Environmental Protection: Overcoming Obstacles to Innovative State Regulatory Programs
Published: 2002-01-31T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: The Environmental Protection Agency (EPA) issues regulations that states, localities, and private companies must comply with under the existing federal approach to environmental protection. This approach has been widely criticized for being costly, inflexible, and ineffective in addressing some of the nation's most pressing environmental problems. The states have used several methods to obtain EPA approval for innovative approaches to environmental protection. Among the primary approaches cited by the state environmental officials GAO interviewed are EPA's Project XL and the Joint EPA/State Agreement to Pursue Regulatory Innovation. Officials in most states told GAO that they faced significant challenges in submitting proposals to EPA, including resistance from within the state environmental agency and a lack of adequate resources to pursue innovative approaches. EPA recognizes that it needs to do more to encourage innovative environmental approaches by states and other entities. As a result, EPA has (1) issued a broad-based draft strategy entitled "Innovating for Better Environmental Results" and (2) adopted the recommendations of an internal task force, which advocated the consideration of innovative alternatives as new regulations are developed.

section_title: Letter
paragraphs: Under the existing federal approach to environmental protection, the  Environmental Protection Agency (EPA), pursuant to statutes such as the  Clean Air Act and Clean Water Act, prescribes regulations with which  states, localities, and private companies must comply.  The approach has  been widely criticized in recent years for being costly, inflexible, and  ineffective in addressing some of the nation’s most pressing environmental  problems.  For example, the National Academy of Public Administration  recently concluded that although traditional regulatory approaches can  keep most forms of industrial pollution in check, they cannot reach many  other sources of pollution and environmental degradation, such as diffuse  sources of water pollution from urban and agricultural runoff.  Even where  existing approaches have succeeded in curtailing pollution from major  industrial sources, they have often been costly or have provided regulated  entities with little incentive to reduce pollution below mandatory  compliance levels.
EPA responded to such concerns during the 1990s with a variety of  initiatives intended to encourage innovative regulatory strategies that  could streamline environmental requirements while encouraging more  effective means of protecting the environment.  Among the agency’s  “flagship” programs was Project XL, which encouraged individual  regulated facilities to propose projects to EPA that would test whether  alternative approaches could achieve compliance at lower cost and  produce greater environmental benefits.
Many sponsors of innovation, however, have expressed disappointment  over the effectiveness of Project XL and similar initiatives intended to  encourage creative improvements in environmental regulation.  Some have  also contended that the states could be key to a more effective and efficient  approach to environmental policy.  Citing states’ closer proximity to  environmental problems and central role in enforcing federal regulation,  they have advocated that EPA show greater flexibility in allowing states to  pursue innovative environmental regulatory approaches.  Others, however,  have cautioned that unless these alternative approaches are carefully  designed, they could impair EPA’s ability to achieve protection of human  health and the environment—the ultimate purpose of the programs—and  may not be permissible under federal environmental statutes.
As agreed with your offices, this report identifies (1) the major avenues  that states have utilized to obtain EPA’s approval of innovative approaches  to environmental protection and (2) the major obstacles that impede states  from pursuing innovative approaches needing EPA’s concurrence.  The  report also discusses EPA’s recent efforts to facilitate innovative  approaches to environmental protection.  To address these issues, we  sought detailed information from a diverse group of 15 states on their  experiences in pursuing innovation.  In selecting these states, we sought  variation in size, location among EPA’s 10 geographic regions, and the  degree of their participation in environmental regulatory innovation.Among other steps, we conducted detailed, structured interviews with  environmental officials from these states, and analyzed in detail 20  initiatives they cited as being among the key initiatives they have pursued.We also interviewed officials in the corresponding eight EPA regional  offices and at EPA’s headquarters, and obtained from them pertinent EPA- state agreements and guidance documents.  A more detailed explanation of  our scope and methodology is included at the end of this report.
subsections: section_title: Background
paragraphs: Federal environmental policy is shaped by numerous federal statutes,  including The Clean Air Act, The Clean Water Act, and The Resource  Conservation and Recovery Act.  These laws charge EPA with protecting  the environment through such activities as setting standards for air and  water quality, issuing permits, and taking enforcement actions.  The laws  also allow states to assume many of these responsibilities.  As states’  responsibilities have grown, they have applied for and received the lead  role in performing these activities.  Consequently, the operational  responsibility for most of EPA’s major programs currently lies with the  states, and EPA routinely relies on states to implement the full range of  environmental responsibilities associated with these programs.
In recent years, a number of organizations have emphasized the need to  supplement or significantly modify the existing prescriptive, command- and-control approach toward environmental protection established under  current federal laws.  For example, in 1998, Resources for the Future (an  environmental policy research organization) noted that while the current  federal approach has many noteworthy achievements, it is also flawed in  several respects. It noted in particular that federal laws and regulations  tend to prescribe the specific means by which environmental goals will be  reached, rather than establishing goals and allowing states and facilities the  flexibility to reach those goals.  GAO has also reported on these matters in  recent years, focusing in particular on EPA’s efforts to “reinvent”  environmental regulation. EPA has also recognized the need for new  approaches in numerous publications and in its interactions with state  governments and other parties.
The Congress has recently considered giving EPA explicit authority to  allow more flexible approaches by states and others.  One such proposal,  the Second Generation of Environmental Improvement Act of 1999 (HR  3448), introduced in the 106th Congress, would have allowed EPA to enter  into innovative strategy agreements with states, companies, or other  interested parties in order to experiment with ways to achieve  environmental standards more efficiently and effectively.  Such agreements  could have involved the modification or waiver of existing agency  regulations.  The bill was not enacted and has thus far not been  reintroduced in the 107th Congress.
section_title: States Have Used Several Key Avenues to Promote Innovative Environmental Approaches
paragraphs: In recent years, states have worked with EPA through several key avenues  to pursue innovative environmental approaches.  Seven of the 15 states we  contacted have used EPA’s Project XL as such a vehicle, even though the  projects in which they are involved were formally proposed to EPA by a  private company.  Partly as a result of states’ dissatisfaction with Project  XL, however, EPA and the Environmental Council of the States (ECOS)  agreed in 1998 to a process in which, among other things, states submit  innovative projects through their respective EPA regional offices and EPA  is provided timelines within which it must respond.  In addition to these  two major avenues, states have also pursued alternative approaches to  environmental protection through the use of the National Environmental  Performance Partnership System (NEPPS), by participating in programs  developed through EPA’s media offices and by negotiating relatively narrow  changes in their day-to-day working relationship with EPA.
subsections: section_title: EPA’s Project XL
paragraphs: Project XL, which stands for “excellence” and “leadership,” was launched  in 1995 as part of the previous administration’s broad effort to reinvent  federal environmental protection policy.  Based on recognition of the need  for new approaches to environmental regulation, Project XL was designed  to allow private businesses, as well as states and local governments, to test  innovative ideas to enhance environmental protection. In exchange for  improved performance, participants would be given the flexibility to  explore new approaches to environmental protection.
To participate in Project XL, businesses, states, and other government  agencies submit proposals to EPA, which then evaluates proposals  according to specific criteria and other considerations.  EPA requires that,  among other things, Project XL participants demonstrate that their  proposals will result in “superior environmental performance,” and include  a system for monitoring and a process for stakeholder involvement.  XL  projects should also be designed to test innovative approaches that are  transferable to other facilities.
