in controlling phosphorus
pollution.
* Wisconsin proposed a broad framework through which the Wisconsin
Department of Natural Resources and EPA would deal with multiple
innovations. Under the agreement, Wisconsin may develop up to 10 pilot
projects with facilities that would test a facility-wide, ’multi-media“
approach to regulation (i.e., an approach that comprehensively
integrates their air, water, and waste regulations) that is built
around the use of an environmental management system. Facilities that
commit to achieving superior environmental performance would be granted
some degree of regulatory flexibility.
The number of proposals under the ECOS/EPA agreement has been fairly
low to date, although participation has been growing recently. As of
February 2001, 3 years after the agreement, 22 proposals had been
proposed from six states in three EPA regions. As indicated in figure 1
below, by January 2002, participation had increased to 15 states, which
together had proposed 45 initiatives. Of these proposals, EPA has
accepted 20, another 22 are still under consideration, and 3 proposals
have been denied or withdrawn. In our interviews with selected states,
we discussed specific state experiences under the agreement. Of the 15
states, 10 had proposed projects under the ECOS/EPA agreement, while
other states indicated that they are considering proposing projects in
the future.
Figure 1: Joint ECOS/EPA Innovations Agreement Projects as of January
2002:
[Refer to PDF for image]
This figure is a map of the United States depicting the number of
proposals submitted under the ECOS agreement, by state, in the
following categories:
4 to 8 proposals:
Michigan;
Oregon;
Texas;
Wisconsin.
2 to 3 proposals:
Connecticut;
Illinois;
Massachusetts;
New Hampshire;
New York;
Virginia.
1 proposal:
Arkansas;
Georgia;
Minnesota;
Ohio;
Vermont.
0 proposals:
Alabama;
Alaska;
Arizona;
California;
Colorado;
Delaware;
District of Columbia;
Florida;
Hawaii;
Idaho;
Indiana;
Iowa;
Kansas;
Kentucky;
Louisiana;
Maine;
Maryland;
Mississippi;
Missouri;
Montana;
Nebraska;
Nevada;
New Jersey;
New Mexico;
North Carolina;
North Dakota;
Oklahoma;
Pennsylvania;
Rhode Island;
South Carolina;
South Dakota;
Tennessee;
Utah;
Washington;
West Virginia;
Wyoming.
Source: Environmental Council of the States.
Note: These figures include both proposals that have been formally
submitted, as well as those in early consultation between EPA and the
state.
[End of figure]
Other Avenues:
In addition to Project XL and the ECOS/EPA agreement, state and EPA
officials identified several other avenues for negotiation that states
have used to obtain EPA‘s approval for innovative environmental
strategies. One is the National Environmental Performance Partnership
System (NEPPS), which was established in 1995 to give states greater
flexibility in setting their priorities and in the way they carry out
their programs if they demonstrate the capacity and willingness to
achieve mutually agreed-upon results. NEPPS provides a framework for
the state‘s relationship with EPA, laying out the state‘s environmental
goals and priorities, and the ways in which they will measure progress
in meeting these goals. Under the system, a state agency may enter into
a Performance Partnership Agreement with its EPA regional office that
typically specifies the signatories‘ respective roles and
responsibilities in achieving specified program objectives.
While not intended to focus solely on innovation, some states have used
NEPPS for this purpose. As our 1999 report[Footnote 8] on NEPPS noted,
for example, Minnesota‘s Pollution Control Agency reorganized its
traditional medium-by-medium (i.e., air, water, and waste) structure
into a structure the agency believed would more effectively address
problems that cross media lines. The agency used its Performance
Partnership Agreement to provide the flexibility it needed to report
environmental results to EPA in line with this new structure. Other
states have also used their partnership agreements to achieve and
document agreements on specific initiatives.
EPA has also sought to promote innovation through its program offices.
For example, the Office of Solid Waste and Emergency Response has
promoted cleanup and redevelopment of contaminated industrial sites by
encouraging state voluntary cleanup programs. Unlike programs that rely
on enforcement alone to achieve cleanups by parties responsible for the
contamination, these voluntary ’Brownfields“ programs allow site owners
and developers to collaborate on bringing sites back to productive use.
EPA has encouraged the programs by providing funding to develop these
programs, reviewing program adequacy, and agreeing not to take further
enforcement action at these sites unless serious environmental
contamination was overlooked.
Finally, EPA regional officials we interviewed mentioned that minor
changes are often adopted through informal discussions during the
normal course of work. They noted that more significant changes, such
as those requiring a change in regulations, would have to go through
one of the avenues for innovation or through the rulemaking process.
States‘ Innovative Proposals Face Obstacles at the State and Federal
Level:
While states can face significant obstacles at the state level before
submitting an innovative proposal to EPA, officials in 12 of the 15
states we contacted stated their most significant obstacles are at the
federal level. States cited prescriptive regulations as one of the most
significant obstacles, along with an EPA culture they viewed as being
averse to risk and resistant to change. EPA officials acknowledged that
its culture has a tendency to resist innovative proposals, but some
noted that such resistance is rooted in the agency‘s primary mission to
ensure strict adherence to the letter of statutes and agency
regulations. They also noted that some states have omitted key elements
when they submit proposals, such as provisions to measure whether the
innovation to be tested will have its intended effect.
Resource Constraints Are Among the Key Obstacles at the State Level:
Officials in all of the states we contacted indicated that they faced
significant obstacles”including lack of resources, cultural resistance
in the state agency, and opposition from environmental groups--even in
advance of proposing a project to EPA. In some cases, state officials
cited these obstacles as reasons why the state had not yet actively
pursued innovations requiring federal approval.
In discussing 20 separate initiatives, state officials cited a heavy
ongoing agency workload and concomitant limited resources as obstacles
to innovative approaches in 11 instances. In several instances, the
state was nevertheless actively pursuing innovative approaches despite
this constraint. For example, a Michigan official stated that finding
sufficient resources was one of the primary difficulties faced in
pursuing initiatives under the EPA/ECOS agreement. Although a
considerable number of additional staff and resources were needed, the
effort was given high-priority status; and therefore, agency resources
were diverted to support it. Similarly, noting that 80 percent of their
resources are consumed in meeting federally mandated requirements,
officials from the Minnesota Pollution Control Agency said the agency‘s
management is reluctant to divert scarce resources to innovative
programs. Nonetheless, they said the agency has actively promoted
Project XL initiatives and is likely to propose future initiatives
under the EPA/ECOS agreement.
Officials from other states, however, said they were unable to pursue
innovative approaches because of the limited resources available to
meet an already-demanding workload. For example, an official of the
Nebraska Department of Environmental Quality said that developing an
innovative proposal would take a considerable investment in up-front
staff time and resources, and the agency‘s federally mandated workload
exhausts all resources. Largely for this reason, Nebraska has not yet
pursued any major innovative initiative requiring EPA approval.
Similarly, an official of the Georgia Department of Natural Resources
cited the agency‘s heavy mandated workload and related budget
constraints as one of the two most significant obstacles to pursuing
innovative approaches.
