United States General Accounting Office

GAO Report to Congressional Requesters

July 1997 ENVIRONMENTAL

PROTECTION

Challenges Facing

EPA’s Efforts to

Reinvent

Environmental

Regulation

GAO/RCED-97-155

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-276854 

July 2, 1997

Congressional Requesters

In response to your request, this report examines (1) what EPA’s reinvention initiatives are and

how the agency is structured to carry them out and (2) what key issues need to be addressed

for these initiatives to have their intended effect.

As arranged with your offices, unless you publicly announce its contents earlier, we will make

no further distribution of this report until 30 days after the date of this letter. At that time, we

will send copies to the appropriate congressional committees; the Administrator, EPA; and the

Director, Office of Management and Budget. We will also make copies available to others upon

request.

Please call me at (202) 512-4907 if you or your staff have any questions. Major contributors to

this report are listed in appendix II.

Peter F. Guerrero

Director, Environmental Protection

 Issues
B-276854 

List of Requesters

The Honorable John Chafee

Chairman, Committee on Environment

 and Public Works

United States Senate

The Honorable Christopher Bond

Chairman, Subcommittee on VA, HUD,

 and Independent Agencies

Committee on Appropriations

United States Senate

The Honorable Tom Bliley

Chairman, Committee on Commerce

House of Representatives

The Honorable Michael Oxley

Chairman, Subcommittee on Finance

 and Hazardous Materials

Committee on Commerce

House of Representatives

The Honorable Bud Shuster

Chairman, Committee on Transportation

 and Infrastructure

House of Representatives

The Honorable Sherwood Boehlert

Chairman, Subcommittee on Water

 Resources and Environment

Committee on Transportation

 and Infrastructure

House of Representatives

The Honorable Jerry Lewis

Chairman, Subcommittee on VA, HUD,

 and Independent Agencies

Committee on Appropriations

House of Representatives

Page 2 GAO/RCED-97-155 Reinventing Environmental Regulation
B-276854 

The Honorable David McIntosh

Chairman, Subcommittee on National

 Economic Growth, Natural Resources,

 and Regulatory Affairs

Committee on Government Reform

 and Oversight

House of Representatives

Page 3 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

Purpose By most accounts, the United States has substantially improved its

environment since the Environmental Protection Agency (EPA) was

founded in 1970, but at a growing cost. For example, the costs of abating

and controlling pollution rose from about $64 billion in 1973 to over

$121 billion in 1994 (1995 dollars). EPA’s leadership notes that future

environmental challenges will be more complicated than those of the past,

requiring fundamentally different regulatory approaches. EPA has sought to

meet these challenges by comprehensively reexamining and reshaping its

efforts to protect the environment. As noted in a March 1996 report on its

progress in “reinventing” environmental regulation, the agency is

undertaking a number of initiatives to “. . . apply common sense, flexibility,

and creativity in an effort to move beyond the one-size-fits-all system of

the past and achieve the very best protection of public health and the

environment at the least cost.”

To better understand EPA’s initiatives and progress in implementing them,

several congressional committees asked that GAO provide a broad

overview of EPA’s reinvention efforts. GAO was asked to focus on (1) what

the initiatives are and how the agency is structured to carry them out and

(2) what key issues need to be addressed for these initiatives to have their

intended effect.

Background Since the early 1970s, EPA’s organization and approach toward

environmental regulation have mirrored the statutes that authorize the

agency’s programs. These statutes generally assign pollution control

responsibilities according to the regulated environmental medium (such as

water or air) or category of pollutant (such as pesticides or other chemical

substances). As a result, the statutes have led to the creation of individual

EPA program offices that focus on reducing pollution within the particular

environmental medium for which each office has responsibility—rather

than on reducing overall pollutant discharges. This structure has, among

other problems, made it difficult for the agency to base its priorities on an

assessment of risk across all environmental problems and to take into

account the cost and feasibility of various approaches. The agency’s

traditional approach toward environmental regulation has also been

criticized as precluding innovative and more cost-effective ways to reduce

pollution and as being inflexible in dealing with other “stakeholders” in the

regulatory process, such as states, regulated entities, and environmental

organizations.

Page 4 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

EPA’s efforts to address these issues go back at least as far as the

mid-1980s, when then-Administrator Lee Thomas called on the agency to

manage its resources and activities so that they (1) account for the relative

risks posed by environmental problems, (2) recognize that pollution

control efforts in one medium can cause pollution problems in another,

and (3) lead to achieving measurable environmental results. Other efforts

have sought to involve stakeholders more collaboratively in the process,

calling, for example, for more negotiated rulemakings. Since that time,

however, GAO and other organizations have stressed the need to make

significantly greater progress in this direction.

The passage of the Government Performance and Results Act of 1993

strengthened EPA’s efforts to protect the environment more efficiently and

effectively. The Results Act requires agencies to consult with the Congress

and other stakeholders to clearly define their missions, establish long-term

strategic goals (and annual goals linked to them), and measure their

performance against the goals they have set. Rather than focusing on the

performance of prescribed tasks and processes, the statute emphasizes the

need for agencies to focus on and achieve measurable program results.

Results in Brief EPA maintains that its reinvention initiatives generally seek to reduce

paperwork and eliminate obsolete rules; make it easier for businesses to

comply with environmental laws; use innovation and flexibility to achieve

better environmental results; and/or engage states, tribes, communities,

and citizens in partnerships to protect public health and the environment.

The agency launched a comprehensive reinvention effort in March 1995

with 25 “high-priority actions” and 14 “other significant actions” to expand

the Administrator’s ongoing efforts to improve the current regulatory

system and lay the groundwork for a new system of environmental

protection. In February 1997, the Administrator announced her decision to

create an Office of Reinvention, which will provide overall direction and

support for the agency’s reinvention initiatives and play a direct role in

leading certain key initiatives. In addition, (1) EPA’s program offices

participate in agencywide initiatives and have generated some of their

own, more medium-specific initiatives and (2) each of EPA’s regional

offices has established varied structures and strategies to implement both

the EPA-wide and program-specific initiatives.

While many of EPA’s reinvention efforts are consistent with both the

Results Act’s goal of focusing on achieving results and with past

recommendations by GAO and other organizations to achieve a more

Page 5 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

integrated, cost-effective approach toward environmental protection, the

agency faces significant challenges that must be addressed effectively if

reinvention is to succeed:

• Key stakeholders in the reinvention process have expressed concern over

the large number of complex and demanding initiatives now being

undertaken, as well as confusion over the underlying purpose of some of

the agency’s major initiatives.

• EPA has had difficulty achieving “buy-in” among the agency’s rank and file,

who have grown accustomed to prescriptive, medium-by-medium

regulation during the agency’s 27-year history.

• The agency has had difficulty achieving agreement among external

stakeholders, including federal and state regulators and industry and

environmental organization representatives—particularly when

stakeholders perceive that unanimous agreement is required before

progress can be made.

• The agency’s process for resolving miscommunication and other problems

involving EPA headquarters staff, regional staff, and other stakeholders

does not distinguish between problems that require the attention of senior

management and those that should be resolved at lower levels within the

agency.

• EPA has an uneven record in evaluating the success of many of its

initiatives. Evaluation is needed both to show EPA management what does

and does not work and to provide convincing evidence to external

stakeholders that an alternative regulatory strategy is worth pursuing.

In addition, the current prescriptive, medium-specific environmental laws

impose requirements that have led to, and tend to reinforce, many of the

existing regulatory and behavioral practices that EPA is seeking to change.

As a consequence, the agency will be limited in its ability to “reinvent”

environmental regulation within this existing legislative framework.

Principal Findings

How Initiatives Are Being

Implemented

The precise number of initiatives under way at EPA is difficult to establish

because, in addition to the 25 “high-priority actions” and 14 “other

significant actions” listed,1

 the agency is implementing other projects with

reinvention-related components through its program offices and regional

1

See app. I for a list of these initiatives, including those that EPA has identified as its “larger, more

cross-cutting efforts.”

Page 6 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

offices. Moreover, EPA reinvention officials stressed that a major thrust of

the reinvention effort is to change the agency’s culture so that staff are

supportive of innovative approaches to environmental regulation.

While EPA has not formally set priorities among its initiatives, the agency

has clearly identified several of them as central to its efforts to reinvent

environmental regulation. Among them are (1) Project XL, which allows

individual facilities to test innovative ways of achieving environmental

protection if they can demonstrate that the proposed changes will yield

superior environmental performance, and (2) the Common Sense

Initiative, which seeks to identify innovative environmental regulatory

practices for different industrial sectors (e.g., the printing and

metal-finishing industries). In addition, the agency is seeking to improve

its working relationship with the states through its National

Environmental Performance Partnership System. This effort is viewed as

particularly significant in light of the states’ central role in directly

implementing many of EPA’s most significant regulatory programs.

EPA is implementing its key reinvention activities through both its

headquarters and its regional offices. In February 1997, the Administrator

announced her decision to create the Office of Reinvention to coordinate

the agency’s reinvention efforts and to help implement Project XL, the

Common Sense Initiative, and several other key agencywide initiatives. As

of June 1997, the exact date of this office’s establishment had not been

determined. In addition, EPA’s program offices are implementing their own,

more medium-specific initiatives. The Office of Water, for example, is

promoting “effluent trading” in watersheds, while the Office of Prevention,

Pesticides, and Toxic Substances is encouraging chemical industries to

develop more environmentally friendly practices through the Green

Chemistry Challenge. Similarly, the Office of Air and Radiation is

attempting to consolidate federal air rules for individual industries.

EPA’s regional offices work directly with regulated entities and other

parties in implementing the initiatives and are using various organizational

structures in doing so. For example, EPA’s Atlanta regional office, which

has maintained its medium-by-medium office structure, forms ad hoc

teams from these offices to implement initiatives as needed. The agency’s

Chicago office has also generally retained its medium-by-medium offices

but has drawn from these offices to form a number of more permanent

“cross-media teams” to implement initiatives. The Boston office, however,

has more fundamentally restructured its organization along the lines of its

multimedia initiatives. Thus, for example, it has replaced its

Page 7 GAO/RCED-97-155 Reinventing Environmental Regulation
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medium-specific divisions with an Office of Environmental Stewardship

and an Office of Ecosystem Management to facilitate a more cross-cutting

approach to environmental management.

Issues to Address If

Reinvention Efforts Are to

Succeed

GAO found that while EPA has made some progress in implementing its

reinvention initiatives, the agency still has a long way to go in resolving

several key issues if environmental regulation is to be truly “reinvented.”

Greater Focus on Key Initiatives Could Improve Prospects of Success.

Successful reinvention efforts require a clear understanding of an

organization’s mission and of how individual efforts work toward

achieving that mission. However, GAO’s discussions with key participants

in EPA’s reinvention process suggest that the large number of initiatives

under way may be diverting attention from high-priority efforts most in

line with the agency’s reinvention objectives. Specifically, officials from

two of the three EPA regional offices GAO visited cited the large number of

initiatives as a problem and indicated that setting priorities among the

initiatives would make the most efficient use of the agency’s resources.

Under the current situation, they noted, the regional offices are expected

to carry out reinvention activities with few resources beyond those the

regions receive to carry out traditional program responsibilities. Officials

from each of the states GAO contacted cited similar problems. The problem

is further compounded by confusion both within EPA and among other

stakeholders over the primary purpose of some of the agency’s most

important initiatives. An EPA-contracted analysis of the Common Sense

Initiative, for example, pointed to the absence of specific objectives and

expectations, noting that “instead of encouraging out-of-the-box thinking

as hoped, this has led to delays . . . as [stakeholders] tried to figure out

what EPA wanted or would accept instead of inventing their own priorities

and processes.”

Extent of Commitment to Reinvention Is Questioned. EPA staff and state

officials contacted by GAO generally agreed that EPA’s top management has

articulated a clear commitment to the agency’s reinvention effort.

However, significant disagreements have surfaced in recent months,

leading some key stakeholders to question EPA management’s direction in

reinventing environmental regulation. Notably, a recent resolution by the

Environmental Council of the States (which represents state

environmental agency leaders) expressed frustration over its recent efforts

to “establish a consensus framework for true environmental regulatory

innovation” that would identify appropriate roles and responsibilities for

Page 8 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

the states. At the staff level, GAO found that program and regional offices

do encourage staff, to varying degrees, to participate in reinvention

activities and that these efforts have engendered wider staff participation.

Nonetheless, all participants GAO interviewed—both inside and outside

EPA—agreed that achieving a full commitment to reinvention by the

agency’s rank and file will be difficult and will take time. One senior

program official, for example, noted that it will take time for culture

change to filter down to EPA line staff and to see if the change takes hold.

Agreement Among All Stakeholders Is Difficult to Achieve. Under EPA’s

reinvention strategy, the agency’s goal is to share information and

decision-making with all stakeholders, including those “external” to the

agency, such as state regulators and representatives of industry and

environmental organizations. Among other things, the agency hopes the

strategy will help to avert litigation by getting up-front agreement among

the affected parties and a commitment by industry representatives to meet

requirements they acknowledge to be achievable. GAO found that the

agency has, indeed, made strenuous efforts to involve stakeholders with

different interests and perspectives but that achieving and maintaining

consensus has been an enormous challenge. EPA’s greatest difficulties have

come when the agency has sought to achieve—or was perceived as

seeking to achieve—100 percent agreement. Officials from the three states

GAO contacted noted that efforts to achieve unanimous agreement have

been problematic, particularly in Common Sense Initiative negotiations.

Industry representatives agreed, some of whom have cited the problem as

a reason why they have considered terminating their participation in the

initiative.

