II

104TH CONGRESS

2D SESSION S. 2160

To provide for alternative procedures for achieving superior environmental

performance, and for other purposes.

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 28, 1996

Mr. LIEBERMAN introduced the following bill; which was read twice and

referred to the Committee on Environment and Public Works

A BILL

To provide for alternative procedures for achieving superior

environmental performance, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Innovative Compliance

5 Act of 1996’’.

6 SEC. 2. FINDINGS.

7 Congress finds that—

8 (1) superior environmental performance can be

9 achieved in some cases by granting regulated indus-
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1 tries the flexibility to develop alternative strategies

2 for achieving environmental results;

3 (2) alternative strategies also have the potential

4 to—

5 (A) substantially reduce compliance costs;

6 (B) foster cooperative partnerships among

7 industry, government, and local communities;

8 (C) encourage greater innovation and

9 greater pollution prevention in meeting environ10 mental goals; and

11 (D) increase the involvement of members

12 of the local community and citizens in decisions

13 relating to the approach taken by a facility for

14 achieving environmental goals; and

15 (3) the acid deposition control program estab16 lished under title IV of the Clean Air Act (42 U.S.C.

17 7651 et seq.), the stratospheric ozone protection pro18 gram established under title VI of the Act (42

19 U.S.C. 7671 et seq.), and other initiatives dem20 onstrate that properly designed market-based ap21 proaches can achieve greater environmental perform22 ance and encourage innovation while saving money

23 for regulated industries and government when com24 pared with more traditional control approaches.
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1 TITLE I—ALTERNATIVE STRATE2 GIES FOR ACHIEVING SUPE3 RIOR ENVIRONMENTAL PER4 FORMANCE

5 SEC. 101. DEFINITIONS.

6 In this title:

7 (1) ADMINISTRATOR.—The term ‘‘Adminis8 trator’’ means the Administrator of the Environ9 mental Protection Agency.

10 (2) AGENCY.—The term ‘‘Agency’’ means the

11 Environmental Protection Agency.

12 (3) AGENCY RULE.—The term ‘‘Agency rule’’—

13 (A) means a rule (as defined in section

14 551 of title 5, United States Code) issued by

15 the Agency; but

16 (B) does not include any emissions reduc17 tion requirement of any rule under title IV of

18 the Clean Air Act (relating to acid deposition

19 control) (42 U.S.C. 7651 et seq.) or any other

20 requirement pursuant to any other enforceable

21 trading program.

22 SEC. 102. PETITION.

23 A person that owns or operates a facility that is sub24 ject to an Agency rule may petition the Administrator to

25 modify or waive the Agency rule with respect to the facility
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1 and to enter into an enforceable compliance agreement

2 with the person establishing an alternative compliance

3 strategy with respect to the facility in accordance with this

4 title.

5 SEC. 103. CONTENTS OF PETITION.

6 A petition under section 102 shall—

7 (1) identify the Agency rule for which the modi8 fication or waiver is sought and the alternative com9 pliance strategy that is proposed;

10 (2) identify the facility to which the modifica11 tion or waiver would pertain; and

12 (3) demonstrate that the alternative compliance

13 strategy meets the requirements of section 105.

14 SEC. 104. STAKEHOLDER PARTICIPATION PROCESS.

15 (a) IN GENERAL.—A person that submits a petition

16 under section 102 shall—

17 (1) undertake a stakeholder participation proc18 ess in accordance with this section; and

19 (2) work to ensure that there is adequate tech20 nical support for an effective process.

21 (b) REQUIREMENTS.—The stakeholder participation

22 process shall—

23 (1) be balanced and representative of interests

24 likely to be affected by the proposed alternative com25 pliance strategy;
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1 (2) ensure options for public access to the proc2 ess and make publicly available the proceedings of

3 the stakeholder participation process, except with re4 spect to confidential information of the petitioner;

5 (3) establish procedures for conducting the

6 stakeholder participation process, including open

7 meetings as appropriate; and

8 (4) if necessary, provide for appropriate agree9 ments to protect confidential information of the peti10 tioner proposing the alternative compliance strategy.