Although most of the more than 50 XL projects approved to date were  submitted by private facilities, some federal and local government agencies  have submitted proposals as well.  In addition, four states have submitted  proposals designed to apply to multiple facilities within the states.  Massachusetts’ Environmental Results Program, for example, covers the  dry cleaning, photo processing, and printing sectors.  Table 1 describes  each of the state-initiated projects that cover multiple facilities or entire  industry sectors.
While not initiating specific Project XL proposals, 7 of the 15 states we  contacted have participated by working on initiatives that were formally  proposed to EPA under Project XL by private companies.  For example,  even before the establishment of Project XL, the Minnesota Pollution  Control Agency had been working with the 3M Company to develop  alternative compliance approaches, which it subsequently pursued under  the auspices of Project XL.  More recently, Minnesota has actively worked  with the Andersen Windows Corporation on a proposal to reduce air  emissions from a facility in Bayport, Minnesota, in exchange for regulatory  flexibility.  Similarly, Virginia played an active role in advocating an  innovative approach to controlling air emissions proposed by Merck  Pharmaceuticals for their facility in Stonewall, Virginia.
section_title: Joint EPA/State Agreement to Pursue Regulatory Innovation
paragraphs: In 1998, EPA and ECOS agreed to encourage experimentation by states  with new approaches to environmental protection through their Joint  EPA/State Agreement to Pursue Regulatory Innovation.  In part, this  agreement grew out of the states’ frustration with other avenues for  pursuing innovation, such as Project XL.  Specifically, states were  frustrated with Project XL’s requirement that sponsors document a  proposal’s ability to achieve “superior environmental performance.”Many  believed that such a requirement was too stringent and precluded  worthwhile projects that would deliver environmental results equivalent to  existing regulations but more efficiently.  States also believed that the  process of submitting a Project XL proposal and receiving EPA’s approval  was too time-consuming.
In response to these concerns, the ECOS/EPA agreement outlined a  process by which states could submit innovative projects through the EPA  regional offices and provided timelines during which EPA must provide a  response.  Specifically, once a state submits a proposal to EPA, the agency  has 4 weeks to reply to the state with a list of questions and concerns.  Within 90 days of receipt of the initial proposal, EPA must issue a final  response to the state.  According to the EPA regional officials we  interviewed, states do not often hold EPA strictly to these deadlines.  Nonetheless, state officials told us that the time limit is sometimes helpful  in obtaining a timely EPA response when necessary.  In addition, the  agreement omits Project XL’s requirement for “superior environmental  performance.”  Instead, it only requires that innovations seek more efficient  and/or effective ways of protecting the environment.
The agreement also lays out a set of principles intended to guide the  development and implementation of innovations.  Specifically, it states that  (1) innovation often involves experimentation that should not harm human  health or the environment but may include some chance of failure;  (2) innovations must seek more efficient or effective ways of meeting  environmental performance goals; (3) innovations should seek creative  ways to tackle environmental problems; (4) stakeholders should be  involved in the development and evaluation of innovations; (5) results of  innovations must be measured and analyzed; (6) innovations must be  enforceable and accountable; and (7) states and EPA must work as  partners to promote innovation.
State proposals submitted to EPA to date have covered a wide range of  innovations.  Some agreements have targeted one specific problem at an  individual facility, while others have been designed to affect a large number  of stakeholders or to develop a framework through which a state and EPA  agree to handle innovative proposals.  For example:
The New Hampshire Department of Environmental Services sought  flexibility under federal regulations for a single pulp and paper mill to  test an innovative regulatory approach to pollution control and  treatment.  Under new regulations, the mill would be required to install  expensive technology to control airborne methanol emissions.  Under  the proposal, however, the mill would use an alternative technology that  would result in a four-fold reduction in methanol emissions over the  current requirements while saving the company approximately  $825,000.
In contrast, a proposal by Michigan’s Department of Environmental  Quality covered a much larger group of stakeholders.  The proposal  seeks approval for a new approach to meeting Total Maximum Daily  Load (TMDL) requirements under the Clean Water Act.  In particular, it  would facilitate ways that point sources of pollution (e.g., an industrial  facility discharging from one or more pipes) could collaborate with  diffuse, “nonpoint” sources in controlling phosphorus pollution.
Wisconsin proposed a broad framework through which the Wisconsin  Department of Natural Resources and EPA would deal with multiple  innovations.  Under the agreement, Wisconsin may develop up to 10  pilot projects with facilities that would test a facility-wide, “multi-media”  approach to regulation (i.e., an approach that comprehensively  integrates their air, water, and waste regulations) that is built around the  use of an environmental management system.  Facilities that commit to  achieving superior environmental performance would be granted some  degree of regulatory flexibility.
The number of proposals under the ECOS/EPA agreement has been fairly  low to date, although participation has been growing recently.  As of  February 2001, 3 years after the agreement, 22 proposals had been  proposed from six states in three EPA regions.  As indicated in figure 1  below, by January 2002, participation had increased to 15 states, which  together had proposed 45 initiatives.  Of these proposals, EPA has accepted  20, another 22 are still under consideration, and 3 proposals have been  denied or withdrawn.  In our interviews with selected states, we discussed  specific state experiences under the agreement.  Of the 15 states, 10 had  proposed projects under the ECOS/EPA agreement, while other states  indicated that they are considering proposing projects in the future.
section_title: Other Avenues
paragraphs: In addition to Project XL and the ECOS/EPA agreement, state and EPA  officials identified several other avenues for negotiation that states have  used to obtain EPA’s approval for innovative environmental strategies.  One  is the National Environmental Performance Partnership System (NEPPS),  which was established in 1995 to give states greater flexibility in setting  their priorities and in the way they carry out their programs if they  demonstrate the capacity and willingness to achieve mutually agreed-upon  results.  NEPPS provides a framework for the state’s relationship with EPA,  laying out the state’s environmental goals and priorities, and the ways in  which they will measure progress in meeting these goals.  Under the  system, a state agency may enter into a Performance Partnership  Agreement with its EPA regional office that typically specifies the  signatories’ respective roles and responsibilities in achieving specified  program objectives.
While not intended to focus solely on innovation, some states have used  NEPPS for this purpose.  As our 1999 report on NEPPS noted, for example,  Minnesota’s Pollution Control Agency reorganized its traditional medium- by-medium (i.e., air, water, and waste) structure into a structure the agency  believed would more effectively address problems that cross media lines.  The agency used its Performance Partnership Agreement to provide the  flexibility it needed to report environmental results to EPA in line with this  new structure.  Other states have also used their partnership agreements to  achieve and document agreements on specific initiatives.
EPA has also sought to promote innovation through its program offices.  For example, the Office of Solid Waste and Emergency Response has  promoted cleanup and redevelopment of contaminated industrial sites by  encouraging state voluntary cleanup programs.  Unlike programs that rely  on enforcement alone to achieve cleanups by parties responsible for the  contamination, these voluntary “Brownfields” programs allow site owners  and developers to collaborate on bringing sites back to productive use.  EPA has encouraged the programs by providing funding to develop these  programs, reviewing program adequacy, and agreeing not to take further  enforcement action at these sites unless serious environmental  contamination was overlooked.