Sustainable Process Is Needed to Resolve Problems. Some of EPA’s earlier

reinvention projects were affected by miscommunication and other

problems among the agency’s headquarters and regional offices and other

participants. For example, an XL project submitted by the 3M Company

foundered when Minnesota and 3M officials withdrew their participation

because they believed EPA headquarters and regional offices were raising

new issues late in their negotiations. To help address these kinds of

problems, the agency designated certain senior managers in

September 1996 as “reinvention ombudsmen” to respond to stakeholders’

questions and resolve problems in a timely fashion. This new process has

helped in the negotiation of recently approved XL projects, but many

stakeholders have noted that in the longer term, senior management will

not be able to intervene each time a problem arises. They cite the need for

a more sustainable process that distinguishes between problems that can

Page 9 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

be resolved at lower levels within the agency and those that require senior

management’s attention.

EPA Is Not Systematically Evaluating Initiatives’ Effectiveness. Measuring

performance allows organizations to track their progress toward achieving

their goals and gives managers crucial information needed to make

organizational and management decisions. EPA has, in fact, made some

progress in measuring the effectiveness of its reinvention initiatives. For

example, the agency hired a contractor to formally evaluate the success of

its stakeholder process. EPA also asked an advisory group to identify

criteria the agency can use to measure the progress and success of other

reinvention projects and of its overall reinvention efforts. At the same

time, officials with the agency’s Regulatory Reinvention Team

acknowledged that the agency has neither sufficient performance data nor

an evaluation component for many of its initiatives.

Stakeholders Disagree on the Need for Statutory Change. GAO found wide

disagreement over whether the current environmental statutes must be

revised for reinvention to succeed. Many state and industry officials have

cited the need for statutory revisions, both in the near term to encourage

experiments in alternative methods of achieving environmental

compliance and in the longer term to achieve a more fundamental change

in the conduct of environmental regulation. For example, after identifying

problems experienced by industry participants in some of EPA’s initiatives,

a September 1996 industry report concluded that “there is no short-cut, no

way around the difficult task of trying to legislate a better system.”

Meanwhile, EPA, supported by some in the environmental community,

maintains that the current statutory framework contains sufficient

flexibility to allow for real progress on most reinvention initiatives.

GAO has concluded—on the basis of its past evaluations, the results to date

of EPA’s key reinvention efforts, and its contacts with a variety of

stakeholders—that constructive modifications can be made under the

current environmental statutory framework. However, the framework

does establish standards that lead to many of the existing regulatory and

behavioral practices the agency is seeking to change. Consequently, as GAO

and other organizations have noted in the past, EPA will be limited in its

ability to achieve major changes in environmental regulation within the

existing legislative framework. According to the Deputy Administrator, the

agency will reexamine this issue when it receives the recommendations of

a key advisory group (the Enterprise for the Environment) later this year.

Page 10 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

Recommendations GAO recommends that the Administrator, EPA,

• direct the Associate Administrator, Office of Reinvention, to review the

agency’s reinvention initiatives to (1) determine whether there are any that

no longer support the agency’s overall reinvention goals and should

therefore be discontinued, (2) set priorities among those that will be

continued, and (3) issue clarifying guidance, as needed, to help ensure that

the specific objectives and expectations of continuing initiatives are clear

among stakeholders within and outside the agency;

• improve the prospects for achieving consensus among concerned parties

in the agency’s reinvention efforts by clarifying the circumstances under

which unanimous agreement is required;

• develop a systematic process to help resolve problems in a timely fashion

by identifying which kinds of problems can be resolved at lower levels

within the agency and which should be elevated for senior management’s

attention; and

• direct that each of the agency’s initiatives include an evaluation

component that measures the extent to which that initiative has

accomplished its intended effect.

Agency Comments GAO provided copies of a draft of this report to EPA for its review and

comment and discussed the agency’s response with the Director of EPA’s

Regulatory Reinvention Team and his staff. The EPA officials said that the

report was balanced and addressed the most important issues facing the

agency’s reinvention efforts. They also expressed general agreement with

the report’s recommendations. The officials suggested that GAO modify its

recommendation to develop evaluation components for EPA’s initiatives to

reflect the difficulty in developing “outcome-based” measures in all cases.

GAO modified the wording of this recommendation to reflect this

suggestion.

The Director of the Regulatory Reinvention Team was concerned that

some readers might infer support on GAO’s part for changes in the

media-based structure of the nation’s environmental statutes, even though

the report did not specifically recommend such changes to facilitate

reinvention. He further noted that GAO’s study did not assess how changes

in environmental law could improve environmental protection. GAO

acknowledges that such an assessment was outside the scope of its

review, although the draft report did reflect the views of EPA officials,

industry and environmental groups, and other participants in the

environmental regulatory process on this issue. GAO also acknowledges

Page 11 GAO/RCED-97-155 Reinventing Environmental Regulation
Executive Summary

that EPA, in consultation with its advisers and key stakeholders, is

ultimately responsible for assessing whether changes to environmental

statutes should be recommended to the Congress. At the same time, GAO

believes that any discussion of the issues affecting the success of

reinvention would be incomplete without mention of the inherent

limitations to fundamental change posed by the statutes’ present

medium-by-medium focus. Such limitations have been acknowledged by

EPA in past years, documented consistently by GAO and other organizations,

and cited as a key issue by the large majority of officials interviewed for

this report.

Finally, the officials suggested that the report focuses on the most visible

of EPA’s initiatives, such as Project XL and the Common Sense Initiative,

and does not sufficiently acknowledge (1) the agency’s smaller, less visible

initiatives and (2) the extent to which reinvention principles are being

applied throughout EPA’s day-to-day activities. Although GAO did not

analyze all of EPA’s reinvention initiatives in detail, focusing instead on the

efforts emphasized by the EPA and state officials contacted during GAO’s

review, the draft report acknowledged that EPA has undertaken numerous

other initiatives and listed many of them in appendix I. The draft report

cautioned against measuring the success of reinvention by the large

number of initiatives under way, noting that EPA may need to reduce the

number of initiatives to improve the prospects of success for its

highest-priority efforts. In regard to the extent that reinvention principles

are being applied throughout EPA’s day-to-day activities, chapter 3 of the

draft report had, in fact, discussed many of the agency’s efforts to instill

reinvention principles into the staffs’ day-to-day activities, emphasizing

that EPA management considers cultural change to be a major goal of its

reinvention efforts. Here, too, however, the draft report discussed the

agency’s difficulties in achieving this goal, noting in chapter 3, for

example, “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 everyday activities.”

The officials’ specific comments on GAO’s conclusions and

recommendations, along with GAO’s responses, are included at the end of

chapter 3. In addition, the officials offered other corrections and

clarifications throughout the report, which were incorporated as

appropriate.

Page 12 GAO/RCED-97-155 Reinventing Environmental Regulation
Page 13 GAO/RCED-97-155 Reinventing Environmental Regulation
Contents

Executive Summary 4

Chapter 1 

Introduction

16

Current Structure Limits EPA’s Flexibility 16

Agency Has Tried to Address Limits of Existing Structure 18

Objectives, Scope, and Methodology 20

Agency Comments 21

Chapter 2 

EPA’s Reinvention

Initiatives and

Structure for

Implementing Them

22

EPA Reinvention Initiatives Cover a Broad Range of Activities 22

Headquarters and Regional Offices Will Carry Out Reinvention

Initiatives

27

Conclusions 31

Chapter 3 

Issues to Address If

Reinvention Efforts

Are to Succeed

32

Greater Focus on Key Initiatives Could Improve Prospects for

Success

33

Stakeholders Have Questioned EPA’s Commitment to

Reinvention

37

Consensus Among All Stakeholders Is Difficult to Achieve 41

EPA Is Not Systematically Evaluating Reinvention Initiatives’

Effectiveness

47

Environmental Statutory Framework Limits Potential to Reinvent

Environmental Regulation

49

Conclusions 54

Recommendations 56

Agency Comments 56

Appendixes Appendix I: EPA’s Major Regulatory Reinvention Initiatives 60

Appendix II: Major Contributors to This Report 63

Page 14 GAO/RCED-97-155 Reinventing Environmental Regulation
Contents

Abbreviations

CERCLA Comprehensive Environmental Response, Compensation,

and Liability Act

CSI Common Sense Initiative

ECOS Environmental Council of the States

EPA Environmental Protection Agency

GAO General Accounting Office

GPRA Government Performance and Results Act

NAPA National Academy of Public Administration

NEPPS National Environmental Performance Partnership System

NRDC Natural Resources Defense Council

PPG Performance Partnership Grant

RCRA Resources Conservation and Recovery Act

XL Project XL

Page 15 GAO/RCED-97-155 Reinventing Environmental Regulation
Chapter 1 

Introduction

Substantial progress has been made in addressing the nation’s

environmental problems since the Environmental Protection Agency (EPA)

was created in 1970. Among other improvements, some of our most

serious air and water quality problems have been alleviated, dangerous

pesticides have been banned, and health threats posed by lead in gasoline

and paint have been reduced. However, these strides in environmental

protection have come to the nation at a growing cost. For example, the

costs of pollution abatement and control have risen significantly—from

$64 billion in 1973 to over $121 billion in 1994 (constant 1995 dollars).

EPA’s top leadership acknowledges that such resource constraints,

combined with (1) the increasing complexity of environmental problems

and (2) the limited effectiveness of EPA’s traditional medium-by-medium

structure to address the full spectrum of pollution problems in an

integrated manner, have forced the agency to fundamentally rethink its

approach to environmental protection. Toward this end, EPA is currently

experimenting with ways to improve its existing program activities and to

lay the groundwork for a new, more flexible, integrated system of

environmental protection—one that will allow the agency to deliver the

highest quality protection possible in the most cost-effective manner. The

passage of the Government Performance and Results Act of 1993 (GPRA)

has provided further impetus for the agency to improve its management

practices, in part through the requirement that it develop measurable

program results.

To better understand EPA’s initiatives and strategy to implement them,

several congressional committees asked that we provide a broad overview

of EPA’s reinvention efforts, focusing on (1) what the initiatives are and

how the agency is structured to carry them out and (2) what key issues

need to be addressed for these initiatives to have their intended effect.

Current Structure

Limits EPA’s

Flexibility

EPA was created in 1970 under an executive reorganization plan that

combined various environmental components of other federal agencies.

This left EPA without a formal overarching mission and statutory

framework to guide its activities. Initially, the agency was charged with the

general task of cleaning up environmental pollution—giving early

attention to air and surface water. As further environmental needs were

identified, the Congress enacted laws to address specific pollution

problems. As a result, a dozen or so statutes govern the agency’s activities,

and several congressional committees are responsible for environmental

issues. However, these statutes are not coordinated or integrated, and in

Page 16 GAO/RCED-97-155 Reinventing Environmental Regulation
Chapter 1 

Introduction

some cases they contain differing approaches and reflect different

philosophies. Hence, the agency has no overall system for setting priorities

across all environmental problems and for identifying and addressing the

most critical environmental needs first.

In response to these legislative mandates, EPA has organized its activities

around environmental media (such as air, water, or land) and the

substances it regulates (such as hazardous waste, pesticides, and toxic

substances)—resulting in a structure that closely parallels the statutes that

authorize its activities. Each of these program offices focuses primarily on

implementing medium-specific or substance-specific responsibilities

detailed in these statutes, rather than addressing the full range of pollution

sources in a cross-cutting manner. The agency’s medium-specific focus

can result in both the intended and unintended transfer of pollution from

one medium to another. For example, removing contaminants from public

sewage systems or industrial smokestacks can create sludge and waste

that can themselves be toxic and lead to further air, water, or land

pollution. As a result, EPA and others have acknowledged a need for

increased attention to such intermedia transfers to ensure that the

agency’s pollution reduction strategies have the best overall impact on the

environment.

While organizing EPA’s activities in this manner has facilitated the

implementation of individual environmental statutes and has reduced or

prevented many threats to human health and the environment, it has also

created problems for the agency. Most significantly, it has limited EPA’s

ability (1) to set risk-based priorities across the full spectrum of

environmental problems and target its limited resources to the most

pressing of these problems and (2) to take into account the cost and

feasibility of various approaches to reduce pollution. It has also impaired

the agency’s ability to experiment with innovative and more cost-effective

ways to address pollution problems, such as pollution prevention

(eliminating or minimizing pollution at its source versus containing it at

the end-of-the-pipe) or market-based incentives (such as taxes on

pollution or trading emission pollution “rights”). Such approaches give

polluters financial reasons to reduce pollution without prescribing the

methods for doing so. The current structure has also restricted EPA’s

Page 17 GAO/RCED-97-155 Reinventing Environmental Regulation
Chapter 1 

Introduction

ability to exercise flexibility with regulated entities, states, environmental

groups, and other stakeholders in the regulatory process.1

Agency Has Tried to

Address Limits of

Existing Structure

Since at least the mid-1980s, EPA has taken steps to address the problems

associated with its medium-specific structure. For example,

then-Administrator Lee Thomas—recognizing that environmental

problems are complex and interrelated—directed the agency to manage its

programs and activities so that they (1) account for the relative risks

posed by environmental problems to help ensure that limited resources

are directed to the most pressing environmental needs; (2) recognize that

pollution control efforts in one medium can result in a transfer of pollution

to another (and, when feasible, that pollution should be eliminated or

minimized at its source); and (3) lead to the achievement of measurable

environmental results.

While our 1988 general management review2

 of EPA credited the agency

with taking steps to address these concerns, it urged the agency, among

other things, to (1) fill important gaps in its efforts to manage for

environmental results (including setting priorities in measurable terms and

ranking them to ensure that the most pressing needs are addressed first)

and (2) establish more effective partnerships with the states, since they

serve as the agency’s key partners in implementing environmental

programs. Since that time, GAO, EPA’s Science Advisory Board, the National

Academy of Public Administration, and other organizations have all

pointed to the need to make significantly greater progress in this direction.

