24784 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

the summer of 1999. In conjunction

with taking final action on its response

to the SO2 NAAQS remand, EPA also

intends to take any final action on the

ILP no later than December 2000. In so

doing, EPA will draw upon its response

to the remand on the SO2 NAAQS

decision so as to ensure consistency

between these actions.

Interim Actions

Between now and when final action

on the SO2 NAAQS remand and the ILP

is taken, EPA intends to work with

States/tribes with known areas of high

5-minute peak SO2 concentrations to

undertake a number of actions. These

actions include the following:

determining whether the existing SO2

NAAQS and State Implementation Plan

(SIP) requirements are being met in such

areas; taking regulatory action in such

areas where appropriate (e.g., SIP calls);

and initiating enforcement review/

action to ensure SIP requirements are

met. The EPA also plans to issue

monitoring and other guidance to

States/tribes/regions to assist them in

identifying and addressing high 5-

minute peak problems.

Solicitation of Information on 5-Minute

Peak SO2 Concentrations

To supplement its current information

on 5-minute peak SO2 concentrations

and exposures of sensitive asthmatic

individuals to peak levels of concern,

EPA is soliciting comments and

associated information and analyses on

such 5-minute peak SO2 concentrations.

The EPA will consider this information

in the context of the interim actions

described above and in its response to

the remand and in its final ILP decision.

More specifically, EPA solicits

information and analyses on the

following: sources or source types and

the nature of events that are most likely

to give rise to short-term peak SO2

levels; the magnitude and frequency of

such peaks; the time of day of the

occurrence of such peaks;

meteorological conditions in the area in

which such peaks occur; the density of

the population near the source(s)

involved; and the frequency with which

asthmatic individuals would likely be

exposed to peak SO2 concentrations at

0.60 ppm and above while at elevated

ventilation rates (i.e., during exercise).

Dated: April 29, 1998.

Richard D. Wilson,

Acting Assistant Adminstrator for Air and

Radiation.

[FR Doc. 98–11874 Filed 5–4–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

[FRL–6009–4]

Environmental Laboratory Advisory

Board, Meeting Date and Agenda

AGENCY: Environmental Protection

Agency.

ACTION: Notice of open meeting.

SUMMARY: The Environmental Protection

Agency (EPA) will convene an open

meeting of the Environmental

Laboratory Advisory Board (ELAB) on

June 4, 1998, from 2 p.m. to 5 p.m. This

meeting will be conducted by

teleconference. The public is invited to

join Ms. Ramona Trovato in Room 911,

West Tower, Waterside Mall, 401 M

Street, SW., Washington, DC.

The agenda will include discussion

on the newly established working group

on Third Party Assessors; Consensus

Position from EPA’s Environmental

Monitoring Management Council;

Continuation of ELAB vs. former

NELAC Coordination Committee;

Conflict-of-Interest Issues with respect

to the Accreditation Authorities;

Training of Assessors; Method Specific

Checklists; Simultaneous Approval of

Laboratories; and the Agenda for July 1,

1998, meeting at NELAC IV.

The public is encouraged to attend.

Time will be allotted for public

comment. Written comments are

encouraged and should be directed to

Ms. Jeanne Mourrain; Designated

Federal Officer; USEPA; NCERQA (MD–

75); Research Triangle Park, NC 27711.

If questions arise, please contact Ms.

Mourrain at 919/541–1120, fax 919/

541–4261, or e-mail

mourrain.jeanne@epamai.epa.gov.

Dated: April 24, 1998.

Nancy W. Wentworth,

Director, Quality Assurance Division.

[FR Doc. 98–11877 Filed 5–4–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

Joint EPA/State Agreement To Pursue

Regulatory Innovation

[FRL–6008–7]

AGENCY: Environmental Protection

Agency.

ACTION: Notice of Availability of Joint

EPA/State Innovation Agreement.

SUMMARY: The U.S. Environmental

Protection Agency (EPA) and senior

State environmental officials recently

signed an agreement entitled Joint EPA/

State Agreement to Pursue Regulatory

Innovation (hereafter ‘‘Innovations

Agreement’’). The purpose of the

Innovations Agreement is to improve

environmental protection in the United

States, improve EPA/State

environmental management practices,

and provide timely decision-making on

good ideas. These goals will be achieved

through innovation proposals by States,

with the intent that many successful

innovations will lead to system-wide

improvements in environmental

protection.

The Innovations Agreement embodies

a set of general principles and a process

for EPA/State innovation activities that

includes:

—Statements of purpose and scope of

the agreement;

—Over-arching principles that will

govern joint EPA/State regulatory

innovation activities;

—The process EPA and the States will

use to identify good ideas, including

both the continuation of existing

State/EPA interactions to start

innovation projects, and the

establishment of a new mechanism for

making decisions on innovative

proposals that do not fit into ongoing

reinvention programs; and

—Guidelines for how EPA and the

States will evaluate the success of

innovation activities carried out

under this agreement.

This Innovations Agreement builds on

the many reinvention efforts that are

underway in the States and EPA. It is

intended to ensure joint decisionmaking, timely review, broad public

involvement, and continued progress in

fostering and implementing ideas that

are good for our environment and the

people we serve.

ADDRESSES: An electronic version of the

Innovations Agreement is available on

EPA’s Office of Reinvention internet

home page at http://www.epa.gov/

reinvent. Interested parties can obtain a

single copy of the report by contacting

Louise McLaurin (phone 202–260–4261

or e-mail

mclaurin.louise@epamail.epa.gov).

FOR FURTHER INFORMATION CONTACT: For

questions on the joint EPA/State

Innovations Agreement, please contact

John Glenn, U.S. Environmental

Protection Agency, Office of

Reinvention, (1803), 401 M Street, S.W.,

Washington, DC, 20460, phone 202–

260–5029, e-mail

glenn.john@epamail.epa.gov; or Bruce

Brott, Minnesota Pollution Control

Agency, phone 612–297–8380, e-mail

bruce.brott@pca.state.mn.us.

SUPPLEMENTARY INFORMATION: To find

new, better, and more efficient and
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24785

effective ways to improve

environmental protection, the

Environmental Council of the States

(ECOS) and EPA Administrator Carol

Browner formed a Task Group to

develop a joint agreement on EPA/State

regulatory innovation. The Task Group

developed the draft Joint EPA/State

Agreement to Pursue Regulatory

Innovation (‘‘Innovations Agreement’’),

which was published for public

comment last fall in the Federal

Register (62 FR 56182–89; October 29,

1997). A balanced set of eleven

comments with 31 signatories

representing industry, environmental

interest groups, and government were

submitted. All comments were

considered in preparing the final draft

of the Innovations Agreement. At the

ECOS meeting on March 25, 1998, the

State officials present voted

unanimously to approve the Innovations

Agreement. In late April, EPA and

senior State environmental officials

signed the joint Agreement. The full text

of the Innovations Agreement and the

EPA/State Response to Comments

follow.

Part 1

Joint EPA/State Agreement To Pursue

Regulatory Innovation

‘‘* * * We must encourage innovation by

providing flexibility with an industry-byindustry, place-by-place approach to

achieving standards, * * *. But we will

require accountability that such standards be

met. Rather than focusing on pollutant-bypollutant approaches, attention must shift to

integrated strategies for whole facilities,

whole economic sectors, and whole

communities.’’ [Excerpt from President

Clinton’s ‘‘Reinventing Environmental

Regulation,’’ March 16, 1995]

The U.S. Environmental Protection

Agency and senior State environmental

officials (hereafter referred to as

‘‘States’’) agree on the need to

experiment with new approaches to

improve our nation’s environment.

These new approaches can help us

identify cleaner, cheaper, smarter ways

to ensure that all Americans enjoy a

clean environment and healthy

ecosystems. Through this joint

commitment, EPA and the States agree

to encourage, evaluate, implement, and

disseminate ideas that seek better ways

of achieving our environmental goals.

This agreement presumes that EPA and

the States will find ways to help good

ideas succeed, and that joint EPA and

State efforts to promote and test new

ideas will result in the maximum

benefit to the American people and their

environment.

Two years ago, EPA and the States

entered into an historic agreement to

establish the National Environmental

Performance Partnership System

(NEPPS). That agreement recognized

that we have achieved significant

progress since environmental protection

programs were created more than 25

years ago. Yet to meet today’s new

challenges, we agreed that States and

EPA must manage for environmental

results, increase public involvement,

and use environmental indicators to

track our progress. We agreed that States

and EPA must become true partners in

implementing federal programs, and

that different State programs need

different levels of federal involvement.

This new partnership creates an

environment in which State and local

regulatory innovations can, and should,

flourish. As the primary, front-line

delivery agent for environmental

programs, States are a natural laboratory

for testing new ideas. State and local

environmental professionals are closest

to environmental problems and

communities, and can often develop the

most practical solutions. These

professionals should be encouraged to

seek innovative solutions that may not

fit within the traditional approaches.

We agree that our efforts to promote

innovation must, in the end, be directed

toward achieving our public health and

environmental goals in a more efficient

or effective way.