Finally, EPA regional officials we interviewed mentioned that minor  changes are often adopted through informal discussions during the normal  course of work.  They noted that more significant changes, such as those  requiring a change in regulations, would have to go through one of the  avenues for innovation or through the rulemaking process.
section_title: States’ Innovative Proposals Face Obstacles at the State and Federal Level
paragraphs: While states can face significant obstacles at the state level before  submitting an innovative proposal to EPA, officials in 12 of the 15 states we  contacted stated their most significant obstacles are at the federal level.  States cited prescriptive regulations as one of the most significant  obstacles, along with an EPA culture they viewed as being averse to risk  and resistant to change.  EPA officials acknowledged that its culture has a  tendency to resist innovative proposals, but some noted that such  resistance is rooted in the agency’s primary mission to ensure strict  adherence to the letter of statutes and agency regulations.  They also noted  that some states have omitted key elements when they submit proposals,  such as provisions to measure whether the innovation to be tested will  have its intended effect.
subsections: section_title: Resource Constraints Are Among the Key Obstacles at the State Level
paragraphs: Officials in all of the states we contacted indicated that they faced  significant obstacles—including lack of resources, cultural resistance in  the state agency, and opposition from environmental groups--even in  advance of proposing a project to EPA.  In some cases, state officials cited  these obstacles as reasons why the state had not yet actively pursued  innovations requiring federal approval.
In discussing 20 separate initiatives, state officials cited a heavy ongoing  agency workload and concomitant limited resources as obstacles to  innovative approaches in 11 instances.  In several instances, the state was  nevertheless actively pursuing innovative approaches despite this  constraint.  For example, a Michigan official stated that finding sufficient  resources was one of the primary difficulties faced in pursuing initiatives  under the EPA/ECOS agreement.  Although a considerable number of  additional staff and resources were needed, the effort was given high- priority status; and therefore, agency resources were diverted to support it.  Similarly, noting that 80 percent of their resources are consumed in  meeting federally mandated requirements, officials from the Minnesota  Pollution Control Agency said the agency’s management is reluctant to  divert scarce resources to innovative programs.  Nonetheless, they said the  agency has actively promoted Project XL initiatives and is likely to propose  future initiatives under the EPA/ECOS agreement.
Officials from other states, however, said they were unable to pursue  innovative approaches because of the limited resources available to meet  an already-demanding workload.  For example, an official of the Nebraska  Department of Environmental Quality said that developing an innovative  proposal would take a considerable investment in up-front staff time and  resources, and the agency’s federally mandated workload exhausts all  resources.  Largely for this reason, Nebraska has not yet pursued any major  innovative initiative requiring EPA approval.  Similarly, an official of the  Georgia Department of Natural Resources cited the agency’s heavy  mandated workload and related budget constraints as one of the two most  significant obstacles to pursuing innovative approaches.
The importance of limited state agency resources as an obstacle to  innovative approaches was also highlighted in an April 2000 ECOS survey.The survey asked state officials to indicate the degree to which each of 12  frequently cited impediments to innovative practices was an obstacle in  their case.  Six of the 29 responding states said that state agency resource  limitations were the single largest obstacle they faced, while officials of 7  states indicated that this was a persistent obstacle that was difficult to  address.  Among the factors not related to federal policy, this factor ranked  as the most significant obstacle in the survey.
A state agency’s culture and working environment can also discourage  innovative approaches.  For 5 of the 20 specific initiatives we discussed,  state officials said that an agency’s culture and working environment to  some extent discouraged alternative approaches to environmental policy.  One state official said that obtaining EPA’s permission to pursue an  innovation was an abstract problem because the state agency had not been  able to reach the point of submitting a proposal.  He explained that internal  staff resistance was the biggest problem, noting in particular that many  rank-and-file managers had been with the agency for 25 to 30 years and had  a professional ethic that emphasized following long-standing approaches to  environmental protection.  The official recalled that several years ago, the  agency had examined alternative approaches to permitting, including an  approach that would allow regulated facilities to certify their own  compliance, and thus allow the agency to shift resources from permitting  activities to enforcement activities.  The division managers in the agency  almost unanimously opposed this approach, fearing that it would lead to  loss of control over regulated entities, a loss of funding for their own  programs, and less effective environmental protection.  In part because of  such resistance, the agency had not recently tested EPA’s receptiveness to  an innovative proposal.
Opposition to innovative approaches from environmental groups and other  stakeholders has also impeded proposals.  Officials in several states noted  that environmental and community groups generally perceive innovative  proposals as opening the door to rollback of environmental standards.  A  Washington state official noted that the state has a very politically active  public, and some environmental and community groups perceive  innovative proposals as potentially compromising the goals of  environmental statutes.  For example, such groups vigorously opposed the  state’s proposal to extend discharge permits under the Clean Water Act  from 5 to 10 years because they feared the state was backing away from  oversight of polluting facilities.  A representative of the Texas Natural  Resource Conservation Commission made similar comments, but noted  that early involvement of such groups can go a long way toward mitigating  their opposition.  He stated that if the concerns of such groups are taken  into account during the design of a proposal, their opposition later in the  process is far less likely.
section_title: Key Federal Obstacles Include Prescriptive Regulations and Cultural Resistance
paragraphs: State officials identified factors at the federal level, including statutes,  regulations, and an EPA culture not conducive to innovation, as more  significant obstacles than the factors they encountered at the state level.  Specifically, officials in 12 of the 15 states we contacted said that these  federal obstacles were more significant in impeding innovation than  obstacles faced at the state level (such as the state agency’s culture and  workload, and opposition from environmental groups).  The three  remaining states said these two categories were about equal in their  significance.
As summarized in table 2, of the federal obstacles we discussed with states,  federal regulations and an EPA culture viewed as resistant to innovative  approaches ranked as the two most significant obstacles affecting progress  among the 20 specific initiatives identified by state officials.  Our  interviews, however, revealed an important relationship between the two  factors.  Specifically, while EPA officials acknowledged the agency’s  culture can be resistant to innovative proposals, some noted—and some  state officials agreed—that what is often construed as “cultural resistance”  is sometimes rooted in a sense of obligation among agency officials to  ensure that statutes and agency regulations are properly and fully  implemented.  EPA officials also pointed out that in some cases state  proposals lacked key elements when they were submitted, such as  provisions for public involvement or a systematic means of measuring  whether the innovation would have its intended effect.
An extensive literature has documented that both existing environmental  statutes and environmental regulations can impede innovation.  However,  the manner in which the two may have this effect differs, with the more  detailed, individual regulations generally having a more direct impact on  proposals than the more general statutes that authorize the regulations.
The major federal environmental statutes are generally less detailed and  specific, in terms of what they require or preclude, than the regulations  EPA develops to implement them.  There tends to be a hierarchical  relationship between statutes and regulations—statutory requirements  establish the broad outlines of environmental policy while regulations  reflect EPA’s effort to implement the statutes, and hence provide much  more specific requirements on how the regulated community is to control  pollution.  Perhaps for this reason, the state officials we interviewed cited  comparatively few instances in which an environmental statute precluded a  particular innovation they were pursuing. Overall, environmental statutes  were ranked either first or second 6 times among the 20 state innovations  we examined.
However, environmental statutes have been linked with a broader, less  direct impact on state environmental innovations by directing regulators  and their resources toward specific, medium-by-medium activities—  sometimes at the expense of alternative strategies that might more  effectively address the highest environmental risks.  For example, in our  July 1997 report on EPA’s “reinvention” activities, we cited the difficulties  in setting risk-based priorities across environmental media because each  statute prescribes certain activities to deal with its own medium-specific  problems. We also cited an observation from an earlier GAO report that  environmental statutes “led to the creation of individual EPA program  offices that have tended to focus solely on reducing pollution within the  particular environmental medium for which they have responsibility, rather  than on reducing overall emissions.” This “stovepipe” effect of the  environmental statutory framework was cited by an EPA headquarters air  official, who noted that the Clean Air Act would not recognize the value at a  specific industrial site of a large reduction in water emissions in exchange  for even a slight increase in air emissions--even though such a trade-off  might have significant net environmental benefits in certain situations.  As  others have noted, however, EPA generally does consider the potential  transfer of pollution from one medium to another when it develops new  regulations.
