June 14, 2006

Office of the Administrator Docket

U.S. Environmental Protection Agency

1200 Pennsylvania Ave NW

Washington, DC 20460

Attn: Docket ID OA-2005-0003

To Whom It May Concern:

On behalf of the Natural Resources Defense Council (NRDC) and its more
than 1.2 million members and online activists, I am pleased to submit
the following comments regarding EPA's "Report on ECOS-EPA
Performance-Based Environmental Programs: Proposed Initial
Implementation Actions," made available for public comment at 71 Fed.
Reg. 28,026 (May 15, 2006), and related materials contained in Docket ID
OA-2005-0003.

NRDC is dedicated to protecting the environment and public health, and
therefore supports the goal of EPA and state environmental agencies
encouraging companies to go beyond environmental compliance. In several
respects, we are encouraged by the responsiveness that is apparent in
the proposed recommendations in the Report, following broader and more
troubling initial recommendations advanced by EPA and ECOS staff in the
fall of 2005.[^1] We are pleased, for example, with the language in the
Notice emphasizing that the program must not in any way weaken
compliance. Nevertheless, most of our concerns continue and our
questions remain unanswered, while Performance Track carries on a push
for expansion that we believe to be unwarranted.

[General Justifications]{.underline}

*Public Priority and Transparency*

The most recent Proposed Initial Implementation Actions, as well as
materials from the Performance Track website, continue to demonstrate
preoccupations with state agency operation and participant company
satisfaction. Unfortunately, while these may be legitimate concerns in
instances, they appear to dwarf, and even at times threaten to
undermine, the respective EPA and state agency public health and
environmental missions.

The continuing ECOS-EPA workgroups are composed exclusively of federal
and state regulators, seeming still to meet or consult with favored
companies, with no public interest organizations or representatives of
the public generally. These sets of agendas are not entirely coincident,
and a much clearer showing of appropriate priorities is crucial for the
perceived, and real, legitimacy of Performance Track and other
performance-based programs. We raised these concerns about transparency
and priorities in our prior comments, and we find it unfortunate that
the workgroups have not been expanded or urged to solicit input from the
public in the evident manner that input has been solicited from
Performance Track member companies.

*Empirical Support*

Corresponding to the program's misdirected priorities in practice, there
continues to be a lack of empirical data supporting the devotion of
significant federal resources to Performance Track and parallel state
programs. Practical results are prioritized by the Government
Performance Results Act and by EPA goals such as those in the Office of
Inspector General's February 17, 2005 report, "Ongoing Management
Improvements and Further Evaluation Vital to EPA Stewardship and
Voluntary Programs." However, we have yet to see any convincing evidence
that voluntary performance-based programs are worth their administrative
costs above and beyond core environmental programs. There has been no
analysis comparing Performance Track in detail to alternative or
existing regulatory frameworks. In fact, it is still difficult to find a
factual basis for the EPA's insistence that performance-based
environmental programs are not only "important" but also "necessary."

*Leading Change*, the Performance Track Fourth Annual Progress Report
(April 2006), illustrates various inadequacies in current data. While
there are notable improvements in some companies' environmental
performance, there are also many improvement indicators that fall far
short of stated goals; there are acknowledged problems with the
self-reported data; and the simple normalization factor cannot account
for all influences on end results.

More fundamentally, even where there are improvements, they may be
merely correlative rather than caused by Performance Track. By the
design of the program, companies are able to choose indicators and goals
that they may be confident they can achieve anyway, or that have obvious
financial benefits. As we pointed out in our earlier comments, emitting
a pollutant at a level under legal requirements is by no means
anomalous. In light of these uncertainties, we must repeat that further
study is necessary *before* expansion of the program and its incentives.
For instance, a recommendation to credit reductions purportedly achieved
by performance-based programs toward other environmental initiatives is
much too hasty and unjustified.