In our 1991 report, Environmental Protection: Meeting Public

Expectations With Limited Resources (GAO/RCED-91-97), for example, we

noted that for EPA to achieve environmental goals with limited resources, it

needs to (1) link budget priorities to relative risks to the environment and

public health rather than rely on public perceptions of risk; (2) measure

changes in environmental conditions rather than measure activities (such

as the number of permits issued) to obtain meaningful information on the

effectiveness of its investments in environmental protection; and

(3) combine traditional and innovative approaches (such as pollution

1

For example, until recently, EPA was limited in its ability to grant states the flexibility to combine

grant funds authorized under separate environmental statutes (such as those set aside for cleaning up

air and water pollution) into one or more “consolidated” grants to address the states’ most important

environmental needs. These grants (authorized by the Congress in April 1996) are now a key tool for

the agency in providing the states with flexibility in spending federal environmental grant resources.

2

Environmental Protection Agency: Protecting Human Health and the Environment Through Improved

Management (GAO/RCED-88-101, Aug. 16, 1988).

Page 18 GAO/RCED-97-155 Reinventing Environmental Regulation
Chapter 1 

Introduction

prevention and the use of market incentives) to ensure that the most

cost-effective methods for controlling pollution are used. The report

observed, however, that EPA was hampered in setting priorities across all

environmental problems by the lack of integration among environmental

statutes.

The National Academy of Public Administration (NAPA) came to similar

conclusions in its 1995 report, Setting Priorities, Getting Results. In

particular, the report noted that EPA lacks a clear statutory mission

because it derives its authority from many different statutes. It also noted,

among other things, that the agency needs to encourage innovation among

its regulated community (localities, states, and industries) to find the most

appropriate methods for achieving environmental protection.

EPA has responded to these and similar concerns by taking a number of

steps to “reinvent” its approach to environmental protection. For example,

the agency launched its Common Sense Initiative (CSI) in 1994 to allow

industrial sectors (such as printing and metal finishing) and their key

stakeholders to work collaboratively to, among other things, (1) identify

opportunities to get better environmental results at less cost;

(2) streamline permitting, recordkeeping, and reporting requirements; and

(3) provide industry with incentives to develop innovative, cost-effective

technologies to meet or exceed environmental standards. EPA has also

increased the involvement of stakeholders in its decision-making

processes.3

More recently, in March 1995, EPA launched a more comprehensive effort

to fundamentally reexamine and reshape its efforts to protect the

environment. As noted in a March 1996 progress report on its efforts to

reinvent environmental regulation, the agency is presently undertaking a

number of initiatives to apply “. . . common sense, flexibility, and creativity

in an effort to move beyond the one-size-fits-all system of the past and

achieve the very best protection of public health and the environment at

the least cost.”

3

This effort is in keeping with Executive Order 12866 (Sept. 1993), which directed federal regulatory

agencies to consider the use of consensual mechanisms (such as negotiated rulemaking) when

developing regulations.

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Introduction

Government Performance

and Results Act Requires a

Focus on Measurable

Results

The provisions of GPRA, also known as “the Results Act,” are consistent

with the principles of reinvention and reinforce many of EPA’s reinvention

efforts. One key provision requires EPA and other agencies to (1) consult

with the Congress and other stakeholders to clearly define their missions,

(2) establish long-term strategic goals and annual goals that are linked to

them, and (3) evaluate their performance on the basis of the goals they

have set and report on their success. Rather than focusing on the

performance of prescribed tasks and processes, the statute emphasizes the

need for agencies to focus on and achieve measurable program results.

Objectives, Scope,

and Methodology

To address questions about EPA’s current efforts to reinvent environmental

regulation, a number of committees asked that we provide information on

(1) what the agency’s reinvention initiatives are and how the agency is

structured to carry them out and (2) what key issues need to be addressed

for these initiatives to have their intended effect.

In addressing the first objective, we interviewed EPA officials responsible

for the agency’s reinvention efforts, including the Deputy Administrator,

the designated Associate Administrator of the future Office of Reinvention,

and members of EPA’s Regulatory Reinvention Team. We also interviewed

officials in selected EPA program offices (such as the Office of Water; the

Office of Prevention, Pesticides, and Toxic Substances; and the Office of

Air and Radiation) to better understand how these offices were structured

to implement both agencywide and program-specific reinvention

initiatives. Following our initial contacts with headquarters officials, we

visited three EPA regional offices—in Atlanta, Boston, and Chicago—to

obtain insights into how the agency’s regional offices are structured to

carry out the agency’s reinvention efforts. These offices were suggested to

us by headquarters officials because they had experience in implementing

some of the agency’s key initiatives. The issues discussed with the

headquarters and regional officials included (1) EPA’s reinvention

philosophy and goals, (2) details on key agencywide and program-specific

initiatives, and (3) the agency’s structure for carrying out these initiatives

(both at headquarters and among the regional offices).

In addressing the second objective, we asked the same EPA officials

questions about the challenges facing the agency in achieving its

reinvention goals. Our questions focused largely on efforts by the agency

to communicate its goals for change to its staff and to external

stakeholders, its efforts to systematically evaluate the success of its

activities, and other issues that are widely viewed among management

Page 20 GAO/RCED-97-155 Reinventing Environmental Regulation
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Introduction

experts as essential ingredients in successfully achieving desired

organizational change. We also posed these questions to other key

stakeholders, including state environmental officials in Georgia,

Massachusetts, and Minnesota (because of their association with the three

regions we visited and their involvement with key reinvention efforts), key

national environmental and industry organizations (such as the Sierra

Club, the Natural Resources Defense Council, the Environmental Law

Institute, and the American Petroleum Institute, among others), and other

organizations familiar with EPA’s reinvention efforts, such as Resources for

the Future and NAPA.

Through these contacts, we identified specific projects to examine in more

detail in order to gain a fuller understanding of the issues and challenges

involved in applying reinvention principles and programs. In these

instances, we contacted industry participants, as well as other

stakeholders in these projects (e.g., representatives of environmental

groups and state regulatory officials).

We conducted our work from October 1996 through May 1997 in

accordance with generally accepted government auditing standards.

Agency Comments We provided copies of a draft of this report to EPA for its review. GAO staff

discussed EPA’s reaction with officials from the Office of the Deputy

Administrator’s Regulatory Reinvention Team. Their comments, and GAO’s

response, are discussed at the end of chapter 3.

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for Implementing Them

EPA maintains that it is seeking, through reinvention efforts, to

fundamentally reexamine and reshape its approach to protecting the

environment. According to the agency, these efforts will (1) achieve better

environmental results through the use of innovative and flexible

approaches to environmental protection; (2) encourage states, tribes,

communities, and citizens to share in environmental decision-making;

(3) make it easier for businesses to comply with environmental laws by

offering them compliance assistance and incentives to prevent pollution at

its source; and (4) eliminate unnecessary paperwork.

To achieve changes of this magnitude, EPA is implementing a range of

specific initiatives addressing one or more of these overall objectives. The

Administrator recently announced her decision to create the Office of

Reinvention to provide overall direction and support for the agency’s

reinvention efforts and to lead certain key initiatives. In addition, (1) EPA’s

program offices participate in agencywide initiatives and have generated

some of their own medium-specific initiatives and (2) each of EPA’s

regional offices has established varied structures and strategies to

implement both the EPA-wide and program-specific initiatives. Reinvention

“ombudsmen” have also been identified in the agency’s program and

regional offices to focus senior management’s attention on

reinvention-related issues.

EPA Reinvention

Initiatives Cover a

Broad Range of

Activities

In March 1995, EPA announced 25 “high-priority actions” and 14 “other

significant actions” aimed at improving the current regulatory system and

laying the groundwork for a new system of environmental protection.1

However, the precise number of initiatives is difficult to establish because,

in addition to these 39 efforts, the agency is implementing less centralized

projects through its program offices and regional offices. These projects

have either a reinvention focus or reinvention-related components. For

example, EPA’s Boston regional office has initiated its own

reinvention-specific activities (including a database to track the progress

of its reinvention activities) and other efforts that have reinvention-related

elements (such as integrating environmental considerations into

transportation planning). Similarly, EPA’s program offices have initiated

their own medium-specific reinvention efforts, such as the Office of

Water’s efforts to improve the nation’s water quality monitoring

information through strategies and recommendations developed by an

intergovernmental task force. In addition, a senior regional official told us

1

See app. I for a list of these initiatives, including those that EPA has identified as its “larger, more

cross-cutting efforts.”

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for Implementing Them

that it is difficult to determine the universe of reinvention initiatives

because many of the innovative practices being undertaken in different

parts of the agency have been under way for years but are not necessarily

tied directly to the 39 initiatives formally identified as “reinvention”

initiatives.

EPA’s Key Reinvention

Initiatives

While EPA has not formally set priorities among its initiatives, the agency

has clearly identified several initiatives as central to its efforts to reinvent

environmental regulation. According to EPA, Project XL and the Common

Sense Initiative (CSI) are the cornerstones of EPA’s central objective of

working with industry to “. . . achieve the very best protection of public

health and the environment at the least cost.” In addition, the agency is

seeking to significantly improve its working relationship with the states

through its National Environmental Performance Partnership System

(NEPPS). This effort is viewed as particularly important in light of the

states’ central role in directly implementing many of EPA’s most significant

regulatory programs.

Project XL The President announced Project XL in March 1995, noting that “this

program will give a limited number of responsible companies the

opportunity to demonstrate excellence and leadership. They will be given

the flexibility to develop alternative strategies that will replace current

regulatory requirements, while producing even greater environmental

benefits”.2

 According to EPA, the project was created in response to the

concerns expressed by numerous companies, facility managers, and

communities that current applications of environmental rules do not

necessarily provide the best possible environmental protection at the least

cost. Further impetus was given by the experiences of some in the

regulated community, who found that they could achieve substantial cost

savings and improve environmental protection through more flexible,

site-specific solutions to environmental protection.

Under Project XL, EPA allows companies to test innovative ways of

achieving environmental protection at both the facility and the community

levels if they can demonstrate that the proposed changes will yield

superior environmental performance. This requires applicants to achieve

results superior to the level of environmental performance that would

have occurred without XL. To test such innovative approaches, project

2

Project XL (which stands for Excellence and Leadership) conducts projects in four areas:

(1) corporate facilities, (2) industrial sectors, (3) federal facilities, and (4) communities. Recognizing

that community-based projects differ substantially from other types of XL projects, EPA issued

separate guidelines for communities in November 1995.

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for Implementing Them

sponsors collaborate with key stakeholders (including communities

located near a project, state and local governments, and environmental

and other public interest groups, among others) to develop project

proposals. These proposals culminate in Final Project agreements that

must be approved by EPA, the state environmental agency, and the project

sponsor in order to be implemented.3

For example, a Final Project Agreement signed last year with Intel

Corporation for its manufacturing site in Chandler, Arizona, includes a

number of innovative features through which the company agreed to

comply with all statutory and regulatory requirements (but to achieve

them more effectively) and to go beyond current requirements to improve

its overall environmental performance. In return, the agreement gives Intel

the flexibility to (1) implement a sitewide environmental master plan that

integrates both mandatory and voluntary environmental undertakings

across all media—air, water, solid waste, and hazardous waste—rather

than operating strictly under separate medium-specific permits;

(2) develop new procedures that will reduce paperwork and other

procedural burdens; and (3) operate under a streamlined air permitting

strategy that gives the company “preapproval” to add new

semiconductor-related facilities as long as the facilities do not exceed

emission limits or fail to comply with other specified requirements (such

as those for reporting). In addition, Intel agreed to report its progress

(using nonproprietary information) to the public in a consolidated,

user-friendly format to allow the public to track the company’s progress in

meeting the goals established for each medium.

Working with corporations and key stakeholders (including states,

localities, and environmental groups), EPA has also approved Project XL

agreements with Berry Corporation in LaBelle, Florida, to consolidate its

citrus juice manufacturing operations under a comprehensive single

multimedia permit, and with Weyerhaeuser Corporation, to reduce the

overall impact on the environment of its mill operations in Flint River,

Georgia.

Common Sense Initiative The EPA Administrator launched CSI in July 1994, as a way to bring

government officials at all levels, environmentalists, and industry leaders

together to create industry-by-industry strategies that will work toward

3

While a Final Project Agreement is, at a minimum, signed by EPA, the state environmental agency,

and the project sponsor, it does not (1) contain legal rights or obligations; (2) serve as a contract or a

regulatory action, such as a permit or rule; or (3) represent a legally binding commitment on any party.

However, according to a notice issued by EPA in April 1997, future XL projects will have an

enforceable component, described in the Final Project Agreement, but also contained in a legally

binding document (such as a permit, rulemaking or administrative order).

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for Implementing Them

“cleaner, cheaper, and smarter” ways to achieve environmental protection

through consensus-based decision-making. CSI is similar to Project XL in

that both initiatives attempt to reduce pollution in the most cost-effective

manner. However, their approaches are somewhat different—Project XL is

currently focused on protecting the environment at individual facilities

and involves stakeholders in a relatively informal process to approve

facility-specific proposals for operating flexibility, while CSI centers on

particular industrial sectors and involves stakeholders in a formal

negotiation process.4

EPA has convened representatives from both its program and its regional

offices, six pilot industries (automobile manufacturing, computers and

electronics, iron and steel, metal finishing, petroleum refining, and

printing), and key stakeholders (including governmental entities, industry,

labor, environmental groups, and environmental justice and community

organizations) to review environmental requirements for each of these

pilot industries. According to the operating principles developed by EPA for

the CSI Council and its related subcommittees, “the purpose of the [CSI]

Council and industry-focused Subcommittees is to hold meetings, analyze

issues, conduct reviews, perform studies and projects to develop

recommendations for administrative, regulatory, and statutory changes

and carry out other related activities.” Subcommittees gather information

in support of a given recommendation primarily through pilot projects to

determine whether a proposal is worthy of being elevated to the full

Council for approval and subsequent submission to EPA in the form of a

recommendation.