11 (c) PUBLIC NOTICE OF PETITION.—A person that

12 submits a petition under section 102 shall provide effective

13 public notice of the intent of the petitioner to pursue the

14 alternative compliance strategy to—

15 (1) community groups;

16 (2) environmental groups;

17 (3) potentially affected employees;

18 (4) persons living near the facility; and

19 (5) Federal, State, and local government agen20 cies in areas that may be affected by the alternative

21 compliance strategy, including areas that may be af22 fected by transport of a pollutant.

23 (d) PARTICIPATION.—

24 (1) IN GENERAL.—Any person may participate

25 in the stakeholder participation process, except that
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1 a person that has a business interest in competition

2 with that of the petitioner may be excluded.

3 (2) GOVERNMENT OFFICIALS.—Federal, State,

4 and local government officials in areas that may be

5 affected by the proposed alternative compliance

6 strategy may participate in the stakeholder partici7 pation process.

8 (3) LIMITATION ON NUMBER OF PARTICI9 PANTS.—In order to provide for a manageable stake10 holder process, a petitioner may propose a limit on

11 the number of stakeholder participants if the peti12 tioner demonstrates to the satisfaction of the Ad13 ministrator that the stakeholder participants ade14 quately represent, in a balanced manner, the full

15 range of interests (excluding competitive business in16 terests) that may be affected by the alternative com17 pliance strategy.

18 (e) MODIFICATION OR WAIVER OF PROCESS.—

19 (1) REQUEST.—A petitioner may request that

20 the Administrator modify or waive 1 or more of the

21 requirements of this section.

22 (2) CRITERIA.—The Administrator may grant a

23 request under paragraph (1) if, after notice and op24 portunity for public comment, the Administrator de25 termines that—
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1 (A) there is insufficient interest in conven2 ing stakeholder participants; and

3 (B) the stakeholder participation process

4 would not be useful in view of the routine or

5 noncontroversial nature of the proposal.

6 SEC. 105. REQUIREMENTS FOR APPROVAL.

7 (a) IN GENERAL.—The Administrator may approve

8 a petition under section 107 if the Administrator deter9 mines that—

10 (1) the facility is in compliance with all applica11 ble environmental and public health regulations and

12 other requirements;

13 (2) the alternative compliance strategy will

14 achieve better overall environmental results than

15 would be achieved under the current regulatory re16 quirements and any reasonably anticipated future

17 regulatory requirements;

18 (3) the alternative compliance strategy will not

19 result in adverse cross-media impacts;

20 (4) the alternative compliance strategy provides

21 accountability, monitoring, enforceability, and public

22 and Agency access to information at least equal to

23 that provided under the Agency rule that is modified

24 or waived;
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1 (5) the alternative compliance strategy provides

2 for access to information adequate to enable verifica3 tion of environmental performance by any interested

4 person;

5 (6) the alternative compliance strategy ensures

6 worker health and safety;

7 (7) no person or population would be subjected

8 to unjust or disproportionate environmental impacts

9 as a result of implementation of the alternative com10 pliance strategy;

11 (8) the alternative compliance strategy will not

12 result in transport of a pollutant to another area;

13 (9) the alternative compliance strategy will not

14 result in a violation of a national environmental or

15 health standard;

16 (10) all State and local environmental agencies

17 in areas that may be affected by the alternative com18 pliance strategy support the petition;

19 (11) the stakeholder participation process met

20 the requirements of section 104;

21 (12) as determined on the basis of a well ac22 cepted, documented methodology, the alternative

23 compliance strategy will not result in any significant

24 increase in the risks of adverse effects, or shift any

25 significant risks of adverse effects, to the health of
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1 an individual, population, or natural resource af2 fected by the alternative compliance strategy;

3 (13) the agreement is for a specified term not

4 to exceed 10 years; and

5 (14) in the case of a petition involving more

6 than 1 pollutant or more than 1 medium, a broad

7 consensus of the stakeholder participants has ap8 proved the alternative compliance strategy.