*Responsiveness*

These concerns about factual support for Performance Track were raised
in our previous comments, but EPA has simply refused to respond to the
majority of our criticisms and concerns. Indeed, the docket, website,
and individual response to our comments contain many assurances and much
rhetoric but few substantive answers to our earlier concerns and
criticisms. Simply appealing to the program's intentions and design
cannot suffice; the program must justify itself in practice. There has
been no attempt to answer the vast majority of our questions regarding
underlying justifications for Performance Track.

For example, our earlier comments contained a sustained analysis and
critique of an October 23, 2003 EPA memorandum conferring the status of
"low priority for routine inspections" on Performance Track members.
While the agency's Response to Comments document touched upon our
comments in the most general fashion, it studiously avoided responded to
the vast majority of specific questions that we asked:

> Why conduct inspections for known criminal activities only in "limited
> situations"? Why allow known, major violations to escape inspection
> and prosecution? What actual EPA experience with voluntary EMSs at
> Performance Track member facilities led the agency to substitute their
> availability for compliance inspections? How many compliance audits
> had EPA conducted at Performance Track member facilities by the time
> this memorandum was adopted, to justify the policy's reliance on such
> audits?[^2]

.....

> How often have Performance Track facilities been inspected at the
> federal and state level, both in the five-year period prior to their
> entry into the program and during the period after they became
> Performance Track members? Will EPA publish this information on the
> Performance Track web site? If EPA does not know, does it plan to find
> out, and how could the agency fairly evaluate the validity of offering
> reduced inspections as an incentive without knowing this information?
>
> Have EPA or states detected violations at Performance Track member
> facilities? If so, has EPA levied fines and/or imposed injunctive
> relief? Did the facility's participation in Performance Track affect
> those questions? Were the facilities "kicked out" of Performance Track
> following those violations? If not, how many were allowed to remain in
> the program and why? Are any existing Performance Track members known
> to be out of compliance today with federal or state environmental
> standards, and if so, how many? What policies govern when a
> Performance Track member will be removed from the program, and
> re-evaluation of a facility's compliance status during its membership
> period? Will EPA publish this information on its web site?
>
> What are the compliance rates at Performance Track member facilities,
> and by member companies, versus the compliance rates at non-member
> facilities and companies? Within the category of compliance rates by
> Performance Track member facilities and companies, what is the
> compliance history for pre-existing legal requirements, on one hand,
> and the compliance history for the alternative requirements created by
> Performance Track?
>
> Does a company's status as an "environmental leader" turn on its
> performance under all public health and environmental statutes and its
> overall environmental and energy impact? Or is the leadership
> designation conferred only with respect to one or more environmental
> media or statutes? If the latter, what is the rationale for this?

November 2005 NRDC comments at 7-8. We repeat these questions here
because we believe the public deserves answers to these important
questions before EPA even thinks about expanding Performance Track in
the manner suggested in the May 15^th^ notice. It is hardly a testament
to the program or the agency's intentions that EPA has refused to
respond to these questions.

When the agency did respond to some of the criticisms in our earlier
comments, if anything the responses were more troubling. For example,
EPA's February 13, 2005 letter responding to our comments noted: "your
letter cites the February 2005 Inspector General report on voluntary
programs as a source of criticism of Performance Track. This report
examined EPA voluntary programs in general, and its findings did not
specifically refer to Performance Track."

This is disingenuous and disappointing. EPA's Fiscal Year 2005
"Performance and Accountability Report" *itself* identifies the February
2005 Inspector General report on voluntary programs as the source of a
program evaluation of Performance Track.[^3] Moreover, staff from the
Office of Inspector General confirmed to me that their February 2005
report was in part an evaluation of Performance Track, along with other
agency voluntary program.

It is discouraging that OPEI has adopted what appears to be a defensive
crouch over good-faith -- and valid -- internal and external criticism
of Performance Track.[^4] Unfortunately, this posture only serves to add
to our concerns about Performance Track and its expansion, and further
undermines the program's credibility. We believe that program
credibility would be enhanced if EPA addressed such concerns directly
\-- through quantitative proof, and the abandonment of enforcement
dispensations, for example -- and demonstrated that the program is
deserving of public support.