Performance Partnerships As noted in our 1995 report entitled EPA and the States: Environmental

Challenges Require a Better Working Relationship (GAO/RCED-95-64, Apr. 3,

1995), EPA has had long-standing difficulties in establishing effective

partnerships with the states. Among the key issues affecting EPA-state

relationships are concerns that EPA (1) is inconsistent in its oversight

across regions, (2) sometimes micromanages state programs, (3) does not

provide sufficient technical support for state programs’ increasingly

complex requirements, and (4) often does not adequately consult the

states before making key decisions affecting them.

4

The Common Sense Initiative Council (established within EPA in October 1994 as the agency’s

national advisory committee for formulating recommendations and advice on the nation’s pollution

control and prevention programs relating to industrial sectors) was directed by EPA to operate by

consensus decision-making. In contrast, recognizing that XL projects and the circumstances that affect

them differ, EPA has not prescribed a single model for involving stakeholders in developing projects.

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for Implementing Them

In establishing the National Environmental Performance Partnership

System (NEPPS) in May 1995, the Administrator and leaders of state

environmental programs indicated they were seeking to

“. . . strengthen our protection of public health and the environment by directing scarce

public resources toward improving environmental results, allowing states greater flexibility

to achieve those results, and enhancing our accountability to the public and taxpayers.

[We] believe that this new environmental performance system will achieve more integrated

environmental management, promote pollution prevention, and enhance environmental

results.”

A key element of the partnership system is the agency’s commitment to

give states with strong environmental performance greater flexibility and

autonomy in running their environmental programs.

While NEPPS provides the overarching framework for developing

partnership agreements, the Performance Partnership Grants (PPG)

program, authorized by the Congress in April 1996, serves as a major tool

for implementing them. This program allows eligible states and tribes to

request that funds from two or more categorical grants (such as those

authorized under the Clean Water Act or those used to implement the

Clean Air Act Amendments) be combined into one or more grants to give

governmental entities greater flexibility in targeting limited resources to

their most pressing environmental needs. These grants are also intended

to be used to better coordinate existing activities across environmental

media and to develop multimedia programs.

As of April 1997, EPA had signed performance partnership agreements with

27 states and environmental performance partnership grants with 21

states.5

Achieving Cultural Change While EPA has cited Project XL, CSI, NEPPS, and other initiatives as tangible

efforts to reinvent environmental regulation, agency officials stress that

reinvention is more than a collection of individual projects. They

emphasize that reinvention reflects a new philosophy that will require a

significant cultural change across the agency—shifting its orientation from

the traditional command-and-control, medium-by-medium focus toward a

new, more integrated system that targets the most serious environmental

problems and then seeks to address them in the most efficient manner.

5

There are three categories of performance partnership grants—environmental, health, and

agricultural. In addition to the 21 environmental grants, as of April 1997, EPA had signed 2 health and

13 agricultural grants.

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for Implementing Them

They stress that this new philosophy will need to filter down to the

program level until it is ingrained in the day-to-day activities of the

agency’s line staff, and they caution that such a fundamental change will

take time.

Headquarters and

Regional Offices Will

Carry Out Reinvention

Initiatives

EPA is implementing its reinvention initiatives through both its

headquarters program offices and regional offices. At headquarters, some

of the initiatives are coordinated agencywide, while other, more

medium-specific activities are being led by the Office of Water, Office of

Air and Radiation, and other program offices. The recently announced

Office of Reinvention, to be located in the Office of the Administrator, will

provide overall direction and support for reinvention activities and play a

direct role in leading some of the agency’s key initiatives.

EPA’s regional offices also participate in agencywide and program-specific

initiatives and, in some cases, have initiated their own reinvention-related

efforts. Our visits to 3 of EPA’s 10 regions identified somewhat different

structures and approaches for carrying out the agency’s reinvention

efforts.

To further support reinvention activities, EPA has also created a position

for an ombudsman (at the senior management level) in each program and

regional office. These officials are charged, among other things, with

ensuring the quick resolution of reinvention-related issues that arise both

inside and outside the agency.

EPA Headquarters

Structure for Implementing

Reinvention

In February 1997, the Administrator announced EPA’s plans to establish an

Office of Reinvention, to be located in the Office of the Administrator. This

office will provide direction and leadership for the agency’s reinvention

activities and take the lead responsibility for implementing some of EPA’s

core initiatives, such as CSI and Project XL.

6

 The Administrator decided that

a formal structure was needed to provide effective coordination of

reinvention activities across the agency, including improved

communication among staff working on separate key reinvention efforts.

The agency is currently drafting a proposal that will, among other things,

outline the functions and responsibilities of this office and determine how

its work will be coordinated with that of other EPA offices and reinvention

efforts that fall outside its immediate purview.

6

As of June 1997, the exact date for establishing the Office of Reinvention had not been determined.

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for Implementing Them

EPA’s program offices participate in both agencywide reinvention efforts,

as needed, and their own, more medium-specific efforts. For example, a

program office may be called upon to review the program-specific

elements of a Project XL proposal for which it has responsibility and/or

work with a regulated entity to determine whether its request for

flexibility can be accommodated. This type of review is especially

important when a project proposal has the potential to set a national

precedent. For example, such reviews were required by EPA’s Office of

General Counsel and Office of Air and Radiation when a Project XL

proposal by the 3M Company requested major deviations from the Clean

Air Act’s requirements.7

Program offices also have the lead responsibility for high-priority,

medium-specific reinvention efforts. For example, the Office of Water is in

charge of one of the agency’s 25 “high-priority actions” to promote effluent

trading in watersheds on a national level to encourage cost-effective

reductions in water pollution. Similarly, the Office of Air and Radiation is

participating in another high-priority effort to consolidate all federal air

rules for a given industry into a single rule and, in turn, to streamline the

requirements for emission limits, monitoring, recordkeeping, and

reporting. Other medium-specific activities include the Design for the

Environment—Green Chemistry Challenge Program. Through this

program, the Office of Prevention, Pesticides, and Toxic Substances

recognizes outstanding accomplishments by industries—large and

small—and academic institutions in designing “environmentally friendly”

chemicals and processes (such as replacing traditional solvents used in a

manufacturing process with alternatives that pollute less).

Regional Offices’

Structures and Strategies

for Implementing

Initiatives

EPA’s regional offices participate in the agencywide and program offices’

reinvention initiatives (as well as their own reinvention-related efforts),

working as needed with regulated entities, other external stakeholders,

and EPA headquarters staff. Over the past 2 years, EPA has given its regional

offices broad latitude to restructure their operations in order to

experiment with integrating activities across environmental media. Among

the three regional offices we visited, we found considerable variation in

the choice of structure—a decision that has a direct impact on each

office’s implementation of reinvention activities.

7

Ultimately, this proposal was withdrawn by the 3M Company and Minnesota, in part because of

unresolved differences over the flexibilities that 3M had requested.

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for Implementing Them

Atlanta Office (Region 4): EPA’s Atlanta office has maintained a traditional

medium-by-medium program structure and carries out its reinvention

initiatives through ad hoc, multimedia teams with part-time, voluntary

membership. According to the Deputy Regional Administrator, the office

has only one full-time staff dedicated to reinvention efforts—specifically,

Project XL—in part because it has found that spreading the workload for

reinvention efforts out among its staff has allowed it to participate in

reinvention while also allowing it to fulfill its traditional program

responsibilities. While the Atlanta office has not formally revised its

appraisal system to encourage staff to become involved in reinvention

activities, staff are informally encouraged to participate through the

region’s awards program.

Chicago (Region 5): The agency’s Chicago office has also largely retained

its traditional, medium-specific organizational structure but has

established (1) a new Office of Strategic Environmental Analysis to,

among other things, oversee regulatory reinvention for the region and

(2) more permanent cross-cutting teams to carry out reinvention activities.

The cross-cutting teams draw upon the expertise of the region’s program

office staff, as needed, to implement reinvention activities. In addition, the

region has 10 geographical place-based teams that have some involvement

in reinvention efforts. These teams were created to address the most

critical needs of 10 principal places (such as the Great Lakes, the upper

Mississippi River, and northwest Indiana) where the environmental

stresses are so great that concentrated efforts are needed to restore

resources and improve the quality of life. Regional officials said that

reinvention has not been formally integrated into the region’s performance

appraisal system but that some managers do include this type of

information in staff performance appraisals.

Boston (Region 1): EPA’s Boston office undertook the most fundamental

reorganization of its activities by adopting a structure that integrates all

media activities into a cross-cutting framework. For example, it replaced

traditional program offices (e.g., air and water) with five new major

divisions: (1) an Office of Environmental Stewardship to carry out

enforcement, compliance assistance, and pollution prevention activities;

(2) an Office of Ecosystem Management, which has established

cross-cutting teams for each state in the region to facilitate a holistic

approach to environmental protection, to develop environmental

standards and goals and to build the capacity of states and localities to

implement them; (3) an Office of Site Restoration and Revitalization to

meet requirements under the Resource Conservation and Recovery Act

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for Implementing Them

(RCRA) and the Comprehensive Environmental Response, Compensation,

and Liability Act of 1980 (CERCLA) and to implement related reinvention

activities; (4) an Office of Environmental Measurement and Evaluation to

provide the infrastructure to measure environmental results; and (5) an

Office of Management and Budget to provide workforce support. This new

organization was designed to give the region more flexibility in solving

complex environmental problems and in integrating its activities across

environmental media.

In conjunction with this restructuring, responsibility for implementing

reinvention activities has been integrated into these new offices and, as

appropriate, incorporated into the routine responsibilities of regional staff.

In turn, regional staff are held accountable for their contributions to

reinvention efforts through the region’s performance appraisal system.

According to the Boston office’s Reinvention Ombudsman, the office

currently has over 40 full-time-equivalent staff dedicated to

reinvention-related activities and has developed a computer tracking

system to monitor the office’s progress in implementing them.

Reinvention Ombudsmen

Designated to Assist With

Implementation

EPA recently designated certain high-level managers as “reinvention

ombudsmen” in its national program offices and regional offices. These

individuals serve as senior management points of contact for

reinvention-related matters both inside and outside the agency—especially

those involving significant policy or legal matters. This action was

prompted by lessons learned during early reinvention efforts—specifically,

that the active involvement of senior EPA management enhances the

likelihood that these efforts will be successful. In a September 1996

memorandum to EPA senior managers, the Deputy Administrator directed

each regional office and national program office to designate a reinvention

ombudsman to ensure that (1) significant legal and policy issues are

brought to the appropriate management level for timely resolution; (2) all

stakeholders have easy access to the information and issues being

reviewed and stakeholders’ involvement is structured to ensure

meaningful input; and (3) entities seeking to participate in EPA’s

reinvention efforts receive timely answers to their applications, questions,

and requests. The Deputy Administrator asked that these reinvention

ombudsmen give “special emphasis” to facilitating Project XL agreements.

In addition, the memorandum set out separate but related responsibilities

for reinvention ombudsmen in the regional and national program offices.

For example, regional reinvention ombudsmen were given the lead

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responsibility for facilitating site-specific projects; ensuring timely and

authoritative responses to inquiries from external stakeholders (such as

states, businesses, and environmental groups); and coordinating efforts, as

necessary, with senior program officials in headquarters. Reinvention

ombudsmen in the agency’s national program offices were directed to take

responsibility for reinvention activities that involve national precedents

and/or multimedia issues and, when necessary, work with their regional

counterparts to resolve medium-specific issues. He stressed that this new

structure was intended to improve coordination, not to replace the

agency’s existing decision-making framework.

Conclusions EPA’s effort to achieve a more flexible, integrated, and cost-effective

approach toward environmental management represents a major

transition for an agency that has focused, since its inception in 1970,

primarily on a medium-specific, command-and-control approach. In recent

months, EPA has responded organizationally in a manner that seeks to

provide greater visibility for, and improved coordination of, its reinvention

initiatives. Among the most notable of these measures was the agency’s

decision to create an Office of Reinvention, both to coordinate agencywide

initiatives and to provide direct leadership for some of EPA’s key initiatives.

Given the fundamental changes being sought by the agency, further

organizational changes, both at headquarters and among the regional

offices, seem probable as EPA gains more experience with reinvention.

Achieving the most appropriate organizational structure, however, is but

one challenge facing EPA. Other key challenges are discussed in chapter 3.

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Issues to Address If Reinvention Efforts Are

to Succeed

Many of EPA’s reinvention efforts are consistent with GPRA’s goal of

focusing on achieving results, as well as with the recommendations of GAO

and other organizations to achieve a more integrated, cost-effective

approach toward environmental protection. Two of the agency’s initiatives

in particular, Project XL and the Common Sense Initiative, seek to provide

industries with substantially greater regulatory flexibility in order to find

the cheapest, most efficient way to comply with environmental

regulations. However, our contacts with EPA headquarters and regional

staff; state, industry and environmental organization officials; and other

stakeholders in the environmental regulatory process—together with the

experiences of other organizations that have attempted to achieve

fundamental change—suggest that the agency faces significant hurdles

that must be addressed effectively if reinvention is to succeed:

• Key stakeholders in the reinvention process have expressed concern over

the large number of complex and demanding initiatives currently being

undertaken, as well as confusion over the underlying purpose of some of

the agency’s major initiatives.

• EPA has had difficulty achieving “buy-in” among the agency’s rank and file,

which have grown accustomed to prescriptive, medium-by-medium

regulation during the agency’s 27-year history.

• The agency has had difficulty achieving agreement among external

stakeholders, including federal and state regulators and industry and

environmental organization representatives—particularly when

stakeholders perceive that unanimous agreement is required before

progress can be made.

• The agency’s process for resolving miscommunication and other problems

involving EPA headquarters staff, regional staff, and other stakeholders

does not distinguish between problems that require the attention of senior

management and those that should be resolved at lower levels within the

agency.

• EPA has an uneven record in evaluating the success of many of its

initiatives. Evaluation is needed both to show EPA management what does

and does not work and to provide convincing evidence to external

stakeholders that an alternative regulatory strategy is worth pursuing.