EPA also seeks to promote regulatory

innovations at all levels. This agreement

complements, but does not supplant,

other national or State efforts to develop

regulatory innovations. Its purposes are

to: improve environmental protection in

the United States; to improve EPA/State

environmental management practices;

and to provide timely decision-making

on good ideas.

States and EPA agree that the

following principles should guide us as

we develop, test and implement

regulatory innovations:

Experimentation: Innovation involves

change, new ideas, experimentation and

some risk of failure. Experiments that

will help us achieve environmental

goals in better ways are worth pursuing

when success is clearly defined, costs

are reasonable, and environmental and

public health protections are

maintained.

Environmental Performance:

Innovations must seek more efficient

and/or effective ways to achieve our

environmental and programmatic goals,

with the objective of achieving a

cleaner, healthier environment and

promoting sustainable ecosystems.

Smarter Approaches: To reinvent

environmental regulation, regulators

should seek creative ways to remedy

environmental problems and improve

the environmental protection system,

and be receptive to innovative, common

sense approaches.

Stakeholder Involvement: Effective

stakeholder involvement produces

better innovation projects and catalyzes

public support for new approaches.

Stakeholders must have an opportunity

for meaningful involvement in the

design and evaluation of innovations.

Stakeholders may include other State/

local government agencies, the regulated

community, citizen organizations,

environmental groups, and individual

members of the public. Stakeholder

involvement should be appropriate to

the type and complexity of the

innovation proposal.

Measuring and Verifying Results:

Innovations must be based on agreedupon goals and objectives with results

that can be reliably measured in order

to enable regulators and stakeholders to

monitor progress, analyze results, and

respond appropriately.

Accountability/Enforcement: For

innovations that can be implemented

within the current regulatory

framework, current systems of

accountability and mechanisms of

enforcement remain in place. For

innovations that involve some degree of

regulatory flexibility, innovators must

be accountable to the public, both for

alternative regulatory requirements that

replace existing regulations and for

meeting commitments that go beyond

compliance with current requirements.

Regulators will reserve full authority to

enforce alternative regulatory

requirements to ensure that public

health and environmental protections

are maintained, and must be willing to

explore new approaches to establish

accountability for beyond-compliance

commitments.

State-EPA Partnership: The States and

EPA will promote innovations at all

levels to increase the efficiency and

effectiveness of environmental

programs. We must work together in the

design, testing, evaluation and

implementation of innovative ideas and

programs, utilizing each other’s

strengths to full advantage.

EPA agrees to establish a process that

ensures timely review and decisionmaking on State innovation proposals

based on implementation of the above

seven principles. The States agree to

consult early with EPA, to develop

proposals consistent with the above

principles, and to involve stakeholders.

EPA and the States agree on the need for

a clearinghouse of regulatory

innovations so that promising ideas can

be shared across state lines and within

EPA.
24786 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

We agree that the principles and

process described in this agreement

should be open to continual

improvement. As part of ongoing review

and evaluation, EPA and the States

agree to evaluate the need to further

institutionalize the broad principles and

process to help future innovations

succeed.

Through this agreement, as detailed in

Part 2, States and EPA are committed to

work together and with all stakeholders

to apply the lessons learned from

successful innovations in creating the

best possible system to achieve greater

environmental protection at a

reasonable cost.

We agree to encourage innovation that

will prepare us for meeting our

environmental challenges well into the

21st century.

Carol M. Browner,

Administrator, U.S. Environmental Protection

Agency.

Robert C. Shinn, Jr.,

Commissioner, New Jersey Department of

Environmental Protection, President of ECOS.

Fred Hansen,

Deputy Administrator, U.S. Environmental

Protection Agency.

Robert W. Varney,

Commissioner, New Hampshire Department

of Environmental Services, Vice President of

ECOS.

J. Charles Fox,

Associate Administrator for Reinvention, U.S.

Environmental Protection Agency.

Peder Larson,

Commissioner, Minnesota Pollution Control

Agency, and Co-Chair, ECOS Regulatory

Innovations Task Group.

Randall Mathis,

Commissioner, Arkansas Department of

Pollution Control and Ecology, and Co-Chair,

ECOS Regulatory Innovations Task Group.

Dated: April 1998.

Part 2

I. Overview of This Agreement

This agreement embodies a set of

general principles and a process for

EPA/State innovation activities. This

agreement includes:

—Statements of purpose and scope of

the agreement;

—Over-arching principles that will

govern joint EPA/State regulatory

innovation activities;

—The process EPA and the States will

use to identify good ideas, including

both the continuation of existing

State/EPA interactions to start

innovation projects, and the

establishment of a new mechanism for

making decisions on innovative

proposals that do not fit into ongoing

reinvention programs; and

—Guidelines for how EPA and the

States will evaluate the success of

innovation activities carried out

under this agreement.

This agreement builds on the many

reinvention efforts that are underway in

the States and EPA. It is intended to

ensure joint decision-making, timely

review, broad public involvement, and

continued progress in fostering and

implementing ideas that are good for

our environment and the people we

serve.

II. Purpose and Scope of the Agreement

A. Purpose

The Administrator of the U.S.

Environmental Protection Agency (EPA)

and senior State environmental officials

agree to three purposes for this effort: to

improve environmental protection in

the United States; to improve EPA/State

environmental management practices;

and to provide timely decision-making

on good ideas. These purposes will be

achieved through State proposals for

innovation, with the intent that many

successful innovations will lead to

system-wide improvements in

environmental protection.

1. Improved Environmental Protection

The Administrator of the U.S.

Environmental Protection Agency (EPA)

and senior State environmental officials

agree that the States and EPA need to

encourage, seek out, and try innovative

approaches to improve our nation’s

environment. These innovative

approaches can offer mechanisms that

are more cost-effective, less adversarial

and contentious, and have a better

environmental impact. While we have

made significant progress in

environmental protection, much

remains to be done and no backsliding

can be permitted. Innovative approaches

offer us tools to improve current

environmental protection programs and

to tackle the environmental problems of

the future.

Innovation can support sustainable

development and continuous

environmental improvement by offering

new approaches that harmonize our

progress toward environmental,

economic, and societal goals. Some

innovations may address only one of

these goals. Innovation proposals that

address more than one of these goals are

desirable. For example, innovations

which facilitate a transition to pollution

prevention and product stewardship as

primary methods of achieving

environmental goals can also have

significant economic or societal

benefits. To support sustainable

development and continuous

environmental improvement,

innovations should utilize pollution

prevention methods rather than

pollution control whenever possible.

2. Improved EPA/State Environmental

Management Practices

Through this agreement, EPA and the

States will test and implement

innovative approaches that lead to

improved environmental programs. This

agreement is consistent with the

concepts embodied in the National

Environmental Performance Partnership

System (NEPPS). In fact, NEPPS was

established, in part, to encourage

innovative approaches by States,

consistent with agreed-upon

environmental goals and indicators. The

agreement recognizes that states and

local governments are natural

laboratories for testing new ideas and

that EPA has an important role in

promoting innovation at all levels,

while continuing to ensure that the

States provide fundamental public

health and environmental protection.

This agreement identifies how we will

work together to identify and promote

innovative ideas and better ways of

doing business. It is intended to help us

communicate and evaluate such ideas

and to encourage joint decision-making

on how such innovations can be

fostered, designed and implemented.

3. Timely Decision-Making on Good

Ideas

Finding better ways to accomplish our

environmental goals is part of the

everyday practice of good government.

Current processes through which many

successful State innovations have been

carried out should continue. We

recognize that the most challenging

regulatory innovation proposals have

been difficult to address. This

agreement establishes an optional

avenue for prompt consideration and

evaluation of innovation proposals.

EPA and States may conclude that

some successful regulatory innovation

projects demonstrate that changes in

EPA regulations, policies, guidance, or

interpretations are needed to improve

the nation’s environmental protection

system. Where such changes can be

made under existing law, EPA will

initiate the process for making the

changes—following applicable

procedures. EPA and States may also

initiate policy discussions on potential

statutory changes that may be needed to

enable nation-wide adoption of

innovative approaches.

B. Scope of the Agreement

As used in this agreement, ‘‘regulatory

innovation’’ is a broad concept. It
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24787

encompasses the process of proposing,

testing, evaluating, refining and sharing

innovative approaches to environmental

regulation in order to achieve national,

regional, state, tribal, and local

environmental objectives. Regulatory

innovations should be more efficient

and/or provide greater environmental

protection than current approaches,

foster cooperation, and include

opportunities for strong stakeholder

involvement.

Many types of innovations are

possible, and potential innovations will

vary in scope, complexity, ease of

implementation, environmental

benefits, and other characteristics. At

this point in time, it is difficult to

design a single system or process that is

appropriate for all potential

innovations. Innovations should be

accomplished through the normal

course of business whenever possible.

This agreement provides a clear

pathway for innovative proposals that

need extra attention or are too complex

to be handled through normal channels.

Proposals that are less complex can be

implemented more quickly, leading to

early success, while more difficult

projects will likely need more analysis

and stakeholder participation. This

agreement builds on and complements

other innovation activities, but is not

intended to replace them.

This agreement signals the

commitment of EPA and State

environmental agencies to work together

on innovations. It does not create any

legal obligations for EPA or the States,

and does not alter EPA’s or States’

statutory responsibilities or the nature

of authorized or delegated State

programs. Any innovations under this

agreement will be implemented within

our existing legal authorities using

appropriate procedures.