Finally, we welcome the EPA's commission of an evaluation of program
effectiveness, as mentioned briefly in the Response to Comments at 12.
We would be interested in learning more about this evaluation -- the
scope of study, the opportunity for outside input and other matters. But
we must also observe that this evaluation inappropriately *follows*
rather than precedes investments in program expansion, and that it
receives no mention in the May 15^th^ Notice. Certainly, the emphases in
the recommendations on "improve\[d\] marketing, outreach and
recruitment" and integrating Performance Track into EPA planning
documents assume a level of success that has not been demonstrated, and
therefore put the cart before the horse. Performance Track should not be
promoted for its own institutional sake, but only for the sake of
enhancing public health and environmental protection; this requires
serious independent analysis and empirical evidence that have not been
forthcoming.

[Implementation and Enforcement]{.underline}

The little evidence that is available shows a program that does not live
up to its own rhetoric. As mentioned above, the Progress Report shows a
high number of unmet and reduced expectations for facility environmental
improvements, in serious areas such as waste generation and volatile
organic compounds (VOCs). In fact, ten of the original thirteen
Performance Track members are emitting millions of pounds more toxic
pollution now than when they became members, according to data from the
Toxics Release Inventory compiled by the Environmental Integrity Project
(EIP).

There are no apparent consequences for failure to meet goals; though the
Program Guide states that "an inability to make any progress, or a
decline in overall facility performance, may result in removal from the
program,"[^5] it does not appear that this has ever occurred.[^6] To
improve this situation as well as to help resolve some questions about
correlation versus causation, the EPA should consider setting
quantitative and meaningful goals for program members.

Digging deeper, not only goals but also requirements are not being met.
Performance Track materials emphasize that members must maintain
compliance with all environmental requirements. Nonetheless, data from
the Enforcement Compliance History Online database from the past three
years, also compiled by the EIP, identifies non-compliance at twenty-two
Performance Track facilities after they joined the program. Most of
these facilities had more than one violation, and at least thirteen
facilities had violations classified as "significant" or "high
priority." For a number of these latter violations, either no
enforcement action was taken or penalties were trivial. Furthermore,
this number of violations is almost certainly an understatement, given
problems with reporting and the infrequency of inspections due to the
agency's own "low priority for routine inspections" policy.

These are serious compliance-related concerns with the Performance Track
program, and this may relate to the fact that fewer than ten percent of
Performance Track facilities received even pre-arranged "site visits" in
2005.[^7] We reiterate the recommendations in the EIP letter of May 30,
2006, to require suspension of non-compliant facilities from the
program, prompt and appropriate enforcement, and current and accurate
data rather than unverified self-reporting.

The May 15th Notice recommends that Performance Track and other state
performance-based programs should "provide a mechanism for removal of
members that fail to meet established compliance criteria," but the
mechanism must be used in order to be meaningful in instances such as
those identified by EIP. According to *Leading Change*, the most recent
progress report, only 8 facilities have been removed (or rather, not
accepted during renewal) for non-compliance over the entire history of
the program. This does not square with the compliance data above. Thus,
we still await answers to our questions regarding the removal, or
non-removal, of non-compliant facilities from Performance Track. Since
the whole premise of Performance Track is to reward companies that
actually meet all environmental requirements and then go beyond them,
this flaw is fundamental and must be corrected if the public is to view
the program as a legitimate exercise.

The EPA can still correct these enforcement concerns, but again, it
should do so before expanding the significant incentives now given to
facilities that may not be meeting even basic requirements, let alone
their additional goals. In this regard, too, Performance Track would be
well served by a thorough and prompt independent assessment.