The importance of limited state agency resources as an obstacle to
innovative approaches was also highlighted in an April 2000 ECOS
survey.[Footnote 9] The survey asked state officials to indicate the
degree to which each of 12 frequently cited impediments to innovative
practices was an obstacle in their case. Six of the 29 responding
states said that state agency resource limitations were the single
largest obstacle they faced, while officials of 7 states indicated that
this was a persistent obstacle that was difficult to address. Among the
factors not related to federal policy, this factor ranked as the most
significant obstacle in the survey.
A state agency‘s culture and working environment can also discourage
innovative approaches. For 5 of the 20 specific initiatives we
discussed, state officials said that an agency‘s culture and working
environment to some extent discouraged alternative approaches to
environmental policy. One state official said that obtaining EPA‘s
permission to pursue an innovation was an abstract problem because the
state agency had not been able to reach the point of submitting a
proposal. He explained that internal staff resistance was the biggest
problem, noting in particular that many rank-and-file managers had been
with the agency for 25 to 30 years and had a professional ethic that
emphasized following long-standing approaches to environmental
protection. The official recalled that several years ago, the agency
had examined alternative approaches to permitting, including an
approach that would allow regulated facilities to certify their own
compliance, and thus allow the agency to shift resources from
permitting activities to enforcement activities. The division managers
in the agency almost unanimously opposed this approach, fearing that it
would lead to loss of control over regulated entities, a loss of
funding for their own programs, and less effective environmental
protection. In part because of such resistance, the agency had not
recently tested EPA‘s receptiveness to an innovative proposal.
Opposition to innovative approaches from environmental groups and other
stakeholders has also impeded proposals. Officials in several states
noted that environmental and community groups generally perceive
innovative proposals as opening the door to rollback of environmental
standards. A Washington state official noted that the state has a very
politically active public, and some environmental and community groups
perceive innovative proposals as potentially compromising the goals of
environmental statutes. For example, such groups vigorously opposed the
state‘s proposal to extend discharge permits under the Clean Water Act
from 5 to 10 years because they feared the state was backing away from
oversight of polluting facilities. A representative of the Texas
Natural Resource Conservation Commission made similar comments, but
noted that early involvement of such groups can go a long way toward
mitigating their opposition. He stated that if the concerns of such
groups are taken into account during the design of a proposal, their
opposition later in the process is far less likely.
Key Federal Obstacles Include Prescriptive Regulations and Cultural
Resistance:
State officials identified factors at the federal level, including
statutes, regulations, and an EPA culture not conducive to innovation,
as more significant obstacles than the factors they encountered at the
state level. Specifically, officials in 12 of the 15 states we
contacted said that these federal obstacles were more significant in
impeding innovation than obstacles faced at the state level (such as
the state agency‘s culture and workload, and opposition from
environmental groups). The three remaining states said these two
categories were about equal in their significance.
As summarized in table 2, of the federal obstacles we discussed with
states, federal regulations and an EPA culture viewed as resistant to
innovative approaches ranked as the two most significant obstacles
affecting progress among the 20 specific initiatives identified by
state officials. Our interviews, however, revealed an important
relationship between the two factors. Specifically, while EPA officials
acknowledged the agency‘s culture can be resistant to innovative
proposals, some noted”and some state officials agreed”that what is
often construed as ’cultural resistance“ is sometimes rooted in a sense
of obligation among agency officials to ensure that statutes and agency
regulations are properly and fully implemented. EPA officials also
pointed out that in some cases state proposals lacked key elements when
they were submitted, such as provisions for public involvement or a
systematic means of measuring whether the innovation would have its
intended effect.
Table 2: States‘ Rankings of Key Federal Factors Impeding Innovative
Proposals:
Federal factors: Statutes;
Number of times ranked first: 4;
Number of times ranked second: 2;
Total number of times ranked first or second: 6.
Federal factors: Regulations;
Number of times ranked first: 7;
Number of times ranked second: 5;
Total number of times ranked first or second: 12.
Federal factors: EPA culture;
Number of times ranked first: 7;
Number of times ranked second: 7;
Total number of times ranked first or second: 14.
Federal factors: Other[A];
Number of times ranked first: 0;
Number of times ranked second: 0;
Total number of times ranked first or second: 0.
[A] In addition to these key factors, ’EPA Policies and Guidance“
(generally, supplemental documents to help interpret or implement
regulations) was ranked first 3 times and was ranked second 5 times.
The officials also had the opportunity to identify federal factors
other than those specifically listed, but did not rank any as the most
or second most significant.
[End of table]
Statutes:
An extensive literature has documented that both existing environmental
statutes and environmental regulations can impede innovation. However,
the manner in which the two may have this effect differs, with the more
detailed, individual regulations generally having a more direct impact
on proposals than the more general statutes that authorize the
regulations.
The major federal environmental statutes are generally less detailed
and specific, in terms of what they require or preclude, than the
regulations EPA develops to implement them. There tends to be a
hierarchical relationship between statutes and regulations”statutory
requirements establish the broad outlines of environmental policy while
regulations reflect EPA‘s effort to implement the statutes, and hence
provide much more specific requirements on how the regulated community
is to control pollution. Perhaps for this reason, the state officials
we interviewed cited comparatively few instances in which an
environmental statute precluded a particular innovation they were
pursuing.[Footnote 10] Overall, environmental statutes were ranked
either first or second 6 times among the 20 state innovations we
examined.
However, environmental statutes have been linked with a broader, less
direct impact on state environmental innovations by directing
regulators and their resources toward specific, medium-by-medium
activities” sometimes at the expense of alternative strategies that
might more effectively address the highest environmental risks. For
example, in our July 1997 report on EPA‘s ’reinvention“ activities, we
cited the difficulties in setting risk-based priorities across
environmental media because each statute prescribes certain activities
to deal with its own medium-specific problems.[Footnote 11] We also
cited an observation from an earlier GAO report that environmental
statutes ’led to the creation of individual EPA program offices that
have tended to focus solely on reducing pollution within the particular
environmental medium for which they have responsibility, rather than on
reducing overall emissions.“[Footnote 12] This ’stovepipe“ effect of
the environmental statutory framework was cited by an EPA headquarters
air official, who noted that the Clean Air Act would not recognize the
value at a specific industrial site of a large reduction in water
emissions in exchange for even a slight increase in air emissions--even
though such a trade-off might have significant net environmental
benefits in certain situations. As others have noted, however, EPA
generally does consider the potential transfer of pollution from one
medium to another when it develops new regulations.
Several state officials told us that federal environmental statutes can
indirectly hinder innovative state approaches not only by what they
include, but also by what they omit. They noted that since
environmental statutes give EPA little or no explicit authority to
grant regulatory flexibility to the states, the agency is placed at a
higher risk when it grants a state or regulated entity permission to
deviate from federal requirements. One state official cited the absence
of such a ’safe legal harbor“ for EPA as a key impediment to state
innovation.
Regulations:
State officials cited regulations as a significant factor more often
than statutes. In discussing 20 specific innovative proposals, state
officials ranked regulations either first or second 12 times among the
federal factors listed in table 2.