In addition, the current prescriptive, medium-specific environmental laws

impose requirements that have led to and tend to reinforce many of the

existing regulatory and behavioral practices that EPA is seeking to change.

As a consequence, the agency will be limited in its ability to truly

“reinvent” environmental regulation within this existing legislative

framework.

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Greater Focus on Key

Initiatives Could

Improve Prospects for

Success

Most of the headquarters and regional officials we interviewed cited the

large number of individual initiatives under way, coupled with limitations

on the agency’s resources, as a key issue to be resolved as EPA moves

forward with reinvention. We also found that progress on some of EPA’s

high-priority initiatives has been impeded by unclear objectives and/or

guidance.

Large Number of Initiatives

May Be Diverting Attention

From High-Priority Efforts

Literature on organizational reinvention and reengineering stress that an

organization needs to have a strong focus and a clear vision of what it is

trying to achieve. A June 1996 GAO report examining federal management

reforms under the Results Act notes that an organization brings its efforts

into focus through a clear understanding of how individual efforts will

support the organization’s overall mission.1

 A 1994 report by the Brookings

Institution states, in particular, that government reform efforts should

“focus . . . on results and avoid having the reform spin off into scores of

different, unconnected directions.”2

 Our interviews suggest that while

many of EPA’s initiatives are, in fact, in line with the agency’s goal of

“achieving the very best protection of public health and the environment at

the least cost,” it may be appropriate at this time for EPA to reexamine

whether all the initiatives now under way are directly linked with this

basic mission.

Officials from two of the three EPA regional offices we visited cited the

large number of initiatives as a problem and indicated that setting

priorities among the initiatives would make the most efficient use of the

agency’s resources. Currently, they noted, the regional offices are

expected to carry out reinvention activities with few resources beyond

those the regions receive to carry out traditional program responsibilities.

For example, according to the Director of the Office of Strategic

Environmental Analysis in EPA’s Chicago office, the office has 17 teams

dealing with various reinvention-related efforts, including sustainable

development, enforcement and compliance, emissions testing,

brownfields,3

 and data management. Regional officials said that although

1

Executive Guide: Effectively Implementing the Government Performance and Results Act

(GAO/GGD-96-118, June 1996).

2

Donald F. Kettl, Reinventing Government? Appraising the National Performance Review, Brookings

Institution, Center for Public Management (Aug. 19, 1994), p. viii.

3

Brownfields are abandoned, idled, or unused industrial and commercial facilities where expansion or

redevelopment is complicated by real or perceived environmental contamination. Under the

Brownfields Initiative, EPA is working with states, cities, community representatives, and other

stakeholders to overcome barriers to assessing, cleaning up, and redeveloping brownfields.

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all of these are worthwhile, the office must face the reality that resources

are limited and are already stretched too thin.

Similarly, one of the two Deputy Regional Administrators in EPA’s Boston

office said that staff in that office are already being pushed beyond their

limits because they are doing both traditional and reinvention activities.

This official observed that some of the agency’s initiatives are extensions

of efforts that are about 15 years old and suggested that the agency review

all of its reinvention-related initiatives and eliminate those that are no

longer a priority. The Deputy Regional Administrator in EPA’s Atlanta office

agreed that it is difficult for staff to perform all traditional and reinvention

activities with the limited resources available but said that he was

responsible as a senior manager for making trade-off decisions under such

circumstances.

Other stakeholders interviewed by GAO echoed the concerns of the Boston

and Chicago officials about the number of reinvention initiatives under

way. Among them were the Commissioner of the Minnesota Pollution

Control Agency, who told us that addressing the problem could help EPA

better track and implement the initiatives that it considers the most

important. He suggested that the head of EPA’s future Office of Reinvention

take on this responsibility. In a similar vein, a representative of the

National Governors’ Association said that state officials have complained

that they are having difficulty managing the large number of initiatives. A

representative of Resources for the Future, a research group that has

examined EPA’s reinvention efforts, also questioned the value of supporting

the current number of initiatives.4

EPA officials, including the agency’s Deputy Administrator, noted that the

agency has no specific plans to systematically review and prioritize its

reinvention initiatives. The Deputy Administrator said he agreed that

decisions should be made periodically over which initiatives should be

undertaken and continued. However, rather than being performed as a

single event, he maintained, these decisions should be part of an iterative

process that takes into account the results of evaluations of the initiatives’

success. He echoed the Minnesota commissioner’s view that such a

4

The Keystone Center—a nonprofit public policy and educational organization—issued a report in

May 1997 entitled Regulatory Reinvention Assessment: Summary of Stakeholder Comments, which

reported similar findings. The report, prepared for EPA’s Regulatory Reinvention Team, summarized

comments by 20 external stakeholders or organizations and more than a dozen EPA staff on various

regulatory reinvention topics. Stakeholders representing both EPA and industry suggested that EPA

select a few key reinvention efforts and focus the agency’s attention and resources on these.

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function would most appropriately be carried out by the Associate

Administrator of the Office of Reinvention.

Key Initiatives Have

Required Greater Resource

Commitment

To further complicate concerns about too many reinvention initiatives and

not enough resources to implement them, two of EPA’s major reinvention

efforts—Project XL and CSI—have proved to be more difficult and

time-consuming than originally anticipated. In particular, the Deputy

Assistant Administrator of Project XL said that one year after that initiative

began, it became apparent that the effort had grown so large that it needed

to be managed more like a program than a series of pilot projects. As a

result, a full-time manager was appointed to coordinate XL activities at EPA

headquarters. Before this, XL coordinators were appointed in each regional

office.5

The growth of this program is also evident in the agency’s annual budget

requests. For fiscal year 1997, EPA requested $2.5 million for the XL

program. In its fiscal year 1998 budget request, the agency asked for

approximately $4 million for Project XL, which includes the redirection of

20 workyears to the regions for Project XL support. This request represents

an increase of approximately 68 percent over the preceding fiscal year’s

budget request.

Progress with CSI has also been slower and more difficult than originally

expected. According to a February 1997 contractor study, CSI participants

representing all industrial sectors and stakeholder groups expressed

concern over the pace of the CSI process, noting that it has taken longer

than expected to develop working relationships among the participants

and to reach consensus on issues.6

 These increased demands are reflected

in CSI’s budget, which has grown by over 50 percent during the program’s

first 3 years of operation.

Unclear Objectives and

Guidance Pose Barriers for

Two Key Reinvention

Programs

The challenges posed by the large number of reinvention initiatives have

been further compounded by confusion over the fundamental objectives of

some of the agency’s key initiatives, particularly Project XL and CSI. When

EPA announced the creation of Project XL in March 1995, the agency

described XL projects as real world tests of innovative strategies that

5

In this connection, Atlanta regional officials pointed out that their office dedicated the equivalent of

five full-time staff to its Project XL activities. Chicago officials said they dedicated five full-time staff

specifically to negotiate the 3M Company’s Project XL proposal.

6

Review of the Common Sense Initiative, The Scientific Consulting Group, Inc. (Feb. 19, 1997).

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achieve cleaner and cheaper results than conventional regulatory

approaches. Officials from two of the three regional offices we visited, as

well as from all three states, said that this statement (together with others

made when Project XL was initially announced) promoted Project XL as an

initiative that would allow companies great flexibility to experiment with

new ways of achieving environmental compliance.

According to officials from the Minnesota Pollution Control Agency, it was

with this understanding that officials from the state and the Minnesota

Mining and Manufacturing (3M) Company proposed the first XL project in

March 1996. The 3M project proposed taking a “one-stop” approach to

permitting by developing a single comprehensive permit for air, water, and

waste at one of its facilities in Minnesota. Minnesota officials said that

they felt they had been given the go-ahead by EPA for the project and were

surprised when EPA headquarters and regional officials subsequently

raised major issues, questioning whether the proposal was sufficiently

protective of the environment.7

 These officials said that EPA’s suggested

changes were prescriptive and were not in keeping with the initial concept

of Project XL.

Miscommunication between EPA officials and officials from Minnesota and

3M over the meaning of “superior environmental performance” also

caused difficulties for the 3M project. According to EPA, Project XL is

intended to allow companies that are environmental leaders to test

creative, common sense ways of achieving superior environmental

protection at their facilities and in their communities. In the case of the 3M

project, which involved a facility that was already performing above

current federal standards, both Minnesota and 3M officials thought that

EPA would give the company credit for this “superior” performance. EPA

agreed that the company should receive credit for past superior

performance but disagreed with the company over the way in which the

credit should be provided. Officials from Minnesota and 3M observed that

EPA’s definition of superior environmental performance did not make it

worthwhile for companies that are already exceeding standards to

participate in Project XL. As a result of these disagreements, Minnesota and

3M withdrew the proposal from consideration in September 1996.

The Deputy Assistant Administrator for Project XL has acknowledged that

in the program’s early stages, the agency was vague in communicating its

vision. This caused a number of problems—particularly a widespread view

7

Specifically, EPA staff from the agency’s Office of Air and Radiation and Office of General Counsel

expressed concern that the project would require significant deviations from requirements imposed

under the Clean Air Act.

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that the agency was not “speaking with one voice” when companies and

states raised issues about project proposals. To help address these

problems, EPA has sponsored quarterly meetings with interested parties to

further explain the agency’s expectations for project proposals. The

agency has recently clarified its Project XL guidance, including what it

means by “superior environmental performance.”

According to the February 1997 contractor study evaluating CSI’s progress,

the EPA Administrator said in introducing the program that everything was

on the table. She challenged CSI participants, the study said, to look

comprehensively at industrial sectors in an effort to imagine the best

possible environmental performance for each sector, identify the barriers

to this level of performance, and develop solutions based on consensus

among stakeholders to overcome these barriers. However, the study found

that while the overall goals of CSI were articulated clearly by the

Administrator in initiating the program, specific objectives and

expectations for the program were not. The study reported that as a

consequence, instead of encouraging out-of-the-box thinking as hoped, the

CSI effort was delayed while confused participants tried to figure out what

EPA was willing to accept. The study concluded that EPA should provide

more guidance on the types of recommendations and projects that the

agency would find most useful for CSI.

8

Stakeholders Have

Questioned EPA’s

Commitment to

Reinvention

For EPA, as for other large and complex organizations, the success of its

reinvention efforts will depend greatly on the strength of the commitment

expressed by its management and achieved by its rank and file. The EPA

staff and state officials whom we interviewed generally agreed that top EPA

management has articulated a clear commitment to the agency’s

reinvention efforts. However, disagreements have surfaced in recent

months that have led some key stakeholders to question EPA

management’s direction of the reinvention efforts. At the staff level, we

found that program and regional offices do encourage staff, to varying

degrees, to participate in reinvention activities and that these efforts have

engendered wider staff participation. Some staff, however, have resisted

participation for a variety of reasons.

8

GAO came to similar conclusions in its ongoing review of CSI. Specifically, GAO’s preliminary

findings indicate that EPA should better define CSI’s goal and expected results, including specific

guidance on how the results will be accomplished.

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Top EPA Management Has

Articulated a Commitment

to Reinvention

Reengineering literature supports the view that an organization’s culture

must be receptive to the goals and principles of reengineering. During a

1994 GAO symposium on reengineering best practices,9

 for example,

panelists from leading organizations emphasized that without a compelling

and well-communicated vision by top management of where reengineering

will take the organization, suspicion and mistrust among staff can prevail.

EPA management has clearly taken steps to communicate its commitment

to reinvention, both to the agency’s staff and to external audiences. For

example, in testimony before the Senate Committee on Appropriations on

February 29, 1996, the Deputy Administrator said that EPA “is working to

change the way the Agency accomplishes its mission” and “remains

committed to setting priorities that allow the Agency to apply limited

resources where they will gain the most public health and environmental

benefits.” Later, in September 1996, he stated in a memorandum to all EPA

regional administrators that the Administrator and he “remain committed

to reinventing the way public health and environmental protections are

delivered in this country” and asked for the commitment of senior

management to ensure that the agency “can take full advantage of

reinvention opportunities.”

As a more tangible expression of this commitment, the Administrator

announced her decision to create an Office of Reinvention in

February 1997. As noted in chapter 2, this office will be charged with

providing overall direction and support for reinvention activities, as well

as direct leadership for some of the agency’s key initiatives (such as CSI

and Project XL). Currently, the agency is further defining this office’s

responsibilities. According to its newly appointed Associate Administrator,

the decision to create this office reflects an understanding that to make

reinvention happen, an overarching structure is needed to provide ongoing

guidance to the rest of the agency. He added that another purpose of the

office will be to help ensure that reinvention efforts and ideas are shared

across the agency.

9

Reengineering Organizations: Results of a GAO Symposium (GAO/NSIAD-95-34, Dec. 13, 1994).

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Stakeholders Have

Questioned the Extent of

EPA’s Commitment to

Reinvention

Most of the EPA, state, industry, and environmental organization officials

we contacted acknowledged the agency’s expressions of commitment to

reinvention, but some have questioned the extent of the agency’s

commitment to fundamental change. For example, a recent report

prepared for an industry group10 notes that the agency is inherently

organized and structured to implement statutes and that “nonstatutory”

programs (such as EPA’s reinvention initiatives) tend to be treated in an “ad

hoc” fashion.