[Incentives]{.underline}

The declaration in the May 15 Notice that "no actions will be undertaken
that could pose a threat to public health and the environment, or in any
way weaken existing environmental laws" is welcome. Unfortunately, it is
not justified by any specific measure in the proposed actions---or,
indeed, by the past and continuing elements of Performance Track. Nor
has our instrumental question been answered: Who would judge, and how,
whether the alternative standards would meet or exceed the displaced or
'streamlined' legal requirements? Vague and unsubstantiated assurances
are not enough in these matters of public health and environmental
safety. Thorough, quantitative analysis is needed to address this most
basic of questions before the agency proceeds further with program
expansion.

*Low-Priority For Inspections*

We reiterate our severe concerns with the program's pre-occupation with
reduced inspections. See generally November 2005 NRDC comments at 6-8.
While it is evident that industry participants are (understandably)
clamoring for inspection relief more than any other incentive,
justification for this relief is too circular, and its connection to
increased environmental performance too attenuated (if one exists at
all), to be justified in terms of public benefit. The design of this
incentive effectively replaces compliance inspection with self-policing
and self-designed Environmental Management Systems (EMSs). The public
has little practical reason to trust in the efficacy of this
self-policing by self-interested companies.

As we have noted, one cannot merely assume that Performance Track
members pose a significantly lower risk \-- especially since inspections
themselves would be instrumental in determining the degree of risk
presented by a facility. It is not enough that facilities are inspected
in some instances, when the EPA determines that there is cause; who
knows what causes it might find if it were doing inspections as usual?
We reiterate our call for the agency to rescind its October 29, 2003
memorandum adopting the "low priority for routine inspections" policy.

Given the fairly minimal nature and magnitude of some facilities'
achievements beyond compliance, and their failure to meet even their own
goals, there is also a problem of congruence with this incentive.
Inspections can focus on matters of the utmost importance to public
health, and should not be traded for mere promises and for improvements
that might well have occurred anyway. Certainly, reduced inspections
relating to hazardous waste and toxic emissions should not be traded for
mediocre or self-serving commitments to noise reduction or materials
use.

Indeed, as discussed in our earlier comments, there is a basic
disconnect between the goals that sources are allowed to select from the
agency's expansive laundry list, and the regulatory and enforcement
relief for which member companies therefore qualify. We urge EPA to
adopt a fundamentally different approach for Performance Track
henceforth. EPA should identify -- for individual facilities or
industrial source sectors, with important input from companies -- which
performance metrics and expected improvements must be met in order to
qualify for Performance Track. Companies should no longer be allowed to
select goals that are easily met or poorly connected to EPA's public
health mission, avoiding goals that relate to air pollution, water
pollution or hazardous waste. And any so-called incentives that EPA
adopts should not involve flexibilities -- whether monitoring, reporting
or recordkeeping -- disconnected from those goals.

Thus for example, EPA might identify the need for improved leak,
detection and repair (LDR) practices at oil refineries or chemical
plants, setting specific quantitative objectives and performance metrics
concerning reductions in hazardous air pollution in order to qualify for
entry into Performance Track. Or EPA could tackle areas of emerging
public health concern, establishing waste reduction and testing
objectives for sewage treatment plants to test and reduce endocrine
disruptors or pharmaceuticals from waste streams. In either instance,
the facilities accepted into Performance Track would be those that
genuinely demonstrated some superior environmental performance or
advancement that could be heralded by EPA and replicated by other
facilities or industries.

Even if EPA does not change course in this manner, we strongly urge EPA
to abandon the current practice of allowing Performance Track applicants
to freely select from a laundry list of commitments and indicators that
do not meaningfully advance public health or environmental protections,
that are disconnected from the available incentives, and that continue
to detract from the program's credibility.

*ECOS-EPA Proposed "High-Value Incentives"*

We do recognize that prior workgroup recommendations to modify permit
requirements for individual Performance Track members appear to have
been somewhat toned down, a beneficial change. If improvements to
permitting processes are warranted -- and we are unaware of the agency
having made the case that they are, they should apply across the board,
not only to Performance Track members.