9 (b) BETTER OVERALL RESULTS.—

10 (1) CRITERIA.—For the purposes of subsection

11 (a)(2), the achievement of better overall environ12 mental results shall be measured as follows:

13 (A) For existing facilities, the benchmark

14 shall be the lesser of—

15 (i) the level of releases of pollutants

16 into the environment being achieved prior

17 to the date of submission of the petition;

18 or

19 (ii) the level of releases of pollutants

20 into the environment allowed under the

21 current regulatory requirements and any

22 reasonably anticipated future regulatory

23 requirements;

24 except that the Administrator may modify the

25 benchmark on a case-by-case basis for a facility
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1 that has reduced releases significantly below ap2 plicable regulatory requirements prior to the

3 date of submission of the petition.

4 (B) For existing facilities being modified to

5 significantly expand production, the benchmark

6 shall be the lesser of—

7 (i) the level of releases of pollutants

8 into the environment being achieved (on a

9 per unit of production basis) prior to the

10 date of submission of the petition; or

11 (ii) the level of releases of pollutants

12 into the environment allowed under the

13 current regulatory requirements and any

14 reasonably anticipated future regulatory

15 requirements on a per unit of production

16 basis.

17 (C) For new facilities, the benchmark shall

18 be based on the lesser of—

19 (i) the level of releases of pollutants

20 into the environment allowed under the

21 current regulatory requirements and any

22 reasonably anticipated future regulatory

23 requirements; or

24 (ii) the level of releases of pollutants

25 into the environment being achieved by the
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1 best performance practices of similarly sit2 uated facilities.

3 (2) OTHER CONSIDERATIONS.—In addition to

4 determining that the criteria of paragraph (1) are

5 met, the Administrator may consider other factors

6 supporting superior environmental, social, and eco7 nomic benefits set forth in the petition.

8 (c) OBJECTION BY STAKEHOLDER.—Notwithstand9 ing subsection (a)(14), the Administrator shall deny a pe10 tition involving more than 1 pollutant or more than 1 me11 dium if—

12 (1) 1 or more stakeholders object to the alter13 native compliance strategy; and

14 (2) the Administrator determines, based on the

15 objection, any response to the objection, and all

16 other relevant facts, that—

17 (A) the objection relates to any of the cri18 teria stated in paragraphs (1) through (13) of

19 subsection (a); and

20 (B) the objection has a clear and reason21 able foundation.

22 SEC. 106. PRIORITY.

23 The Administrator shall give priority to petitions with

24 alternative compliance strategies using pollution preven25 tion approaches and to petitions submitted by persons
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1 with a strong record of outstanding environmental per2 formance and worker health and safety protection.

3 SEC. 107. DETERMINATION OF PETITION.

4 Not later than 180 days after receiving a petition

5 under section 102, the Administrator, subject to section

6 112, shall—

7 (1) propose to approve the petition and enter

8 into an enforceable compliance agreement; or

9 (2) submit a written explanation to the peti10 tioner of the basis for determining that the require11 ments of section 105 are not met.

12 SEC. 108. PUBLIC NOTICE OF INTENT TO APPROVE PETI13 TION.

14 The Administrator shall publish notice of the intent

15 to approve a petition in the Federal Register at least 60

16 days prior to approving the petition.

17 SEC. 109. ENFORCEABILITY.

18 (a) IN GENERAL.—If the Administrator and a person

19 enter into an enforceable compliance agreement under this

20 title, the person shall comply with the agreement in lieu

21 of any Agency rule modified or waived by the agreement,

22 and compliance with the agreement shall be considered to

23 be compliance with the Agency rule for all purposes.