III. Principles for EPA/State Regulatory

Innovation

EPA and the States agree to a set of

basic overarching principles that will

guide our joint regulatory innovation

activities. There are seven overarching

principles relating to regulatory

innovation activities—Experimentation,

Environmental Performance, Smarter

Approaches, Stakeholder Involvement,

Measuring and Verifying Results, and

Accountability/Enforcement, and StateEPA Partnership.

A. Experimentation

Innovation involves change, new

ideas, experimentation, and some risk of

failure. Experiments that will help us

achieve environmental goals in better

ways are worth pursuing when success

is clearly defined, costs are reasonable,

and environmental and public health

protections are maintained.

1. The States and EPA should

recognize the value of prudent risktaking through experiments designed to

achieve improved results.

2. The States and EPA should seek

ways to make good ideas work,

presuming that innovations to help meet

environmental goals are worth our

investment.

3. The States and EPA should

carefully monitor and manage

innovations to ensure that problems are

immediately identified and remedied.

Experimentation should be based on

sound judgment, reasoning and

common sense.

4. If a promising experiment

encounters difficulties that likely can be

corrected and that do not jeopardize

environmental protection, project

sponsors should be allowed to fix

problems before the experiment is

abandoned in favor of the traditional

approach.

5. Experimentation does not include

relaxing health or environmental

standards or reducing protection of

public health or the environment.

6. Experiments should be designed to

test new approaches and as appropriate

lessons learned should be used to

improve the current system of

environmental protection.

B. Environmental Performance

Innovations must seek more efficient

and/or effective ways to achieve our

environmental and programmatic goals,

with the objective of achieving a

cleaner, healthier environment and

promoting sustainable ecosystems.

1. Protecting public health and the

environment are the primary goals of

both EPA and State environmental

agencies, and we agree that innovations

can help us find cleaner, cheaper,

smarter ways of improving our nation’s

environment. Innovations that facilitate

a transition to pollution prevention and

product stewardship as primary

methods of achieving environmental

goals are highly desirable and can have

significant economic or societal benefits

to support sustainable development.

2. Many opportunities exist to

improve environmental protection

through innovations that have the clear

potential to provide environmental and

ecosystem benefits. In addition,

innovations may be designed primarily

to improve the cost effectiveness of

achieving environmental goals; these

projects must ensure that there is no

adverse impact on: environmental

protection, public access to information,

and public access to the decisionmaking process.

3. For projects that have a greater

uncertainty of the environmental

outcome, or that involve experimental

technologies or approaches, innovations

should be expected to have the clear

potential to provide increased

environmental protection, promote

ecosystem sustainability, or both. EPA

and the State agency, in their best

judgment and in consultation with

stakeholders, will determine whether

such proposals have the clear potential

to produce appropriate gains in

environmental protection, improved

sustainability of the ecosystem, or both.

4. Innovations may be designed to fit

local and regional conditions, as long as

local solutions do not create

environmental problems for other

localities, such as undesired downwind

and downstream effects, or undermine

national standards.

5. No population group should be

subjected to disproportionately high and

adverse human health or environmental

impacts as a result of the innovation.

C. Smarter Approaches

To reinvent environmental regulation,

regulators should seek creative ways to

remedy environmental problems and

improve environmental protection, and

be receptive to innovative, common

sense approaches.

1. Regulators should work with

industry and communities to solve

environmental problems by identifying

ways to remove barriers that prevent

prudent, common sense solutions.

2. Regulators should be professional,

accountable and deserving of the

public’s trust.

3. Regulators should seek to

understand all perspectives, and help

stakeholders find common ground.

4. Regulators should act promptly to

evaluate, and implement, proposals that

are straightforward, technically

achievable, and have clear advantages,

while ensuring adequate opportunities

for public involvement and review.

D. Stakeholder Involvement

Effective stakeholder involvement

produces better innovation projects and

catalyzes public support for new

approaches. Stakeholders must have an

opportunity for meaningful involvement

in the design and evaluation of

innovations. Stakeholders may include

other State/local government agencies,

the regulated community, citizen

organizations, environmental groups,

and individual members of the public.

Stakeholder involvement should be

appropriate to the type and complexity

of the innovation proposal.

1. Innovations should include

opportunities for early, open, and
24788 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

inclusive stakeholder involvement in

project development, specifically

including those who may be affected by

the decisions. Stakeholders should be

provided adequate time to review

proposals and participate in the process.

When an innovation has the potential to

result in significant policy changes,

additional efforts, that could include

incentives and assistance, should be

made to provide additional

opportunities so that affected and

interested stakeholders can be

meaningfully involved.

2. Consistent with the principle of

providing meaningful opportunity for

stakeholder involvement, each State

should have the flexibility to use its

own stakeholder participation process,

as long as applicable federal and State

procedural requirements are met or

exceeded. EPA and States will identify

national program issues and ensure

opportunities for active involvement

from national and regional stakeholder

groups, especially where decisions on

regional, state, or local issues have

broader impacts.

3. Project proposals and the process

for their consideration should be made

transparent to stakeholders so that the

benefits of the proposed change can be

fully evaluated. Information needed to

understand the proposed innovation

and to verify compliance and

environmental performance should be

publicly available in an understandable

form. EPA and States commit to provide

regular analysis of the types of

innovations implemented and their

environmental impacts.

4. Because some stakeholder groups

(e.g., small businesses, public interest

groups) often have a limited capacity to

participate in innovation projects, EPA

and States will explore different

approaches to facilitating stakeholder

involvement.

5. In circumstances where local

governments share regulatory

responsibility, they should participate

as partners with the State in developing

and implementing the innovation.

E. Measuring and Verifying Results

Innovations must be based on agreedupon goals and objectives with results

that can be reliably measured in order

to enable regulators and stakeholders to

monitor progress, analyze results and

respond appropriately.

1. The success of innovations should

be judged by the results they achieve.

Goals and objectives should be:

established in advance, measurable, and

based on the desired results.

2. Results should be verifiable by

reliable measurements and both process

and results should be understandable to

regulators and the public.

3. Regulators should have access to

high quality information sufficient to

verify the environmental performance of

an innovation.

4. Regulators and the public should

have a full understanding of the

differences between the innovation and

traditional approaches, including

expectations for the project,

accountability for performance, and any

potential risks.

F. Accountability/Enforcement

For innovations that can be

implemented within the current

regulatory framework, current systems

of accountability and mechanisms of

enforcement remain in place. For

innovations that involve some degree of

regulatory flexibility, innovators must

be accountable to the public, both for

alternative regulatory requirements that

replace existing regulations and for

meeting commitments that go beyond

compliance with current requirements.

Regulators will reserve full authority to

enforce alternative regulatory

requirements to ensure that public

health and environmental protections

are maintained, and must be willing to

explore new approaches to establish

accountability for beyond-compliance

commitments.

1. For persons or activities not

covered by the innovation project,

applicable statutory and regulatory

requirements remain in effect and fully

enforceable.

2. If a promising innovation project

encounters difficulties that likely can be

corrected and that do not jeopardize

environmental protection, regulatory

agencies should evaluate the

circumstances and use judgment in

allowing project sponsors to correct

problems before a project is abandoned

in favor of the traditional approach.

3. Regulators must have authority to

address such circumstances as

imminent and substantial

endangerment, actual harm, or criminal

conduct.

4. Innovations may include both: (a)

Enforceable ‘‘alternative regulatory

requirements’’ that provide protection

equivalent to that provided by otherwise

applicable environmental standards or

requirements, and (b) other ‘‘beyondcompliance commitments’’ that seek to

exceed otherwise applicable standards

or requirements. Alternative regulatory

requirements and beyond-compliance

commitments should be clearly

distinguished in advance.

Alternative Regulatory Requirements:

—Alternative regulatory requirements

should be enforceable with all the

remedies available under current law.

—Regulators should consider the

circumstances and use their judgment

in choosing remedies when a facility

fails to meet alternative regulatory

requirements.

—Potential responses for failure to meet

such alternative regulatory

requirements should be identified in

advance.

Beyond-Compliance Commitments:

—As part of an innovation, facilities

may agree to beyond-compliance

commitments in exchange for

regulatory flexibility or some other

incentive.

—Potential responses for failure to meet

such beyond-compliance

commitments should be defined in

advance.

—Responses for failure to meet beyondcompliance commitments should fit

the circumstances. They may include:

a series of interim accountability

measures short of project termination,

trying a different approach, modifying

the innovative approach, or reverting

to the traditional approach.

5. Innovations should not undermine

the state’s, federal government’s, or

citizens’ authority or capacity to enforce

delegated or authorized state programs.

G. State-EPA Partnership

The States and EPA will promote

innovations at all levels to increase the

efficiency and effectiveness of

environmental programs. We must work

together in the design, testing,

evaluation and implementation of

innovative ideas and programs, utilizing

each other’s strengths to full advantage.

1. As the primary front-line managers

of many environmental protection

programs, the States and local

governments are natural laboratories for

innovations. The States should manage

their own programs, adapt to local

conditions, and test new approaches for

delivering more environmental

protection for less.