States cited a number of instances in which regulations prescribed an
approach for dealing with an environmental problem that a state
believed it could more effectively address in another way. Oregon
officials cited such a proposal, pursued under the state‘s Green Permit
Program,[Footnote 13] in which the state sought to provide flexibility
to a regulated facility as an incentive for improved environmental
performance. The state‘s Department of Environmental Quality proposed
to grant a semiconductor manufacturing firm expedited permit review and
various other incentives in exchange for the firm‘s commitment to
future environmental improvements through its environmental management
system. As part of the application, the facility sought the approval of
its system of correcting and detecting leaks in its hazardous waste
piping from processes to storage tanks. According to a state official,
the system‘s overall performance matches or exceeds federal regulatory
requirements, though it does not meet certain technical specifications
of regulations under the Resource, Conservation, and Recovery Act
(RCRA). As a result, EPA determined that it was unable to approve that
particular aspect of the facility‘s application. EPA did not rule out
approval of this system, but stated that additional information would
be required to justify it. An EPA official said that, after site visits
and review of additional information provided by the facility, EPA
Region 10 has concluded preliminarily that the required justification
has been established. EPA and the state must now agree on a legally-
enforceable alternative to the relevant RCRA requirements. EPA
officials noted that the most likely approach, a site-specific rule, is
a time-consuming approach that could take over 6 months. An Oregon
official added that EPA is proceeding slowly on this issue both because
it could set a precedent for numerous similar facilities across the
nation and because the process is taxing limited regional staff
resources.
The Oregon experience is comparable to experiences cited by officials
in other states in which a regulation either discouraged an innovation
or imposed significant costs in pursuing the innovation. It is also
comparable to the experiences documented in an extensive literature on
the effect of prescriptive regulations on efforts to innovate. In
summarizing part of this literature, the Environmental Law Institute
(ELI) cited as a major problem the design of most regulatory standards
under the Clean Water Act and Clean Air Act, which require EPA to
establish technology-based discharge rate limits based on ’available“
or ’feasible“ emission control technologies.[Footnote 14] ELI noted
that while alternative solutions are not specifically prohibited, such
regulatory standards may preclude innovation in a number of ways, such
as limiting permit writers to conservative choices and eliminating
incentives for progress beyond established standards. ELI summarized
the effect of prescriptive regulatory standards by noting that they
’may severely limit innovation, creating higher costs than necessary.“
Officials in EPA‘s regions and headquarters both cautioned that federal
regulations are critical in ensuring reasonable consistency in the
level of environmental protection afforded to individuals across the
country. Several officials also noted that there is a ’natural tension“
between this goal and the goal of allowing states greater flexibility
to address environmental problems in the way they believe best meets
their needs. Overall, however, they generally concurred with the
comments voiced by state officials concerning the effects of detailed,
prescriptive regulations on environmental regulatory innovation. An
official with EPA‘s Office of Air and Radiation added that it is
important to remember that the federal environmental protection system
is about 30 years old and that many regulations in effect today were
written before the relatively recent emphasis on developing more
flexible innovative approaches.
EPA‘s Culture:
State officials indicated that a long-standing EPA culture that resists
alternative approaches to environmental protection is viewed as one of
the most significant obstacles to state environmental innovation. The
importance of cultural factors was evident in our discussions of the
factors affecting progress on specific innovative proposals. Of the 20
individual proposals that the states discussed, EPA culture was cited
as either the first or second most important factor in 14 cases.
Some state officials noted that such cultural resistance often
manifests itself in a lengthy and time-consuming review and approval
process. One EPA regional official referred to the numerous levels of
review, the large number of EPA stakeholders, and the degree to which
every detail of a proposal is examined as a ’death by 1,000 cuts,“
saying that after such a review process, it is often hard to keep the
original concept or retain what is truly innovative.
Along these lines, an official in Massachusetts‘ Department of
Environmental Protection cited as an example the experience of a
proposed addendum to its Project XL Agreement that established the
state‘s Environmental Results Program. The official said that EPA‘s
July 1999 response had included an extensive set of questions and
comments that went well beyond what the state DEP had proposed, and was
viewed by DEP staff as essentially asking the agency to justify the
entire Environmental Results Program all over again. She added that DEP
staff were frustrated not only by the volume of the questions posed,
but also by the appearance that no one at EPA had been assigned to
consolidate the numerous comments from various EPA offices. DEP‘s
reaction was to temporarily shelve the project, claiming that it did
not have the resources to enter into protracted negotiations to resolve
EPA‘s concerns. According to the Commissioner, the subsequent
intervention of the EPA Office of Enforcement and Compliance
Assurance‘s Policy Director helped to revive the proposal. Currently,
DEP is awaiting EPA approval of a draft state rule containing the
changes the state desires.
New Jersey officials cited similar experiences during negotiations over
the state‘s Gold Track program, stating that some EPA program staff
strongly resisted requests for regulatory flexibility. One official
noted that EPA staff had exhibited a ’what if“ mentality when reviewing
proposals”developing a worst possible case scenario and holding that
scenario up as a reason to reject the proposal. This official added
that the EPA approach appeared to focus more on a search for reasons
not to pursue innovation, rather than on an examination as to whether
the proposal was fundamentally sound and how it could best be
implemented.
EPA officials we interviewed also acknowledged the existence of an EPA
culture predisposed to view innovative proposals skeptically. For
example, an official of EPA‘s Office of Solid Waste and Emergency
Response noted that this cultural tendency is partly rooted in the fact
that many EPA staff are used to addressing environmental problems in a
’tried and true“ way and that EPA‘s reward system does not encourage
staff to pursue innovative approaches. Similarly, an official of EPA‘s
Office of Air and Radiation noted that EPA has a culture somewhat
resistant to new approaches, in part, because of its reluctance to
deviate from approaches that it believes have proven effective over the
last 30 years.
The agency recognized the challenge of promoting acceptance of new
approaches on the part of its rank-and-file in our July 1997 report on
its reinvention efforts, which documented widespread agreement among
EPA officials, state officials, and others that the agency has a long
way to go before reinvention becomes an integral part of its staff‘s
every day activities.[Footnote 15] It cited the view of the then-head
of EPA reinvention activities as noting that many staff are comfortable
with traditional ways of doing business and consider their program-
specific job responsibilities as their first priority and reinvention
projects as secondary. Also commenting on EPA staffs‘ comfort with
traditional approaches, a senior ECOS official noted that EPA was
created in the early 1970s, and that many current employees have spent
their entire careers there. He noted that for some of them, a
familiarity and comfort with earlier norms and practices may make it
hard to embrace some of the agency‘s recent experiments with
alternative compliance strategies.