Several state officials told us that federal environmental statutes can  indirectly hinder innovative state approaches not only by what they  include, but also by what they omit.  They noted that since environmental  statutes give EPA little or no explicit authority to grant regulatory flexibility  to the states, the agency is placed at a higher risk when it grants a state or  regulated entity permission to deviate from federal requirements.  One  state official cited the absence of such a “safe legal harbor” for EPA as a  key impediment to state innovation.
subsections: section_title: Regulations
paragraphs: State officials cited regulations as a significant factor more often than  statutes.  In discussing 20 specific innovative proposals, state officials  ranked regulations either first or second 12 times among the federal factors  listed in table 2.
States cited a number of instances in which regulations prescribed an  approach for dealing with an environmental problem that a state believed it  could more effectively address in another way.  Oregon officials cited such  a proposal, pursued under the state’s Green Permit Program, in which the  state sought to provide flexibility to a regulated facility as an incentive for  improved environmental performance.  The state’s Department of  Environmental Quality proposed to grant a semiconductor manufacturing  firm expedited permit review and various other incentives in exchange for  the firm’s commitment to future environmental improvements through its  environmental management system.  As part of the application, the facility  sought the approval of its system of correcting and detecting leaks in its  hazardous waste piping from processes to storage tanks.  According to a  state official, the system’s overall performance matches or exceeds federal  regulatory requirements, though it does not meet certain technical  specifications of regulations under the Resource, Conservation, and  Recovery Act (RCRA).  As a result, EPA determined that it was unable to  approve that particular aspect of the facility’s application.  EPA did not rule  out approval of this system, but stated that additional information would be  required to justify it.  An EPA official said that, after site visits and review of  additional information provided by the facility, EPA Region 10 has  concluded preliminarily that the required justification has been  established.  EPA and the state must now agree on a legally-enforceable  alternative to the relevant RCRA requirements.  EPA officials noted that the  most likely approach, a site-specific rule, is a time-consuming approach  that could take over 6 months.  An Oregon official added that EPA is  proceeding slowly on this issue both because it could set a precedent for  numerous similar facilities across the nation and because the process is  taxing limited regional staff resources.
The Oregon experience is comparable to experiences cited by officials in  other states in which a regulation either discouraged an innovation or  imposed significant costs in pursuing the innovation.  It is also comparable  to the experiences documented in an extensive literature on the effect of  prescriptive regulations on efforts to innovate.  In summarizing part of this  literature, the Environmental Law Institute (ELI) cited as a major problem  the design of most regulatory standards under the Clean Water Act and  Clean Air Act, which require EPA to establish technology-based discharge  rate limits based on “available” or “feasible” emission control  technologies. ELI noted that while alternative solutions are not  specifically prohibited, such regulatory standards may preclude innovation  in a number of ways, such as limiting permit writers to conservative  choices and eliminating incentives for progress beyond established  standards.  ELI summarized the effect of prescriptive regulatory standards  by noting that they “may severely limit innovation, creating higher costs  than necessary.”
Officials in EPA’s regions and headquarters both cautioned that federal  regulations are critical in ensuring reasonable consistency in the level of  environmental protection afforded to individuals across the country.  Several officials also noted that there is a “natural tension” between this  goal and the goal of allowing states greater flexibility to address  environmental problems in the way they believe best meets their needs.  Overall, however, they generally concurred with the comments voiced by  state officials concerning the effects of detailed, prescriptive regulations on  environmental regulatory innovation.  An official with EPA’s Office of Air  and Radiation added that it is important to remember that the federal  environmental protection system is about 30 years old and that many  regulations in effect today were written before the relatively recent  emphasis on developing more flexible innovative approaches.
section_title: EPA’s Culture
paragraphs: State officials indicated that a long-standing EPA culture that resists  alternative approaches to environmental protection is viewed as one of the  most significant obstacles to state environmental innovation.  The  importance of cultural factors was evident in our discussions of the factors  affecting progress on specific innovative proposals.  Of the 20 individual  proposals that the states discussed, EPA culture was cited as either the first  or second most important factor in 14 cases.
Some state officials noted that such cultural resistance often manifests  itself in a lengthy and time-consuming review and approval process.  One  EPA regional official referred to the numerous levels of review, the large  number of EPA stakeholders, and the degree to which every detail of a  proposal is examined as a “death by 1,000 cuts,” saying that after such a  review process, it is often hard to keep the original concept or retain what  is truly innovative.
Along these lines, an official in Massachusetts’ Department of  Environmental Protection cited as an example the experience of a  proposed addendum to its Project XL Agreement that established the  state’s Environmental Results Program.  The official said that EPA’s July  1999 response had included an extensive set of questions and comments  that went well beyond what the state DEP had proposed, and was viewed  by DEP staff as essentially asking the agency to justify the entire  Environmental Results Program all over again.  She added that DEP staff  were frustrated not only by the volume of the questions posed, but also by  the appearance that no one at EPA had been assigned to consolidate the  numerous comments from various EPA offices.  DEP’s reaction was to  temporarily shelve the project, claiming that it did not have the resources  to enter into protracted negotiations to resolve EPA’s concerns.  According  to the Commissioner, the subsequent intervention of the EPA Office of  Enforcement and Compliance Assurance’s Policy Director helped to revive  the proposal.  Currently, DEP is awaiting EPA approval of a draft state rule  containing the changes the state desires.
New Jersey officials cited similar experiences during negotiations over the  state’s Gold Track program, stating that some EPA program staff strongly  resisted requests for regulatory flexibility.  One official noted that EPA staff  had exhibited a “what if” mentality when reviewing proposals—developing  a worst possible case scenario and holding that scenario up as a reason to  reject the proposal.  This official added that the EPA approach appeared to  focus more on a search for reasons not to pursue innovation, rather than on  an examination as to whether the proposal was fundamentally sound and  how it could best be implemented.
EPA officials we interviewed also acknowledged the existence of an EPA  culture predisposed to view innovative proposals skeptically.  For example,  an official of EPA’s Office of Solid Waste and Emergency Response noted  that this cultural tendency is partly rooted in the fact that many EPA staff  are used to addressing environmental problems in a “tried and true” way  and that EPA’s reward system does not encourage staff to pursue  innovative approaches.  Similarly, an official of EPA’s Office of Air and  Radiation noted that EPA has a culture somewhat resistant to new  approaches, in part, because of its reluctance to deviate from approaches  that it believes have proven effective over the last 30 years.
The agency recognized the challenge of promoting acceptance of new  approaches on the part of its rank-and-file in our July 1997 report on its  reinvention efforts, which documented widespread agreement among EPA  officials, state officials, and others that the agency has a long way to go  before reinvention becomes an integral part of its staff’s every day  activities. It cited the view of the then-head of EPA reinvention activities  as noting that many staff are comfortable with traditional ways of doing  business and consider their program-specific job responsibilities as their  first priority and reinvention projects as secondary.  Also commenting on  EPA staffs’ comfort with traditional approaches, a senior ECOS official  noted that EPA was created in the early 1970s, and that many current  employees have spent their entire careers there.  He noted that for some of  them, a familiarity and comfort with earlier norms and practices may make  it hard to embrace some of the agency’s recent experiments with  alternative compliance strategies.