We wish to take particular exception to the proposal to allow NPDES
permits for Performance Track facilities to be re-issued or modified
ahead of backlogged, priority NPDES permits when PT members are "under
competitive pressure." 71 Fed. Reg. at 28,029. We think it highly
questionable for EPA to exploit its regulatory authorities to give a
competitive leg-up to favored companies based upon their participation
in an agency-run initiative. This competitive advantage is a far cry
from Energy Star logos or even Performance Track certificates, since
agencies should exercise their inherent government functions (like
permitting) evenhandedly. But out of curiosity, which companies in the
United States does EPA believe are *not* "under competitive pressure"?
Such competition defines a market economy, meaning that this "criterion"
simply translates to Performance Track facilities being bumped ahead of
everyone else in line when it comes to re-issuance or modification of
NPDES permits?

But when the "backlogged, priority NPDES permits" that are being delayed
by Performance Track favoritism are priorities because of public health
or environmental factors, we fail to see how this incentive can be
justified on public health or environmental grounds. Related to our
earlier "disconnect" comments, a PT member that recycles or reduces
noise vibrations could slow an NPDES permit issued to a higher priority
applicant -- allowing more harmful discharges to continue with outdated
(or no) permit limits -- with zero assurance that a net environmental
benefit to water quality would result from this incentive. In light of
EPA's assurance that "incentives will not result in a net reduction in
environmental performance," we do not believe this incentive is
appropriate.

More importantly, once again, the recommended incentives have yet to be
justified in terms of their quantified returns. In the absence of
sufficient data, the connection between these particular incentives and
enhanced environmental outcomes is not evident. It may be the case that
scarce governmental resources would be better devoted to generalized
standard-setting or better enforcement of existing laws, and it is
essential for EPA -- and independent program evaluators -- to weigh this
trade-off.

Because NRDC shares the objective of encouraging companies to achieve
superior environmental performance, we applaud EPA's efforts to enhance
recognition of high-performing facilities and their success stories.
Several aspects of the Performance Track learning network are also a
valuable aspect of the program, allowing companies to share strategies
and best practices. Performance Track should be careful, though, to
clarify that it is facilities rather than companies that are recognized.
As it stands now, and as we pointed out in prior comments with no real
response from the agency, there is a tendency in Performance Track
publications to confuse the public regarding the entities for which
recognition is deserved. A company should not receive undue benefits and
publicity for investing in a single facility out of many that it
controls, especially when other facilities owned by that company are
violating the law or performing poorly.

[State Program Integration]{.underline}

The recommendation to integrate Performance Track with state
performance-based environmental leadership programs adds another layer
of concern. For starters, a brief examination of state programs' entry
requirements shows that many are even less stringent than those of
Performance Track. We provide here a few examples from some state
programs' own websites, although we urge EPA to undertake a
comprehensive review:

> • Louisiana's Environmental Leadership Program (ELP) requires only a
> "letter . . . indicating a desire" to enroll and to "support \[ELP's\]
> guiding principles," plus a "brief plan" and annual
> self-reporting.[^8]
>
> • Maine's "STEP-UP" requires a "record of substantial compliance" for
> only the top two of three levels, despite allowing regulatory
> incentives for all levels such as "negotiation" of "alternative
> procedures" for record keeping and reporting.[^9]
>
> • Some programs do not appear to require comprehensive, public annual
> reporting, while many programs have different compliance history
> criteria.