However, EPA officials indicated that what may be perceived as
’cultural resistance“ among EPA staff may, in fact, reflect
understandable concerns that they properly implement the agency‘s core
mission. An official with the agency‘s Office of Policy, Economics, and
Innovation added that in some cases, EPA staff may feel that specific
regulations were the culmination of a good faith commitment made to
stakeholders and members of the public who participated in the
regulatory development process. An official of EPA‘s New York office
noted that EPA is obligated to ensure a certain level of environmental
protection, and if proposed innovations could potentially negatively
affect the environment, the benefits of moving forward must be
carefully balanced against the risks. Another EPA official noted that
close scrutiny is warranted in situations where an alternative approach
may be viewed as setting a precedent for similar requests in situations
where it may not be appropriate. An official of EPA‘s Chicago office
also noted that to allow deviation from regulatory requirements, EPA
must develop an alternative legal mechanism to ensure accountability.
Developing such legal mechanisms can be very time consuming. Perhaps
most importantly, EPA staff are mindful of the potential consequences
when innovative proposals are at odds with laws or regulations. A state
official said that EPA has to be cautious in permitting innovative
approaches because the agency is often sued by environmental and
community groups if it does not follow laws and regulations to the
letter.
On the other hand, EPA and some state officials indicated that EPA‘s
disinclination to consider alternative approaches may be slowly
changing. Officials of the state environmental agencies in
Massachusetts and New Hampshire indicated that EPA‘s Boston office has
become a stronger advocate for flexibility and new approaches. For
example, a Massachusetts official said the states in the region
generally get a sympathetic hearing when they make proposals. The
official also said that EPA‘s Office of Enforcement and Compliance
Assurance has also become more willing to consider innovative
approaches. Similarly, the New Hampshire official stated that EPA is
gradually changing the mindset of its staff to be more open to
innovative proposals and that there is a healthy and respectful working
relationship between the state and the agency‘s Boston Office on these
matters. Senior ECOS staff also told us that while further progress is
needed, the agency has also sought to include state input earlier in
its decision-making process to resolve long-standing data reporting
problems and other key issues.
EPA Sometimes Determines That Proposals Are Missing Key Elements:
While EPA officials acknowledged the key obstacles cited during our
state interviews, they also told us that state innovative proposals
sometimes encounter delays resulting from deficiencies in the form and
content of the proposals. Project XL, the ECOS/EPA agreement, and other
avenues for innovation each have certain ground rules on which
participating parties agree. The EPA officials noted, and some state
officials agreed, that in some cases a proposal‘s rejection or delay
may have less to do with an obstacle encountered at the federal level
than with a problem in the proposal‘s ability to meet these ground
rules.
As noted earlier, for example, Project XL requires that proposed
innovative approaches result in ’superior environmental performance,“
in comparison to traditional approaches. According to EPA‘s Chicago
office staff, the difficulty in documenting compliance with this
criterion was a primary point of contention regarding the XL proposal
made by the Andersen Windows corporation with backing by the state of
Minnesota. Among other things, Andersen Windows desired to obtain
flexibility to change production processes without costly permit
reviews under the Clean Air Act‘s Prevention of Significant
Deterioration regulations. In exchange, the firm proposed to establish
a per-unit volatile organic compounds emissions rate of 0.763 pounds
per unit of production (referred to as the performance ratio). The
performance ratio ensures that future capacity increases would use less
polluting processes, such as the substitution of water-based wood
finishes for the solvent-based wood finishes the facility had
traditionally used. Also, the project would adopt an overall emissions
cap of 2,651 tons of volatile organic compounds per year.
Although the proposed emission cap was above current actual emission
levels, Andersen Windows contended that because it was below current
allowable emissions, EPA should take into account the firm‘s past
efforts to reduce VOC emissions. EPA, on the other hand, wanted the
project to commit to a level of emissions no higher than current actual
emissions. EPA contended that there was no plausible scenario under
which the facility would have emitted at a level near the proposed cap,
and thus the proposal did not constitute a commitment to superior
environmental performance. In response, the facility made a number of
concessions, including the performance ratio limit, a lower overall
emissions cap, and an explicit, enforceable commitment that any new
paint processes would use less polluting materials. After extensive
negotiations, EPA agreed to the proposal.
The ECOS/EPA agreement also includes a series of principles to which
signatories of proposals agree. Among them, proposals should include
provisions for stakeholder involvement in a project, provisions for the
enforcement of alternative regulatory requirements to ensure that
public health and environmental protections are maintained, and a
process for assessing the results of the innovative approach to test
whether the desired results are actually achieved. Representatives of
the Office of Enforcement and Compliance Assurance stated that state
proposals do not always include an evaluation component, while others
have not identified how stakeholder involvement would be assured. An
official in EPA‘s Chicago office also noted that some ECOS proposals
did not meet the requirement that they be sufficiently limited in scope
that they may be considered ’experimental,“ in order to minimize any
risks if the initiative does not work as anticipated. For example, EPA
initially resisted a Michigan proposal to take an innovative approach
to controlling phosphorous discharges into state watersheds. Because
the state initially proposed that this program be adopted in at least
three watersheds and possibly statewide, EPA felt that its scope was
not sufficiently limited to be considered an experiment. The project
was approved after Michigan agreed to limit the proposal to a single
watershed.
Finally, project submittals may be subject to EPA‘s ’compliance
screening guidance.“ The guidance provides that participants in
regulatory flexibility programs, such as Project XL and the EPA/ECOS
agreement, have good overall compliance records. In particular,
participation is deemed inappropriate if an applicant has been the
subject of a recent criminal conviction, an ongoing criminal
investigation, or ongoing EPA-initiated litigation. Participation may
also be deemed inappropriate if an applicant has been involved in
violations resulting in a serious threat to human health or the
environment, a pattern of significant noncompliance, or is the subject
of a citizen enforcement suit.
Such screening guidance became a central issue in a Project XL proposal
submitted by the Hopewell Regional Wastewater Treatment Facility in
Virginia. The facility receives industrial wastewater from a variety of
manufacturers, including makers of pulp and paper, organic chemicals,
and plastics. As a result of federal pretreatment regulations under the
Clean Water Act, the contributing manufacturers were faced with the
requirement to add redundant pretreatment technology. Adding the
technology would have adversely affected treatment performance at the
Hopewell plant. Consequently, the Hopewell Regional Wastewater
Treatment Facility and contributing sources proposed to move the
application of pretreatment standards from the industrial users to the
Hopewell plant. An EPA Deputy Regional Administrator expressed EPA‘s
support for the project and its desire to continue technical review of
the proposal. However, the participation of two of the contributing
firms was temporarily deferred pending the resolution of outstanding
significant non-compliance at those facilities. The state subsequently
resubmitted the proposal under the ECOS/EPA agreement. In July 2001,
EPA indicated that the proposal could move forward to fuller
development, but that the two firms with noncompliance issues could not
participate until their enforcement cases were resolved.
Recent EPA Actions Are Intended to Facilitate State Innovative
Approaches:
EPA has recently taken a number of measures to address at least some of
the obstacles discussed in this report, and those changes may foster an
improved climate for pursuing innovative state approaches. In June
2001, EPA adopted the recommendations of its Task Force on Improving
EPA Regulations. Subsequently, in October 2001, the agency published a
draft strategy on Innovating for Better Environmental Results.