However, EPA officials indicated that what may be perceived as “cultural  resistance” among EPA staff may, in fact, reflect understandable concerns  that they properly implement the agency’s core mission.  An official with  the agency’s Office of Policy, Economics, and Innovation added that in  some cases, EPA staff may feel that specific regulations were the  culmination of a good faith commitment made to stakeholders and  members of the public who participated in the regulatory development  process.  An official of EPA’s New York office noted that EPA is obligated to  ensure a certain level of environmental protection, and if proposed  innovations could potentially negatively affect the environment, the  benefits of moving forward must be carefully balanced against the risks.  Another EPA official noted that close scrutiny is warranted in situations  where an alternative approach may be viewed as setting a precedent for  similar requests in situations where it may not be appropriate.  An official  of EPA’s Chicago office also noted that to allow deviation from regulatory  requirements, EPA must develop an  alternative legal mechanism to ensure  accountability.  Developing such legal mechanisms can be very time  consuming.  Perhaps most importantly, EPA staff are mindful of the  potential consequences when innovative proposals are at odds with laws or  regulations.  A state official said that EPA has to be cautious in permitting  innovative approaches because the agency is often sued by environmental  and community groups if it does not follow laws and regulations to the  letter.
On the other hand, EPA and some state officials indicated that EPA’s  disinclination to consider alternative approaches may be slowly changing.  Officials of the state environmental agencies in Massachusetts and New  Hampshire indicated that EPA’s Boston office has become a stronger  advocate for flexibility and new approaches.  For example, a  Massachusetts official said the states in the region generally get a  sympathetic hearing when they make proposals.  The official also said that  EPA’s Office of Enforcement and Compliance Assurance has also become  more willing to consider innovative approaches.  Similarly, the New  Hampshire official stated that EPA is gradually changing the mindset of its  staff to be more open to innovative proposals and that there is a healthy  and respectful working relationship between the state and the agency’s  Boston Office on these matters.  Senior ECOS staff also told us that while  further progress is needed, the agency has also sought to include state  input earlier in its decision-making process to resolve long-standing data  reporting problems and other key issues.
section_title: EPA Sometimes Determines That Proposals Are Missing Key Elements
paragraphs: While EPA officials acknowledged the key obstacles cited during our state  interviews, they also told us that state innovative proposals sometimes  encounter delays resulting from deficiencies in the form and content of the  proposals.  Project XL, the ECOS/EPA agreement, and other avenues for  innovation each have certain ground rules on which participating parties  agree.  The EPA officials noted, and some state officials agreed, that in  some cases a proposal’s rejection or delay may have less to do with an  obstacle encountered at the federal level than with a problem in the  proposal’s ability to meet these ground rules.
As noted earlier, for example, Project XL requires that proposed innovative  approaches result in “superior environmental performance,” in comparison  to traditional approaches.  According to EPA’s Chicago office staff, the  difficulty in documenting compliance with this criterion was a primary  point of contention regarding the XL proposal made by the Andersen  Windows corporation with backing by the state of Minnesota.  Among other  things, Andersen Windows desired to obtain flexibility to change  production processes without costly permit reviews under the Clean Air  Act’s Prevention of Significant Deterioration regulations.  In exchange, the  firm proposed to establish a per-unit volatile organic compounds emissions  rate of 0.763 pounds per unit of production (referred to as the performance  ratio).  The performance ratio ensures that future capacity increases would  use less polluting processes, such as the substitution of water-based wood  finishes for the solvent-based wood finishes the facility had traditionally  used.  Also, the project would adopt an overall emissions cap of 2,651 tons  of volatile organic compounds per year.
Although the proposed emission cap was above current actual emission  levels, Andersen Windows contended that because it was below current  allowable emissions, EPA should take into account the firm’s past efforts to  reduce VOC emissions.  EPA, on the other hand, wanted the project to  commit to a level of emissions no higher than current actual emissions.  EPA contended that there was no plausible scenario under which the  facility would have emitted at a level near the proposed cap, and thus the  proposal did not constitute a commitment to superior environmental  performance.  In response, the facility made a number of concessions,  including the performance ratio limit, a lower overall emissions cap, and an  explicit, enforceable commitment that any new paint processes would use  less polluting materials.  After extensive negotiations, EPA agreed to the  proposal.
The ECOS/EPA agreement also includes a series of principles to which  signatories of proposals agree.  Among them, proposals should include  provisions for stakeholder involvement in a project, provisions for the  enforcement of alternative regulatory requirements to ensure that public  health and environmental protections are maintained, and a process for  assessing the results of the innovative approach to test whether the desired  results are actually achieved.  Representatives of the Office of Enforcement  and Compliance Assurance stated that state proposals do not always  include an evaluation component, while others have not identified how  stakeholder involvement would be assured.  An official in EPA’s Chicago  office also noted that some ECOS proposals did not meet the requirement  that they be sufficiently limited in scope that they may be considered  “experimental,” in order to minimize any risks if the initiative does not  work as anticipated.  For example, EPA initially resisted a Michigan  proposal to take an innovative approach to controlling phosphorous  discharges into state watersheds.  Because the state initially proposed that  this program be adopted in at least three watersheds and possibly  statewide, EPA felt that its scope was not sufficiently limited to be  considered an experiment.  The project was approved after Michigan  agreed to limit the proposal to a single watershed.
Finally, project submittals may be subject to EPA’s “compliance screening  guidance.”  The guidance provides that participants in regulatory flexibility  programs, such as Project XL and the EPA/ECOS agreement, have good  overall compliance records.  In particular, participation is deemed  inappropriate if an applicant has been the subject of a recent criminal  conviction, an ongoing criminal investigation, or ongoing EPA-initiated  litigation.  Participation may also be deemed inappropriate if an applicant  has been involved in violations resulting in a serious threat to human health  or the environment, a pattern of significant noncompliance, or is the  subject of a citizen enforcement suit.
Such screening guidance became a central issue in a Project XL proposal  submitted by the Hopewell Regional Wastewater Treatment Facility in  Virginia.  The facility receives industrial wastewater from a variety of  manufacturers, including makers of pulp and paper, organic chemicals, and  plastics.  As a result of federal pretreatment regulations under the Clean  Water Act, the contributing manufacturers were faced with the requirement  to add redundant pretreatment technology.  Adding the technology would  have adversely affected treatment performance at the Hopewell plant.  Consequently, the Hopewell Regional Wastewater Treatment Facility and  contributing sources proposed to move the application of pretreatment  standards from the industrial users to the Hopewell plant.  An EPA Deputy  Regional Administrator expressed EPA’s support for the project and its  desire to continue technical review of the proposal.  However, the  participation of two of the contributing firms was temporarily deferred  pending the resolution of outstanding significant non-compliance at those  facilities.  The state subsequently resubmitted the proposal under the  ECOS/EPA agreement.  In July 2001, EPA indicated that the proposal could  move forward to fuller development, but that the two firms with  noncompliance issues could not participate until their enforcement cases  were resolved.
section_title: Recent EPA Actions Are Intended to Facilitate State Innovative Approaches Regulations. Subsequently, in October 2001, the agency published a draft
paragraphs: EPA has recently taken a number of measures to address at least some of  the obstacles discussed in this report, and those changes may foster an improved climate for pursuing innovative state approaches.  In June 2001,  EPA adopted the recommendations of its Task Force on Improving EPA  strategy on Innovating for Better Environmental Results.