2. The federal government should

ensure good science, strong national

health and environmental standards,

and should work in partnership with

the States by providing analysis,

expertise, and facilitating learning

among the States. EPA should promote

innovation at all levels (national,

regional, state, tribal, place-based,

community, and in the private sector).

EPA retains its role to set national

standards and measures, implement

programs not delegated to states or

tribes, address interstate issues, apply

and interpret national statutes and
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24789

regulations, and ensure fair and

effective enforcement, thus ensuring

that all states provide fundamental

public health and environmental

protection and a level playing field.

3. EPA and state roles in innovations

must be clearly designed to utilize each

party’s unique strengths and avoid

duplication. Decision makers should be

clearly identified.

4. Assigned roles and responsibilities

should be honored and respected, and

joint problem-solving should be

encouraged.

5. Communication must be open,

honest, frank and frequent. The States

and EPA should work to understand

each other’s perspectives, achieve

consensus on major issues, make

decisions in a timely manner, and

resolve conflicts quickly and efficiently.

IV. Process for Considering State

Innovations Proposals

EPA and the States are engaged in

many successful efforts to reinvent

environmental regulation. These efforts

should continue unimpeded. EPA and

the States agree that, where procedures

currently exist, innovation proposals

should be handled through normal EPA/

State program activities or other ongoing

reinvention activities. Proposals that do

not fit into an existing pathway can be

handled via the new process established

under this agreement.

The process of developing

Performance Partnership Agreements

(PPAs) under National Environmental

Performance Partnership System offers

one opportunity for States and EPA,

working with stakeholders, to agree on

innovative approaches to pursue.

However, participation in a PPA is not

the only avenue for States and EPA to

work on innovative approaches.

Memorandum of Agreements and/or

Work Plans can serve the same function

as a PPA. Inclusion of anticipated

innovative approaches in the PPAs or

other agreements will allow the States

and EPA to allocate staff resources and

establish priorities for innovative

projects. For example, individual States

may choose to place higher priority on

innovation projects which promote clear

cost or environmental benefits for the

public. It is envisioned that States will

include in the PPAs or other agreements

a discussion of potential innovative

activities, indicating how the

innovations link to environmental goals

and providing a picture of proposed

changes.

A. Use Existing Pathways

This agreement is designed to

supplement, rather than replace,

ongoing innovation activities underway

in EPA and the States. Such innovation

activities should continue. State

innovations that do not require a change

to Federal guidance, regulations or

statutes can proceed without EPA

review. EPA’s role will consist of

support and advice, if requested. EPA

and States should continue to work

together on innovations that may

involve using existing flexibilities in

current law and regulation, and on

existing innovation programs such as

Project XL.

B. New Process Established Under This

Agreement

The States and EPA agree to establish

an optional process, which States may

use to get timely decisions on

innovation proposals. This process

includes senior-level management

attention and specific time frames to

ensure prompt decisions by EPA. The

following process establishes a

management framework so that actions

and next steps, along with interested

participants and decision-makers, can

be clearly identified and taken into

account. EPA’s Regional Administrators

are responsible for ensuring that the

process moves forward; individual

States are expected to establish similar

senior-level points of contact to manage

the State’s role in the innovation

process.

This process is intended to be

flexible. For example, EPA Regional

Offices, EPA Headquarters Offices, and

the States are encouraged to maintain

open lines of communication at both

staff and management levels beyond the

formal process described below, and

States are encouraged to invite EPA into

the early discussion stages of any

project. Early consultation between EPA

and the States is important in

identifying obstacles early and in

determining who needs to be involved

so that the project can move forward

expeditiously.

EPA will also work with individual

States as needed to establish priorities

in the review of proposals based on

guidance developed in the Performance

Partnership Agreement or other EPA/

State agreed mechanism. EPA and the

States recognize that the success of this

process will be affected by the quality

and clarity of proposals and the

effectiveness of communication between

EPA, the State, and stakeholders. The

States and EPA are committed to

working together to ensure that

communications are frequent, open,

honest, and directed to finding means to

allow innovations to succeed.

While one of the objectives of the

innovation proposals is efficiency, the

very act of designing an experiment,

testing the hypothesis, and evaluating

the results may be resource intensive for

all parties. The optimum management of

resources by EPA and the State will

help ensure the success of the review

process, the implementation of the

projects, and adherence to time lines.

1. Stage One—Developing Quality

Proposals

States and EPA recognize that clear,

well-developed proposals will facilitate

review and speed decision-making.

States are encouraged to consult with

EPA as early as possible in the

development of a proposal. The States

should be able to use this early

consultation process to develop a clear

understanding of their proposals with

EPA and key stakeholders.

During the early consultation, the

State and EPA will identify issues that

need attention, possible barriers to

implementation, uncertainties regarding

risks, and value added to all parties.

These discussions will be open and

candid and will provide the State with

information that will be important and

useful for the development of the

proposal. While early consultation is

encouraged, not all proposals will

require the same degree of discussion

and/or consultation.

EPA and States will bring a positive,

constructive approach to consideration

of proposals and seek ways to help good

ideas to succeed.

States will prepare proposals that: a)

are consistent with the principles

described in this agreement, and b)

clearly present the objective of the

proposal, the expected benefits, a

description of the activities, and a

determination as to whether the

proposal: may require a change to

Federal guidance, policy, past practices

or rule interpretation, but not

regulations or statutes; may require a

change to or waiver from Federal

regulations, but not statutes; or, may

require a change to a Federal statute.

EPA will: (a) Provide clear statements

of its position, along with timely and

authoritative answers to questions about

what changes, variances, or associated

approvals a particular proposal may

require; and (b) work with the State to

identify the most efficient path by

which a particular proposal could be

implemented.

In addition, States will provide

meaningful opportunities for

stakeholder involvement in the design

and development of regulatory

innovation proposals. The degree of

stakeholder involvement depends on

the nature of the proposal. Where a

proposal would involve a change in or

variance from existing national
24790 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

guidance, regulations, or statutes, early

consultation among EPA, States, and

national stakeholder groups can help

identify critical issues that need to be

addressed. If EPA believes that broader

stakeholder involvement is warranted,

in accordance with the Stakeholder

Involvement Principle, EPA will contact

the State and identify, in partnership

with the State, an approach to obtain

such involvement as early in the process

as possible.

The Senior State Environmental

Official or their designee then submits

a written description of the regulatory

innovation proposal to the EPA

Regional Administrator, who then

initiates the review process described

below. The State will designate a highlevel official as the single point of

contact for each project.

2. Stage Two—Review of Proposal and

Decision

a. EPA Review. The EPA Regional

Office will have primary responsibility

for review of the innovation proposal.

This responsibility includes proposal

distribution within the Region and to

the affected EPA National Program

Managers and the Office of Reinvention;

review and response to the State; and

appropriate stakeholder involvement. In

cases where national policy or

regulatory issues are involved, the

Regional Administrator must ensure

complete review by relevant national

program offices.

EPA will consider several factors in

the review of the innovative proposals,

including:

(1) Consistency with the principles in

this agreement;

(2) Comments from stakeholders;

(3) Type of flexibility from federal

guidance or regulation needed to

implement the proposal;

(4) Clear presentation and analysis of

issues;

(5) Expected benefits of the

innovation (including net improvements

in environmental, ecosystem, and

efficiency results);

(6) Potential benefits of the innovation

as compared to the investment of time

and resources required for

implementation, and impact on

agencies’ resources and workloads.

The review process is intended to be

flexible. EPA and the State should

maintain open lines of communication

at all levels—staff and management—to

ensure that questions and concerns are

raised and discussed. During the review

process, EPA may seek input from other

States and stakeholders, including

environmental groups and the regulated

community, to fully identify the

strengths and weaknesses of the

proposal.

b. EPA decision. Upon completion of

the consultation and review period, the

Regional Administrator will make a

decision to accept or reject a proposal.

If a proposal involves a national policy

or regulatory issue, the decision will be

made jointly with relevant National

Program Managers and the Office of

Reinvention. This decision will be

communicated verbally and in a written

form to the designated Senior State

Environmental Official. The written

decision will include the rationale for

the determination.

EPA and the State will determine the

category into which the proposal falls.

The type of proposal will have an

impact on the time frame for

implementation. The categories are:

Category 1: Straight-forward,

transparent proposal with clear

advantages, few obstacles, technically

achievable, and minimum

environmental risk.

Category 2: Experimental proposal

that has a greater uncertainty of

environmental outcome; requires more

attention to design, implementation,

and evaluation; and may involve some

risk of failure. The unpredictability of

the experiment means that it will be

more resource intensive and may

require more time.

Category 3: Strategic proposal that

involves broad-based, new approaches

(e.g., statutory changes) and requires

policy discussion to further develop

concepts. Proposals may be assigned to

an existing policy forum for discussion

or a new forum could be established.