The EPA Task Force on Improving EPA regulations was created in April
2001 to reexamine EPA‘s regulatory development process and identify
ways to improve supporting scientific, economic, and policy analysis.
In addition, the task force sought ways to enhance regulatory
flexibility and to create strong partnerships with states and
businesses. Among other key findings, the task force determined that in
the process of developing regulations, EPA should develop and consider
a broader array of policy options, including innovative alternatives
and market-based approaches. Importantly, the task force report
recommended that the regulations development process consider the
possibility of innovative alternatives and that EPA strengthen the
involvement of states and local governments during the regulatory
development process. Should EPA follow through on this recommendation,
it would help the agency address one of the key obstacles identified in
this report”the effect of prescriptive EPA regulations in impeding
innovative regulatory strategies. By involving state officials early in
the regulations development process and identifying the potential
effects of regulatory proposals at this stage, there is a greater
chance that regulations will be developed in a manner that encourages,
rather than inhibits, innovation.[Footnote 16] The strategy, however,
applies to the development of new regulations rather than the obstacles
posed by existing regulations.
EPA‘s Draft Strategy on Innovating for Environmental Results maintains
that EPA‘s efforts to promote innovation over the course of the last
decade have made significant advances, but they have resulted in a
disparate array of projects that were not designed to achieve system-
wide improvement. Furthermore, it notes that the transaction costs have
been high and that there has not been a consistent process for
expanding the application of pilot programs. To address these issues,
the strategy proposes a 4-pronged strategic framework:
* Strengthening EPA‘s partnership with states, including a greater
emphasis on performance management and the NEPPS process.
* Focusing on four priority issues: reducing greenhouse gases, reducing
smog, restoring and maintaining water quality, and reducing the cost of
water and water infrastructure.
* Diversifying environmental tools and approaches.
* Fostering a more innovative culture and organizational system at EPA
and states.
Among other things, the strategy emphasizes fostering an organizational
culture at EPA that is more friendly to innovative approaches.
Following up on EPA reinvention activities of the last 10 years, it
states that EPA should integrate support for innovation into its
planning, budgeting, and organizational systems. It also notes that a
more innovative culture will require EPA staff to view their jobs more
broadly; that is, not just as overseers of ongoing operations, but as
problem solvers, partners, and facilitators. It also proposes to hold
senior managers accountable for supporting innovative approaches and
increasing their responsibilities for scaling up successful
innovations. According to EPA officials, the process of diffusion and
broader application of successful innovations may lead to gradual
revision of existing regulations that may be inhibiting better ways of
achieving environmental goals.
The details of both EPA initiatives still need to be fleshed out and a
number of issues resolved. For example, some state officials have
questioned the focus of the Draft Strategy on Innovating for
Environmental Results on four priority issues (greenhouse gases, smog,
water quality, and water infrastructure), fearing that this focus
downplays other issues of greater importance to individual states or
localities. According to EPA, states will play a role in refining the
Draft Strategy as it undergoes further development. How these and other
issues are resolved will determine the ultimate impact these efforts
have on EPA‘s reinvention efforts in general and on its efforts to
collaborate with states on innovative environmental proposals in
particular.
Conclusions:
While states face a variety of obstacles when seeking to promote
innovative approaches to environmental protection, we found their most
significant obstacles to be at the federal level. Of these federal
obstacles, the detailed requirements of prescriptive federal
environmental regulations were cited as among the most significant,
along with a cultural resistance among many EPA staff toward
alternative approaches. In some cases, however, the underlying cause of
this cultural resistance was traced back to the regulations.
Specifically, many EPA staff believe that strict interpretations must
be applied to detailed regulations if they are to be legally
defensible.
The identification by state officials of prescriptive federal
regulations as a key obstacle to innovation is consistent with the
findings of numerous research organizations that have cited the need
for environmental regulations to focus more on the desired
environmental results and, where possible, to be less prescriptive
concerning the specific means of achieving these results. It is also
consistent with EPA‘s recent adoption of the recommendations of its own
Task Force on Improving EPA Regulations which advocates, among other
things, that innovative alternatives should be considered as new
regulations are developed.
It remains to be seen if implementation of the EPA recommendations will
have the desired effect in reforming the regulations development
process to better accommodate innovative proposals. Yet, however
successful these efforts are in accounting for the impact of new
regulations, they still do not focus on the key problem (documented by
this report and by those of other organizations) concerning the impact
of many existing prescriptive regulations on innovation, nor do other
EPA initiatives resolve the problem. As noted in this report, current
statutes are generally less prescriptive than the more detailed
regulations by which they are implemented. However, the statutes
contain no explicit language authorizing the use of innovative
environmental approaches in lieu of specific regulatory requirements
and, as noted in this report, this absence of a ’safe legal harbor“ for
EPA has been a significant obstacle to states and others in their
efforts to test innovative proposals. It has also tended to reinforce
the cultural resistance to innovation that EPA is seeking to change.
Accordingly, in the absence of legislative changes, the effectiveness
of the agency‘s innovation efforts will warrant monitoring by EPA and
other stakeholders in the innovations process, and will also warrant
continued congressional attention.
Agency Comments:
We provided a draft of this report for review and comment to EPA and to
ECOS‘ headquarters office in Washington, D.C. EPA did not submit a
formal letter but provided individual comments from several
headquarters and regional offices that have dealt with the issues
discussed in the report. From headquarters, we received comments from
the Office of Air and Radiation, Office of Enforcement and Compliance
Assurance, the Office of Solid Waste and Emergency Response, and the
Office of Policy, Economics, and Innovation. The Office of Air and
Radiation indicated general agreement with the report‘s findings as did
the Office of Enforcement and Compliance Assurance, which said that the
report ’reflects a balanced approach to analyzing such a broad topic
and recognition of EPA‘s recent efforts to facilitate innovative
approaches to environmental protection.“
The Office of Solid Waste and Emergency Response provided minor
technical comments. Comments from all three offices were incorporated
as appropriate. The Office of Policy, Economics, and Innovation (OPEI)
commented on our conclusion that its initiatives to alleviate the
impacts of EPA regulations focused on new regulations rather than
existing regulations. The Office said that the report should recognize
that a major thrust of its Draft Strategy on Innovating for
Environmental Results involves the ’scaling up“ or ’diffusion“ of
successful innovations to broader applications through the revision of
regulations, policies, or program practices. We added language to
reflect this as a key component of the EPA strategy. However, as OPEI
staff acknowledged in a subsequent discussion about this point, the
agency has yet to pursue this strategy in the type of systematic or
large-scale manner that would be needed to deal materially with the
large number of EPA regulations at issue, and has not evaluated the
extent to which scaling up has been practiced or has succeeded.
OPEI also observed that there may be some confusion in that the report
identified two different ways in which statutes could inhibit state
innovation: (1) by prescribing in detail how a program activity must be
carried out (or by precluding alternatives) and (2) by omitting
explicit language authorizing regulatory flexibility to proponents of
innovation and regulators in a manner that would provide the ’safe
legal harbor“ needed to assure the legality of their innovative
proposals. The draft report discussed each of these potential impacts
individually, but we added additional clarifying language in response
to the OPEI comment. In addition to these two issues, OPEI offered a
number of more detailed comments and suggestions, which we incorporated
as appropriate.