The EPA Task Force on Improving EPA regulations was created in April  2001 to reexamine EPA’s regulatory development process and identify ways  to improve supporting scientific, economic, and policy analysis.  In  addition, the task force sought ways to enhance regulatory flexibility and to  create strong partnerships with states and businesses.  Among other key  findings, the task force determined that in the process of developing  regulations, EPA should develop and consider a broader array of policy  options, including innovative alternatives and market-based approaches.  Importantly, the task force report recommended that the regulations  development process consider the possibility of innovative alternatives and  that EPA strengthen the involvement of states and local governments  during the regulatory development process.  Should EPA follow through on  this recommendation, it would help the agency address one of the key  obstacles identified in this report—the effect of prescriptive EPA  regulations in impeding innovative regulatory strategies.  By involving state  officials early in the regulations development process and identifying the  potential effects of regulatory proposals at this stage, there is a greater  chance that regulations will be developed in a manner that encourages,  rather than inhibits, innovation. The strategy, however, applies to the  development of new regulations rather than the obstacles posed by existing  regulations.
EPA’s Draft Strategy on Innovating for Environmental Results maintains  that EPA’s efforts to promote innovation over the course of the last decade  have made significant advances, but they have resulted in a disparate array  of projects that were not designed to achieve system-wide improvement.  Furthermore, it notes that the transaction costs have been high and that  there has not been a consistent process for expanding the application of  pilot programs.  To address these issues, the strategy proposes a 4-pronged  strategic framework:
Strengthening EPA’s partnership with states, including a greater  emphasis on performance management and the NEPPS process.
Focusing on four priority issues: reducing greenhouse gases, reducing  smog, restoring and maintaining water quality, and reducing the cost of  water and water infrastructure.
Diversifying environmental tools and approaches.
Fostering a more innovative culture and organizational system at EPA  and states.
Among other things, the strategy emphasizes fostering an organizational  culture at EPA that is more friendly to innovative approaches.  Following  up on EPA reinvention activities of the last 10 years, it states that EPA  should integrate support for innovation into its planning, budgeting, and  organizational systems.  It also notes that a more innovative culture will  require EPA staff to view their jobs more broadly; that is, not just as  overseers of ongoing operations, but as problem solvers, partners, and  facilitators.  It also proposes to hold senior managers accountable for  supporting innovative approaches and increasing their responsibilities for  scaling up successful innovations.  According to EPA officials, the process  of diffusion and broader application of successful innovations may lead to  gradual revision of existing regulations that may be inhibiting better ways  of achieving environmental goals.
The details of both EPA initiatives still need to be fleshed out and a number  of issues resolved.  For example, some state officials have questioned the  focus of the Draft Strategy on Innovating for Environmental Results on four  priority issues (greenhouse gases, smog, water quality, and water  infrastructure), fearing that this focus downplays other issues of greater  importance to individual states or localities.  According to EPA, states will  play a role in refining the Draft Strategy as it undergoes further  development.  How these and other issues are resolved will determine the  ultimate impact these efforts have on EPA’s reinvention efforts in general  and on its efforts to collaborate with states on innovative environmental  proposals in particular.
section_title: Conclusions
paragraphs: While states face a variety of obstacles when seeking to promote innovative  approaches to environmental protection, we found their most significant  obstacles to be at the federal level.  Of these federal obstacles, the detailed  requirements of prescriptive federal environmental regulations were cited  as among the most significant, along with a cultural resistance among many  EPA staff toward alternative approaches.  In some cases, however, the  underlying cause of this cultural resistance was traced back to the  regulations.  Specifically, many EPA staff believe that strict interpretations  must be applied to detailed regulations if they are to be legally defensible.
The identification by state officials of prescriptive federal regulations as a  key obstacle to innovation is consistent with the findings of numerous  research organizations that have cited the need for environmental  regulations to focus more on the desired environmental results and, where  possible, to be less prescriptive concerning the specific means of achieving  these results.  It is also consistent with EPA’s recent adoption of the  recommendations of its own Task Force on Improving EPA Regulations  which advocates, among other things, that innovative alternatives should  be considered as new regulations are developed.
It remains to be seen if implementation of the EPA recommendations will  have the desired effect in reforming the regulations development process  to better accommodate innovative proposals.  Yet, however successful  these efforts are in accounting for the impact of new regulations, they still  do not focus on the key problem (documented by this report and by those  of other organizations) concerning the impact of many existing  prescriptive regulations on innovation, nor do other EPA initiatives resolve  the problem.  As noted in this report, current statutes are generally less  prescriptive than the more detailed regulations by which they are  implemented.  However, the statutes contain no explicit language  authorizing the use of innovative environmental approaches in lieu of  specific regulatory requirements and, as noted in this report, this absence  of a “safe legal harbor” for EPA has been a significant obstacle to states and  others in their efforts to test innovative proposals.  It has also tended to  reinforce the cultural resistance to innovation that EPA is seeking to  change.  Accordingly, in the absence of legislative changes, the  effectiveness of the agency’s innovation efforts will warrant monitoring by  EPA and other stakeholders in the innovations process, and will also  warrant continued congressional attention.
section_title: Agency Comments
paragraphs: We provided a draft of this report for review and comment to EPA and to  ECOS’ headquarters office in Washington, D.C.  EPA did not submit a  formal letter but provided individual comments from several headquarters  and regional offices that have dealt with the issues discussed in the report.  From headquarters, we received comments from the Office of Air and  Radiation, Office of Enforcement and Compliance Assurance, the Office of  Solid Waste and Emergency Response, and the Office of Policy, Economics,  and Innovation.  The Office of Air and Radiation indicated general  agreement with the report’s findings as did the Office of Enforcement and  Compliance Assurance, which said that the report “reflects a balanced  approach to analyzing such a broad topic and recognition of EPA’s recent  efforts to facilitate innovative approaches to environmental protection.”  The Office of Solid Waste and Emergency Response provided minor  technical comments.  Comments from all three offices were incorporated  as appropriate.
The Office of Policy, Economics, and Innovation (OPEI) commented on our  conclusion that its initiatives to alleviate the impacts of EPA regulations  focused on new regulations rather than existing regulations.  The Office  said that the report should recognize that a major thrust of its Draft  Strategy on Innovating for Environmental Results involves the “scaling up”  or “diffusion” of successful innovations to broader applications through the  revision of regulations, policies, or program practices.  We added language  to reflect this as a key component of the EPA strategy.  However, as OPEI  staff acknowledged in a subsequent discussion about this point, the agency  has yet to pursue this strategy in the type of systematic or large-scale  manner that would be needed to deal materially with the large number of  EPA regulations at issue, and has not evaluated the extent to which scaling  up has been practiced or has succeeded.
OPEI also observed that there may be some confusion in that the report  identified two different ways in which statutes could inhibit state  innovation:  (1) by prescribing in detail how a program activity must be  carried out (or by precluding alternatives) and (2) by omitting explicit  language authorizing regulatory flexibility to proponents of innovation and  regulators in a manner that would provide the “safe legal harbor” needed to  assure the legality of their innovative proposals.  The draft report discussed  each of these potential impacts individually, but we added additional  clarifying language in response to the OPEI comment.  In addition to these  two issues, OPEI offered a number of more detailed comments and  suggestions, which we incorporated as appropriate.