24 (b) SPECIFICATION OF AGENCY RULES TO WHICH

25 AGREEMENT APPLIES.—An agreement under subsection
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1 (a) shall specify each Agency rule that is modified or

2 waived.

3 SEC. 110. PRELIMINARY COMMENT PROCESS.

4 The Administrator shall establish a process for pro5 viding preliminary comments by the Administrator on a

6 petition.

7 SEC. 111. JUDICIAL REVIEW.

8 A decision by the Administrator to approve or dis9 approve a petition under this title shall constitute final

10 agency action and shall be subject to judicial review.

11 SEC. 112. LIMITATION ON PETITIONS CONSIDERED.

12 The Administrator shall not consider more than 50

13 petitions for alternative compliance strategies unless—

14 (1) a petitioner demonstrates that, because the

15 petitioner is situated in a position that is virtually

16 identical to that of another person that has been

17 granted approval of a petition, the petitioner may be

18 at a substantial competitive disadvantage if the peti19 tion is not considered; or

20 (2) at the sole discretion of the Administrator

21 and taking into account the full range of the Agen22 cy’s obligations, the Administrator determines that

23 adequate resources exist to evaluate a greater num24 ber of petitions and to oversee implementation of a
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1 greater number of enforceable compliance agree2 ments.

3 SEC. 113. SMALL BUSINESS PROPOSALS.

4 The Administrator shall establish a program to facili5 tate development of proposals for alternative means of

6 compliance from groups of small businesses and to provide

7 expedited review of proposals for alternative means of

8 compliance from groups of small businesses.

9 SEC. 114. REPORT AND EVALUATION.

10 Not later than 3 years after the date of enactment

11 of this Act, the Administrator shall submit a report to

12 Congress on the aggregate effect of the enforceable com13 pliance agreements entered into under this title, includ14 ing—

15 (1) the number and characteristics of the agree16 ments;

17 (2) estimates of the environmental and public

18 health benefits, including any reduction in quantities

19 or types of emissions and wastes generated;

20 (3) estimates of the effect on compliance costs

21 and jobs creation;

22 (4) the degree and nature of public participa23 tion and accountability;

24 (5) the incidence of noncompliance with the

25 agreements entered into under this title compared to
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1 the incidence of noncompliance with relevant Agency

2 rules by similarly situated facilities;

3 (6) conclusions on the functioning of stake4 holder participation processes; and

5 (7) recommendations for legislative action.

6 SEC. 115. SAVINGS CLAUSE.

7 A decision by the Administrator to enter into an en8 forceable compliance agreement under this title shall not

9 create any obligation of the Agency to modify any Agency

10 rule insofar as the rule applies to any facility other than

11 the facility subject to the enforceable compliance agree12 ment. Nothing in this title shall affect the ability of the

13 Administrator to enter into or carry out enforceable alter14 native compliance agreements under other law.

15 SEC. 116. COMPUTER ACCESS.

16 The Administrator shall establish, and provide on-line

17 computer access to, a national repository of enforceable

18 compliance agreements entered into under this title.

19 SEC. 117. FUNDING.

20 (a) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to the Agency to carry

22 out this title such sums as are necessary for fiscal years

23 1997 through 2000.

24 (b) AUTHORIZATION OF FEES.—
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1 (1) IN GENERAL.—The Administrator may as2 sess reasonable fees for consideration of petitions.

3 (2) OFFSET.—Fees assessed under paragraph

4 (1) shall offset the expenses incurred by the Admin5 istrator and may be used only for processing, admin6 istering, implementing, and enforcing enforceable

7 compliance agreements.

8 (3) OTHER FEES.—Fees assessed under this

9 subsection shall be collected in lieu of fees associated

10 with otherwise applicable rules or requirements

11 modified by an enforceable compliance agreement.