We also received comments from EPA‘s Chicago, Dallas, New York, and
Seattle offices. In addition to their technical comments and
corrections, the Chicago, Dallas, and Seattle offices expressed general
agreement with the material presented. The Dallas Office noted, for
example, that ’most of the views [identified in the report] have been
expressed by state contacts or facility representatives, but also have
been shared by individual EPA employees that have worked on one or more
innovations programs.“ The New York Office provided no overall opinion,
but offered a number of technical comments and corrections. These
comments and corrections, and those of the other three regional
offices, were incorporated as appropriate.
ECOS‘s Executive Director and his staff said that the draft report was
fair and well documented. They noted in particular their agreement with
the report‘s findings that EPA regulations tend to be more of an
obstacle to innovation than their underlying environmental statutes,
and that a continued need exists for cultural change at both the state
and EPA level. They also proposed a number of technical revisions and
clarifications, which we incorporated in finalizing the report.
Objectives, Scope, and Methodology:
To identify the major avenues through which states can achieve
concurrence with EPA on innovative approaches to environmental
protection, we interviewed officials with EPA‘s headquarters and
regional offices, officials from the Environmental Council of the
States, and officials from other interest groups and research
organizations. We also reviewed recent studies and other literature
pertaining to states‘ experience with innovative environmental
regulatory strategies.
To obtain information on the obstacles that states face when adopting
innovative approaches to environmental protection, we interviewed
cognizant officials from 15 states”Georgia, Massachusetts, Michigan,
Minnesota, Nebraska, New Hampshire, New Jersey, New York, Oregon,
Pennsylvania, Tennessee, Texas, Virginia, Washington, and Wisconsin. We
intentionally selected a sample of states that was diverse in size, was
representative of different EPA regions, and had varying degrees of
experience with environmental regulatory innovation. To obtain further
diversity in the initiatives we examined, we asked the state officials
to identify two of their major innovative proposals”one that they
pursued and EPA accepted and one that was proposed and not accepted.
For each, we first sought written information in advance of our
interviews with cognizant state officials. Then, through our interviews
with these officials, we sought to obtain a fuller understanding of the
circumstances surrounding each initiative, and to identify the
obstacles that may have inhibited or prevented progress. For the states
in which officials elected not to identify initiatives pursued with
EPA, we sought to identify the factors influencing their reasons for
not doing so.
In addition to these state interviews, we conducted a series of
interviews with the corresponding EPA regional offices to obtain their
views about the obstacles to state environmental innovation in general
and to gather information about their experiences with the specific
initiatives identified by states in their jurisdiction. We also
interviewed officials with EPA headquarters offices including the
Office of Policy, Economics, and Innovation; the Office of Enforcement
and Compliance Assurance; and key program offices that have had
experiences with innovative state regulatory proposals.
We conducted our work from March through December 2001 in accordance
with generally accepted government auditing standards.
As we agreed with your office, unless you publicly announce the
contents of this report earlier, we plan no further distribution of it
until 30 days from the date of this letter. We will then send copies to
others who are interested and make copies available to others who
request them. If you or your staff have any questions about this
report, please call me or Steve Elstein at (202) 512-3841. Key
contributors to this report are listed in appendix II.
Signed by:
David G. Wood:
Director, Natural Resources and Environment:
[End of section]
Appendix I: Key Innovations Identified by States:
State[A]: Massachusetts: Cathode ray tube (CRT) recycling;
Description of innovations cited by state officials: Cathode ray tubes
in computer equipment are a growing waste problem because of the high
turnover rates for computer equipment. The Massachusetts Department of
Environmental Protection wanted to create a system for reusing and
recycling these parts, but ran into difficulties because the parts are
classified as hazardous waste under the Resource Conservation and
Recovery Act (RCRA) due to their high lead content. The state undertook
a number of actions, including exempting intact CRTs as hazardous
waste, to increase reuse and recycling efforts in the state.
State[A]: Massachusetts: Environmental Results Program;
Description of innovations cited by state officials: The Environmental
Results Program is a regulatory system established under Project XL
designed to streamline permitting and reporting requirements and
improve performance in the printing, photo processing, and dry cleaning
sectors. The state sets out to accomplish this through the use of
industry-wide performance standards and self-certification of
compliance. In the future, Massachusetts would like to expand this
program to other industrial sectors.
State[A]: Michigan: TMDL for Lake Allegan Watershed;
Description of innovations cited by state officials: Under this ECOS
agreement project, the Michigan Department of Environmental Quality
(MDEQ) adopted a new watershed approach to meet TMDL requirements for
phosphorus in the Lake Allegan Watershed. This new approach utilizes a
cooperative agreement between point source dischargers, non-point
dischargers, and the MDEQ to establish the necessary reduction
allocations among the various sources. The resulting allocation for the
point source dischargers will then be written into the next round of
National Pollution Discharge Elimination System permits.
State[A]: Michigan: Development of a presumptive BACT for auto assembly
plants;
Description of innovations cited by state officials: The Clean Air Act
requires a case-by-case Best Available Control Technology (BACT)
analysis for auto assembly plant painting and coating operations.
Whenever a facility makes any changes to its technology, it must go
through this time-consuming process, even though the BACT is typically
the same in each case. With this ECOS agreement, the Michigan
Department of Environmental Quality will test an innovative permitting
approach under which a 3 year BACT analysis will be developed for
specific automotive painting and coating sources. For a 3 year period,
an auto assembly facility will be able to use this 3 year BACT in lieu
of performing a completely new analysis. This new approach will save
resources, which can then be used for other activities with greater
environmental benefits.
State[A]: Minnesota: Andersen Windows;
Description of innovations cited by state officials: Under this Project
XL agreement, the Andersen Window Corporation is testing a new approach
to reducing air emissions through the use of a performance ratio. This
ratio will measure the amount of volatile organic compound (VOC)
emissions per unit of production. The facility can make changes to its
processes as long as it stays below the performance ratio and the
facility-wide VOC cap. This performance-based system will give the
facility flexibility and provide an incentive for improved
environmental performance.
State[A]: Minnesota: Project XL proposal for 3M;
Description of innovations cited by state officials: The 3M Hutchinson
plant was one of the original participants in Project XL. The company‘s
proposal sought to develop a multimedia permit that would cover the
facility‘s air emissions, storm water management, liquid storage
facility requirements, and hazardous waste generator requirements. In
exchange, 3M would commit to a number of requirements intended to
enhance the facility‘s environmental performance. Eventually, this
proposal was withdrawn from Project XL.
State[A]: New Hampshire: Groveton Paper Mill;
Description of innovations cited by state officials: In April 2002,
Groveton Paper Board, Inc. would have been required to install a $1
million system to capture and incinerate emissions of airborne
methanol. The company found an alternative pollution control technology
that has the potential to cut methanol emissions by four times what is
required by law, while saving the company $825,000. In addition, the
new technology will reduce 20 tons per year of other hazardous air
pollutants.