These examples and others make us dubious of proposals to integrate
state "performance-based" programs into EPA planning documents,
partnership agreements, and budgeting processes. Most of them are simply
not *performance*-based, but rather, are dependent on "goals" and
self-reporting. Some state programs also give even more regulatory
incentives and relief than Performance Track has proposed. For example:

> • Texas' "Clean Texas" program website states that the program offers
> outright "\[e\]xemption from pollution prevention planning under the
> Waste Reduction Policy Act."[^10]
>
> • Maine's STEP-UP offers "penalty forbearance."[^11]
>
> • Colorado's ELP, upon request, replaces inspections with infrequent
> third-party audits and "\[a\]llow\[s\] sites to comply with only
> \[the\] most stringent Leak Detection and Repair (LDAR) requirements"
> for members in its upper-tier---which it says is "equivalent to EPA's
> Performance Track."[^12]

While we have no doubt that states are sincere in their goals to improve
environmental quality and public health, the EPA should not support
these programs without extensive and detailed review of their
environmental returns, declining to provide equal recognition and
treatment for programs that fail to meet all Performance Track criteria.

\* \* \* \* \*

Thank you for the opportunity to comment on the May 15^th^ Notice.
Please do not hesitate to contact me about any of the issues discussed
herein, at (202) 289-2406.

Sincerely,

John Walke

Clean Air Director

NRDC

[^1]: See generally November 3, 2005 letter from John Walke, NRDC, to
    EPA Docket ID OA-2005-0003, incorporated herein by reference
    (hereinafter "November 2005 NRDC comments")..

[^2]: Separately, we would like to know how many compliance audits EPA
    has conducted at Performance Track member facilities since the
    program's inception; what the results of those audits were; and
    whether the audit results will be made publicly available on the
    Performance Track web site.

[^3]: See Fiscal Year 2005 "Performance and Accountability Report" at
    Goal 5-15. This report also concluded that in FY 2005 Performance
    Track failed to meet 5 of its 6 goals, or "planned performance
    measures," for specific annual reductions in six media/resource
    areas. Indeed, for 3 of the 6 performance measures, performance
    actually worsened with increased energy usage (a 22 million MMBtu
    increase compared to the goal of 240,000 MMBtus in reductions);
    increased solid waste (22,000 ton increase compared to the goal of
    150,000 tons in reductions); and increased materials use (150,000
    ton increase compared to the goal of a 2,154-ton increase). *Id.* at
    5-14.

[^4]: We reiterate here the recommendations by the OIG in that report
    that echo our own continuing concerns with Performance Track:

    > EPA should also determine how to measure the outcomes of
    > stewardship activities so it is able to verify that it is
    > achieving its goals. EPA needs to show that the programs it
    > selects to meet its goal are more effective in achieving
    > environmental results than other programs it runs.
    >
    > EPA also needs to correctly measure the environmental benefits of
    > these activities. The Agency can begin to address these needs by
    > working to quantify how voluntary behavior change programs can
    > assist EPA improving environmental and human health protection.
    >
    > Currently, only some voluntary programs require participants to
    > commit to reporting outcomes from their activities. EPA expects
    > these participants to provide annual reports with performance
    > information, but each year some do not turn in reports, leaving
    > the Agency without adequate data to assess the efficacy of the
    > program.
    >
    > If EPA is unable to overcome these measurement challenges, it will
    > not be able to determine program outcomes. Further evaluations of
    > EPA's stewardship and voluntary programs are necessary to assist
    > the Agency in tracking and measuring these efforts.

    OIG Report at 21-22.

[^5]: Performance Track Program Guide (2005), at 11.

[^6]: *See* Leading Change, Performance Track Fourth Annual Progress
    Report (2006), at 14.

[^7]: *See* Leading Change, Performance Track Fourth Annual Progress
    Report (2006), at 14.

[^8]: "About the Program -- Requirements for Participation,"
    http://www.deq.louisiana.gov/portal/default.aspx?tabid=200

[^9]: "Maine STEP-UP Program Description,"
    http://www.maine.gov/dep/oc/stepup/step-up.pdf

[^10]: "Benefits,"
    http://www.cleantexas.org/index.cfm?fuseaction=public.benefits

[^11]: "Maine STEP-UP Program Description,"
    http://www.maine.gov/dep/oc/stepup/step-up.pdf

[^12]: "Environmental Leadership Program Incentives Table,"
    http://www.cdphe.state.co.us/el/elp/incentivestable.pdf