If the proposal requires changes of

interpretation or substance regarding

national statutes, regulations or policies

before proceeding with an innovation

project, both EPA and the State will

reach agreement on all proposed

changes. These projects will be

accomplished through mechanisms

available under Federal law and

regulation, which may include

variances, site-specific rules, legal

interpretations, or other means.

c. Appeals. In the event that a dispute

arises during this process or a State

disagrees with a Region’s decision, the

State may appeal in writing to the EPA

Deputy Administrator. The State may

also request a review by a panel

consisting of EPA Senior Managers and

State Commissioners. The panel will

review the proposal, the issues, and

merits of the dispute, and submit

recommendations to the EPA Deputy

Administrator for a final decision.

d. Time frames for decision. EPA and

the States are committed to working

together to ensure timely responses to

State proposals.

Initial response to proposal: EPA will

respond to the State with follow-up

questions, clarifications, and initial

reactions including an initial

identification of obstacles to approval

within four weeks of its receipt of a

written innovation proposal from the

State.

Decision to proceed with proposal:

EPA will make a preliminary decision to

accept or reject a proposal within 3

months of the receipt of a proposal from

the State. If, during the review, EPA

determines that additional information

is needed from the State, EPA will

promptly notify the State, and EPA and

the State will agree on an appropriate

schedule for completing the review.

Decisions on proposals may be

reached more quickly for proposals that

are straight-forward, with clear

advantages, widely supported,

technically achievable, and

implementable in the short-term. A

preliminary decision to accept a

proposal will be accompanied by an

explanation of subsequent actions

needed before a final decision can be

made or implementation can begin. For

example, a proposal that involves

amending an EPA regulation would

require a notice and comment process in

accordance with the Administrative

Procedures Act.

V. Measuring and Evaluating Success

Before an approved proposal is

implemented, we must define success

and how we will measure it. This can

help eliminate misunderstandings about

whether or not the process and

innovation as a whole is progressing

effectively, and if it is not, what steps

need to be taken to correct any

problems.

Therefore, EPA and the States agree

on the importance of evaluating the

success of regulatory innovation

activities that flow through the process

outlined in Section IV. The challenge is

to develop useful measures without

choking the very creativity we seek to

stimulate. We want to ensure that a

variety of ideas are being proposed, that

robust stakeholder participation

processes are utilized, that decisions are

made in a timely fashion, and that the

most promising innovations are being

implemented successfully. To

accomplish this, we must measure both

the success of the innovations and the

success of our decision-making process.

Performance measures that emphasize

environmental results, including

pollution prevention, are most

desirable, although we may have to rely
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24791

more on process measures in the near

term.

A. Measuring the Innovation’s Impact

The success of the innovation

project’s impact will depend on how

well it was designed and the results

achieved. Successful innovation project

designs should be clearly described so

successful projects can be used to

improve the entire system, and/or

adapted to other site specific situations.

The quality of the projects implemented

can be measured by: (1) Environmental

impact, (2) efficiency, and (3) other

relevant indicators. In addition to

providing information about the success

of an individual innovation project,

these measurements also provide

guidance on improving future

innovation projects. States and EPA

should agree in advance who is

responsible for collecting and

disseminating this information.

The proposed measures in Appendix

A provide a starting point for discussion

in terms of a framework and some

common criteria for innovations.

Common criteria allow the States and

EPA to evaluate the progress in

innovations state-wide and nationally.

B. Measuring the Process

We must ensure that the decision

making process is effective, or the

process will not be used. The success of

the process depends on the effectiveness

of the communications between EPA

and the States and the timeliness of

decisions. Measurements include: (1)

The number and quality of innovation

projects proposed, (2) the number and

quality of innovations implemented, (3)

the timeliness of the actions taken in the

process, (4) the number of proposals

appealed, and (5) the speed with which

information about successful

innovations are disseminated to other

States. The success of the process is

enhanced by the development of

effective partnerships across all

interested and affected stakeholder

groups to design innovations which will

meet multiple objectives and to build

broad support for their implementation.

EPA and States will evaluate factors that

are difficult to measure but are critically

important to successful outcomes,

including the degree of EPA-State

cooperation and stakeholder

participation. EPA should collect this

information and make it available at a

central location so it can be used by the

States, EPA, and stakeholders. Within

60 days of signing this agreement, EPA

and the Environmental Council of the

States (ECOS) will designate a central

location.

VI. Information Sharing

Accepted State innovation proposals

and completed projects are most

valuable when widely available to State

and local regulators, the regulated

community, environmental

organizations and the public at large.

We agree on the need to share

information, track commonalities and

analyze barriers to promising State

innovations. Knowledge of both

successes and failures will help the

States, EPA and stakeholders develop

better approaches for achieving our

environmental goals. Because sharing

information and innovative ideas among

the States is key to the success of this

agreement, the States, through ECOS,

will set up a regulatory innovation

clearinghouse that serves to notify

potentially affected States of innovation

proposals and highlights the results of

this agreement and other State/EPA

innovations that EPA Reinvention

Ombudsmen or State Commissioners

deem appropriate.

VII. Next Steps

EPA and the States agree on the

following steps to ensure prompt

implementation of the agreement:

A. Joint Evaluation

By October 1999, States, EPA and

other interested parties will begin to

evaluate the success of regulatory

activities that have been reviewed under

the new process. The evaluation will

consider both the environmental and

efficiency benefits derived from each

innovation, and the efficiency of the

new review process. The results of the

evaluation will be shared with EPA, the

States and stakeholders.

B. Modifications to the Agreement

If the evaluation indicates a need to

modify or amend this agreement, EPA

and the States agree to discuss such

modifications or amendments and make

needed changes by January 2000.

Attachments

A. Proposed Core Performance Measures

B. Examples of Regulatory Innovations

Attachment A—EPA/State

Environmental Regulatory Innovations,

Proposed Core Performance Measures

Environmental Goal

A sustainable environment with healthy

communities and ecosystems

Environmental Objectives

—Air quality improvements

—Water quality improvements

—Land quality improvements

Program Objectives (Outcomes)

—More effective and efficient

environmental regulatory systems

—reductions in releases to the

environment

—reductions in resources expended to

implement the regulatory process, by

regulators, regulated entities, other

stakeholders: time, work years, money

—increased stakeholder participation in

the regulatory process

—Large majority of high priority, high quality

innovation projects are successfully

implemented

—Successful results of innovation projects

are: clearly described, widely

disseminated, adopted in other site

specific situations, used to improve

entire systems

Program Activities (Outputs)

—Number of innovation projects proposed

—Number of innovation projects

implemented

—Quality of projects implemented:

environmental, efficiency, other

indicators

—Stakeholder participation

—Timeliness of actions taken in process

Attachment B—Examples of Regulatory

Innovations

To encourage creative thinking and the

development of good regulatory innovation

proposals, EPA and the States have

developed the attached examples of

regulatory innovation projects. Four

examples of potential regulatory innovations

are provided. Examples 1, 2 and 3 are

suggestions of innovative ideas that States

have developed—they are intended to

illustrate the kinds of proposals that may be

developed. These examples have not been

reviewed or accepted by EPA as projects for

this process. Example 4 describes an

innovative proposal that was recently

implemented in North Carolina.

Example 1: Mercury in Wastewater Effluent

Objective: Substitute sludge testing and

limit requirements for mercury in place of

effluent limits and monitoring requirements

in NPDES permits for municipalities.

Description and expected benefits:

Mercury cannot be detected accurately in

municipal wastewater effluent. Dilution of

mercury in effluent leads to non-detectable

monitoring results. In addition, mercury test

methods at the low levels seen in municipal

effluent can easily pick up contamination of

sampling and analysis and lead to false

positives. As a result, most municipalities

can show compliance with mercury effluent

limits and need take no steps to reduce

mercury in their effluent.

This proposal would eliminate effluent

limits from NPDES permits for

municipalities, and instead substitute sludge

monitoring (where mercury concentrates in

the wastewater treatment process). If mercury

in sludge exceeds federal clean sludge levels,

municipalities would be required to develop

mercury source reduction programs. Since

mercury can be more accurately detected in

sludge, this would lead to better targeting of
24792 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

the municipalities that need to develop

mercury source reduction programs.

Federal obstacle halting or hindering

progress: Requires changes in either federal

statute or variance/change in federal

regulations. Attorneys state that sludge

requirements as proposed cannot be tied to

surface water standards.

Additional background information: This

proposal was strongly supported by

municipalities, environmental groups,

Wisconsin DNR staff, and EPA staff. All saw

that this proposal would lead to greater

environmental benefits than the current

NPDES system.

State: Wisconsin Department of Natural

Resources, Bureau of Watershed

Management.

Example 2: Continuous Emissions

Monitoring for Air Pollutants

Objective: Create a flexible approach to

compliance demonstration for air emission

limits that have been consistently achieved.

In exchange, install continuous emissions

monitoring for other toxic pollutants for

which more data is needed. This approach

would reward facilities which have

demonstrated superior environmental

performance with simplified compliance

demonstration requirements.

Description and expected benefits:

—Federal guidance on practical

enforceability requires that compliance

demonstration schemes use available

technology which produces verification

of compliance data as frequently as

practically possible.

—A facility is required to use continuous

emission monitors (CEMs) to show

compliance with an air emission limit.

Data has been gathered for several years

and it shows consistent emission levels

at or lower than 50% of the limit. In

addition, other surrogate process

parameters are continuously monitored.