State[A]: New Hampshire: Management of Inactive Asbestos Disposal Sites
in Nashua and Hudson, New Hampshire;
Description of innovations cited by state officials: Over 250 sites in
Nashua and Hudson, New Hampshire were contaminated with asbestos when a
local asbestos manufacturing plant delivered asbestos to landowners to
use as fill. EPA determined that these sites qualified as ’inactive
disposal sites“ and ’stationary sources“ under the National Emission
Standards for Hazardous Waste Pollutants (NESHAPS). As a result, the
sites were subject to a number of requirements, many of which were
unreasonable for homeowners. The New Hampshire Department of
Environmental Services worked with EPA to find a reasonable solution.
Eventually, they used a mechanism in 40 CFR 63.93 that allows a state
rule to be substituted for the federal regulation. In September, they
provided a draft proposal to EPA, and currently they are working with
EPA for a resolution.
State[A]: New Jersey: Gold Track;
Description of innovations cited by state officials: The Gold Track
Program is a Project XL initiative. It is part of a tiered system that
is designed to reward companies that commit to higher levels of
environmental performance. The Gold Track is the highest tier in the
system and it provides recognition and regulatory flexibility for
facilities that commit to the highest standards of environmental
performance.
State[A]: New York: Project XL proposal for IBM Fishkill facility;
Description of innovations cited by state officials: The IBM Fishkill
facility is a manufacturer of semiconductor and electronic computing
equipment. The facility‘s wastewater sludge is classified as hazardous
waste under the Resources Conservation and Recovery Act. The facility
would like to test an alternative approach that involves recycling this
waste for reuse in cement. Under Project XL, EPA has decided to grant
regulatory flexibility to the facility to recycle the sludge.
State[A]: New York: Project XL proposal for storage of hazardous waste
by public utilities;
Description of innovations cited by state officials: Under RCRA,
generators of hazardous waste must transport their waste to permitted
treatment, storage, and disposal facilities. Under this agreement,
public utilities in New York State will be able to consolidate the
waste from remote locations at a central collection facility and store
it there for up to 90 days before transporting it to one of these
facilities. This project is intended to increase public safety by
facilitating removal of hazardous waste and decreasing the risk of
accidental release; to increase efficiency of transportation of
hazardous wastes for public utilities; and to save time and resources
for public utilities and the New York Department of Environmental
Conservation.
State[A]: Oregon: Green Permits;
Description of innovations cited by state officials: Established by
state legislation, the Green Permits Program is designed to encourage
facilities to achieve greater environmental performance than required
by law, and to adopt environmental management systems in exchange for
incentives such as regulatory flexibility, public recognition, and a
single point of contact with the agency. EPA‘s involvement is spelled
out in a memorandum of agreement (MOA) between the Oregon Department of
Environmental Quality, the Lane Regional Air Pollution Authority, and
EPA. The MOA is based on the principles of the Joint State/EPA
Agreement to Pursue Regulatory Innovation. Currently seven facilities
are participating in the program.
State[A]: Oregon: Green Permit for LSI Logic;
Description of innovations cited by state officials: LSI Logic is a
semiconductor facility in Gresham, Oregon, that participates in the
Green Permits Program. Among other things, the facility‘s Green Permits
Application requests equivalency under Subpart BB of the Resource
Conservation and Recovery Act, which is related to monitoring,
detection, and repair of leaks from equipment that handles hazardous
waste. LSI Logic contends that its equipment, while not meeting the
exact requirements of the regulations, performs in a manner that is
equal or superior to the technology that is required. EPA and the state
have preliminarily determined that the firm‘s approach is acceptable,
and the parties are now in the process of identifying a legally-
enforceable alternative for the facility, such as a site-specific rule.
State[A]: Pennsylvania: Acid Mine Reclamation;
Description of innovations cited by state officials: This Project XL
program is designed to encourage coal miners to remine and reclaim
abandoned coal mine sites. Under current regulations, operators must
meet numeric limits under the National Pollutant Discharge Elimination
System (NPDES) at individual discharge points. Operators may be
reluctant to engage in remining activities because they may exceed
these limits because of pre-existing discharges from closed mines.
Under this project, operators can use Best Management Practices and
monitor the concentration of pollutants in-stream, which is expected to
reduce risk and expense to coal mine operators, improve water quality,
and increase the number of operators participating in remining and
reclamation activities.
State[A]: Pennsylvania: Lucent Technologies Project XL;
Description of innovations cited by state officials: The Lucent
Technologies Microelectronics Group entered into a Project XL Agreement
with EPA that is designed to test whether an environmental management
system (EMS) could be used to develop a single document to cover all
environmental aspects of a regulated entity that has demonstrated
superior environmental performance. It will also explore, among other
things, whether it is appropriate to use an EMS as a basis for granting
regulatory flexibility and if there are regulatory approaches that are
cheaper, cleaner, and smarter ways of protecting the environment.
State[A]: Texas: Transportation Equipment Cleaning Partnership;
Description of innovations cited by state officials: Established under
the Joint EPA/State Agreement to Pursue Regulatory Innovation, this
initiative seeks to allow ’barge scale“ (iron oxide) material produced
during the barge-cleaning process as a marketable product. Currently
classified as either industrial or hazardous waste, the material is
transported and treated at an off-site RCRA facility, with any
remaining residue placed in an authorized landfill. Under this
agreement, the participating facility would use its onsite thermal
oxidizer to convert the material for use as a product. This project is
expected to result in reduced risk for exposure to hazardous materials
for employees, the public, and the environment and in resource savings
for the participant.
State[A]: Virginia: Project XL for Merck Stonewall Plant;
Description of innovations cited by state officials: The Merck
Stonewall plant is located near the Shenandoah National Park in
Virginia”an area of special concern for air quality. Merck was one of
the first participants in Project XL and its proposal was designed to
improve air quality in the area. Under the agreement, Merck agreed to
convert its coal-burning powerhouse to burn natural gas, resulting in
lower levels of emissions. In exchange for this commitment, the
facility would be allowed to function under an emissions cap for
criteria pollutants, allowing Merck to make process changes without
first obtaining EPA approval.
State[A]: Virginia: Hopewell Regional Wastewater Treatment Facility;
Description of innovations cited by state officials: This proposal,
submitted under the Joint State/EPA Agreement to Pursue Regulatory
Innovation, seeks EPA‘s approval for a modification of pretreatment
requirements for the Hopewell Regional Wastewater Treatment Facility
under the Clean Water Act. The facility treats wastewater from a number
of industrial facilities and current regulations require that standards
for water quality must be met at the industrial users‘ end-of-pipe. The
standards were designed for treatment facilities that treat domestic
wastewater and because the facility only treats industrial wastewater,
the Hopewell Wastewater Treatment Facility would like these
requirements modified to allow it to meet the standards at its own end-
of-pipe, thus eliminating redundant treatment processes and resulting
in improved quality in the receiving stream.