The state officials we interviewed all acknowledged EPA management’s

expressed commitment to reinvention, but some cited differences over the

roles of EPA and the states in developing and implementing new projects

and processes. These differences centered around issues such as how

much flexibility the states have to negotiate and approve reinvention

projects and how to include stakeholders in negotiations. These

differences came to a head in February 1997 when EPA temporarily

withdrew from negotiations on a proposal jointly prepared by leaders of

the Environmental Council of the States (ECOS) and EPA staff outlining an

overarching framework for how EPA and the states will promote and

implement regulatory reinvention efforts. Among other things, the

proposal was intended to “establish guiding principles for reinvention and

an efficient process that is receptive to innovative proposals” and

“improve decision-making between states and EPA on innovation

proposals, emphasizing clear lines of communication, decision authority,

accountability, and timeliness.” However, EPA’s Deputy Administrator

temporarily withdrew EPA’s agreement with the proposal, noting, among

other things, that specific conditions must be met before regulatory

flexibility can be granted.11

In response, ECOS initially asserted that EPA’s withdrawal “damaged trust

and [raised] questions about [EPA’s] commitment to working in partnership

with the states to create a better environmental system. . . .” EPA and ECOS

subsequently renewed negotiations and plan to meet regularly to maintain

an ongoing dialogue on reinvention issues. However, according to the

Commissioner of the Minnesota Pollution Control Agency, who has led

this effort on behalf of ECOS, the experience points to some fundamental

10Industry Incentives for Environmental Improvement: Evaluation of U.S. Federal Initiatives,

Resources for the Future (Sept. 1996). This report is addressed to the Global Environmental

Management Initiative, a nonprofit organization of 21 leading corporations dedicated to helping

businesses achieve environmental, health, and safety excellence.

11Specifically, the Deputy Administrator’s letter stated, among other things, that proposals seeking

regulatory flexibility must achieve “superior environmental performance” and that “the degree of

superior performance must be proportional to the degree of flexibility sought.”

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differences between at least some of the states and EPA management over

the future roles of EPA and the states in managing the reinvention process.

He maintained that it is unclear at this point whether these differences can

be resolved. As of June 1997, EPA—in consultation with ECOS—expects to

publish a new draft proposal in the Federal Register for public comment

later this year.

Achieving Commitment by

Rank and File Will Take

Time

Despite some differences between various stakeholders and EPA

management over the future direction of reinvention, all participants in the

process we interviewed—both within and outside EPA—agreed that

achieving full commitment to reinvention by the agency’s rank and file will

be difficult and will take time. The Special Assistant for Reinvention

Efforts in EPA’s Office of Prevention, Pesticides, and Toxic Substances

reflected many of these views when he told us that it will take time for

culture change to filter down to EPA line staff and to see if the change takes

hold.

The three EPA regions we visited are taking different approaches to

achieving commitment by line staff to reinvention. For example, the

Atlanta office encourages staff to participate voluntarily in ad hoc media

teams that are working on reinvention initiatives. While this region has not

formally revised its reward system to emphasize reinvention activities, the

Regional Administrator has made it clear to the staff that he views

reinvention as a top priority and values participation. Even so, the Office’s

Deputy Regional Administrator acknowledged that the reaction of the

regional staff to reinvention has been mixed, noting that the staff that

participate in these initiatives are generally those that accept change more

readily. He noted that some staff have raised various issues about

reinvention, including concerns that (1) some reinvention projects may

not provide adequate protection for the environment and public health and

(2) some projects may not be legal under current statutes. He

acknowledged that although some of these concerns may be well founded,

others stem from a desire to maintain traditional ways of regulating.

The Chicago office also encourages staff to voluntarily participate in

reinvention efforts through cross-media teams. According to regional

office management, as teams are formed to focus on various reinvention

efforts, participation is “spreading like roots” through the regional office.

Like the Atlanta office, the Chicago office has not formally revised its

reward system to include a reinvention component, but staff participation

in reinvention efforts can be reflected in performance ratings. Chicago

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officials further noted that wider participation can be expected as the

region gains more experience—and achieves more success—with

reinvention efforts.

As noted in chapter 2, the Boston office recently reorganized so that

reinvention activities are an integral part of its program activities.

According to one of the office’s Deputy Regional Administrators, the

practical effect of this reorganization, which is reinforced by regional

office management, is that reinvention is expected to be a routine part of

all staff activities. She added that internal incentives “to reinvent” are built

into staff job descriptions.

Yet in spite of the efforts both at headquarters and among the regions, we

found 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 everyday activities. For example, the Director of

EPA’s Regulatory Reinvention Team acknowledged that reinvention goals

have been slow to trickle down to line staff. This official pointed out 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.

Many state and other officials shared this perception. Overall, these

officials said that the existing incentive system leads staff to focus on

traditional ways of regulating and discourages them from being open to

new approaches to environmental regulation. Similarly, the report

prepared for the Global Environmental Management Initiative maintains

that EPA personnel “give the non-statutory programs low priority because

most of their effort is devoted to meeting requirements set by Congress

and the Courts.”

Consensus Among All

Stakeholders Is

Difficult to Achieve

EPA’s reinvention strategy includes the goal of sharing information and

making decisions with all stakeholders, including those that are external

to the agency, such as state regulators, industry officials, and

environmental organization officials. We found that EPA has made great

efforts to include external stakeholders in the reinvention process but that

achieving consensus—especially full consensus—on reinvention-related

issues among parties with varying, and often conflicting, interests has

proved to be very difficult. As noted in chapter 2, to help deal with issues

raised during negotiations among stakeholders, the agency has designated

reinvention ombudsmen to elevate difficult issues for EPA management’s

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attention in a timely manner. However, most of the EPA regional and state

officials we interviewed saw this process as a useful but temporary

solution. These officials maintained that, in the long term, EPA needs to

develop a process for resolving less controversial issues at lower levels

within the agency.

Reinvention Stresses

Collaboration Over

Confrontation

Since the early 1970s, EPA’s regulations and actions have been the subject

of constant litigation, frequently delaying the implementation of

environmental controls while at the same time adding considerably to the

cost of compliance by industry and to the costs of regulation by state and

local governments. In recent years, the agency has increasingly tried to

address this problem by seeking consensus among the key stakeholders

on broader regulatory approaches, as well as specific actions. This

strategy is intended to help avert litigation by getting agreement up front

among affected parties and by getting a commitment by industry to meet

requirements it acknowledges are achievable. It is consistent with

Executive Order 12866 (issued on Sept. 30, 1993), which directed each

federal regulatory agency to consider the use of consensual mechanisms,

including negotiated rulemaking, when developing regulations. It was

further reinforced by the President’s March 1995 Report on Reinventing

Environmental Regulation, which stated that

“the adversarial approach that has often characterized our environmental system precludes

opportunities for creative solutions that a more collaborative system might encourage.

When decision-making is shared, people can bridge differences, find common ground, and

identify new solutions. To reinvent environmental protection, we must first build trust

among traditional adversaries.”

To help build trust among interested parties, the report states that

(1) environmental standards must be set with full public participation;

(2) an inclusive decision-making process must be employed that will

provide states, tribes, communities, businesses, and individual citizens

with an opportunity to participate; (3) state, tribal, and local governments

will serve as full partners in developing and implementing policies to

achieve national goals; and (4) EPA will become a partner providing

information and research to empower local decisionmakers.

Definition of Consensus

Varies Among EPA

Initiatives

EPA reinvention officials acknowledge that the agency is searching for a

workable definition of what it means to achieve consensus among

stakeholders. To date, the agency has defined consensus in various ways.

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For example, the Deputy Assistant Administrator for Project XL told us

that the goal of negotiating with stakeholders under this program is to get

all participants’ concerns on the table and to show that the agency

respects and is receptive to varying views on issues. However, this official

stressed that EPA may not agree with the positions raised by the

stakeholders and that the agency reserves the right to make the final

decision on whether to approve a project.12 In the case of CSI, however,

stakeholder groups have generally been seeking to achieve 100 percent

agreement among participants.

Achieving Full Consensus

Has Been Challenging

Most stakeholders we interviewed agreed that achieving consensus among

stakeholders is one of the most difficult challenges EPA faces in attempting

to reinvent environmental regulation. They noted that the challenge has

been particularly difficult when the agency has sought to achieve—or was

perceived as seeking to achieve—100 percent agreement. Officials from

two of the three states that we contacted, for example, agreed that EPA

goes to great lengths to include external stakeholders in these negotiations

but noted that efforts to achieve unanimous agreement have been

problematic, particularly in CSI negotiations. According to an official from

Georgia, EPA is “bending over backwards” to include stakeholders, but

when unanimous consent is required, any stakeholder has the power to

veto a project. In this state official’s opinion, this approach is an invitation

for gridlock and should give way to a less stringent definition of

consensus.

Industry representatives have also voiced concerns about the feasibility of

achieving 100 percent agreement among stakeholders. This concern

contributed to the ambivalence some industry groups expressed about

continuing to participate in CSI. A representative of the American

Petroleum Institute said, for example, that trying to achieve 100 percent

agreement among stakeholders essentially paralyzes negotiations and is

one of the key reasons why participating in CSI has been very costly and

labor intensive for the petroleum industry. He told us that giving every

participant the power to veto a project “creates a huge road block,”

especially when participants assume polarized positions. According to this

official, without more tangible results, the Institute cannot justify its

continued participation in CSI.

12For example, although EPA worked with environmental groups to address a number of their

concerns, the agency ultimately approved the Weyerhaeuser project even though one major

environmental group was concerned that the regulatory flexibility was not merited.

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The 1997 contractor study of CSI, discussed above, supported many of

these factors. The study concluded that CSI participants perceive that

consensus has been defined as unanimity, thus providing each individual

with veto power. It cited the belief by many participants that consensus

should be redefined to require less than complete agreement so that an

idea can move forward even if some participants do not favor it but can

“live with it.”

In response to these concerns, officials from EPA’s Regulatory Reinvention

Team said that the agency is currently working with CSI participants to

explore the use of a less restrictive definition of consensus. The officials

caution, however, that some CSI groups may prefer to continue to define

consensus as 100 percent agreement among stakeholders.

In contrast, under Project XL, where EPA does not seek unanimous

consensus among stakeholders, the agency has experienced increasing

success in finalizing project proposals through negotiations with

stakeholders.13 As discussed previously in this chapter, EPA was unable to

resolve stakeholders’ concerns about the first XL project proposal,

submitted by the 3M Company. However, since this time, EPA has

successfully completed negotiations on three XL projects. According to

EPA’s Deputy Assistant Administrator for Project XL, this success is due, in

part, to the agency’s insistence that it has the right to make the final

decision on whether to approve or disapprove a project. For example,

during negotiations for two recently approved XL projects proposed by

Intel Corporation and Weyerhaeuser, EPA decided to approve these

projects even though all stakeholders’ concerns were not resolved.14

Summarizing EPA’s approach under Project XL, the Deputy Assistant

Administrator stressed that while EPA always wants to get all stakeholders’

issues on the table and have them thoroughly discussed, the agency does

not expect unanimous support from stakeholders for all XL projects.

13According to an April 1997 Federal Register notice outlining updated guidelines for Project XL, the

agency allows a project’s sponsor and stakeholders to determine the ground rules for a project, such

as what type of decision-making process will be used. However, EPA reserves the right to decide

whether to approve a project for implementation.

14According to EPA, in the case of the Intel project, an environmental group was concerned about the

way in which the permit was structured. Also, a local citizens’ group said, among other things, that the

Final Project Agreement should have a much stronger focus on pollution prevention. In the case of the

Weyerhaeuser project, the Natural Resources Defense Council objected to a provision of the project

proposal that would allow EPA to waive certain permitting requirements under the Clean Air Act and

the Clean Water Act.

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Some Environmental and

Local Interest Groups Lack

Resources to Participate

Fully in Project

Negotiations

Another issue affecting the ability of key stakeholders to achieve

consensus stems from the difficulties many environmental and local

groups face in trying to participate fully in project negotiations. A

representative of the Natural Resources Defense Council (NRDC) noted, in

particular, that these groups do not have enough staff and/or technical

expertise to evaluate project proposals and to fully gauge the impact of

these proposals. She noted, for example, that although NRDC’s resources

are already stretched to the limit, the group had to dedicate two attorneys

and one staff researcher just to evaluate the Weyerhaeuser XL project

proposal and to participate in negotiations on that project. To address this

problem, the NRDC representative said that EPA needs to take steps to

ensure that groups representing environmental and local concerns have

the resources to participate meaningfully in project negotiations.

EPA responded to this problem in January 1997 by announcing that it is

prepared to offer technical assistance to all Project XL stakeholder groups

to help them evaluate project proposals. The agency plans to offer up to

$25,000 in technical assistance for each project.

EPA Initiates a Process to

Help Address

Stakeholders’ Issues

An official from EPA’s Regulatory Reinvention Team acknowledged the

need to improve the agency’s process for including external stakeholders

in project negotiations. As one step in this direction, EPA has established a

process for reinvention ombudsmen to assist in resolving disputes during

project negotiations. In a September 1996 memorandum, EPA’s Deputy

Administrator instructed each regional office and headquarters program

office to designate a senior official to serve as a reinvention ombudsman.

According to this memorandum,

“The primary role of the reinvention ombudsmen is to facilitate quick resolution of issues

arising in reinvention projects by raising them to the appropriate management levels

throughout the Agency for attention and appropriate action. The reinvention ombudsmen

are not meant to replace existing decision-making frameworks, but serve as a single point

of contact to ensure that necessary decisions are coordinated and made in a timely

manner.”

The process has met with some success. According to a Georgia state

official involved with the Weyerhaeuser project, the intervention in

negotiations by the Atlanta office’s Deputy Regional Administrator—the

designated reinvention ombudsman—was instrumental in resolving

outstanding concerns. The Commissioner of Minnesota’s Pollution Control

Agency told us that having a reinvention ombudsman could have helped to

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resolve some of the problems that ultimately caused the 3M project to

unravel.

While acknowledging the benefits of using a reinvention ombudsman to

facilitate the Weyerhaeuser negotiations, the Georgia official pointed out

that the negotiations appeared to consume a great deal of the Deputy

Regional Administrator’s time and questioned whether such senior

officials can commit so much time whenever a reinvention initiative

encounters a problem. The other state officials we interviewed echoed this

sentiment, pointing out that the reinvention ombudsman process should

be viewed as a short-term solution to the types of problems that have

occurred during project negotiations. In the opinion of these officials, a

longer-term solution should employ a process that distinguishes between

problems that can be resolved at lower levels within the agency and those

that need to be elevated for senior management’s attention.