We also received comments from EPA’s Chicago, Dallas, New York, and  Seattle offices.  In addition to their technical comments and corrections,  the Chicago, Dallas, and Seattle offices expressed general agreement with  the material presented.  The Dallas Office noted, for example, that “most of  the views  have been expressed by state contacts  or facility representatives, but also have been shared by individual EPA  employees that have worked on one or more innovations programs.”  The  New York Office provided no overall opinion, but offered a number of  technical comments and corrections.  These comments and corrections,  and those of the other three regional offices, were incorporated as  appropriate.
ECOS’s Executive Director and his staff said that the draft report was fair  and well documented.  They noted in particular their agreement with the  report’s findings that EPA regulations tend to be more of an obstacle to  innovation than their underlying environmental statutes, and that a  continued need exists for cultural change at both the state and EPA level.  They also proposed a number of technical revisions and clarifications,  which we incorporated in finalizing the report.
section_title: Objectives, Scope, and Methodology
paragraphs: To identify the major avenues through which states can achieve  concurrence with EPA on innovative approaches to environmental  protection, we interviewed officials with EPA’s headquarters and regional  offices, officials from the Environmental Council of the States, and officials  from other interest groups and research organizations.  We also reviewed  recent studies and other literature pertaining to states’ experience with  innovative environmental regulatory strategies.
To obtain information on the obstacles that states face when adopting  innovative approaches to environmental protection, we interviewed  cognizant officials from 15 states—Georgia, Massachusetts, Michigan,  Minnesota, Nebraska, New Hampshire, New Jersey, New York, Oregon,  Pennsylvania, Tennessee, Texas, Virginia, Washington, and Wisconsin.  We  intentionally selected a sample of states that was diverse in size, was  representative of different EPA regions, and had varying degrees of  experience with environmental regulatory innovation.  To obtain further  diversity in the initiatives we examined, we asked the state officials to  identify two of their major innovative proposals—one that they pursued  and EPA accepted and one that was proposed and not accepted.  For each,  we first sought written information in advance of our interviews with  cognizant state officials.  Then, through our interviews with these officials,  we sought to obtain a fuller understanding of the circumstances  surrounding each initiative, and to identify the obstacles that may have  inhibited or prevented progress.  For the states in which officials elected  not to identify initiatives pursued with EPA, we sought to identify the  factors influencing their reasons for not doing so.
In addition to these state interviews, we conducted a series of interviews  with the corresponding EPA regional offices to obtain their views about the  obstacles to state environmental innovation in general and to gather  information about their experiences with the specific initiatives identified  by states in their jurisdiction.  We also interviewed officials with EPA  headquarters offices including the Office of Policy, Economics, and  Innovation; the Office of Enforcement and Compliance Assurance; and key  program offices that have had experiences with innovative state regulatory  proposals.
We conducted our work from March through December 2001 in accordance  with generally accepted government auditing standards.
As we agreed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days from  the date of this letter.  We will then send copies to others who are  interested and make copies available to others who request them.  If you or  your staff have any questions about this report, please call me or Steve  Elstein at (202) 512-3841.  Key contributors to this report are listed in  appendix II.
section_title: Key Innovations Identified by States
paragraphs: Description of innovations cited by state officials  Cathode ray tubes in computer equipment are a growing waste problem because of the high  turnover rates for computer equipment.  The Massachusetts Department of Environmental  Protection wanted to create a system for reusing and recycling these parts, but ran into difficulties  because the parts are classified as hazardous waste under the Resource Conservation and  Recovery Act (RCRA) due to their high lead content.  The state undertook a number of actions,  including exempting intact CRTs as hazardous waste, to increase reuse and recycling efforts in the  state.
The Environmental Results Program is a regulatory system established under Project XL designed  to streamline permitting and reporting requirements and improve performance in the printing, photo  processing, and dry cleaning sectors.  The state sets out to accomplish this through the use of  industry-wide performance standards and self-certification of compliance. In the future,  Massachusetts would like to expand this program to other industrial sectors.
Under this ECOS agreement project, the Michigan Department of Environmental Quality (MDEQ)  adopted a new watershed approach to meet TMDL requirements for phosphorus in the Lake Allegan  Watershed.  This new approach utilizes a cooperative agreement between point source dischargers,  non-point dischargers, and the MDEQ to establish the necessary reduction allocations among the  various sources. The resulting allocation for the point source dischargers will then be written into the  next round of National Pollution Discharge Elimination System permits.
The Clean Air Act requires a case-by-case Best Available Control Technology (BACT) analysis for  auto assembly plant painting and coating operations.  Whenever a facility makes any changes to its  technology, it must go through this time-consuming process, even though the BACT is typically the  same in each case.  With this ECOS agreement, the Michigan Department of Environmental Quality  will test an innovative permitting approach under which a 3 year BACT analysis will be developed for  specific automotive painting and coating sources.  For a 3 year period, an auto assembly facility will  be able to use this 3 year BACT in lieu of performing a completely new analysis.  This new approach  will save resources, which can then be used for other activities with greater environmental benefits.
Under this Project XL agreement, the Andersen Window Corporation is testing a new approach to  reducing air emissions through the use of a performance ratio.  This ratio will measure the amount of  volatile organic compound (VOC) emissions per unit of production.  The facility can make changes to  its processes as long as it stays below the performance ratio and the facility-wide VOC cap.  This  performance-based system will give the facility flexibility and provide an incentive for improved  environmental performance.
The 3M Hutchinson plant was one of the original participants in Project XL.  The company’s proposal  sought to develop a multimedia permit that would cover the facility’s air emissions, storm water  management, liquid storage facility requirements, and hazardous waste generator requirements.  In  exchange, 3M would commit to a number of requirements intended to enhance the facility’s  environmental performance.  Eventually, this proposal was withdrawn from Project XL.
Description of innovations cited by state officials  In April 2002, Groveton Paper Board, Inc. would have been required to install a $1 million system to  capture and incinerate emissions of airborne methanol.  The company found an alternative pollution  control technology that has the potential to cut methanol emissions by four times what is required by  law, while saving the company $825,000.  In addition, the new technology will reduce 20 tons per  year of other hazardous air pollutants.
Over 250 sites in Nashua and Hudson, New Hampshire were contaminated with asbestos when a  local asbestos manufacturing plant delivered asbestos to landowners to use as fill.  EPA determined  that these sites qualified as “inactive disposal sites” and “stationary sources” under the National  Emission Standards for Hazardous Waste Pollutants (NESHAPS).  As a result, the sites were  subject to a number of requirements, many of which were unreasonable for homeowners.  The New  Hampshire Department of Environmental Services worked with EPA to find a reasonable solution.  Eventually, they used a mechanism in 40 CFR 63.93 that allows a state rule to be substituted for the  federal regulation.  In September, they provided a draft proposal to EPA, and currently they are  working with EPA for a resolution.
The Gold Track Program is a Project XL initiative.  It is part of a tiered system that is designed to  reward companies that commit to higher levels of environmental performance.  The Gold Track is the  highest tier in the system and it provides recognition and regulatory flexibility for facilities that commit  to the highest standards of environmental performance.
The IBM Fishkill facility is a manufacturer of semiconductor and electronic computing equipment.  The facility’s wastewater sludge is classified as hazardous waste under the Resources Conservation  and Recovery Act. The facility would like to test an alternative approach that involves recycling this  waste for reuse in cement.  Under Project XL, EPA has decided to grant regulatory flexibility to the  facility to recycle the sludge.