—The permittee wishes to show compliance

by an alternative compliance method

which requires periodic testing to assure

continued compliance. The surrogate

parameters will continue to be

monitored and will be used to ensure

that the operating conditions remain

within the range under which

compliance has been demonstrated by

periodic testing.

—In exchange, the facility agrees to install

CEM for certain toxic organics from

certain processes. The nature and levels

of these toxics are not very well defined

based on mass balance approaches. The

information generated by these CEMs

will be useful for an air toxics analysis

being conducted in the area.

Federal obstacle halting or hindering

progress: Requires change or deviation from

established EPA policies regarding federal

enforceability as a practical matter on

emission limits. However, the demonstrated

level of confidence on compliance warrants

a less rigorous approach, particularly because

it includes a periodic verification process.

Additional background information: The

permittees believe that it is important to

build a trust relationship with regulators to

be able to re-direct resources to areas where

the need is greater to realize further

improvements or to generate new

information on environmental matters.

State: Minnesota Pollution Control Agency,

Air Quality Division, Permits Section.

Example 3: Tiered Permitting System for

Hazardous Waste Facilities

Objective: Create a permitting system for

hazardous waste (HW) management facilities

that are presently exempt from the existing

RCRA Part B permitting system but still pose

a potential threat to human health and the

environment if improperly designed and

operated.

Description and expected benefits:

—Current RCRA regulations exempt

recycling facilities from any permitting

requirements, but require a Part B permit

if HW is stored prior to recycling.

—Environmentally safe recycling is

preferable to disposal and should be

encouraged.

—Recycling facilities can be as complicated

as treatment and disposal facilities and

require some oversight to ensure that

they are protective of human health and

the environment.

—Requiring the standard Part B permit for

recycling facilities creates a disincentive

and may greatly limit the number of

recycling facilities.

—A less onerous tiered permit provides

regulatory oversight and does not pose

the same disincentive as a Part B permit

for recycling facilities.

—The tiered permit incorporates

performance standards and financial

assurance as appropriate and is custom

tailored to the facility without requiring

all of the elaborate features of a Part B

permit.

Federal obstacle halting or hindering

progress: May require a variance from federal

statutes and regulations that prescribe

standards and require a Part B permit for

storage of HW depending on what type of

storage activities are covered under the tiered

permit.

Additional background information: State

legislation required fluorescent lamp

recyclers to be permitted. Rules are in the

development stage with extensive regulated

community involvement. The tiered

permitting system will be extended to all

types of HW facilities for which a Part B

permit is not required or not appropriate,

including recyclers and some types of storage

facilities.

State: Minnesota Pollution Control Agency,

Hazardous Waste Division, Regulatory

Compliance Section.

Example 4: River Basin-Based Planning and

Permitting

Objective: To coordinate stream modeling

and permitting on a river-basin or sub-basin

scale instead of in a piecemeal fashion.

Description and expected benefits:

River-basin based planning and permitting

would:

—Enable better planning and resource

allocation

—Increase consistency between permits

—Increase consideration of basin-wide

pollutant inputs (point and nonpoint) for

better decision-making and planning

—Improve efficiency of modeling, data

collection for modeling, and permitting

activities

—Provide opportunity for greater stakeholder

involvement in the planning process

Federal statutes prohibit permits with a

term greater than five years

To synchronize NPDES permit renewal for

an entire river basin, the State had to issue

five year permits followed by an additional

short-term permit. The burden on permitting

and modeling staff was further increased

because EPA Region IV was also pressing NC

to address its permit backlog. The State

lacked sufficient modeling resources to

address the existing backlog and also issue

short term permits in selected basins. The

State proposed to reissue the short-term

permits with existing limits without

modeling and to refocus its permitting staff

away from the permit backlog and toward the

basin-wide permitting approach. Region IV

was hesitant to endorse the basin-wide

concept.

Contact with EPA Headquarters (Office of

Water) convinced EPA to hire a facilitator to

help the State develop an implementation

strategy for the basin-wide planning and

permitting approach. EPA Headquarters also

sponsored a workshop to obtain input from

surrounding States. This involvement

allowed the State to develop a convincing

strategy, and subsequently, Region IV agreed

to the proposal. EPA also provided a

104(b)(3) grant to increase monitoring and

modeling in the Tar-Pamlico River Basin to

help pilot the approach.

Federal obstacle halting or hindering

progress: Required change in EPA past

practice.

Additional background information: At

first, permittees reacted to the short-term

permits due to the extra burden of

completing permit applications and paying

application fees. However, the concerns of

permittees were quelled by pointing out the

long-term improvements in consistency

among permits in the river basin and in

efficiency of issuing these permits.

Environmental stakeholders were supportive

of the approach from the start due to a greater

opportunity for involvement in the planning

process.

State: North Carolina.

Joint EPA/State Agreement to Pursue

Regulatory Innovation, Response to

Comments

Purpose of the Agreement and

Environmental Performance

Summary of Comments: A number of

commenters were concerned that the

agreement did not emphasize the

importance of innovation as means to

move toward environmental

sustainability. They suggested focusing

the agreement on holistic pollution

prevention and product stewardship

approaches, because these approaches

can help address the root causes of

pollution and move toward a more
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24793

sustainable system. Also, these

commenters felt that the agreement

emphasized efficiency over

environmental gains, rather than

advocating innovations that can

simultaneously achieve environmental,

economic, and social goals. These

commenters felt that environmental gain

should be a key factor in prioritizing

innovations. An opposing view was

expressed by some commenters, that the

agreement should put more emphasis on

economic gains as incentives for

innovation. A number of commenters

expressed support for ‘‘efficiency only’’

projects that would achieve the same

level of environmental quality.

Conflicting comments were received

about whether better environmental

performance should be required in

proportion to any regulatory flexibility

granted.

Response: EPA and the states agree

that the concept of innovations leading

to environmental sustainability should

be emphasized (added language to

Purpose section and Environmental

Performance sub-principle on this

concept). Innovations that

simultaneously address environmental,

economic and social objectives are

highly desirable. However, the

agreement recognizes that, in some

cases, it will make sense to pursue

innovations that are primarily targeted

at efficiency improvement, as long as

environmental protections are fully

maintained. The agreement does not

include a specific ‘‘proportionality’’ test

that would require increased

environmental performance in return for

regulatory flexibility. However,

innovations which have a greater

uncertainty of the environmental

outcome, or are more experimental in

nature, will be expected to have the

potential for improved environmental

results. Also, as proposals are reviewed,

the potential benefits of a proposal will

be weighed against the resources needed

to implement the proposal, and if

resource limitations become an issue,

priority will be given to proposals that

appear to have a greater return on

investment.

Specific Comments

Comment: The agreement speaks

several times of innovations that have

the clear potential to provide

environmental benefits. Other

principles are not similarly qualified in

the agreement. The italicized phrase

should be replaced with a positive

concept such as ‘‘clearly.’’

Response: The phrase ‘‘have the clear

potential’’ is appropriate for projects

that have a greater uncertainty of the

environmental outcome, or that involve

experimental technologies or

approaches. However, we agree that it is

important that the intent of the project

is to achieve better environmental

results, even if those results cannot be

guaranteed, and we expect that

experimental projects will be designed

to achieve increased environmental

protection.

Comment: A commenter said that the

agreement will result in numerous

waivers of EPA requirements, based

only on ‘‘equivalency,’’ and will

eliminate incentives to achieve superior

environmental performance.

Response: EPA and the states are not

entering into this agreement simply in

order to provide a pathway for obtaining

waivers of regulatory requirements. The

purposes of this agreement are clearly

stated: to improve environmental

protection, to improve EPA/State

environmental management practices,

and to provide timely decision-making

on good ideas. We believe that this

agreement will foster cooperative

exploration of innovative approaches

that can potentially lead to substantial

improvements in both our management

system and in the level of human health

and environmental protection. It is not

our intent to undermine incentives for

achieving superior environmental

performance. For example, EPA’s

Project XL offers regulatory flexibility in

return for superior environmental

performance, stakeholder involvement,

and several other criteria. If under this

agreement, EPA receives proposals that

are more appropriate for Project XL (e.g.,

proposals requesting significant

regulatory flexibility for a single facility)

then EPA will recommend that those

proposals will be directed to the XL

process.

Experimentation

Summary of Comments: A commenter

said that the agreement should more

clearly acknowledge that

‘‘experimental’’ efforts may at some

future time be incorporated into the

mainstream of environmental

protection. Other commenters said that

the agreement speaks of ‘‘maintaining’’

or ‘‘not jeopardizing’’ environmental

protections, rather than enhancing

them, and doesn’t address the value of

interim incentives or enforcement

responses.

Response: EPA and the states agree

that a main purpose of experimentation

is to test approaches that may later be

appropriate to be applied more broadly.

A sub-principle has been added to the

Experimentation principle which states

‘‘Experiments should be designed to test

new approaches and as appropriate

lessons learned should be used to

improve the current system of

environmental protection.’’ The idea of

using interim accountability measures

has been added to the Accountability/

Enforcement principle.