In this connection, ECOS and EPA are working to develop an alternative plan

to facilitate the approval of reinvention project proposals. A February 1997

draft of the plan acknowledged that the process for developing, evaluating,

and acting upon proposals for innovation must be improved. The draft

outlined a process for classifying projects into one of four categories and

identified, for each category, which parties are responsible for reviewing

and approving the proposals.15 While the Deputy Administrator withdrew

the proposal the following month for a variety of reasons, he told us that

EPA is still committed to working with the states to establish a system that

effectively resolves stakeholders’ issues and provides for distinguishing

between problems that are best addressed at lower levels in EPA and those

that must be resolved at higher levels.

15For example, project proposals viewed as potentially inconsistent with a federal statute or regulation

would have been placed in categories 1 and 2. EPA headquarters, the EPA regional office, and the state

would then have jointly reviewed the proposal. Project proposals viewed as potentially inconsistent

with federal guidance, policies, and past practices or interpretations of the rule would have been

placed in category 3. The state and EPA regional office would have had the primary responsibility for

reviewing the proposals. Project proposals requiring no changes in federal guidance, past practices,

regulations, or statutes would have been placed in category 4. Under these circumstances, the states

would have been free to proceed without EPA’s review.

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EPA Is Not

Systematically

Evaluating

Reinvention

Initiatives’

Effectiveness

GAO found that EPA has yet to develop a systematic process for evaluating

the effectiveness of its initiatives, although it has made some progress in

certain instances. The agency is currently taking initial steps toward

developing criteria that can be used to evaluate the success both of

individual projects and of its overall reinvention efforts.

Measurement of Progress

Is Important but Difficult

GAO and other organizations have maintained that a system for measuring

progress is of paramount importance in helping to ensure successful

organizational change. In a June 1996 report on implementing GPRA, GAO

observed that “measuring performance allows organizations to track the

progress they are making toward their goals and gives managers crucial

information on which to base their organizational and management

decisions.”16

In March 1996, GAO testified on the contribution that the Results Act can

make to congressional and executive branch decision-making and noted

that striving to measure outcomes is one of the most challenging and

time-consuming aspects of reinvention. According to the report “many

[federal] agencies are having difficulty in making the transition to a focus

on outcomes.” Such findings were substantiated by a recent report by the

National Academy of Sciences, which focused on industry-initiated efforts

to achieve environmental compliance through alternative means. While

emphasizing the value of developing such measures, the report cautioned

that “it is not easy and often not possible to quantify the effectiveness of

most industry-initiated programs. . . .”17

EPA’s Efforts to Measure

Progress Have Thus Far

Been Limited

EPA has had some experience in systematically measuring the effectiveness

of new programs. For example, an independent research firm under

contract with EPA issued a report in 1995 on the effectiveness of its “33/50”

program, which seeks voluntary cooperation from industrial firms to

16Executive Guide: Effectively Implementing the Government Performance and Results Act

(GAO/GGD-96-118, June 1996).

17Fostering Industry-Initiated Environmental Protection Efforts, National Academy of Sciences

(Washington, D.C.: 1997), p. 2.

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reduce toxic chemicals through source reduction.18 At the end of 1996, the

agency hired a contractor to evaluate the effectiveness of its processes for

involving stakeholders. In May 1997, the contractor issued a report

summarizing comments made by various internal and external stakeholder

groups that were interviewed regarding their expectations for reinvention,

opinions on possible performance measures and criteria for measuring the

success of reinvention, and general advice on regulatory reinvention.

Among other things, the stakeholders agreed that measures of

environmental health should be the primary performance criteria for

measuring reinvention success. EPA is currently evaluating the report’s

findings.

Nonetheless, EPA reinvention officials acknowledged that a large number

of reinvention projects do not currently have evaluation components. They

added that among the projects that do have such components, the quality

varies widely. These officials explained that, in part, it is too early to

evaluate some of the reinvention efforts. For example, the February 1997

contractor review of CSI’s first 2 years found that it is too early to observe

the effects of CSI on statutes and regulations as well as on environmental

compliance; environmental indicators; quality of life; public health;

productivity; and burden on industry, government, and society.

Even though it may be too early to observe the effects of reinvention

initiatives, we believe it is not too early to build evaluation components

into reinvention projects so that observable effects down the road can be

evaluated. The agency has recently taken initial steps toward this end.

Specifically, the Administrator has asked the National Advisory Council

for Environmental Policy and Technology’s Reinvention Criteria

Committee to identify criteria the agency can use to measure the progress

and success of specific reinvention projects and its overall reinvention

efforts. In October 1996, the committee completed a 6-month review of

seven separate EPA reinvention initiatives to determine how they might be

evaluated. These initiatives include CSI, Self-Policing/Audit policies,

Self-Certification efforts, the Environmental Leadership Program (ELP),

Project XL, NEPPS and the Sustainable Development Challenge Grants

Program. This review found that two of the seven reinvention

initiatives—ELP and NEPPS—had begun to define evaluation criteria. Since

this review, the committee held a 2-day public meeting in April 1997 to

solicit perspectives on defining evaluation criteria from representatives of

18The nonprofit environmental research firm INFORM found that 31 percent of the reductions in toxic

releases claimed by EPA had been initiated before the announcement of the 33/50 program. The firm

also found that most companies relied on “end-of-pipe” treatment technologies or on-site recycling and

energy recovery, rather than source reduction, to reduce their toxic releases.

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state and local government, academia, industry, environmental

organizations, and nongovernmental organizations. The Committee plans

to hold another meeting in July 1997 to continue discussions on defining

evaluation criteria.

Environmental

Statutory Framework

Limits Potential to

Reinvent

Environmental

Regulation

GAO found considerable disagreement among stakeholders on whether

changes to the current statutory framework are needed to facilitate the

regulatory reform process. Most of the state and industry officials we

interviewed cited the need for (1) statutory authority to waive certain legal

requirements that they believe impede experiments designed to test

alternative methods of achieving environmental compliance and/or

(2) more fundamental changes to the environmental statutory framework

to encourage changes in the way environmental regulation is conducted

nationwide, or both. In contrast, EPA maintains—and some in the

environmental community agree—that the current statutory framework is

sufficiently flexible to allow for real progress in most of the agency’s

reinvention efforts and that substantial changes in the statutes could

compromise protection of the environment and public health. The agency

further notes that it will need to consider the results of an analysis by an

advisory group that is currently assessing this issue.

On the basis of past evaluations by GAO and others, the experiences to date

of EPA’s key reinvention efforts, and our contacts with a variety of

stakeholders for this review, we believe that some constructive

modifications can be made under the current environmental statutory

framework. Nonetheless, the framework does impose requirements that

have led to and reinforce many of the existing practices the agency is most

seeking to change. Consequently, as GAO and other organizations have

noted in the past, EPA will be limited in its ability to achieve fundamental

changes in environmental regulation within the legislative framework as

currently constructed.

Current Statutory

Framework Discourages

Cross-Cutting Approaches

As noted in chapter 1, EPA has no formal, overarching legislative mission

because it was created under an executive reorganization plan. Instead, its

statutory responsibilities are set forth in a dozen or so separate pieces of

legislation that generally assign pollution control responsibilities

according to environmental medium (e.g., air and water) or category of

pollutant (e.g., pesticides). These numerous legislative mandates have led

to the creation of individual EPA program offices that focus primarily on

reducing pollution within the particular environmental medium for which

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they have responsibility, rather than on reducing overall pollutant

discharges.

The complications arising from this framework have been documented by

GAO and other organizations for many years. In our 1988 general

management review of EPA,

19 we cited several problems, including

difficulties in setting risk-based priorities across environmental media

because each statute prescribes certain activities to deal with its own

medium-specific problems. In addition, different statutes require the use of

different approaches in developing and evaluating regulatory

options—often resulting in “fragmentation of effort, conflict in resource

allocation, bias against new chemical/pesticide products, and multiple risk

assessment documents for the same substance.” In 1991, we touched on

these issues again, noting, for example, that “numerous legislative

mandates have 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.”20 More recently, in testifying on efforts by EPA

to improve its working relationship with the states and to provide them

with additional flexibility,21 we concluded that “as long as environmental

laws are medium-specific and prescriptive and EPA personnel are held

accountable for meeting the requirements of the laws, it will be difficult

for the agency to fundamentally change its relationships with the states to

reduce day-to-day control over program activities.”

As an alternative to modifying the statutory framework, a bill introduced

at the end of the 104th Congress would have authorized a demonstration

program under which the EPA Administrator could modify or waive an

agency rule if, among other things, a regulated facility could demonstrate

that an alternative compliance strategy would achieve better overall

environmental results than would be achieved under current regulatory

requirements. Under the bill, the Administrator could not approve an

alternative compliance strategy that would result in a violation of a

national environmental or health standard.

19Environmental Protection Agency: Protecting Human Health and the Environment Through

Improved Management (GAO/RCED-88-101, Aug. 16, 1988).

20Environmental Protection: Meeting Public Expectations With Limited Resources (GAO/RCED-91-97,

June 18, 1991).

21Environmental Protection: Status of EPA’s Initiatives to Create a New Partnership With States

(GAO/T-RCED-96-87), p. 8.

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EPA Believes Statutory

Framework Allows for

Innovation

According to the Deputy Administrator, EPA has taken the position that it

needs to review the results of the Enterprise for the Environment Initiative

(E4E) before it considers the need for legislative changes. This initiative is

examining, among other things, whether policy reforms are needed to shift

the current regulatory system toward one that is more performance-based

and flexible and that uses market mechanisms and alternative

enforcement and compliance approaches to achieve environmental

protection.22 Participants in this effort plan to deliver a package of

recommendations to the Congress and the administration in 1997. The

Deputy Administrator added, however, that the agency’s experience to

date with reinvention confirms that much can be accomplished within the

existing statutory framework. EPA reinvention officials supported this

view, maintaining that as they have evaluated proposed projects on a

case-by-case basis, they have found that proposed changes have been

achievable within the constraints posed by existing statutes.

In addition, according to these officials, the agency can deal effectively

with potential regulatory barriers through “site-specific rulemakings” that

allow it to offer additional flexibility to participating companies. Under

these rulemakings, EPA can promulgate a rule that will permit the agency

to approve the terms of a project employing an alternative regulatory

approach. According to EPA, the authority for such a rule would be based

on an alternative interpretation of a statute applicable only to the specific

site. The facility would then comply with this site-specific rule.

Many in the environmental community also believe that statutory change

is not needed and that much flexibility already exists in environmental

statutes. An attorney with the Natural Resources Defense Council cited

the Clean Water Act as an example, noting that the law allows site-specific

variances from water quality-based effluent limitations. Using this

flexibility, facilities can have up to 5 years to comply with water quality

effluent limitations.

22The Center for Strategic and International Studies—an independent, nonprofit, nonpartisan

institution founded in 1962 to advance the understanding of emerging global and domestic

issues—launched the E4E initiative in Nov. 1995. The objective of this initiative is to engage key

stakeholders (environmentalists, business, labor), experts, and Democratic and Republican political

leaders in a policy dialogue aimed at rebuilding a consensus on the strategic direction of U.S.

environmental policy.

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Many in the Regulated

Community Doubt That

Much Progress Can Be

Made Without Statutory

Changes

EPA’s view that reinvention can produce substantial results without

statutory changes is at odds with the view held by many in

industry—whose participation, as key members of the regulated

community, is crucial for reinvention to succeed. Both individual

companies and other industrial organizations, including some discussed

earlier that have participated in reinvention experiments, have expressed

strong reservations about the potential for reinvention within the present

statutory framework. For example, the report to the Global Environmental

Management Initiative, discussed earlier in this chapter, noted that the

agreements under Project XL do not provide firms with any protection

from lawsuits by citizens or environmental groups that may object to the

terms of these agreements. As a result, according to the report, “industry

participants in reinvention programs generally steer the programs to

peripheral matters because their general counsels caution them against

taking any action that might result in litigation.” 23

Similarly, reflecting on its experience as the petroleum industry’s

representative on the Common Sense Initiative Council, a representative

of the American Petroleum Institute told us that the Institute favors

statutory change to explicitly authorize reinvention-type activities.

Echoing the Global Environmental Management Initiative’s concern over

the consequences to companies of being perceived as violating the law, he

noted that even frivolous lawsuits pose a real threat. He added that

companies “going out on a limb” need to be afforded statutory protection.

Some industry representatives have specifically questioned whether EPA’s

strategy of using site-specific rulemakings will provide industry with the

assurance it desires that actions taken under a reinvention project will not

extend the approval process for reinvention projects for months or years,

because it may take years to implement a rule and additional years to

litigate it. In fact, these concerns may be well founded because some

environmental organizations have raised concerns that site-specific

rulemakings may allow EPA regions to essentially rewrite federal policies,

may raise questions about whether EPA’s rules are applied consistently

across the nation, and may preclude national environmental groups and

other parties from participating adequately in the process. Among the

23Industry Incentives for Environmental Improvement: Evaluation of U.S. Federal Initiatives,

Resources for the Future (Sept. 1996). This report was published before EPA introduced the use of

site-specific rulemaking, which is intended to help protect companies from third-party lawsuits.

However, as discussed later in this section, even with the use of site-specific rulemakings, some

industry representatives remain concerned that litigation against EPA may still delay reinvention

projects.

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other reservations voiced by industry representatives are concerns that

EPA may not have the statutory authority to modify a rule in some cases.24

The state officials interviewed expressed some disagreement over the

need for statutory change. Georgia environmental officials acknowledged

that current law poses constraints on innovation but said that legislative

changes may be premature until EPA and the states have gained more

experience with reinvention. In contrast, officials from Massachusetts and

Minnesota both agreed that environmental statutes need to be changed

before real progress can be made in implementing reinvention.