State[A]: Wisconsin: Environmental Cooperative Agreement for the
Wisconsin Electric Power Company;
Description of innovations cited by state officials: The Environmental
Cooperation Pilot Program (ECPP) was developed by the Wisconsin
Department of Natural Resources to allow facilities to test innovative
approaches to environmental protection in exchange for superior
environmental performance. Through the program, which is supported by
the Wisconsin statute, the DNR is authorized to enter into agreements
with up to 10 different facilities in the state. The Pleasant Prairie
Power Plant is one of the participating facilities. Under the
agreement, the facility commits to a number of measures, including the
use of pollution prevention techniques and the adoption of an
environmental management system. In exchange, the facility will enjoy
the benefits of alternative monitoring, reduced reporting, permit
streamlining and recovery and combustion of ash stored in the company‘s
landfills.
State[A]: Wisconsin: Project XL proposal for the Wisconsin Electric
Power Company;
Description of innovations cited by state officials: The Project XL
proposal for Wisconsin Electric Power Company was designed to create an
integrated, multi-pollutant air quality approach for all six of the
company‘s coal burning power plants. Under the agreement, Wisconsin
Electric would meet certain limits for sulfur dioxide, nitrogen oxides,
and particulate matter that are more stringent than current
requirements. In exchange for this, Wisconsin Electric would be granted
flexibility in making certain changes at the facilities. Specifically,
it would be exempt from some of the requirements for New Source Review,
Prevention of Significant Deterioration and New Source Performance
Standards if the changes meet certain qualifications. This agreement
was expected to give Wisconsin Electric incentive to make improvements
to the system and to result in lower emissions, while resulting in cost
savings due to paperwork reduction and efficiency gains for Wisconsin
Electric and Wisconsin Department of Natural Resources. To date, EPA
has not approved this proposal.
[A] Georgia, Nebraska, Tennessee, and Washington also participated in
interviews, but they did not identify an innovation that they proposed
to EPA.
[End of table]
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Steve Elstein (202) 512-6515:
Staff Acknowledgments:
In addition to the individual named above, Mike Hartnett and Stephanie
Luehr contributed significantly to this report. Kimberly Clark, Karen
Keegan, and Jonathan McMurray also made significant contributions.
[End of section]
Footnotes:
[1] The 15 states are Georgia, Massachusetts, Michigan, Minnesota,
Nebraska, New Hampshire, New Jersey, New York, Oregon, Pennsylvania,
Tennessee, Texas, Virginia, Washington, and Wisconsin.
[2] Of the 15 states we contacted, 9 identified two initiatives each, 2
identified one initiative, and 4 did not identify any initiatives.
[3] Pollution Control in the United States: Evaluating the System.
Davies, J. Clarence and Jan Mazurek, Resources for the Future,
Washington, D.C.
[4] These reports include Environmental Protection: Challenges Facing
EPA‘s Efforts to Reinvent Environmental Regulation [hyperlink,
http://www.gao.gov/products/GAO/RCED-97-155], July 2, 1997 and
Environmental Protection: Collaborative EPA-State Effort Needed to
Improve New Performance Partnership System [hyperlink,
http://www.gao.gov/products/GAO/RCED-99-171], June 21, 1999.
[5] Project XL was in part inspired by the example of the Amoco Oil
Company‘s refinery in Yorktown, Virginia. At that facility, extensive
emissions testing revealed that the large majority of benzene emissions
came from the unregulated terminal loading facility, rather than the
other sources for which EPA had mandated specific and costly
technological controls. Even though all parties agreed that controlling
emissions at the loading dock was preferable to the more expensive
controls mandated for other sources at the refinery, the company could
not substitute this preferred alternative for the more expensive
controls because specific federal regulations required these controls.
[6] In the first years of Project XL, EPA defined ’superior
environmental performance“ as ’environmental performance that is
superior to what would be achieved through compliance with current and
reasonably anticipated future regulations“. Because different Project
XL participants often interpreted this definition differently, EPA
issued clarifying guidance in 1997. Nonetheless, what constitutes
’superior environmental performance“ has remained a point of contention
in some Project XL initiatives.
[7] The TMDL program covers bodies of water that do not meet a state‘s
water quality standards after pollution controls have been applied.
Under the program, a TMDL is set based on a calculation of the amount
of pollution a water body can receive and still meet the water quality
standard set by the state. TMDLs allocate waste loads among the
contributing sources.
[8] Environmental Protection: Collaborative EPA-State Effort Needed to
Improve New Performance Partnership System [hyperlink,
http://www.gao.gov/products/GAO/RCED-99-171], June 21, 1999.
[9] Perceived Barriers to Innovation in Environmental Protection;
Roberts, Robert E. and Timothy R. Titus; The Environmental Council of
the States, April 2000.
[10] State officials cited several exceptions. A provision of the Clean
Air Act was a significant impediment to the Michigan Department of
Environmental Quality‘s effort to grant automobile parts manufacturers
certain permitting flexibilities. Other state and EPA officials noted
that other sections of the Clean Air Act, and various sections of the
Resource Conservation and Recovery Act, also contain requirements that
leave states with little flexibility and with no recourse to obtain
flexibility from EPA.
[11] Environmental Protection: Challenges Facing EPA‘s Efforts to
Reinvent Environmental Regulation [hyperlink,
http://www.gao.gov/products/GAO/RCED-97-155], July 2, 1997, p. 50.
[12] Environmental Protection: Meeting Public Expectations With Limited
Resources [hyperlink, http://www.gao.gov/products/GAO/RCED-91-97], June
18, 1991.
[13] Established in 1997, Oregon‘s Green Permits program is designed to
encourage facilities with strong environmental track records to achieve
better environmental performance than required by law. In exchange for
commitment to improved environmental performance through commitments
such as adoption of environmental management systems, the program
offers participating facilities cost savings and operational
efficiencies through more flexible application of environmental
requirements. In a May 2000 memorandum of agreement, EPA and the Oregon
Department of Environmental Quality entered into a working partnership
to proceed with the Green Permits Program.
[14] Environmental Law Institute, Innovation, Cost and Environmental
Regulation: Perspectives on Business, Policy, and Legal Factors
Affecting the Cost of Compliance, May 1999. The Environmental Law
Institute is a research and education center that seeks to develop
effective solutions to pressing environmental problems.
[15] Environmental Protection: Challenges Facing EPA‘s Efforts to
Reinvent Environmental Regulation [hyperlink,
http://www.gao.gov/products/GAO/RCED-97-155], July 2, 1997, p. 41.
[16] GAO recommended a similar approach in a report published earlier
this year entitled, Environmental Protection: EPA Should Strengthen Its
Efforts to Measure and Encourage Pollution Prevention [hyperlink,
http://www.gao.gov/products/GAO-01-283], Feb. 2001. Specifically, the
report recommended that EPA ensure that, as required by the Pollution
Prevention Act of 1990, it reviews proposed regulations to determine
their effect on the use of pollution prevention techniques.
[End of section]
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