Stakeholder Involvement

Summary of Comments: Many

commenters addressed the issue of

stakeholder involvement in the

development of innovation proposals. A

number of commenters agreed that

‘‘stakeholder involvement should be

appropriate to the type and complexity

of the innovation proposal.’’ Some

commenters raised concerns that

stakeholder processes can become too

elaborate or can delay a project for too

long, and that consensus should not be

required. Other commenters

emphasized that the agreement did not

convey a true partnership approach,

lacking elements such as: firm

requirements for inclusiveness,

addressing the need for technical

assistance, and success measures that

evaluate the effectiveness of the

stakeholder process. These commenters

also felt that the linkage between

stakeholder involvement and the

process for different categories of

projects should be addressed.

Response: EPA and the states believe

that stakeholder involvement is

important to successful innovation

projects, and we are adding a clear

statement to the Stakeholder

Involvement principle that stakeholder

involvement is important because it

produces better innovations. We believe

that the stakeholder principle provides

sufficient flexibility for EPA and States

to design stakeholder processes that are

appropriate for different types of

innovations and as appropriate, allows

states to use existing stakeholder

participation processes. There is a range

of opportunities for stakeholder

involvement that may be appropriate,

depending on the type and complexity

of the innovation. For a straight-forward

innovation designed to streamline an

existing process, providing opportunity

for participation and comment may be

sufficient. For proposals with significant

policy implications, the need for public

involvement will likely be greater, and

it is the responsibility of government

agencies to take extra steps so that

active involvement can occur. Some

changes were made to the stakeholder

principle and sub-principles to clarify

this intent.

EPA and the states realize that it is

often difficult for some parties, such as

small businesses and public interest

groups, to actively participate in

stakeholder processes. EPA and the

states will try different approaches to
24794 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

facilitating stakeholder involvement,

such as: providing easily-accessible

information about new project proposals

(e.g. via the Internet), providing

assistance in understanding proposals to

help focus on priority issues and

projects, and pursuing other creative

mechanisms that foster participation.

Issues such as technical assistance for

stakeholder participants will be

addressed on a project-by-project basis.

Also, language was added to the section

on ‘‘Measuring and Evaluating Success’’

to emphasize the need to evaluate the

effectiveness of the stakeholder process.

Specific Comments

Comment: A commenter expressed

the need for affirmative language on all

levels of government working together

and to more clearly recognize and

define the role of local governments in

the regulatory system and in innovation.

Response: EPA and the States agree

that local governments are essential

partners in innovations that come under

the jurisdiction of local regulatory

authorities. A sub-principle has been

added to the Stakeholder Involvement

principle to recognize the importance of

working cooperatively with local

governments.

Comment: Several commenters stated

that the reference to involving national

stakeholder groups to examine national

issues should be broadened to recognize

the important role of state groups, and

the interest of national groups in

important state and local issues.

Criteria, and an accountability

mechanism, are needed to help identify

cases where national (or state)

stakeholder involvement is needed.

Response: EPA and the states agree

that stakeholders should have the

opportunity to be involved in design

and development of proposals, and that

both national and regional groups may

be interested in important regional,

state, and local issues that are likely to

have broader impacts (added clarifying

language to stakeholder sub-principle).

At this time, we do not think it

appropriate to develop specific criteria

for national stakeholder involvement.

We will make every effort to make

information available and to keep

stakeholders informed about proposals

under this agreement, so that

stakeholders will have the opportunity

to participate. As we gain experience

with the process, we will consider

whether it is possible and appropriate to

develop criteria for national stakeholder

involvement.

Comment: Several commenters

pointed to the need for special efforts to

involve stakeholders such as small

business and public interest groups in

innovations, due to their limited

resources.

Response: EPA and the States agree

that creative approaches to foster such

involvement should be encouraged. A

new sub-principle was added to

Stakeholder Involvement to encourage

these efforts.

Comment: A commenter expressed

concern that the EPA review process

includes the active solicitation of

comments after the stakeholder process

has been completed.

Response: EPA and the states agree

that in cases where there has been a

robust stakeholder process, that no

additional input would be needed.

However in some cases, such as a

proposal that comes to EPA in a

preliminary stage of development, EPA

may need to consult with stakeholders

to ensure that all points of view are

considered, prior to making a decision.

In cases where a federal or state

regulation will be changed, public

notice and comment may be part of the

required legal process that would occur

following the preliminary decision.

Comment: A commenter asked for

clarification about subprinciple D.2 (the

requirement that stakeholder processes

meet or exceed applicable state and

federal requirements) and whether this

refers to procedural or environmental

requirements.

Response: The language has been

added to indicate that this statement

refers to procedural requirements.

Smarter Approaches

Comment: A commenter pointed out

the need to ensure that proposed

innovations do not undermine the

original purpose of ‘‘regulatory

barriers.’’

Response: EPA and the states agree

that the underlying regulatory objectives

of a ‘‘regulatory barrier’’ need to be

carefully considered in the development

of innovations. The language in the

‘‘Smarter Approaches’’ subprinciple

indicates that the purpose of removing

‘‘regulatory barriers’’ is to solve

environmental problems. In deciding

whether a proposed innovation is

helping to solve an environmental

problem, regulators will need to ensure

that the underlying environmental

purpose of the ‘‘regulatory barrier’’ will

still be achieved.

Accountability/Enforcement

Summary of Comments: Some

commenters raised concerns that all

conditions that are integral to an

innovation project should be

enforceable, and that accountability

could be strengthened by including a

series of interim accountability

measures as part of the project design.

Another commenter suggested that EPA

and the states should not pursue

traditional enforcement mechanisms

such as penalties if problems are

encountered during implementation of

an innovation project.

Response: EPA and the States agree

that accountability and enforcement

remedies should be used that are

appropriate to the circumstances of an

innovation project, and the language of

the Accountability/Enforcement section

has been clarified to reflect this intent.

For example, it may be appropriate for

project participants to agree on a series

of interim accountability measures that

will be tracked as the project is

implemented. In order to preserve

enforcement authority for use in serious

circumstances, we cannot rule out the

use of penalties. The agreement

indicates that ‘‘alternative regulatory

requirements’’ will be enforceable with

all the remedies available under current

law. ‘‘Beyond compliance

commitments’’ may also be part of some

innovation agreements, and

accountability measures for these

commitments should be determined

when the innovation is designed. In

some cases, if innovations include a set

of activities, it may difficult to

distinguish between ‘‘alternative

regulatory requirements’’ and ‘‘beyond

compliance commitments.’’ In these

cases, EPA and the state will carefully

evaluate all proposed activities and

determine an appropriate requirement

category based on the projected net

result of the proposed activities.

Specific Comments

Comment: A commenter said that

clarification was needed to convey that

current requirements are enforceable

only to the extent that they are not

modified by an approved innovation

project.

Response: EPA and the States agree

that the intent of the agreement is that

all applicable statutory and regulatory

requirements, other than those included

in the innovation project, remain in

effect for all entities and are fully

enforceable.

Roles of Project Proponents and

Stakeholders

Summary of Comments: Several

commenters raised questions about

whether sponsors other than a state

could initiate projects. A commenter

suggest that more incentives for

industry to participate should be

provided. Several commenters also

raised the issue of appeals, and whether

parties other than the state could appeal

an EPA decision on a proposal.
Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices 24795

Response: We are committed to

working with partners in the regulated

community, and other stakeholders, to

develop successful innovation projects

and have a variety of mechanisms in

place to do so. The focus of this

agreement is to facilitate state proposals

for innovative environmental

management approaches. States are coregulators with EPA and are responsible

for implementation of delegated or

authorized environmental programs. We

encourage non-state sponsors to partner

with states in moving innovations

forward under the agreement. Other

pathways (such as Project XL) are

available for other sponsors to work

with directly with EPA on innovation

projects. Similarly, because this

agreement is designed for state

proposals, states are the appropriate

parties to appeal decisions. Input of

interested stakeholders will be

considered throughout the review and

appeals processes.

Relationship of Categories of Projects

and Application of Principles

Summary of Comments: A number of

commenters stated that the agreement

should include objective criteria for

deciding how projects should be

classified and where certain principles

may vary based on the category.

Response: While the principles

articulated in this agreement will set a

standard for all innovation proposals,

we expect some principles or subprinciples to be more relevant to certain

types of projects. For example, while

stakeholder input will be important for

all innovations, we anticipate increasing

levels of stakeholder involvement in

Categories 2 and 3, as compared to

Category 1. In terms of environmental

performance, cost-effectiveness projects

would generally be expected to fit in

Category 1. More experimental

proposals that fall in category 2 would

generally be expected to have the

potential to provide increased

environmental protection. Other

principles may also vary somewhat in

their applicability across categories.

EPA Review and Decision on Proposals

Review Criteria

Comments: A commenter stated that

the agreement should further define the

decisional criteria that EPA will use to

approve or disapprove a proposal.

Several commenters said that the

criteria addressing resources should also

include impact on stakeholders’

resources and workloads.

Response: The agreements lists

several criteria EPA will use in

reviewing proposals. We believe these

criteria can only be refined through

some direct experience in evaluating

project proposals. The first criterion is

‘‘consistency with the principles in the

agreement.’’ Evaluation of proposals

against this criterion will include an

evaluation of whether stakeholder

involvement in design and development

of the innovation is consistent with the

Stakeholder Involvement principle.