12 (4) WAIVER.—The Administrator may waive

13 any fees under this subsection for any proposal for

14 an alternative means of compliance from a small en15 tity (as defined under section 601 of title 5, United

16 States Code) or group of small entities.

17 TITLE II—ENVIRONMENTAL

18 MARKET-BASED STRATEGIES

19 SEC. 201. CONSIDERATION OF MARKET-BASED MECHA20 NISMS.

21 Before issuing a rule establishing a new program in22 tended to limit the discharge or emission of a pollutant

23 into the environment, the Administrator of the Environ24 mental Protection Agency shall, in appropriate cir-
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1 cumstances, consider including market-based mechanisms

2 in the design and implementation of the program.

3 SEC. 202. MARKET-BASED MECHANISMS.

4 (a) IN GENERAL.—Subject to subsection (b), a mar5 ket-based mechanism shall include—

6 (1) the imposition, on each regulated person, of

7 express legal accountability for an explicit perform8 ance objective expressed as a quantity of actual dis9 charges or emissions (and each such person’s emis10 sions or discharge limit shall represent a share of a

11 total limit on emissions or discharges from all

12 sources affected by the rule); and

13 (2) the authorization of the regulated person to

14 comply with the requirements described in para15 graph (1) by transferring or acquiring increments of

16 emissions or discharge reductions, which shall rep17 resent reductions in emissions or discharges in ex18 cess of those required to be made by a regulated en19 tity to meet its emissions or discharge limits.

20 (b) OTHER APPROPRIATE FACTORS.—

21 (1) IN GENERAL.—If the Administrator of the

22 Environmental Protection Agency determines that a

23 program with the elements specified in subsection

24 (a) is not appropriate, the Administrator may in25 clude in a market-based mechanism a method by
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1 which a regulated person subject to emissions or dis2 charge limits that are not expressed as a quantity of

3 total emissions or discharges may—

4 (A) elect to meet the applicable emissions

5 or discharge limits by limiting the person’s total

6 emissions or discharges to a specified quantity

7 that corresponds to the regulated person’s ini8 tial emissions or discharge limits; and

9 (B) achieve compliance with the emissions

10 or discharge limits established under subpara11 graph (A) by acquiring or transferring incre12 ments of emissions or discharge reductions.

13 (2) INCREMENTAL REDUCTIONS.—Subject to

14 paragraph (3), increments described in paragraph

15 (1)(B) shall—

16 (A) represent reductions in emissions or

17 discharges in excess of reductions required to

18 be made by a regulated entity to meet its emis19 sions or discharge limits; and

20 (B) be permanent, enforceable, and nondis21 crete.

22 (3) EXCLUSION AS PART OF MECHANISM.—A

23 rule permitting sources to acquire increments of

24 emissions or discharge reductions when increments

25 represent reductions that are discrete, nonperma-
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1 nent, or discontinuous and are generated by sources

2 the total emissions or discharges of which are not

3 subject to a quantified emissions or discharge limita4 tion requirement shall not be part of a market-based

5 mechanism.

6 (c) LIMITATION.—Notwithstanding any other provi7 sion of this title, the Administrator of the Environmental

8 Protection Agency may not consider market-based mecha9 nisms for a program if—

10 (1) the program would result in levels of emis11 sions or discharges of the pollutant regulated by the

12 rule in excess of those that would be achieved under

13 an alternative program, taking into account any in14 centives for generating and retaining excess reduc15 tions created by the opportunity to acquire and

16 transfer increments of emissions or discharge reduc17 tions as a means of meeting the emissions or dis18 charge limitation requirement applicable to the

19 source; or

20 (2) the program pertains to a pollutant the

21 properties of which are such that the environmental

22 or human health purposes for which the pollutant is

23 subject to regulation, taking into account any dis24 proportionate or unjust environmental impacts to an

25 individual, population, or natural resource, and any
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1 transport of the pollutant that may result, may be

2 achieved only through the imposition of nontransfer3 able source-specific emissions or discharge limitation

4 requirements.

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