Existing Statutory

Framework Imposes Some

Limits on Reinvention

Our own work substantiates the claims of many state officials and industry

representatives that ambiguities about the legality of at least some

proposed reinvention proposals may be enough to discourage their use.

For example, in June 1992, we concluded that the use of water pollutant

trading had been limited, in part, by the absence of a clear and

unambiguous authorization of this practice in the Clean Water Act.25 We

cited an EPA analysis of participating states that found states’ concerns

over the absence of such authorization inhibited trading because of

perceived legal risks that programs would be overturned or disallowed by

regulators or the courts. We concluded that there would be benefits in

amending the act to more clearly signal that trading is permissible. A

recent study by Argonne National Laboratory reached similar conclusions,

noting that “to some extent, companies that elect to trade do so at their

own risk. . . . Conservative corporate and municipal government managers

would be more willing to undertake trades if they felt their risk of future

litigation and liability were reduced.”

Similarly, we testified in February 1996 that concerns over existing

statutory requirements have hampered states’ efforts to experiment with

integrated environmental management, a concept under which a state

focuses on a whole facility and all of its sources of pollution, rather than

on a medium-specific source of pollution.26 We noted, for example, that

24A proposal for a site-specific rulemaking was published on March 31, 1997, for an XL project proposal

made by Merck and Company, Inc. This is the first XL project to use site-specific rulemaking. As of

May 1997, the rulemaking proposal was going through final negotiations.

25Water Pollution: Pollutant Trading Could Reduce Compliance Costs If Uncertainties Are Resolved

(GAO/RCED-92-153, June 15, 1992).

26Environmental Protection: Status of EPA’s Initiatives to Create a New Partnership With States

(GAO/T-RCED-96-87, Feb. 29, 1996), p.6. For example, rather than performing multiple inspections for

various environmental media, a state could use an integrated approach that incorporates inspections

for all media into a single, facilitywide inspection that focuses on production processes.

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while these efforts had indeed met with some success, they were

hampered by EPA funding and reporting requirements linked to individual

federal environmental statutes. Referring to states’ efforts to pursue

innovative regulatory programs, such as integrated environmental

management, we concluded that “as long as environmental laws are

medium-specific and prescriptive and EPA personnel are held accountable

for meeting the requirements of the laws, it will be difficult for the agency

to fundamentally change its relationships with the states to reduce

day-to-day control over program activities.”

These examples do not suggest that all meaningful improvements

necessarily require legislative authorization. In fact, EPA can point to

specific instances when constructive, cost-effective changes have been

made under current law. They do, however, substantiate the claims of

many state and industry officials that EPA will be limited in its ability to

truly “reinvent” environmental regulation under the legislative framework

as presently constructed.

Conclusions In many respects, EPA’s experience with reinvention is similar to that of

other public and private organizations that have attempted to change their

operations and cultures. To date, the agency has taken some important

steps toward devising a system that will protect the nation’s environment

more efficiently and cost-effectively. For example, the agency has learned

that it needs a system for elevating problems requiring senior

management’s attention. It also has begun to develop criteria for

systematically evaluating its reinvention efforts. Nonetheless, EPA faces

significant hurdles that must be addressed effectively if reinvention is to

succeed.

First, we found that managing a large number of often-complex and

demanding initiatives has caused difficulties for EPA staff as well as other

stakeholders. The problem has been compounded by (1) the fact that

some of the agency’s key initiatives have proved to be more demanding

than originally conceived and (2) key stakeholders are confused about the

primary objectives of these initiatives. EPA officials, including the Deputy

Administrator, have pointed out that the agency should respond to this

issue over time as evaluations of these initiatives provide management

with the information it needs to determine which programs should be

continued and what can be done to improve them. However, a systematic

and comprehensive review may be useful at this time—particularly in light

of (1) the problems, identified by EPA and other participants in reinvention

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activities, with the number and clarity of the initiatives; (2) the fact that

the agency has had several years of experience with many of the

initiatives; and (3) the fact that the agency has a long way to go in

developing evaluation components for many of the initiatives. Such a

review could lead EPA to discontinue initiatives that no longer support the

agency’s overall reinvention goals; set priorities among the initiatives that

will continue; and ensure that the specific objectives and expectations for

these initiatives are clear to stakeholders inside and outside the agency.

Second, while EPA has made enormous—perhaps unprecedented—efforts

to involve stakeholders with different interests and perspectives in the

reinvention process, achieving and maintaining consensus has proved to

be an enormous challenge. That challenge has been most difficult when

EPA has sought to achieve—or was perceived as seeking to

achieve—100 percent agreement. As the agency proceeds to evaluate its

involvement of stakeholders in the reinvention process, we believe that it

could usefully clarify its definition of consensus and the circumstances

under which unanimous agreement must be achieved.

Third, a long-term, institutional process for quickly resolving reinvention

problems could help EPA avert the kind of miscommunication,

disagreements, and other issues that undermined some of its earlier

reinvention projects. While EPA’s use of “reinvention ombudsmen” has

helped in specific cases, participants within and outside EPA have

maintained that senior managers will not be able to intervene each time a

problem arises. They maintain that a more sustainable process is

needed—one that distinguishes between problems that can be resolved at

lower levels within the agency and those that need to be elevated for

senior management’s attention. EPA management expressed its agreement

to us with the concept of such a process, and is currently negotiating

arrangements for this type of process with the states.

Fourth, EPA has made progress toward measuring the effectiveness of

some of its reinvention initiatives, developing strategies for evaluation and

establishing criteria to assess its reinvention efforts as a whole. At the

same time, EPA reinvention officials acknowledged that many initiatives do

not have an evaluation component and that such a component is not

formally required. We believe the agency should build on its initial steps

toward evaluating the success of reinvention by setting the expectation

that each of its reinvention initiatives should include some kind of

evaluation component. Such an evaluation component is all the more

important in light of the acknowledgement by EPA management that it

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needs such information to make informed decisions about which

initiatives to continue and how to improve them.

Finally, much discussion has focused on the potential need for statutory

changes as a precondition for reinventing environmental regulation. We

believe that constructive modifications can indeed be made under the

current environmental statutory framework. However, EPA will be limited

in its ability to truly “reinvent” environmental regulation without

legislative changes. EPA says it will need to consider the results of a key

advisory group, expected this summer, before concluding whether and

what kind of statutory changes it believes are needed.

Recommendations GAO recommends that the Administrator, EPA,

• direct the Associate Administrator, Office of Reinvention, to review the

agency’s reinvention initiatives to (1) determine whether there are any that

no longer support the agency’s overall reinvention goals and should

therefore be discontinued, (2) set priorities among those that will be

continued, and (3) issue clarifying guidance, as needed, to help ensure that

the specific objectives and expectations of continuing initiatives are clear

among stakeholders inside and outside the agency;

• improve the prospects for achieving consensus among concerned parties

in EPA’s reinvention efforts by clarifying the circumstances under which

unanimous agreement is required;

• develop a systematic process that would help to address problems in a

timely fashion by identifying which kinds of problems can be resolved at

lower levels within the agency and which should be elevated for senior

management’s attention; and

• direct that each of the agency’s initiatives include an evaluation

component that measures the extent to which the initiative has had its

intended effect.

Agency Comments Officials with EPA’s Regulatory Reinvention Team expressed general

agreement with the report’s recommendations, offering observations or

suggesting modifications in some cases. The Team’s Director noted,

however, that the timely resolution of complex problems involving

numerous regional and program office staff may not always be possible.

We acknowledge the difficulty of resolving such problems expeditiously.

However, we believe that the type of “triage” suggested in our

recommendation, which would elevate complex problems for senior

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management’s attention when disagreements could not (or should not) be

resolved at lower levels, would help to address this difficulty.

The Regulatory Reinvention Team’s Director also indicated that our

recommendation to include outcome-based evaluation components for

each initiative may be impractical because measuring environmental

outcomes may not be possible in all cases. We agree and modified this

recommendation to avoid calling for outcome-based measures in all cases.

However, we continue to believe that, when possible, outcome-based

performance measures should be used, as the Results Act directs.

The Director of the Regulatory Reinvention Team expressed some concern

that although the report did not specifically recommend statutory changes

to facilitate reinvention, some readers may infer that GAO is advocating

change in the medium-specific structure of the federal environmental

statutes. He added that the report did not assess how changes in

environmental law can improve environmental protection. We

acknowledge that assessing how specific changes could improve the

environmental statutory framework was outside the scope of this review,

although our draft report did reflect the views of EPA officials, industrial

and environmental groups, and other participants in the environmental

regulatory process on this issue. We also acknowledge that EPA, in

consultation with key advisers and stakeholders, is ultimately responsible

for assessing whether changes to environmental statutes should be

recommended to the Congress. At the same time, we believe that any

discussion of the issues affecting reinvention’s success would be

incomplete without citing the inherent limitations to fundamental change

posed by the statutes’ current medium-by-medium focus. Such limitations

have been acknowledged by EPA in past years; documented consistently in

analyses by GAO and other organizations; and cited as a key issue by the

large majority of officials interviewed for this report.

Finally, the officials suggested that the report focuses on the most visible

of EPA’s initiatives, such as Project XL and the Common Sense Initiative,

and does not sufficiently acknowledge (1) the agency’s smaller, less visible

initiatives and (2) the extent to which reinvention principles are being

applied throughout EPA’s day-to-day activities. Although we did not analyze

all of EPA’s reinvention initiatives in detail, focusing instead on the efforts

emphasized by the EPA and state officials contacted during our review, the

draft report acknowledged that EPA has undertaken numerous other

initiatives and listed many of them in appendix I. The draft report

cautioned against measuring the success of reinvention by the large

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number of initiatives under way, noting that EPA may need to reduce the

number of initiatives to improve the prospects of success for its

highest-priority efforts. In regard to the extent that reinvention principles

are being applied throughout EPA’s day-to-day activities, chapter 3 of the

draft report had, in fact, discussed many of the agency’s efforts to instill

reinvention principles into the staffs’ day-to-day activities, emphasizing

that EPA management considers cultural change to be a major goal of its

reinvention efforts. Here, too, however, the draft report discussed the

agency’s difficulties in achieving this goal, noting in chapter 3, for

example, “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 everyday activities.”

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Appendix I 

EPA’s Major Regulatory Reinvention

Initiatives

In March 1995, the administration announced a comprehensive effort to

reinvent environmental regulation1

 and identified 25 “high-priority actions”

and 14 “other significant actions” that the agency would use to launch this

effort. More recently, EPA identified 10 efforts for us as its larger and more

cross-cutting initiatives. These initiatives are denoted below in bold type.

Four of the 10 initiatives, which were not included in the original

announcement, are listed below under “Other Larger Cross-Cutting

Efforts.”

25 High-Priority

Actions

Improvements to the

Current System

• Issue a rule allowing open-market air emissions trading

• Promote effluent trading in watersheds

• Refocus hazardous waste regulation on high-risk wastes

• Refocus drinking water treatment requirements on the highest risks

• Expand the use of risk assessment in local communities

• Provide flexible funding for states and tribes

• Provide sustainable development challenge grants

• Encourage regulatory negotiation and consensus-based rulemaking

• Reduce existing reporting and recordkeeping requirements by

25 percent

• Create one-stop emission reports

• Consolidate federal air rules

• Move to risk-based enforcement

• Establish compliance incentives for small businesses and communities

• Establish small business compliance assistance centers

• Create incentives for auditing, disclosure, and correction

• Develop a self-certification (compliance) program for environmental

requirements not associated with emissions or risk data

• Expand the public’s electronic access to information on all EPA

programs

• Establish an EPA center for environmental information and statistics

Building Blocks for a New

System:

• Project XL (Excellence and Leadership) for facilities

• Alternative strategies for sectors (Common Sense Initiative)

1

President Bill Clinton and Vice President Al Gore, Reinventing Environmental Regulation, National

Performance Review (Mar. 16, 1995).

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Initiatives

• Alternative strategies for communities

• Alternative strategies for agencies

• Pilot third-party audits for industry compliance

• Multimedia permitting

• Design for the Environment—“Green Chemistry Challenge”

Other Significant

Actions

Performance and Market

Based Regulations

• Conduct several demonstrations of facilitywide limits for air emissions

• Propose targeted Clean Water Act revisions to provide flexibility in

meeting effluent discharge deadlines

Setting Priorities Based on

Sound Science

• Eliminate millions of storm water permit applications

• Exempt low-risk pesticides and toxic chemicals from regulation

• Establish a program to forecast future environmental problems

Building Partnerships • Encourage states and tribes to implement a flexible, performance-based

approach for permitting municipal landfills

Cutting Red Tape • Save billions on the costs of disposing of polychlorinated bi-phenyls (PCB)

• Simplify air permit revision requirements

• Simplify the review of new air pollution sources

• Simplify water permit paperwork

• Streamline corrective action procedures under the Resource,

Conservation, and Recovery Act

Better Accountability,

Compliance, and

Enforcement

• Develop flexible compliance agreements for specific industries

The Power of Information • Commission an independent study on collecting and using information

more effectively

• Establish a data transfer system that will allow facilities to report

monitoring results electronically

Page 61 GAO/RCED-97-155 Reinventing Environmental Regulation
Appendix I 

EPA’s Major Regulatory Reinvention

Initiatives

Other Larger Cross-Cutting

Initiatives

• Brownfields Initiative

• Environmental Leadership Program

• National Environmental Performance Partnership System

• Voluntary Partnerships (applies to a broad range of activities)

Page 62 GAO/RCED-97-155 Reinventing Environmental Regulation
Appendix II 

Major Contributors to This Report

Resources,

Community, and

Economic

Development

Division, Washington,

D.C.

Steve Elstein, Assistant Director

Lisa T. Pittelkau, Evaluator-in-Charge

Beverly Norwood Dulaney, Senior Evaluator

Office of the General

Counsel

Karen Keegan, Senior Attorney

(160365) Page 63 GAO/RCED-97-155 Reinventing Environmental Regulation
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