Statutory Change

Comments: A commenter said that

where statutory impediments are

identified, EPA should be willing to

entertain statutory revisions and,

together with states, advocate these

revisions to Congress. Another

commenter said that EPA should not

indicate that it will reach agreement

with all the states before pursuing any

changes in interpretation or statutes.

Response: EPA and the states believe

that exploration of innovative

approaches may, in some cases, point to

the need for regulatory or statutory

change. Where such changes will

promote effective, common sense

solutions to environmental problems,

EPA is committed to pursuing change

through appropriate mechanisms. In all

cases, we believe there must be an open

process and full public discussion and

debate.

Handling Numerous Proposals and

Setting Priorities

Comments: A commenter pointed out

that the management of numerous state

innovation proposals may become an

overwhelming task for EPA, the states,

and interested stakeholders, and

therefore, EPA and ECOS should focus

first on those innovation proposals

having the greatest potential for success.

Response: EPA is concerned about the

difficulty of managing appropriate

participation and review for numerous

proposals while upholding high

standards of review and meeting

ambitious time frames for decisions.

EPA will strive to address all State

innovative proposals promptly and

carefully. It is difficult to anticipate how

many projects may be proposed. If a

large number of projects are submitted,

EPA will likely need to use a screening

and priority-setting process to ensure

that available resources are used

effectively.

Time Frames for Decision

Comments: One commenter suggested

that the agreement include a forcing

function to ensure that deadlines are

met, such as a default mechanism that

the project is approved if time expires.

Another commenter said that the

agreement should clarify that the 3-

month decision is a definitive decision

by EPA to accept or reject the proposal.

Response: EPA is committed to

responding as promptly as possible to

innovation proposals, as reflected in the

ambitious 3-month target for decisionmaking. However, the 3-month deadline

will not be met in all cases—a great deal

will depend on the quality and

completeness of the proposal, and, in a

number of cases, more information will

likely be needed to augment the initial

proposal submission. EPA and the state

will jointly agree on extending the

deadline as appropriate to the

circumstances. Additionally, the 3-

month decision is a preliminary

decision to go forward with a project.

EPA must follow all legal requirements

that are applicable in each situation in

order to reach a final decision and begin

implementation. Thus, ‘‘default

approval,’’ in cases where EPA does not

meet the target, is not possible. For

example, a proposal that involves

change to a regulation must be carried

out through notice-and-comment

rulemaking, and under the law, EPA

cannot make a final decision until

public comment has been considered.

Other Comments

Stakeholder Evaluation of Proposals and

Results

Comments: A commenter

recommended establishing a national

advisory committee, perhaps including

stakeholder representatives from the

local, state, and national level, that

would evaluate proposals, analyze

ongoing progress with innovations, and

evaluate the transferability of successful

results.

Response: The Stakeholder

Involvement principle provides for the

participation of stakeholders in the

evaluation of project proposals. EPA

and the states agree that stakeholders

also need to be involved in evaluating

the success of innovations implemented

under this agreement. The Next Steps

section has been modified to say that

EPA, states, and other interested parties

will work jointly on evaluating both the

results of innovations and the process

for review and implementation of the

projects.

Confidential Business Information

Comments: A commenter said that

information sharing is an important part

of the process, however, the agreement

lacks guidance regarding protection of

confidential business information.

Response: EPA and the states feel that

there are adequate provisions in place,

outside of this agreement, in federal and

state law and regulation, to adequately
24796 Federal Register / Vol. 63, No. 86 /Tuesday, May 5, 1998 / Notices

protect confidential business

information. As we move forward with

implementing the agreement, we will

develop procedures to ensure that

information shared in the development

of proposals but designated as

confidential business information

remains confidential.

Measuring Success/Core Performance

Measures

Comments: A commenter said that

core performance measures should

emphasize environmental results (e.g.,

fewer diseases from pollution) over bean

counting (i.e., number of projects).

Another commenter said that the three

environmental objectives (air, water,

land quality improvements) are not

inclusive of all ecosystem

improvements, and that the measures

should take a broader holistic approach

towards improving environmental

quality.

Response: EPA and the states agree

that success measures should look more

broadly at improving human health and

environmental quality. The set of

measures in Attachment A of the

agreement is provided as a starting point

for discussion. As implementation of

the agreement gets underway, EPA and

the states, working with stakeholders,

will further develop the set of

performance measures that will be used

for evaluating success.

Specific Comment

Comment: A commenter said that the

provisions under the Measuring/

Verifying Results principle do not

require measurement and monitoring.

Response: EPA and the states believe

that the intent of this language is clear—

that innovations must have results that

are measurable and verifiable.

Legal Status of the Agreement

Comment: A commenter stated that it

is inappropriate for EPA to enter into an

informal agreement with a non-profit

organization (ECOS) that would subvert

EPA’s legal obligations.

Response: A paragraph has been

added to the agreement to clarify its

legal status. The paragraph says, ‘‘This

agreement signals the commitment of

EPA and state environmental agencies

to work together on innovations. It does

not create any legal obligations for EPA

or the states, and does not alter EPA’s

or states’ statutory responsibilities or the

nature of authorized or delegated state

programs. Any innovations under this

agreement will be implemented within

our existing legal authorities using

appropriate procedures.’’

Dated: April 29, 1998.

J. Charles Fox,

Associate Administrator, Office of

Reinvention.

[FR Doc. 98–11799 Filed 5–4–98; 8:45 am]

BILLING CODE 6560–50–P

ENVIRONMENTAL PROTECTION

AGENCY

[Docket No. 98F–FRL–6008–8]

Final EPA Supplemental

Environmental Projects Policy Issued

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Notice.

SUMMARY: The Environmental Protection

Agency (EPA) is issuing a revised, final

EPA Supplemental Environmental

Projects Policy. This Policy supersedes

the May 1995 Interim Revised

Supplemental Environmental Projects

Policy. Based on experience gained

implementing the Interim Revised SEP

Policy, EPA has refined and clarified

this Policy to better assist it in

exercising its enforcement discretion to

establish appropriate settlement

penalties and supplemental

environmental projects (SEPs) that

secure significant environmental and

public health improvements.

DATES: EPA will implement this Policy

effective May 1, 1998.

FOR FURTHER INFORMATION CONTACT: Ann

Kline, 202–564–0119, Office of

Regulatory Enforcement, Mail Code

2248–A, United States Environmental

Protection Agency, 401 M Street, SW.,

Washington, DC 20460.

SUPPLEMENTARY INFORMATION: These

final revisions to the EPA Supplemental

Environmental Projects (SEP) Policy

refine and clarify the 1995 Interim

Revised Supplemental Environmental

Projects Policy for easier

implementation. The basic structure and

operation of the Policy remains

unchanged. The primary purpose of this

Policy is to obtain environmental and

public health protection and

improvements that may not otherwise

have occurred without the settlement

incentives provided by this Policy. The

final Policy retains the 1995 Policy

framework for determining whether a

proposed project can be considered in

establishing an appropriate settlement

penalty. In addition, this Policy also sets

out clear legal guidelines, well-defined

categories of acceptable projects and

simple easy-to-apply rules for

calculating and applying the cost of a

SEP in determining an appropriate

settlement penalty.

The most significant changes made to

the 1995 Interim Revised Policy

include: (1) Explicit encouragement of

community input into the development

of SEPs in appropriate cases; (2) a

prohibition on using SEPs to mitigate

claims for stipulated penalties except in

extraordinary circumstances; and (3) the

creation of an ‘‘other’’ category, under

which projects that do not fit within a

defined category of this Policy but

otherwise meet all other criteria of the

Policy may be approved under certain

procedural requirements. A full copy of

this Policy is set forth below and also

may be found at U.S. EPA’s Web site at

http://www.epa.gov/oeca/sep.

Dated: April 10, 1998.

Steven A. Herman,

Assistant Administrator, Office of

Enforcement and Compliance Assurance,

United States Environmental Protection

Agency.

A. Introduction

1. Background

In settlements of environmental

enforcement cases, the U.S.

Environmental Protection Agency (EPA)

requires the alleged violators to achieve

and maintain compliance with Federal

environmental laws and regulations and

to pay a civil penalty. To further EPA’s

goals to protect and enhance public

health and the environment, in certain

instances environmentally beneficial

projects, or Supplemental

Environmental Projects (SEPs), may be

part of the settlement. This Policy sets

forth the types of projects that are

permissible as SEPs, the penalty

mitigation appropriate for a particular

SEP, and the terms and conditions

under which they may become part of

a settlement. The primary purpose of

this Policy is to encourage and obtain

environmental and public health

protection and improvements that may

not otherwise have occurred without the

settlement incentives provided by this

Policy.

In settling enforcement actions, EPA

requires alleged violators to promptly

cease the violations and, to the extent

feasible, remediate any harm caused by

the violations. EPA also seeks

substantial monetary penalties in order

to deter noncompliance. Without

penalties, regulated entities would have

an incentive to delay compliance until

they are caught and ordered to comply.

Penalties promote environmental

compliance and help protect public

health by deterring future violations by

the same violator and deterring

violations by other members of the

regulated community. Penalties help

ensure a national level playing field by