Under RCRA, generators of hazardous waste must transport their waste to permitted treatment,  storage, and disposal facilities.  Under this agreement, public utilities in New York State will be able  to consolidate the waste from remote locations at a central collection facility and store it there for up  to 90 days before transporting it to one of these facilities.  This project is intended to increase public  safety by facilitating removal of hazardous waste and decreasing the risk of accidental release; to  increase efficiency of transportation of hazardous wastes for public utilities; and to save time and  resources for public utilities and the New York Department of Environmental Conservation.
Description of innovations cited by state officials  Established by state legislation, the Green Permits Program is designed to encourage facilities to  achieve greater environmental performance than required by law, and to adopt environmental  management systems in exchange for incentives such as regulatory flexibility, public recognition,  and a single point of contact with the agency.  EPA’s involvement is spelled out in a memorandum of  agreement (MOA) between the Oregon Department of Environmental Quality, the Lane Regional Air  Pollution Authority, and EPA.  The MOA is based on the principles of the Joint State/EPA Agreement  to Pursue Regulatory Innovation.  Currently seven facilities are participating in the program.
LSI Logic is a semiconductor facility in Gresham, Oregon, that participates in the Green Permits  Program.  Among other things, the facility’s Green Permits Application requests equivalency under  Subpart BB of the Resource Conservation and Recovery Act, which is related to monitoring,  detection, and repair of leaks from equipment that handles hazardous waste. LSI Logic contends  that its equipment, while not meeting the exact requirements of the regulations, performs in a  manner that is equal or superior to the technology that is required.  EPA and the state have  preliminarily determined that the firm’s approach is acceptable, and the parties are now in the  process of identifying a legally-enforceable alternative for the facility, such as a site-specific rule.
This Project XL program is designed to encourage coal miners to remine and reclaim abandoned  coal mine sites.  Under current regulations, operators must meet numeric limits under the National  Pollutant Discharge Elimination System (NPDES) at individual discharge points.  Operators may be  reluctant to engage in remining activities because they may exceed these limits because of pre- existing discharges from closed mines.  Under this project, operators can use Best Management  Practices and monitor the concentration of pollutants in-stream, which is expected to reduce risk and  expense to coal mine operators, improve water quality, and increase the number of operators  participating in remining and reclamation activities.
The Lucent Technologies Microelectronics Group entered into a Project XL Agreement with EPA that  is designed to test whether an environmental management system (EMS) could be used to develop  a single document to cover all environmental aspects of a regulated entity that has demonstrated  superior environmental performance.  It will also explore, among other things, whether it is  appropriate to use an EMS as a basis for granting regulatory flexibility and if there are regulatory  approaches that are cheaper, cleaner, and smarter ways of protecting the environment.
Established under the Joint EPA/State Agreement to Pursue Regulatory Innovation, this initiative  seeks to allow “barge scale” (iron oxide) material produced during the barge-cleaning process as a  marketable product.  Currently classified as either industrial or hazardous waste, the material is  transported and treated at an off-site RCRA facility, with any remaining residue placed in an  authorized landfill.  Under this agreement, the participating facility would use its onsite thermal  oxidizer to convert the material for use as a product.  This project is expected to result in reduced  risk for exposure to hazardous materials for employees, the public, and the environment and in  resource savings for the participant.
Description of innovations cited by state officials  The Merck Stonewall plant is located near the Shenandoah National Park in Virginia—an area of  special concern for air quality.  Merck was one of the first participants in Project XL and its proposal  was designed to improve air quality in the area.  Under the agreement, Merck agreed to convert its  coal-burning powerhouse to burn natural gas, resulting in lower levels of emissions.  In exchange for  this commitment, the facility would be allowed to function under an emissions cap for criteria  pollutants, allowing Merck to make process changes without first obtaining EPA approval.
This proposal, submitted under the Joint State/EPA Agreement to Pursue Regulatory Innovation,  seeks EPA’s approval for a modification of pretreatment requirements for the Hopewell Regional  Wastewater Treatment Facility under the Clean Water Act.  The facility treats wastewater from a  number of industrial facilities and current regulations require that standards for water quality must be  met at the industrial users’ end-of-pipe.  The standards were designed for treatment facilities that  treat domestic wastewater and because the facility only treats industrial wastewater, the Hopewell  Wastewater Treatment Facility would like these requirements modified to allow it to meet the  standards at its own end-of-pipe, thus eliminating redundant treatment processes and resulting in  improved quality in the receiving stream.
The Environmental Cooperation Pilot Program (ECPP) was developed by the Wisconsin Department  of Natural Resources to allow facilities to test innovative approaches to environmental protection in  exchange for superior environmental performance.  Through the program, which is supported by the  Wisconsin statute, the DNR is authorized to enter into agreements with up to 10 different facilities in  the state.  The Pleasant Prairie Power Plant is one of the participating facilities.  Under the  agreement, the facility commits to a number of measures, including the use of pollution prevention  techniques and the adoption of an environmental management system. In exchange, the facility will  enjoy the benefits of alternative monitoring, reduced reporting, permit streamlining and recovery and  combustion of ash stored in the company’s landfills.
The Project XL proposal for Wisconsin Electric Power Company was designed to create an  integrated, multi-pollutant air quality approach for all six of the company’s coal burning power plants.  Under the agreement, Wisconsin Electric would meet certain limits for sulfur dioxide, nitrogen  oxides, and particulate matter that are more stringent than current requirements.  In exchange for  this, Wisconsin Electric would be granted flexibility in making certain changes at the facilities.  Specifically, it would be exempt from some of the requirements for New Source Review, Prevention  of Significant Deterioration and New Source Performance Standards if the changes meet certain  qualifications.  This agreement was expected to give Wisconsin Electric incentive to make  improvements to the system and to result in lower emissions, while resulting in cost savings due to  paperwork reduction and efficiency gains for Wisconsin Electric and Wisconsin Department of  Natural Resources.  To date, EPA has not approved this proposal.
Georgia, Nebraska, Tennessee, and Washington also participated in interviews, but they did not  identify an innovation that they proposed to EPA.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Mike Hartnett and Stephanie  Luehr contributed significantly to this report.  Kimberly Clark, Karen Keegan, and Jonathan McMurray also made significant contributions.
section_title: GAO’s Mission
paragraphs: The General Accounting Office, the investigative arm of Congress, exists to  support Congress in meeting its constitutional responsibilities and to help improve  the performance and accountability of the federal government for the American  people. GAO examines the use of public funds; evaluates federal programs and  policies; and provides analyses, recommendations, and other assistance to help  Congress make informed oversight, policy, and funding decisions. GAO’s  commitment to good government is reflected in its core values of accountability,  integrity, and reliability.
section_title: Obtaining Copies of GAO Reports and Testimony
paragraphs: The fastest and easiest way to obtain copies of GAO documents is through the  Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-text files of  current reports and testimony and an expanding archive of older products. The  Web site features a search engine to help you locate documents using key words  and phrases. You can print these documents in their entirety, including charts and  other graphics.
Each day, GAO issues a list of newly released reports, testimony, and  correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site  daily. The list contains links to the full-text document files. To have GAO E-mail  this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily  e-mail alert for newly released products” under the GAO Reports heading.
subsections: section_title: Order by Mail or Phone
section_title: Visit GAO’s Document Distribution Center
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
paragraphs: Web site: www.gao.gov/fraudnet/fraudnet.htm, E-mail: fraudnet@gao.gov, or 1-800-424-5454 or (202) 512-7470 (automated answering system).
section_title: Public Affairs